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Cavco(CVCO) - 2023 Q2 - Quarterly Report
2022-11-03 16:00
[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents Cavco Industries, Inc.'s unaudited consolidated financial statements and detailed notes for the periods ended October 1, 2022, and October 2, 2021 [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheet Summary (in thousands) | ASSETS / LIABILITIES & EQUITY | October 1, 2022 | April 2, 2022 | | :---------------------------- | :-------------- | :------------ | | **Total Assets** | $1,264,666 | $1,154,972 | | Total Current Assets | $819,791 | $744,117 | | Cash and cash equivalents | $333,249 | $244,150 | | Inventories | $233,965 | $243,971 | | Property, plant and equipment, net | $189,968 | $164,016 | | Goodwill | $100,577 | $100,993 | | **Total Liabilities** | $334,799 | $323,692 | | Total Current Liabilities | $306,051 | $294,170 | | **Total Stockholders' Equity**| $928,932 | $830,455 | [Consolidated Statements of Comprehensive Income](index=4&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Consolidated Statements of Comprehensive Income (in thousands) | Metric | Three Months Ended Oct 1, 2022 | Three Months Ended Oct 2, 2021 | Six Months Ended Oct 1, 2022 | Six Months Ended Oct 2, 2021 | | :------------------------------------ | :----------------------------- | :----------------------------- | :--------------------------- | :--------------------------- | | Net revenue | $577,392 | $359,543 | $1,165,730 | $689,965 | | Gross profit | $157,599 | $89,928 | $302,323 | $163,941 | | Income from operations | $90,705 | $44,556 | $169,293 | $77,737 | | Net income attributable to Cavco common stockholders | $74,116 | $37,610 | $133,718 | $64,656 | | Basic EPS | $8.32 | $4.09 | $15.01 | $7.03 | | Diluted EPS | $8.25 | $4.06 | $14.88 | $6.97 | - Net revenue for the three months ended October 1, 2022, increased by **60.6% to $577.4 million** compared to $359.5 million in the prior year period. For the six months ended October 1, 2022, net revenue increased by **69.0% to $1,165.7 million** compared to $689.9 million in the prior year period[10](index=10&type=chunk) - Net income attributable to Cavco common stockholders for the three months ended October 1, 2022, increased by **97.1% to $74.1 million** compared to $37.6 million in the prior year period. For the six months ended October 1, 2022, net income increased by **106.8% to $133.7 million** compared to $64.7 million in the prior year period[10](index=10&type=chunk) [Consolidated Statements of Cash Flows](index=5&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended Oct 1, 2022 | Six Months Ended Oct 2, 2021 | | :------------------------------------------------- | :--------------------------- | :--------------------------- | | Net cash provided by operating activities | $162,942 | $80,087 | | Net cash used in investing activities | $(34,933) | $(156,045) | | Net cash used in financing activities | $(39,224) | $(18,873) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $88,785 | $(94,831) | | Cash, cash equivalents and restricted cash at end of the period | $348,119 | $244,476 | - Net cash provided by operating activities significantly increased by **$82.8 million**, from $80.1 million in the prior year to **$162.9 million** for the six months ended October 1, 2022, primarily due to higher net income[12](index=12&type=chunk)[126](index=126&type=chunk) - Net cash used in investing activities decreased by **$121.1 million**, from $156.0 million in the prior year to **$34.9 million** for the six months ended October 1, 2022, mainly due to lower acquisition spending in the current period[12](index=12&type=chunk)[127](index=127&type=chunk) - Net cash used in financing activities increased by **$20.4 million**, from $18.9 million in the prior year to **$39.2 million** for the six months ended October 1, 2022, primarily due to increased common stock repurchases[12](index=12&type=chunk)[128](index=128&type=chunk) [Notes to Consolidated Financial Statements](index=6&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) [1. Basis of Presentation](index=6&type=section&id=1.%20Basis%20of%20Presentation) Cavco operates in factory-built housing and financial services segments, designing and building homes, offering consumer finance and insurance, and recently made key acquisitions - Cavco operates in two segments: (1) factory-built housing, including wholesale and retail operations, and (2) financial services, including manufactured housing consumer finance and insurance[16](index=16&type=chunk) - The company acquired an additional **20% ownership** in Craftsman Homes, LLC and Craftsman Homes Development, LLC during fiscal 2022, gaining a controlling interest. It also purchased certain manufactured housing assets and assumed liabilities of The Commodore Corporation[17](index=17&type=chunk) [2. Revenue from Contracts with Customers](index=7&type=section&id=2.%20Revenue%20from%20Contracts%20with%20Customers) Factory-built housing revenue grew significantly, especially for U.S. HUD code homes, while financial services revenue remained stable or slightly decreased Net Revenue by Segment (in thousands) | Segment | Three Months Ended Oct 1, 2022 | Three Months Ended Oct 2, 2021 | Six Months Ended Oct 1, 2022 | Six Months Ended Oct 2, 2021 | | :---------------------- | :----------------------------- | :----------------------------- | :--------------------------- | :--------------------------- | | Factory-built housing | $559,602 | $342,094 | $1,132,199 | $654,377 | | Financial services | $17,790 | $17,449 | $33,531 | $35,588 | | **Total Net Revenue** | **$577,392** | **$359,543** | **$1,165,730** | **$689,965** | - Factory-built housing revenue increased by **63.6%** for the three months and **73.0%** for the six months ended October 1, 2022, driven by U.S. HUD code homes[20](index=20&type=chunk) - Financial services revenue saw a modest **2.0% increase** for the three months but a **5.8% decrease** for the six months ended October 1, 2022[20](index=20&type=chunk) [3. Restricted Cash](index=7&type=section&id=3.%20Restricted%20Cash) Restricted cash, mainly from CountryPlace customer payments, slightly increased from April 2 to October 1, 2022 Restricted Cash (in thousands) | Category | October 1, 2022 | April 2, 2022 | | :--------------------------------------------------- | :-------------- | :------------ | | Cash related to CountryPlace customer payments to be remitted to third parties | $13,933 | $13,857 | | Other restricted cash | $937 | $1,327 | | Total Restricted Cash | $14,870 | $15,184 | | Less current portion | $(14,535) | $(14,849) | | **Non-current Restricted Cash** | **$335** | **$335** | [4. Investments](index=8&type=section&id=4.%20Investments) Investments include debt and equity securities; total investments were stable, but marketable equity securities saw a net unrealized loss Investments (in thousands) | Investment Type | October 1, 2022 | April 2, 2022 | | :---------------------------- | :-------------- | :------------ | | Available-for-sale debt securities | $19,488 | $17,760 | | Marketable equity securities | $14,441 | $16,780 | | Non-marketable equity investments | $20,761 | $20,479 | | **Total Investments** | **$54,690** | **$55,019** | | Less short-term investments | $(16,367) | $(20,086) | | **Long-term Investments** | **$38,323** | **$34,933** | Net Investment Gains and Losses on Marketable Equity Securities (in thousands) | Metric | Three Months Ended Oct 1, 2022 | Three Months Ended Oct 2, 2021 | Six Months Ended Oct 1, 2022 | Six Months Ended Oct 2, 2021 | | :--------------------------------------------------- | :----------------------------- | :----------------------------- | :--------------------------- | :--------------------------- | | Net (loss) gain recognized during the period | $(233) | $243 | $(2,575) | $1,939 | | Unrealized (loss) gain recognized during the period on securities still held | $(17) | $100 | $(2,285) | $1,660 | [5. Inventories](index=9&type=section&id=5.%20Inventories) Inventories slightly decreased from April to October 2022, with reductions in raw materials, work in process, and finished goods Inventories (in thousands) | Category | October 1, 2022 | April 2, 2022 | | :-------------- | :-------------- | :------------ | | Raw materials | $93,358 | $95,929 | | Work in process | $29,600 | $30,638 | | Finished goods | $111,007 | $117,404 | | **Total** | **$233,965** | **$243,971** | [6. Consumer Loans Receivable](index=9&type=section&id=6.%20Consumer%20Loans%20Receivable) Consumer loans receivable and allowance for loan losses decreased, with the portfolio concentrated in Texas and Florida Consumer Loans Receivable (in thousands) | Category | October 1, 2022 | April 2, 2022 | | :------------------------------------------ | :-------------- | :------------ | | Loans held for investment, previously securitized | $23,241 | $26,014 | | Loans held for investment | $14,213 | $14,771 | | Loans held for sale | $11,035 | $8,500 | | Construction advances | $993 | $3,547 | | **Total Gross Loans** | **$49,482** | **$52,832** | | Allowance for loan losses | $(1,739) | $(2,115) | | **Net Consumer Loans Receivable** | **$46,970** | **$49,884** | Allowance for Consumer Loan Losses (in thousands) | Metric | Six Months Ended Oct 1, 2022 | Six Months Ended Oct 2, 2021 | | :----------------------------------- | :--------------------------- | :--------------------------- | | Allowance at beginning of period | $2,115 | $3,188 | | Change in estimated loan losses, net | $(376) | $(57) | | Charge-offs | $(19) | $(332) | | Recoveries | $19 | $0 | | **Allowance at end of period** | **$1,739** | **$2,799** | - As of October 1, 2022, **43%** of the consumer loans receivable portfolio was concentrated in Texas and **16%** in Florida[33](index=33&type=chunk) [7. Commercial Loans Receivable](index=11&type=section&id=7.