CAVCO INDUSTRIES INC

Previous wording

It is difficult to predict the future of housing demand, employee availability, our supply chain or the Company's performance and operations. Our home order backlog at March 30, 2024 was approximately $191 million in wholesale sales values, down $53 million from $244 million one year earlier. Distributors may cancel orders prior to production without penalty. After production of a particular home has commenced, the order becomes non-cancelable and the distributor is obligated to take delivery of the home. Accordingly, until production of a particular home has commenced, we do not consider order backlog to be firm orders. We continue to focus on balancing the production levels and workforce size with the demand for our product offerings to maximize efficiencies.

Current wording

It is difficult to predict the future of housing demand, employee availability, our supply chain or the Company's performance and operations. Our home order backlog at March 29, 2025 was approximately $197 million in wholesale sales values, up $6 million from $191 million one year earlier. Distributors may cancel orders prior to production without penalty. After production of a particular home has commenced, the order becomes non-cancelable and the distributor is obligated to take delivery of the home. Accordingly, until production of a particular home has commenced, we do not consider order backlog to be firm orders. We continue to focus on balancing the production levels and workforce size with the demand for our product offerings to maximize efficiencies.

Previous wording

In the financial services segment, we continue to assist customers in need by servicing existing loans and insurance policies and complying with state and federal regulations regarding loan forbearance, home foreclosures and policy cancellations. Certain loans serviced for investors expose us to cash flow deficits if customers do not make contractual monthly payments of principal and interest in a timely manner. For certain loans serviced for Ginnie Mae and Freddie Mac, and home-only loans serviced for certain other investors, we must remit scheduled monthly principal and/or interest payments and principal curtailments regardless of whether monthly mortgage payments are collected from borrowers. Ginnie Mae permits cash obligations on loans in forbearance from COVID-19 to be offset by other incoming cash flows from loans such as loan pre-payments. Through fiscal year 2024, monthly collections of principal and interest from borrowers have exceeded scheduled principal and interest payments owed to investors; however, any future regulatory mandates requiring extended forbearance could negatively impact future cash obligations.

Current wording

In the financial services segment, we continue to assist customers in need by servicing existing loans and insurance policies and complying with state and federal regulations regarding loan forbearance, home foreclosures and policy cancellations. Certain loans serviced for investors expose us to cash flow deficits if customers do not make contractual monthly payments of principal and interest in a timely manner. For certain loans serviced for Ginnie Mae and Freddie Mac, and home-only loans serviced for certain other investors, we must remit scheduled monthly principal and/or interest payments and principal curtailments regardless of whether monthly mortgage payments are collected from borrowers.

Previous wording

Net factory-built housing revenue per home sold is a volatile metric dependent upon several factors. A primary factor is the price disparity between sales of homes to independent distributors, builders, communities and developers ("Wholesale") and sales of homes to consumers by Company-owned retail stores ("Retail"). Wholesale sales prices are primarily comprised of the home and the cost to ship the home from a homebuilding facility to the home-site. Retail home prices include these items and retail markup, as well as items that are largely subject to home buyer discretion, which include installation, utility connections, site improvements, landscaping and other additional services. Changes to the proportion of home sales among our distribution channels between reporting periods impacts the overall net revenue per home sold. For fiscal 2024, we sold 13,047 homes Wholesale and 3,881 Retail versus 16,066 homes Wholesale and 3,310 homes Retail in the prior year. Our homes are constructed in one or more floor sections ("modules") which are then installed on the customer's site. Fluctuations in net factory-built housing revenue per home sold are also partially the result of changesin the number of modules per home, the selection of different home types/models and optional home upgrades, creating changes in product mix. These selections vary regularly based on consumer interests, local housing preferences and economic circumstances. Product prices are also periodically adjusted for the cost and availability of raw materials included in, and labor used to produce, each home. For these reasons, we have experienced, and expect to continue to experience, volatility in overall net factory-built housing revenue per home sold.