%20Commercial%20Loans%20Receivable) Commercial loans receivable increased, supporting distributors and developers, with a higher allowance for loan losses but no nonperforming loans Commercial Loans Receivable (in thousands) | Category | October 1, 2022 | April 2, 2022 | | :--------------------------------------------------- | :-------------- | :------------ | | Loans receivable | $77,345 | $69,693 | | Allowance for loan losses | $(1,123) | $(1,011) | | Deferred financing fees, net | $(117) | $(116) | | **Total Net Commercial Loans Receivable** | **$76,105** | **$68,566** | | Less current portion | $(32,663) | $(32,644) | | **Non-current Commercial Loans Receivable** | **$43,442** | **$35,922** | Allowance for Commercial Loan Losses (in thousands) | Metric | Six Months Ended Oct 1, 2022 | Six Months Ended Oct 2, 2021 | | :----------------------------------- | :--------------------------- | :--------------------------- | | Balance at beginning of period | $1,011 | $816 | | Change in estimated loan losses, net | $112 | $10 | | **Balance at end of period** | **$1,123** | **$826** | - As of October 1, 2022, **19%** of the commercial loans receivable balance was concentrated in New York, down from **25%** in April 2022[40](index=40&type=chunk) [8. Property, Plant and Equipment, net](index=12&type=section&id=8.%20Property,%20Plant%20and%20Equipment,%20net) Net property, plant, and equipment significantly increased due to additions in buildings, improvements, and machinery, reflecting capital expenditures Property, Plant and Equipment, net (in thousands) | Category | October 1, 2022 | April 2, 2022 | | :-------------------------------- | :-------------- | :------------ | | Land | $34,777 | $32,154 | | Buildings and improvements | $142,890 | $100,775 | | Machinery and equipment | $56,601 | $48,638 | | Construction in progress | $12,474 | $29,281 | | **Total at cost** | **$246,742** | **$210,848** | | Accumulated depreciation | $(56,774) | $(46,832) | | **Property, plant and equipment, net** | **$189,968** | **$164,016** | - Depreciation expense for the six months ended October 1, 2022, was **$7.3 million**, a substantial increase from $2.9 million in the prior year period[42](index=42&type=chunk) [9. Goodwill and Other Intangibles](index=13&type=section&id=9.%20Goodwill%20and%20Other%20Intangibles) Goodwill and other intangibles were stable, but amortization expense for intangible assets significantly increased year-over-year Goodwill and Other Intangibles, net (in thousands) | Category | October 1, 2022 Net Carrying Amount | April 2, 2022 Net Carrying Amount | | :---------------------------- | :---------------------------------- | :-------------------------------- | | Goodwill | $100,577 | $100,993 | | Trademarks and trade names | $15,680 | $15,680 | | State insurance licenses | $1,100 | $1,100 | | Customer relationships | $10,166 | $11,108 | | Other | $504 | $571 | | **Total** | **$128,027** | **$129,452** | - Amortization expense for intangible assets was **$1.0 million** for the six months ended October 1, 2022, compared to $339,000 for the six months ended October 2, 2021[44](index=44&type=chunk) [10. Accrued Expenses and Other Current Liabilities](index=13&type=section&id=10.%20Accrued%20Expenses%20and%20Other%20Current%20Liabilities) Accrued expenses and other current liabilities increased due to higher warranties and rebates, despite fewer customer deposits Accrued Expenses and Other Current Liabilities (in thousands) | Category | October 1, 2022 | April 2, 2022 | | :----------------------- | :-------------- | :------------ | | Salaries, wages and benefits | $55,232 | $54,172 | | Customer deposits | $48,255 | $56,318 | | Estimated warranties | $30,841 | $26,250 | | Unearned insurance premiums | $26,453 | $24,917 | | Accrued volume rebates | $24,897 | $18,641 | | Other | $77,718 | $70,790 | | **Total** | **$263,396** | **$251,088** | [11. Warranties](index=14&type=section&id=11.%20Warranties) Estimated warranty liability increased as charges to costs and expenses surpassed payments and deductions for the six-month period Activity in Liability for Estimated Warranties (in thousands) | Metric | Six Months Ended Oct 1, 2022 | Six Months Ended Oct 2, 2021 | | :----------------------------------- | :--------------------------- | :--------------------------- | | Balance at beginning of period | $26,250 | $18,032 | | Charged to costs and expenses | $28,627 | $17,119 | | Payments and deductions | $(24,036) | $(16,334) | | **Balance at end of period** | **$30,841** | **$25,745** | [12. Other Liabilities](index=14&type=section&id=12.%20Other%20Liabilities) Non-current other liabilities slightly decreased, mainly due to reductions in secured financing and redeemable noncontrolling interest Non-current Other Liabilities (in thousands) | Category | October 1, 2022 | April 2, 2022 | | :------------------------------------------- | :-------------- | :------------ | | Finance lease payables | $6,280 | $6,316 | | Other secured financing | $2,585 | $2,933 | | Mandatorily redeemable noncontrolling interest | $2,290 | $2,371 | | **Total** | **$11,155** | **$11,620** | | Less current portion | $(735) | $(784) | | **Non-current portion** | **$10,420** | **$10,836** | [13. Reinsurance and Insurance Loss Reserves](index=14&type=section&id=13.%20Reinsurance%20and%20Insurance%20Loss%20Reserves) Standard Casualty Company's premiums increased, but net incurred losses exceeded claim payments, leading to a higher reserve for claims Premiums (in thousands) | Metric | Six Months Ended Oct 1, 2022 Written | Six Months Ended Oct 1, 2022 Earned | Six Months Ended Oct 2, 2021 Written | Six Months Ended Oct 2, 2021 Earned | | :----------------------------- | :----------------------------------- | :---------------------------------- | :----------------------------------- | :---------------------------------- | | Direct premiums | $14,896 | $14,388 | $13,149 | $12,319 | | Assumed premiums—nonaffiliated | $17,846 | $16,168 | $16,814 | $15,008 | | Ceded premiums—nonaffiliated | $(8,643) | $(8,643) | $(7,361) | $(7,361) | | **Total** | **$24,099** | **$21,913** | **$22,602** | **$19,966** | Activity in Reserve for Claims (in thousands) | Metric | Six Months Ended Oct 1, 2022 | Six Months Ended Oct 2, 2021 | | :----------------------------------- | :--------------------------- | :--------------------------- | | Balance at beginning of period | $8,149 | $7,451 | | Net incurred losses during the period | $16,586 | $15,257 | | Net claim payments during the period | $(16,945) | $(15,358) | | **Balance at end of period** | **$7,790** | **$7,350** | [14. Commitments and Contingencies](index=15&type=section&id=14.%20Commitments%20and%20Contingencies) The company faces repurchase obligations, mortgage commitments, and a **$1.5 million** SEC penalty settlement related to a former CEO's trading - Maximum liability under repurchase agreements with financial institutions for distributor inventory financing approximated **$189.4 million** at October 1, 2022, up from $141.0 million at April 2, 2022. A reserve of **$5.0 million** was held for these commitments[56](index=56&type=chunk) - Outstanding interest rate lock commitments (IRLCs) had a notional amount of **$37.0 million** as of October 1, 2022[59](index=59&type=chunk) - The company settled an SEC civil action on September 23, 2022, agreeing to an injunction and a **$1.5 million** monetary penalty, which did not materially impact financial statements[61](index=61&type=chunk) [15. Stockholders' Equity and Redeemable Noncontrolling Interest](index=17&type=section&id=15.%20Stockholders'%20Equity%20and%20Redeemable%20Noncontrolling%20Interest) Stockholders' equity significantly increased due to net income and paid-in capital, partially offset by common stock repurchases Changes in Stockholders' Equity (in thousands) | Metric | April 2, 2022 Balance | October 1, 2022 Balance | | :--------------------------------------------------- | :-------------------- | :---------------------- | | Total Stockholders' Equity attributable to Cavco Stockholders | $830,455 | $928,932 | | Redeemable Noncontrolling Interest | $825 | $926 | | Net income attributable to Cavco common stockholders (6 months) | $133,718 | $133,718 |\ | Common stock repurchases (6 months) | $(38,960) | $(38,960) | [16. Earnings Per Share](index=19&type=section&id=16.%20Earnings%20Per%20Share) Basic and diluted EPS substantially increased for both periods, driven by higher net income and a lower weighted average share count Earnings Per Share (EPS) | Metric | Three Months Ended Oct 1, 2022 | Three Months Ended Oct 2, 2021 | Six Months Ended Oct 1, 2022 | Six Months Ended Oct 2, 2021 | | :--------------------------------------------------- | :----------------------------- | :----------------------------- | :--------------------------- | :--------------------------- | | Net income attributable to Cavco common stockholders | $74,116 | $37,610 | $133,718 | $64,656 | | Basic EPS | $8.32 | $4.09 | $15.01 | $7.03 | | Diluted EPS | $8.25 | $4.06 | $14.88 | $6.97 | | Weighted average shares outstanding (Basic) | 8,903,703 | 9,190,866 | 8,910,933 | 9,194,577 | [17. Fair Value Measurements](index=19&type=section&id=17.%20Fair%20Value%20Measurements) Fair values of financial instruments were largely consistent with book values, except for consumer and commercial loans receivable Book Value and Estimated Fair Value of Financial Instruments (in thousands) | Financial Instrument | October 1, 2022 Book Value | October 1, 2022 Estimated Fair Value | April 2, 2022 Book Value | April 2, 2022 Estimated Fair Value | | :----------------------------------- | :--------------------------- | :----------------------------------- | :----------------------- | :--------------------------------- | | Available-for-sale debt securities | $19,488 | $19,488 | $17,760 | $17,760 | | Marketable equity securities | $14,441 | $14,441 | $16,780 | $16,780 | | Non-marketable equity investments | $20,761 | $20,761 | $20,479 | $20,479 | | Consumer loans receivable | $46,970 | $53,340 | $49,884 | $53,354 | | Commercial loans receivable | $76,105 | $71,878 | $68,566 | $65,942 | [18. Related Party Transactions](index=20&type=section&id=18.%20Related%20Party%20Transactions) Sales to related parties, mainly manufactured housing distributors, increased for both periods, as did receivables from related parties - Total sales to related parties were **$20.1 million** for the three months and **$37.3 million** for the six months ended October 1, 2022, compared to $14.0 million and $28.8 million, respectively, in the prior year periods[74](index=74&type=chunk) - Receivables from related parties included **$5.1 million** of accounts receivable and **$2.2 million** of commercial loans outstanding as of October 1, 2022[74](index=74&type=chunk) [19. Business Segment Information](index=20&type=section&id=19.%20Business%20Segment%20Information) Factory-built housing saw substantial growth in revenue and income, while financial services income declined despite stable revenue Net Revenue by Segment (in thousands) | Segment | Three Months Ended Oct 1, 2022 | Three Months Ended Oct 2, 2021 | Six Months Ended Oct 1, 2022 | Six Months Ended Oct 2, 2021 | | :---------------------- | :----------------------------- | :----------------------------- | :--------------------------- | :--------------------------- | | Factory-built housing | $559,602 | $342,094 | $1,132,199 | $654,377 | | Financial services | $17,790 | $17,449 | $33,531 | $35,588 | | **Total Net Revenue** | **$577,392** | **$359,543** | **$1,165,730** | **$689,965** | Income (loss) before income taxes by Segment (in thousands) | Segment | Three Months Ended Oct 1, 2022 | Three Months Ended Oct 2, 2021 | Six Months Ended Oct 1, 2022 | Six Months Ended Oct 2, 2021 | | :-------------------------- | :----------------------------- | :----------------------------- | :--------------------------- | :--------------------------- | | Factory-built housing | $90,374 | $46,893 | $170,146 | $80,452 | | Financial services | $2,437 | $2,128 | $1,975 | $4,047 | | **Total** | **$92,811** | **$49,021** | **$172,121** | **$84,499** | Total Assets by Segment (in thousands) | Segment | October 1, 2022 | April 2, 2022 | | :---------------------- | :-------------- | :------------ | | Factory-built housing | $1,096,450 | $929,535 | | Financial services | $168,216 | $225,437 | | **Total Assets** | **$1,264,666** | **$1,154,972**| [20. Subsequent Event](index=20&type=section&id=20.%20Subsequent%20Event) Cavco signed a binding offer to acquire Solitaire Homes for **$93 million**, expanding its manufacturing and retail presence in the Southwest and Mexico - On October 27, 2022, Cavco signed a binding offer to acquire Solitaire Homes, Inc., including four manufacturing facilities and twenty-two retail locations[77](index=77&type=chunk) - The purchase price for Solitaire Homes totals **$93 million**, expected to be funded entirely with cash on hand and to close early in the Company's fourth fiscal quarter of 2023[78](index=78&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, condition, and outlook, highlighting growth in housing, challenges in financial services, strategic initiatives, liquidity, and inflation impacts [Forward-Looking Statements](index=21&type=section&id=Forward-Looking%20Statements) - The report contains forward-looking statements regarding financial performance, industry conditions, liquidity, acquisitions, and economic factors, which involve risks and uncertainties that could cause actual results to differ materially[80](index=80&type=chunk)[81](index=81&type=chunk) [Introduction](index=21&type=section&id=Introduction) - This section should be read in conjunction with the Company's Consolidated Financial Statements and related Notes in Part I, Item 1 of this Report[82](index=82&type=chunk) [Company Overview](index=21&type=section&id=Company%20Overview) - Cavco Industries, Inc. is a leading producer of factory-built housing products, including manufactured homes, modular homes, and park model RVs, distributed through independent and company-owned retailers. It also operates financial services subsidiaries, CountryPlace Acceptance Corp. (finance) and Standard Casualty Company (insurance)[83](index=83&type=chunk) - The company operates **26 homebuilding production lines** across the U.S. and recently opened two new lines in Glendale, Arizona, and Hamlet, North Carolina[85](index=85&type=chunk) - Subsequent to the quarter, Cavco signed an offer to acquire Solitaire Homes, Inc., which includes four manufacturing facilities and twenty-two retail locations, strengthening its Southwest presence and expanding into Mexico[87](index=87&type=chunk) [Company and Industry Outlook](index=22&type=section&id=Company%20and%20Industry%20Outlook) - Industry home shipments increased **14.2%** for the first 8 months of calendar year 2022, reflecting the industry's ability to provide affordable housing solutions[88](index=88&type=chunk)[89](index=89&type=chunk) - Cavco focuses on identifying niche market opportunities, building quality, energy-efficient homes, and maintaining a conservative cost structure and strong financial position[91](index=91&type=chunk)[92](index=92&type=chunk) - The company continues to make commercial loan programs available to its wholesale distribution chain and invests in community-based lending initiatives to expand financing availability and product distribution[94](index=94&type=chunk)[95](index=95&type=chunk) - Challenges include volatile material and labor costs, which may affect gross margins, and efforts are ongoing to improve recruitment and retention of qualified production employees to meet demand[96](index=96&type=chunk)[98](index=98&type=chunk) [Net Revenue](index=24&type=section&id=Net%20Revenue) Net Revenue by Segment and Homes Sold (in thousands, except per home sold) | Metric | Three Months Ended Oct 1, 2022 | Three Months Ended Oct 2, 2021 | Change ($) | Change (%) | | :--------------------------------------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Factory-built housing Net Revenue | $559,602 | $342,094 | $217,508 | 63.6% | | Financial services Net Revenue | $17,790 | $17,449 | $341 | 2.0% | | Total Factory-built homes sold | 5,111 | 3,597 | 1,514 | 42.1% | | Net factory-built housing revenue per home sold | N/A | N/A | N/A | N/A | | **Six Months Ended Oct 1, 2022** | | | | | | Factory-built housing Net Revenue | $1,132,199 | $654,377 | $477,822 | 73.0% | | Financial services Net Revenue | $33,531 | $35,588 | $(2,057) | (5.8)% | | Total Factory-built homes sold | 10,457 | 7,297 | 3,160 | 43.3% | | Net factory-built housing revenue per home sold | $108,272 | $89,678 | $18,594 | 20.7% | - Factory-built housing revenue increased due to higher home sales volume and selling prices, with the Commodore acquisition contributing **$107 million** and **$208 million** for the three and six months, respectively[104](index=104&type=chunk) - Financial services net revenue increased **2.0%** for the three months due to higher home loan sales, but decreased **5.8%** for the six months primarily from realized/unrealized losses on marketable equity securities and lower interest income[106](index=106&type=chunk) [Gross Profit](index=26&type=section&id=Gross%20Profit) Gross Profit by Segment (in thousands) | Metric | Three Months Ended Oct 1, 2022 | Three Months Ended Oct 2, 2021 | Change ($) | Change (%) | | :----------------------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Factory-built housing Gross Profit | $149,665 | $82,299 | $67,366 | 81.9% | | Financial services Gross Profit | $7,934 | $7,629 | $305 | 4.0% | | Consolidated Gross Profit % of Net Revenue | 27.3% | 25.0% | N/A | 2.3% | | **Six Months Ended Oct 1, 2022** | | | | | | Factory-built housing Gross Profit | $289,251 | $148,572 | $140,679 | 94.7% | | Financial services Gross Profit | $13,072 | $15,369 | $(2,297) | (14.9)% | | Consolidated Gross Profit % of Net Revenue | 25.9% | 23.8% | N/A | 2.1% | - Factory-built housing gross profit and gross profit percentage increased due to higher average sales prices[111](index=111&type=chunk) - Financial services gross profit increased for the three months due to higher home loan sales but decreased for the six months primarily due to higher insurance claims from weather events and greater unrealized losses on marketable equity securities[112](index=112&type=chunk) [Selling, General and Administrative Expenses](index=27&type=section&id=Selling,%20General%20and%20Administrative%20Expenses) Selling, General and Administrative Expenses (in thousands) | Metric | Three Months Ended Oct 1, 2022 | Three Months Ended Oct 2, 2021 | Change ($) | Change (%) | | :--------------------------------------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Factory-built housing SG&A | $61,640 | $40,347 | $21,293 | 52.8% | | Financial services