Current wording

Net factory-built housing revenue per home sold is a volatile metric dependent upon several factors. A primary factor is the price disparity between sales of homes to independent distributors, builders, communities and developers ("Wholesale") and sales of homes to consumers by Company-owned retail stores ("Retail"). Wholesale sales prices are primarily comprised of the home and the cost to ship the home from a homebuilding facility to the home-site. Retail home prices include these items and retail markup, as well as items that are largely subject to home buyer discretion, which include installation, utility connections, site improvements, landscaping and other additional services. Changes to the proportion of home sales among our distribution channels between reporting periods impacts the overall net revenue per home sold. For fiscal 2025, we sold 15,621 homes Wholesale and 4,132 Retail versus 13,047 homes Wholesale and 3,881 homes Retail in the prior year. Our homes are constructed in one or more floor sections ("modules") which are then installed on the customer's site. Fluctuations in net factory-built housing revenue per home sold are also partially the result of changesin the number of modules per home, the selection of different home types/models and optional home upgrades, creating changes in product mix. These selections vary regularly based on consumer interests, local housing preferences and economic circumstances. Product prices are also periodically adjusted for the cost and availability of raw materials included in, and labor used to produce, each home. For these reasons, we have experienced, and expect to continue to experience, volatility in overall net factory-built housing revenue per home sold.

Previous wording

Financial services segment Net revenue increased 6.7% primarily due to $4.9 million from more insurance policies in force in the current year.

Current wording

Financial services segment Net revenue increased 5.3% primarily due to $8.1 million from higher insurance premiums in the current year, partially offset by fewer loans sold by the finance subsidiary.

Previous wording

In the factory-built housing segment, Gross profit decreased from the lower home sales prices and fewer units sold, partially offset by lower input costs. In the financial services segment, Gross profit decreased primarily due to higher weather-related claims and market fluctuations of the marketable equity securities in the insurance subsidiary's portfolio.

Current wording

In the factory-built housing segment, Gross profit increased from higher home sales, partially offset by lower average selling prices. In the financial services segment, Gross profit decreased primarily due to higher weather related insurance claims and reduced revenue from loan sales.

Previous wording

Interest income was $21.0 million in fiscal year 2024 and $10.7 million in fiscal year 2023. The increase is due to higher interest rates throughout fiscal year 2024.

Current wording

Interest income was flat with $21.1 million in fiscal year 2025 and $21.0 million in fiscal year 2024.

Previous wording

Other income, net primarily consists of realized and unrealized gains and losses on corporate investments, gains and losses from the sale of property, plant and equip ment and partnership income from our unconsolidated joint ventures. For fiscal years 2024 and 2023, Other income, net was$0.8 million and $0.4 million, respectively. Prior year saw non-recurring retirement of property, plant and equipment with a $1.2 million loss. This was offset by $0.3 million of gains on corporate equity securities in fiscal 2024 compared to $0.8 million of gains in the prior fiscal year.

Current wording

Other income, net primarily consists of realized and unrealized gains and losses on corporate investments, gains and losses from the sale of property, plant and equip ment and partnership income from our unconsolidated joint ventures. For fiscal years 2025 and 2024, Other income, net was$0.2 million and $0.8 million, respectively. The largest driver of the change was $0.1 million of gains on corporate equity securities in fiscal year 2025 compared to $0.3 million of gains on corporate equity securities in the prior fiscal year.

Previous wording

Income tax expense was $41.3 million, resulting in an effective tax rate of 20.7%, for the fiscal year ended March 30, 2024, compared to income tax expense of $65.9 million and an effective rate of 21.5% for the fiscal year ended April 1, 2023. The lower effective tax rate in fiscal year 2024 is primarily related to $4.2 million in tax credits related to the sale of energy efficient homes and Energy Star credits available under the Internal Revenue Code §45L and $2.4 million related to the research and development, solar, and work opportunity tax credits.

Current wording

Income tax expense was $40.0 million, resulting in an effective tax rate of 19.0% for the fiscal year ended March 29, 2025, compared to income tax expense of $41.3 million and an effective rate of 20.7% for the fiscal year ended March 30, 2024. The lower effective tax rate in fiscal year 2025 is related to an increase of $5.4 million in tax credits primarily related to the sale of energy efficient homes and Energy Star credits available under the Internal Revenue Code §45L compared to the prior year.