SG&A | $5,254 | $5,025 | $229 | 4.6% | | Consolidated SG&A as % of Net revenue | 11.6% | 12.6% | N/A | (1.0)% | | **Six Months Ended Oct 1, 2022** | | | | | | Factory-built housing SG&A | $122,563 | $75,844 | $46,719 | 61.6% | | Financial services SG&A | $10,467 | $10,360 | $107 | 1.0% | | Consolidated SG&A as % of Net revenue | 11.4% | 12.5% | N/A | (1.1)% | - Factory-built housing SG&A increased due to the Commodore acquisition and higher salary, incentive compensation, legal, and professional fees[114](index=114&type=chunk) - As a percentage of Net revenue, SG&A improved by **100** and **110 basis points** for the three and six months, respectively, due to better utilization of fixed costs on higher sales[115](index=115&type=chunk) [Other Components of Net Income](index=28&type=section&id=Other%20Components%20of%20Net%20Income) Other Components of Net Income (in thousands) | Metric | Three Months Ended Oct 1, 2022 | Three Months Ended Oct 2, 2021 | Change ($) | Change (%) | | :----------------------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Interest expense | $233 | $203 | $30 | 14.8% | | Other income, net | $2,339 | $4,668 | $(2,329) | (49.9)% | | Income tax expense | $18,613 | $11,338 | $7,275 | 64.2% | | Effective tax rate | 20.1% | 23.1% | N/A | (3.0)% | | **Six Months Ended Oct 1, 2022** | | | | | | Interest expense | $394 | $367 | $27 | 7.4% | | Other income, net | $3,222 | $7,129 | $(3,907) | (54.8)% | | Income tax expense | $38,229 | $19,770 | $18,459 | 93.4% | | Effective tax rate | 22.2% | 23.4% | N/A | (1.2)% | - The decrease in Other income, net, was primarily due to a **$3.3 million** gain recognized in the prior year from the Craftsman acquisition remeasurement and a **$1.1 million** unrealized loss on corporate marketable investments in the current year, partially offset by higher interest income on cash balances[121](index=121&type=chunk) - The effective tax rate benefited from **$2.7 million** of estimated non-recurring net tax credits related to the sale of energy-efficient homes under the renewed Internal Revenue Code §45L program[122](index=122&type=chunk) [Liquidity and Capital Resources](index=28&type=section&id=Liquidity%20and%20Capital%20Resources) - The company believes its cash and cash equivalents, along with cash flow from operations, will be sufficient to fund operations and growth for the foreseeable future[123](index=123&type=chunk) - Cavco expects to continue evaluating potential acquisitions and strategic investments, which may require significant cash use[123](index=123&type=chunk) Summary of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended Oct 1, 2022 | Six Months Ended Oct 2, 2021 | Change ($) | | :--------------------------------------------------- | :--------------------------- | :--------------------------- | :--------- | | Cash, cash equivalents and restricted cash at beginning of fiscal year | $259,334 | $339,307 | $(79,973) | | Net cash provided by operating activities | $162,942 | $80,087 | $82,855 | | Net cash used in investing activities | $(34,933) | $(156,045) | $121,112 | | Net cash used in financing activities | $(39,224) | $(18,873) | $(20,351) | | Cash, cash equivalents and restricted cash at end of the period | $348,119 | $244,476 | $103,643 | [Critical Accounting Estimates](index=29&type=section&id=Critical%20Accounting%20Estimates) - There have been no significant changes to critical accounting estimates during the six months ended October 1, 2022, compared to those disclosed in the Form 10-K[129](index=129&type=chunk) [Other Matters](index=29&type=section&id=Other%20Matters) - High inflation and rising interest rates could adversely impact gross margins and the ability of home buyers to obtain affordable financing, posing a risk to future profitability and financial position[130](index=130&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=30&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes occurred in the company's quantitative and qualitative disclosures about market risk since the Form 10-K filing - No material changes from the quantitative and qualitative disclosures about market risk previously disclosed in the Form 10-K[132](index=132&type=chunk) [Item 4. Controls and Procedures](index=30&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of October 1, 2022, with no material changes in internal control over financial reporting - The Company's President and Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were effective as of October 1, 2022[133](index=133&type=chunk) - There has been no material change in the Company's internal control over financial reporting during the fiscal quarter ended October 1, 2022[134](index=134&type=chunk) [PART II. OTHER INFORMATION](index=31&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=31&type=section&id=Item%201.%20Legal%20Proceedings) Legal proceedings information is incorporated by reference from Note 14 to the Consolidated Financial Statements - Legal proceedings information is incorporated by reference from Note 14 to the Consolidated Financial Statements[137](index=137&type=chunk) [Item 1A. Risk Factors](index=31&type=section&id=Item%201A.%20Risk%20Factors) Readers should consider risk factors from the 2022 Form 10-K, as additional unknown risks may also materially affect the business - Readers should carefully consider the risk factors discussed in Part I, Item 1A of the 2022 Annual Report on Form 10-K, as well as additional unknown risks[138](index=138&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=31&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Board approved a **$100 million** stock repurchase program on May 26, 2022, with no repurchases made to date - The Board of Directors approved a **$100 million** stock repurchase program on May 26, 2022, with no repurchases made under this new program as of the report date[139](index=139&type=chunk) [Item 5. Other Information](index=31&type=section&id=Item%205.%20Other%20Information) No other information required under this item was not previously disclosed - There is no other information required to be disclosed under this item which was not previously disclosed[140](index=140&type=chunk) [Item 6. Exhibits](index=31&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including certifications, XBRL taxonomy documents, and the interactive data file List of Exhibits | Exhibit No. | Exhibit | | :---------- | :----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | | 31.1 | Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Rule 13a-14(a)/15d-14(a) | | 31.2 | Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Rule 13a-14(a)/15d-14(a) | | 32 | Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | | 101.INS | The instance document does not appear in the interactive data file because its XBRL tags are embedded within the Inline XBRL document. | | 101.SCH | Inline XBRL Taxonomy Extension Schema Document | | 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | | 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | | 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | | 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | | 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | [SIGNATURES](index=32&type=section&id=SIGNATURES) - The report was signed by William C. Boor, Director, President and Chief Executive Officer, and Allison K. Aden, Executive Vice President, Chief Financial Officer & Treasurer, on November 4, 2022[145](index=145&type=chunk)
Cavco(CVCO) - 2023 Q1 - Earnings Call Transcript
2022-08-05 22:01
Financial Data and Key Metrics Changes - Net income increased by 121% year-over-year and 12% compared to the fourth quarter [7] - Net revenue for the period was $588.3 million, up 78.1% from $330.4 million in the previous year [19] - Consolidated gross profit as a percentage of net revenue was 24.6%, up from 22.4% in the same period last year [23] Business Line Data and Key Metrics Changes - Factory built housing segment net revenue increased by 83.4% to $572.6 million, driven by the addition of Commodore operations and a 26.9% increase in average revenue per home sold [20] - Financial services segment net revenue decreased by 13.2% to $15.7 million due to unrealized losses on marketable equity securities and decreased loan sales volume [22] Market Data and Key Metrics Changes - Backlog ended the quarter at 25 to 27 weeks compared to four weeks last quarter, with a drop of approximately 10% from $1.1 billion to $1 billion [13][14] - Retail traffic remains strong, but buyers have become more patient, resulting in lower deposit ratios [15] Company Strategy and Development Direction - The company is well-positioned for demand drivers despite high prices and increasing rates, focusing on manufactured housing as an affordable solution [9][11] - New manufacturing facilities in Glendale, Arizona, and Hamlet, North Carolina, are nearing completion, expected to begin operations in the coming months [17][18] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the economic uncertainty and inflation affecting prospective buyers but emphasizes the ongoing need for affordable housing [9][79] - The company anticipates a near-term reset of retail inventories, with orders potentially dropping below true buyer demand for a short timeframe [15] Other Important Information - The company executed nearly $39 million of stock repurchases, completing the previously authorized $100 million program [29] - An additional $100 million for future share repurchases was authorized by the Board [30] - The company reached an agreement in principle with the SEC to settle litigation, pending final approval [35] Q&A Session Summary Question: Growth rate in shipments and organic growth - Management confirmed organic growth in the number of homes sold is in the mid to high teens, excluding Commodore [38] Question: Moderation of order rates - Management indicated that orders are off the highs but are comparable to pre-pandemic levels with appropriate seasonality [40] Question: Impact of lower financial services profitability and Commodore pricing - Management noted that the lower financial services profitability and Commodore pricing are expected to impact margins, with a drag of about 200 basis points from Commodore [48] Question: Sustainability of production levels - Management expressed confidence in sustaining production levels above 5,000 units, citing improvements in staffing and supply chain conditions [74]
Cavco(CVCO) - 2023 Q1 - Quarterly Report
2022-08-04 16:00
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended July 2, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 000-08822 CAVCO INDUSTRIES INC. (Exact name of registrant as specified in its charter) Delaware 56-2405642 (State or other jurisdictio ...
Cavco(CVCO) - 2022 Q4 - Annual Report
2022-05-30 16:00
PART I [Business](index=4&type=section&id=Item%201.%20Business) Cavco Industries is a leading U.S. producer of factory-built homes, including manufactured and modular homes, with financial services - Cavco is one of the largest producers of manufactured homes in the United States, operating **26 homebuilding production lines** and distributing through **45 Company-owned retail stores**[9](index=9&type=chunk) - On September 24, 2021, Cavco acquired The Commodore Corporation, expanding its presence in the Northeast, Midwest, and Mid-Atlantic markets and adding six manufacturing facilities[10](index=10&type=chunk) - The business is divided into two segments: Factory-built Housing and Financial Services. The financial services arm includes CountryPlace for mortgages and Standard Casualty for property and casualty insurance[9](index=9&type=chunk)[11](index=11&type=chunk)[12](index=12&type=chunk) Factory-Built Homes Sold (Fiscal Years) | Fiscal Year | Homes Sold | | :--- | :--- | | 2022 | 16,697 | | 2021 | 14,214 | | 2020 | 15,100 | - The company's home order backlog increased significantly to approximately **$1.1 billion as of April 2, 2022**, up from **$603 million a year prior**. The acquisition of Commodore contributed **$264 million to this increase**[32](index=32&type=chunk) - The company faces competition from other national manufacturers, including Clayton Homes, Inc. and Skyline Champion Corporation, which may have greater financial resources[59](index=59&type=chunk) [Risk Factors](index=17&type=page&id=Item%201A.%20Risk%20Factors) The company faces significant operational, economic, and regulatory risks, including supply chain disruptions, interest rate fluctuations, and ongoing SEC litigation - Business and operational risks include impacts from the COVID-19 pandemic, labor shortages, raw material price fluctuations, and potential cyber incidents[99](index=99&type=chunk)[103](index=103&type=chunk)[118](index=118&type=chunk) - Industry and economic risks are significant, including tightened credit standards for home-only loans, rising interest rates, limited wholesale financing for distributors, and the cyclical nature of housing demand[137](index=137&type=chunk)[142](index=142&type=chunk)[144](index=144&type=chunk) - The company faces legal and regulatory risks, including extensive government regulation, restrictive local zoning, and ongoing SEC litigation filed in September 2021 related to actions by the former CEO and CFO[151](index=151&type=chunk)[152](index=152&type=chunk) - Contingent repurchase obligations for wholesale financing provided to distributors amounted to a maximum of approximately **$141.0 million as of April 2, 2022**[127](index=127&type=chunk) [Unresolved Staff Comments](index=26&type=page&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - None[159](index=159&type=chunk) [Properties](index=27&type=section&id=Item%202.%20Properties) The company operates 26 active manufacturing facilities across the U.S., mostly owned, along with administrative offices and retail stores Overview of Core Properties | Property Type | Count | Ownership Status | | :--- | :--- | :--- | | Active Manufacturing Facilities | 26 | Mostly Owned | | Component and Supply Facilities | 2 | 1 Owned, 1 Leased | | Inactive Manufacturing Facilities | 3 | All Owned | | Administrative & Other Locations | 5 | Mostly Leased | - The company owns the land for most of its manufacturing facilities, with exceptions for the Goodyear, AZ and Dorchester, WI plants, which are leased[163](index=163&type=chunk) [Legal Proceedings](index=28&type=section&id=Item%203.%20Legal%20Proceedings) Legal proceedings information, including ongoing SEC litigation against the company and former executives, is referenced from Note 16 - Information on legal proceedings is incorporated by reference from Note 16 to the Consolidated Financial Statements[164](index=164&type=chunk) [Mine Safety Disclosures](index=28&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Not applicable[165](index=165&type=chunk) PART II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=29&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Cavco's common stock trades on Nasdaq, with no recent dividends, and the company actively engages in stock repurchase programs - The company's common stock is traded on the Nasdaq Global Select Market under the symbol CVCO[168](index=168&type=chunk) - No dividends have been paid on common stock in the past two fiscal years[169](index=169&type=chunk) Share Repurchase Activity (Q4 FY2022) | Period | Total Shares Purchased | Average Price Paid Per Share | Value of Shares Remaining Under Program (End of Period) | | :--- | :--- | :--- | :--- | | Mar 6, 2022 to Apr 2, 2022 | 115,200 | $264.52 | $38,960,000 | - A new **$100 million stock repurchase program** was approved by the Board of Directors on May 25, 2022[170](index=170&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Strong housing demand drove significant revenue and net income growth in FY2022, supported by strategic acquisitions and improved operational efficiency [Company Outlook](index=31&type=section&id=Company%20Outlook) The company anticipates continued strong housing demand, focusing on expanding lending programs and advocating for favorable financing policies despite supply chain challenges - Housing demand remains strong, with the home order backlog increasing to **$1.1 billion as of April 2, 2022**, up from **$603 million a year earlier**[180](index=180&type=chunk) - The company has reduced open production positions by nearly **25% over the past year**, achieving an average plant capacity utilization rate exceeding **80% in Q4 FY2022**[181](index=181&type=chunk) - Management is focused on expanding home-only lending programs and working with industry associations to encourage favorable legislative and GSE action to address financing needs for affordable homes[186](index=186&type=chunk)[187](index=187&type=chunk) [Results of Operations](index=33&type=section&id=Results%20of%20Operations) FY2022 saw substantial increases in net revenue, gross profit, and net income, driven by higher housing sales and a significant energy-efficient home tax credit Net Revenue (FY2022 vs. FY2021) | Segment | FY2022 (in thousands) | FY2021 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Factory-built housing | $1,556,283 | $1,037,889 | 49.9% | | Financial services | $70,875 | $70,162 | 1.0% | | **Total** | **$1,627,158** | **$1,108,051** | **46.8%** | Gross Profit & Margin (FY2022 vs. FY2021) | Segment | FY2022 Gross Profit (in thousands) | FY2022 Margin | FY2021 Gross Profit (in thousands) | FY2021 Margin | | :--- | :--- | :--- | :--- | :--- | | Factory-built housing | $372,250 | 23.9% | $199,604 | 19.2% | | Financial services | $36,499 | 51.5% | $39,373 | 56.1% | | **Consolidated** | **$408,749** | **25.1%** | **$238,977** | **21.6%** | - Selling, general and administrative (SG&A) expenses increased by **37.4% to $206.3 million**, but improved as a percentage of net revenue to **12.7% from 13.6% in the prior year**[197](index=197&type=chunk)[198](index=198&type=chunk) - Income tax expense was **$14.2 million**, resulting in a low effective tax rate of **6.7% for FY2022**, primarily due to **$35.7 million in non-recurring net tax credits** related to the sale of energy-efficient homes[204](index=204&type=chunk) [Liquidity and Capital Resources](index=36&type=section&id=Liquidity%20and%20Capital%20Resources) Operating cash flow increased in FY2022, but overall cash decreased due to significant investing activities for acquisitions and stock repurchases Summary of Cash Flows (Fiscal Years Ended) | (in thousands) | April 2, 2022 | April 3, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $144,224 | $114,031 | | Net cash used in investing activities | ($159,102) | ($23,349) | | Net cash used in financing activities | ($65,095) | ($6,982) | | **Net (decrease) increase in cash** | **($79,973)** | **$83,700** | - The increase in cash used for investing activities was primarily due to the purchases of Commodore and Craftsman[211](index=211&type=chunk) - The increase in cash used for financing activities was mainly related to common stock repurchases and payments of secured term loans[212](index=212&type=chunk) [Critical Accounting Estimates](index=38&type=section&id=Critical%20Accounting%20Estimates) Critical