Previous wording

We believe that cash and cash equivalents at March 30, 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 are 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 have sufficient liquid resources including our $50.0 million revolving credit facility (the "Revolving Credit Facility"), of which no amounts were outstanding at March 30, 2024. The Credit Agreement includes the following financial covenants: (i) as of the end of any fiscal quarter, the Consolidated Total Leverage Ratio (as defined in the Credit Agreement) cannot exceed 3.25 to 1.00 and (ii) a requirement to maintain Consolidated EBITDA (as defined in the Credit Agreement) for any period of four fiscal quarters of at least $75 million. The Credit Agreement also contains customary representations and warranties, and affirmative and negative covenants. The Company anticipates compliance with its debt covenants and projects its level of cash availability to be in excess of cash needed to operate the business for the next year. Regardless, 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 March 29, 2025, 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 are 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 have sufficient liquid resources including our $75.0 million revolving credit facility, of which no amounts were outstanding at March 29, 2025. The revolving credit facility is part of the Amended and Restated Credit Agreement among the Company, Bank of America, N.A., as administrative agent, swing line lender, letter of credit issuer, and the guarantors party thereto (the “Credit Agreement”). The Credit Agreement includes the following financial covenants: (i) as of the end of any fiscal quarter, the Consolidated Total Leverage Ratio (as defined in the Credit Agreement) cannot exceed 3.25 to 1.00 and (ii) a requirement to maintain Consolidated EBITDA (as defined in the Credit Agreement) for any period of four fiscal quarters of at least $75 million. The Credit Agreement also contains customary representations and warranties, and affirmative and negative covenants. The Company anticipates compliance with its debt covenants and projects its level of cash availability to be in excess of cash needed to operate the business for the next year. Regardless, 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

Consumer loan originations decreased $87.2 million to $90.8 million during the year ended March 30, 2024, from $178.0 million during the year ended April 1, 2023. Proceeds from the sale of consumer loans provided $91.5 million in cash, compared to $186.0 million in the previous year, a net decrease of $94.5 million.

Current wording

Consumer loan originations decreased $24.7 million to $66.1 million during the year ended March 29, 2025, from $90.8 million during the year ended March 30, 2024. Proceeds from the sale of consumer loans provided $51.1 million in cash, compared to $91.5 million in the previous year, a net decrease of $40.4 million.

Previous wording

Commercial loan originations decreased $20.8 million to $111.2 million during the year ended March 30, 2024, from $132.1 million during the year ended April 1, 2023. Proceeds from the collection on commercial loans provided $117.3 million in cash, compared to $98.2 million in the previous year, a net increase of $19.1 million.

Current wording

Commercial loan originations increased $32.1 million to $143.4 million during the year ended March 29, 2025, from $111.2 million during the year ended March 30, 2024. Proceeds from the collection on commercial loans provided $135.1 million in cash, compared to $117.3 million in the previous year, a net increase of $17.8 million.

Previous wording

Net cash used in investing activities for the year ended March 30, 2024 was primarily used for purchases of property, plant and equipment and acquisition of Kentucky Dream Homes during the year. Net cash used in investing activities for the year ended April 1, 2023 was primarily for the acquisition of Solitaire Homes and purchases of property, plant and equipment including opening manufacturing facilities in Glendale, Arizona and Hamlet, North Carolina.

Current wording

Net cash used in investing activities for the year ended March 29, 2025 was primarily used for purchases of property, plant and equipment. Net cash used in investing activities for the year ended March 30, 2024 was primarily used for purchases of property, plant and equipment and the acquisition of Kentucky Dream Homes during fiscal year 2024.

Previous wording

Net cash used in financing activities for the year ended March 30, 2024 and April 1, 2023 was primarily related to common stock repurchases, partially offset by net proceeds received from the exercise of stock options.

Current wording

Net cash used in financing activities for the years ended March 29, 2025 and March 30, 2024 was primarily related to common stock repurchases, partially offset by net proceeds received from the exercise of stock options.

Previous wording

Warranties. Estimates include the number of homes still under warranty, including homes in distributor inventories, homes purchased by consumers still within the one-year warranty period, the timing in which work orders are completed and the historical average costs incurred to service a home. While the number of homes still under warranty and the timing in which work orders are completed are readily determinable, the average costs incurred will vary based on market prices, which are the primary subjective inputs in estimating the reserve. We expect that a 5% increase in average costs would increase our reserve proportionally.

Current wording

Warranties. Estimates include the number of homes still under warranty, including homes in distributor inventories, homes purchased by consumers still within the one-year warranty period, the timing in which work orders are completed and the historical average costs incurred to service a home. While the number of homes still under warranty are readily determinable, the average costs incurred, which will vary based on market prices, and the timing in which work orders are completed are the primary subjective inputs in estimating the reserve. We expect that a 5% increase in average costs would increase our reserve proportionally.