accounting estimates involve significant judgment for warranty reserves, deferred tax asset valuation allowances, and goodwill impairment assessments - Key estimates include warranty reserves, which are sensitive to the average costs incurred to service a home[219](index=219&type=chunk) - The determination of valuation allowances for deferred tax assets requires significant judgment based on forecasts of future taxable profits[220](index=220&type=chunk) - Goodwill and intangible asset valuation involves significant estimates regarding future cash flows, growth rates, and discount rates. The fair value of reporting units would need to decrease by over **450% to indicate impairment**[221](index=221&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=39&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risk is interest rate sensitivity, impacting housing demand, loan portfolio fair values, and Interest Rate Lock Commitments - The company's primary market risk is interest rate sensitivity, which can adversely affect housing demand and financing availability[226](index=226&type=chunk) Impact of 1% Unfavorable Interest Rate Change on Fair Value | Instrument | Reduction in Fair Value (in thousands) | | :--- | :--- | | Consumer loans receivable | $2,592 | | Commercial loans receivable | $421 | | Securitized financings | $883 | - The company had outstanding Interest Rate Lock Commitments (IRLCs) with a notional amount of **$51.7 million as of April 2, 2022**, which are subject to interest rate and fallout risk[228](index=228&type=chunk) [Financial Statements and Supplementary Data](index=39&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section incorporates the Consolidated Financial Statements, auditor's reports, and notes by reference from page F-1 - This item refers to the Consolidated Financial Statements and related notes commencing on page F-1 of the report[229](index=229&type=chunk) [Controls and Procedures](index=40&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management and the independent auditor concluded that disclosure controls and internal control over financial reporting were effective as of April 2, 2022, excluding recently acquired businesses representing approximately 17% of total assets - Management concluded that the company's disclosure controls and procedures were effective as of April 2, 2022[232](index=232&type=chunk) - Management concluded that internal control over financial reporting was effective as of April 2, 2022. This assessment excluded the internal controls of the recently acquired Craftsman and Commodore entities[235](index=235&type=chunk)[236](index=236&type=chunk) - The independent registered public accounting firm, RSM US LLP, provided an unqualified audit opinion on the effectiveness of the company's internal control over financial reporting as of April 2, 2022[237](index=237&type=chunk)[242](index=242&type=chunk) PART III [Directors, Executive Officers and Corporate Governance](index=44&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2022 Proxy Statement - Required information is incorporated by reference from the 2022 Proxy Statement[252](index=252&type=chunk) [Executive Compensation](index=44&type=section&id=Item%2011.%20Executive%20Compensation) Executive compensation information is incorporated by reference from the 2022 Proxy Statement - Required information is incorporated by reference from the 2022 Proxy Statement[254](index=254&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=44&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Security ownership details and equity compensation plan information are incorporated by reference from the 2022 Proxy Statement Equity Compensation Plan Information (as of April 2, 2022) | Plan Category | Securities to be Issued Upon Exercise | Weighted-Average Exercise Price | Securities Remaining for Future Issuance | | :--- | :--- | :--- | :--- | | Approved by stockholders | 230,614 | $131.53 | 283,208 | | Not approved by stockholders | — | — | — | | **Total** | **230,614** | **$131.53** | **283,208** | [Certain Relationships and Related Transactions, and Director Independence](index=45&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on related party transactions and director independence is incorporated by reference from the 2022 Proxy Statement - Required information is incorporated by reference from the 2022 Proxy Statement[258](index=258&type=chunk) [Principal Accounting Fees and Services](index=45&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Principal accounting fees and services information is incorporated by reference from the 2022 Proxy Statement - Required information is incorporated by reference from the 2022 Proxy Statement[259](index=259&type=chunk) PART IV [Exhibits, Financial Statement Schedules](index=46&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists financial statements and exhibits, noting the omission of schedules as information is provided elsewhere - Financial Statements are listed in the Index on page F-1. All schedules have been omitted[262](index=262&type=chunk) [Form 10-K Summary](index=47&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company indicates no Form 10-K summary is provided - None[270](index=270&type=chunk) [Financial Statements and Notes](index=49&type=section&id=Financial%20Statements%20and%20Notes) [Report of Independent Registered Public Accounting Firm](index=50&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) The independent auditor issued an unqualified opinion on the financial statements, identifying the valuation of acquired intangibles as a critical audit matter - The auditor issued an unqualified opinion on the financial statements[278](index=278&type=chunk) - A critical audit matter was identified concerning the valuation of acquired intangible assets from The Commodore Corporation acquisition, which required significant auditor judgment to evaluate management's estimates of future cash flows, royalty rates, and discount rates[284](index=284&type=chunk)[285](index=285&type=chunk) [Consolidated Financial Statements](index=52&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements present Cavco's financial position, showing increased assets, equity, revenue, and net income for FY2022 Key Balance Sheet Data (as of April 2) | (in thousands) | 2022 | 2021 | | :--- | :--- | :--- | | Total Current Assets | $744,117 | $651,799 | | Total Assets | $1,154,972 | $951,833 | | Total Current Liabilities | $294,170 | $237,104 | | Total Stockholders' Equity | $830,455 | $683,640 | Key Income Statement Data (Year Ended) | (in thousands, except EPS) | April 2, 2022 | April 3, 2021 | | :--- | :--- | :--- | | Net Revenue | $1,627,158 | $1,108,051 | | Gross Profit | $408,749 | $238,977 | | Income from Operations | $202,496 | $88,825 | | Net Income Attributable to Stockholders | $197,699 | $76,646 | | Diluted EPS | $21.34 | $8.25 | [Notes to Consolidated Financial Statements](index=56&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed disclosures on accounting policies, significant estimates, acquisitions, segment information, and financial instruments - Revenue from wholesale factory-built housing is recognized upon shipment, while retail sales are recognized upon delivery, setup, and customer acceptance[305](index=305&type=chunk)[307](index=307&type=chunk) - Goodwill is tested annually for impairment, and as of April 2, 2022, all goodwill is attributed to the factory-built housing segment. No impairment was recognized in fiscal years 2020, 2021, or 2022[329](index=329&type=chunk)[330](index=330&type=chunk) - The company is contingently liable under repurchase agreements with financial institutions, with a maximum liability of approximately **$141.0 million as of April 2, 2022**[334](index=334&type=chunk)[425](index=425&type=chunk) - The effective income tax rate for FY2022 was significantly lowered by tax credits, predominantly a **$37.5 million benefit** related to the sale of energy-efficient homes under IRC §45L[417](index=417&type=chunk)[419](index=419&type=chunk) - The company acquired a controlling **70% interest in Craftsman** on July 4, 2021, and purchased The Commodore Corporation on September 24, 2021, for total consideration of **$146.2 million**[463](index=463&type=chunk)[468](index=468&type=chunk)
Cavco(CVCO) - 2022 Q4 - Earnings Call Transcript
2022-05-27 18:49
Financial Data and Key Metrics Changes - Cavco Industries reported record results for fiscal year 2022, with revenue growth of 47% and earnings growth of 119% compared to the previous year [7] - Net revenue for Q4 2022 was $505.5 million, up 64.9% from $306.5 million in Q4 2021, with the acquisition of Commodore contributing $89.2 million to this increase [17] - Consolidated gross profit margin increased to 25.6% in Q4 2022 from 23.1% in the same period last year [20] - Net income attributable to Cavco shareholders rose 112.6% to $53.6 million, with diluted earnings per share increasing to $5.86 from $2.71 [24] Business Line Data and Key Metrics Changes - The factory-built housing segment saw net revenue increase by 69.5% to $488.3 million, driven by the addition of Commodore operations and a 31% increase in average revenue per home sold [18] - Financial services segment net revenue decreased by 7.2% to $17.2 million due to lower interest income and home loan sales income [20] Market Data and Key Metrics Changes - The backlog remained flat sequentially but was significantly up year-over-year, with orders above pre-pandemic levels [10] - Production capacity utilization improved from approximately 75% to over 80%, exceeding pre-pandemic levels [8] Company Strategy and Development Direction - The company is focused on increasing production capacity through new plants and strategic acquisitions, including the Commodore acquisition which added approximately 25% to capacity [12] - There is an emphasis on product simplification and improving staffing and retention to enhance production efficiency [9][43] - The company aims to address the housing supply deficit, particularly in urban areas, and expects to capture market share from traditional site-built housing [16] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing challenges such as labor and supply chain issues, as well as the impact of rising interest rates on affordability [13][14] - Despite these challenges, management remains optimistic about the demand for manufactured housing, particularly as buyers shift from site-built to manufactured homes due to affordability concerns [15] - The company is monitoring market dynamics closely to adjust strategies as needed [16] Other Important Information - The company completed a $100 million stock repurchase authorization, demonstrating its commitment to returning value to shareholders [12] - The effective tax rate increased to 22.1% due to lower tax benefits from stock options compared to the previous year [24] Q&A Session Summary Question: Capacity and Production Outlook - Management indicated that there is potential for continued increases in unit production due to improved productivity and labor management [29] Question: Supply Chain Challenges - Management noted that supply chain issues remain persistent, with logistics and trucking becoming significant challenges [30] Question: Margin Expectations - Management expects a continued impact of approximately 200 basis points on margins from the Commodore acquisition for the next couple of quarters [32] Question: Demand and Cancellations - Management reported that while there has been some shifting in orders due to rising prices and interest rates, overall demand remains strong [34] Question: Demand Consistency Across Channels - Management observed strong demand from community operators, particularly larger REITs, while retail demand remains stable [38] Question: Backlog Mix Changes - Management noted a steady shift towards multi-section homes, driven by affordability challenges [40] Question: Product Simplification Progress - Management confirmed that product simplification efforts are ongoing and are expected to continue to enhance production efficiencies [42] Question: Industry Capacity Increases - Management indicated that while some competitors are adding capacity, the overall increase is limited by staffing and supply chain constraints [45] Question: Consumer Delinquencies and Mortgage Rates - Management reported no significant increase in consumer delinquencies and noted that home-only mortgage rates have recently increased to a range of low-6s to mid-7s [46][47]
Cavco(CVCO) - 2022 Q3 - Quarterly Report
2022-02-06 16:00
Revenue and Sales Performance - Net revenue for factory-built housing increased by $318.1 million, or 42.4%, from $749.9 million in 2020 to $1.1 billion in 2022[130] - The average sales price for factory-built homes increased by 24.4%, from $75,166 per home sold to $93,488[130] - The company experienced a 12.0% increase in industry home shipments in 2021 compared to the prior year[112] - Net factory-built housing revenue per home sold increased by 24.9% and 22.8% for the three and nine months ended January 1, 2022, respectively, compared to the same periods in 2020[132] Backlog and Production Capacity - The backlog as of January 1, 2022, was $1.1 billion, up $633 million, or 134.1%, compared to $472 million at December 26, 2020[122] - The company acquired Commodore, contributing $277 million to the year-over-year increase in backlog[122] - Factory utilization for the third fiscal quarter of 2022 reached approximately 80%, up from 75% in the previous four quarters[120] - Home order rates remain above pre-COVID levels, indicating strong housing demand despite moderation from previous highs[121] - The company operates 26 homebuilding production lines across various states in the U.S.[109] Financial Performance - Gross profit for factory-built housing rose to $104.1 million for the three months ended January 1, 2022, up from $47.0 million in the prior year, representing a 80.3% increase[136] - The gross profit margin for factory-built housing improved to 25.2% for the three months ended January 1, 2022, compared to 17.4% in the prior year[136] - The financial services segment reported a revenue increase of $2.0 million, or 4.0%, from $51.7 million in 2020 to $53.7 million in 2022[130] - Financial services segment revenue increased due to higher home loan sales volume, with unrealized gains on marketable equity securities decreasing to $0.5 million for the three months ended January 1, 2022, down from $1.0 million in the prior year[132] Expenses and Cash Flow - Selling, general and administrative expenses for factory-built housing increased by $25.2 million for the three months ended January 1, 2022, primarily due to the acquisition of Commodore and higher compensation expenses[139] - Cash and cash equivalents at January 1, 2022, were $339.3 million, an increase of $83.7 million compared to $255.6 million at December 26, 2020[151] - Net cash provided by operating activities increased to $126.0 million for the nine months ended January 1, 2022, compared to $91.6 million in the previous year, driven by higher net income and consumer loan sales[151] - Consumer loan originations decreased by $1.2 million to $122.9 million for the nine months ended January 1, 2022, compared to $124.1 million for the same period in 2020[152] - Cash receipts, net of amounts loaned, increased cash by $8.1 million, while the prior period net activity provided an additional $6.4 million in cash[153] - Greater cash was used in the current period for the purchase of Craftsman and Commodore, indicating strategic growth acquisitions[154] - Net cash used in financing activities was primarily for the repurchase of common stock and the full payment of secured term loans as of January 1, 2022[155] Strategic Outlook and Challenges - The company plans to evaluate potential acquisitions and strategic investments to support growth, leveraging its strong cash position[148] - The company continues to face challenges related to labor availability and supply chain disruptions affecting production efficiency[124] Tax and Accounting - The effective tax rate for the three months ended January 1, 2022, was a benefit of (35.1)%, significantly lower than 23.9% in the prior year, due to estimated non-recurring net tax credits[143] - There have been no significant changes to critical accounting policies during the nine months ended January 1, 2022, compared to those disclosed in the previous Form 10-K[156] - There were no material changes to contractual obligations as set forth in the Annual Report on Form 10-K[155] - There have been no material changes from the quantitative and qualitative disclosures about market risk previously disclosed in the Form 10-K[160]
Cavco(CVCO) - 2022 Q3 - Earnings Call Transcript
2022-02-04 23:08
Financial Data and Key Metrics Changes - Cavco Industries reported record revenues of $431.7 million for Q3 2022, a 49.5% increase year-over-year from $288.8 million in Q3 2021 [10] - Diluted EPS rose to $8.57 compared to $2.12 in the same quarter last year, with a significant impact from non-recurring tax credits [5][16] - The effective income tax rate was a benefit of 35.1% for Q3 2022, influenced by a non-recurring tax benefit of $34.4 million [14][15] Business Line Data and Key Metrics Changes - The factory-built housing segment saw net revenues increase by 52.7% to $413.6 million, driven by the acquisition of Commodore and a 24.4% increase in average revenue per home sold [10][12] - Total units sold increased by 22.8% to 4,424 units from 3,603 units in Q3 2021 [10] - Financial services segment net revenues increased by 0.6% to $18.1 million, attributed to a higher number of insurance policies and home loan sales [11] Market Data and Key Metrics Changes - The backlog remained consistent at $1.1 billion, representing 36 to 38 weeks of production, indicating strong demand despite higher production rates [6] - Average selling prices on a consolidated basis were slightly down compared to Q2 2022, influenced by the mix of retail and wholesale sales [7][12] Company Strategy and Development Direction - The company plans to start operations at a new facility in Glendale, Arizona, which will double park model capacity [9] - The integration of Commodore is progressing well, with expectations for improved margins as lower-priced homes in backlog are sold [9][41] - The company is focused on operational improvements and optimizing customer relationships to capture synergies from the Commodore acquisition [30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining production momentum despite ongoing labor challenges and supply chain inefficiencies [8][28] - The demand for manufactured housing remains strong, driven by demographic factors and a significant housing deficit [8][35] - Rising interest rates may pose short-term pressures, but the impact on manufactured housing is expected to be less severe compared to site-built homes [61] Other Important Information - Selling, general, and administrative expenses increased to $60.3 million, primarily due to the addition of Commodore and higher incentive wages [14] - The cash balance decreased to $267.3 million, primarily due to the acquisition of Commodore and increased inventory purchases [17] Q&A Session Summary Question: Contribution of Commodore in the quarter - Management confirmed that Commodore contributed $73 million in revenue, aligning with expectations for capacity and shipment [21][22] Question: Demand and order rates - Management clarified that order rates remain strong, with seasonal patterns observed but still above pre-pandemic levels [23][24] Question: Gross margin impacts - Management indicated that lower lumber prices benefited margins, while selling Commodore's price-protected homes in backlog had a negative impact [25][26] Question: Capacity utilization and unit growth - Management expressed optimism about maintaining unit growth and production capacity, with current utilization at 80% [27][28] Question: Synergies from Commodore acquisition - Management noted potential operational synergies from the acquisition, focusing on best practices and technology improvements [30] Question: Demand by channel and demographic - Management observed strong demand across both community and dealer channels, with a shift towards higher-end manufactured homes [35] Question: Credit quality and lending - Management reported stable credit quality, with applications coming from higher FICO score customers [56] Question: Raw material challenges - Management acknowledged ongoing challenges with raw material supply, affecting efficiency but noted minimal shutdowns [64] Question: Energy tax credit - Management explained the identification and utilization of energy tax credits as part of a continuous evaluation process [65] Question: Share repurchases - Management confirmed that share repurchases remain a priority, with $9 million repurchased in the quarter [67]
Cavco(CVCO) - 2022 Q2 - Earnings Call Transcript
2021-11-05 19:42
Financial Data and Key Metrics Changes - Cavco Industries reported a record quarter with revenues increasing approximately 39% year-over-year and diluted EPS up nearly 150% [8] - The company achieved a record housing gross margin of 24.1%, attributed to a 13% sequential increase in average selling price and favorable lumber pricing [8][10] - Consolidated gross profit as a percentage of net revenue was 25%, up from 20.8% in the same period last year, marking a 420 basis point improvement [22] Business Line Data and Key Metrics Changes - Within the factory-built housing segment, net revenue increased 42% to $342 million compared to $241 million in the prior year quarter, driven by a 35.3% uplift in average revenue per home sold [19] - The Financial Services segment net revenue increased 2.6% to $17.5 million, primarily due to higher home loan sales volume and servicing income [21] Market Data and Key Metrics Changes - Demand for Cavco's products remained strong, with backlogs growing to approximately $1.1 billion, representing about 40 to 42 weeks of production [9] - Active utilization for Q2 2022 was consistent with Q1 2022 at 75%, higher than the 70% utilization rate in Q2 2021 [21] Company Strategy and Development Direction - The company is focused on addressing affordable housing issues and has made strategic investments to improve production efficiency, such as a 20% throughput improvement in Fort Worth [14][15] - The acquisition of Commodore Homes is expected to enhance geographic expansion and increase capacity by 25% [16][17] Management's Comments on Operating Environment and Future Outlook - Management noted ongoing supply chain challenges affecting production, but expressed optimism about stabilizing and growing the workforce [11][12] - The company anticipates continued strong demand and believes it can sell every house it can produce, despite labor and supply constraints [10][11] Other Important Information - The cash balance decreased to $224.3 million, down $98 million from six months earlier, primarily due to the acquisition of Commodore Homes and higher inventory purchases [29] - Stockholders' equity increased to approximately $733.1 million as of October 2, up $49.5 million from April 3 [33] Q&A Session Summary Question: Sustainability of gross margin levels - Management indicated that while there was a temporary drop in lumber prices, predicting future gross margins remains challenging due to fluctuating costs [34][35] Question: Expectations for production levels - Management noted that supply chain issues remain a key concern, but they are seeing progress in stabilizing the workforce [38][39] Question: Demand environment by channel - Demand is strong across all channels, with the company capturing market share from site-built homes due to challenges faced by traditional builders [46][48] Question: Backlog management - Management explained that they have been conservative in reporting backlog numbers, excluding some long-term orders to maintain a high-quality backlog [50][53] Question: Commodore acquisition impact - The acquisition had a minimal impact on gross margin in the current quarter due to purchase accounting, but margins are expected to improve as inventory is sold through [54][55] Question: SEC complaint status - Management provided an update on the SEC complaint, indicating that they filed a motion to dismiss and are prepared for litigation if necessary [70][71]
Cavco(CVCO) - 2022 Q2 - Quarterly Report
2021-11-04 16:00
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended October 2, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 000-08822 CAVCO INDUSTRIES INC. (Exact name of registrant as specified in its charter) Delaware 56-2405642 (State or other jurisdic ...
Cavco(CVCO) - 2022 Q1 - Earnings Call Transcript
2021-08-08 16:15
Financial Data and Key Metrics Changes - Revenues increased approximately 30% year-over-year, reaching $330.4 million compared to $254.8 million in the prior year's first quarter [7][15] - Diluted EPS was up about 60%, coming in at $2.92 versus $1.80 in the first quarter of 2021 [7][20] - Consolidated gross profit as a percentage of net revenue was 22.4%, up from 21.7% in the same period last year [18] Business Line Data and Key Metrics Changes - In the factory-built housing segment, net revenue increased 31.2% to $312.3 million from $238.1 million in the prior year quarter, driven by an 18.7% increase in average revenue for homes sold [16] - Financial services segment net revenue increased 8.4% to $18.1 million, mainly due to higher loan sales volume and servicing income [17] Market Data and Key Metrics Changes - Backlogs grew to $792 million, representing approximately 40 weeks of production, with 80% of the backlog growth attributed to high demand and 20% due to reduced production over the past five quarters [12][13] Company Strategy and Development Direction - The company announced the acquisition of Commodore Homes for $140 million, which is expected to expand its footprint into the northeast and increase unit shipments by approximately 25% [8] - Investments in existing plants, such as the Fort Worth plant expansion, are aimed at increasing capacity by about 20% [8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in operational execution and noted that demand remains strong, with backlogs providing a positive outlook [13] - The company is addressing persistent labor and supply challenges while focusing on improving retention and building skills [11] Other Important Information - The company completed its first corporate responsibility report, emphasizing accountability and improvement in stakeholder impact [26] - Cash balance increased to $329.8 million from $322.3 million three months earlier, primarily due to net income and changes in working capital [22] Q&A Session Summary Question: Raw material availability and pain points - Management acknowledged ongoing challenges with raw material availability, particularly with inputs manufactured in the U.S. and logistics disruptions for imports [28][29] Question: Update on automation efforts - Management highlighted optimism regarding automation and process improvements, particularly from the Commodore acquisition [30][31] Question: Additional capacity from plants and acquisition - The Commodore acquisition is expected to provide a significant increase in unit production, estimated at a 25% increase [34] Question: Production increase despite supply chain headwinds - Management remains optimistic about increasing production and addressing labor challenges, aiming to surpass pre-pandemic levels [40][41] Question: Impact of ASP increase - The increase in average selling prices was primarily due to pricing adjustments to cover higher input costs, with minimal impact from product mix [41] Question: Timing for closing the Commodore deal - The acquisition is expected to close in the fiscal quarter of the last calendar quarter, pending regulatory filings [46] Question: Backlog pricing and potential margin expansion - Management indicated that lower input costs would lead to margin expansion, as pricing adjustments have been made to the backlog [51] Question: Labor availability and hiring conditions - Management expressed cautious optimism about improving labor availability, citing job fairs and increased wages as factors [53][55] Question: Realistic production goals post-acquisition - Management indicated that achieving production levels around 4,000 homes per quarter is realistic based on historical performance [56][58] Question: Share repurchase authorization - The company has a remaining authorization of approximately $86 million from a $100 million buyback program initiated last October [59]