Cavco(CVCO) - 2024 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Consolidated Balance Sheets The Consolidated Balance Sheets provide a snapshot of the company's financial position as of September 30, 2023, and April 1, 2023, detailing assets, liabilities, and stockholders' equity, showing an increase in total assets and stockholders' equity Consolidated Balance Sheet Highlights (September 30, 2023 vs. April 1, 2023) | Metric | Sep 30, 2023 ($ in thousands) | Apr 1, 2023 ($ in thousands) | |:----------------------------|:------------------------------|:-----------------------------| | Total Current Assets | 875,443 | 804,579 | | Total Assets | 1,368,791 | 1,307,975 | | Total Current Liabilities | 305,475 | 293,391 | | Total Stockholders' Equity | 1,019,255 | 976,286 | Consolidated Statements of Comprehensive Income The Consolidated Statements of Comprehensive Income show the company's financial performance for the three and six months ended September 30, 2023, compared to the prior year, highlighting significant decreases in net revenue, gross profit, and net income attributable to stockholders Consolidated Statements of Comprehensive Income Highlights (Three Months Ended) | Metric | Sep 30, 2023 ($ in thousands) | Oct 1, 2022 ($ in thousands) | Change ($) | Change (%) | |:----------------------------------------|:------------------------------|:-----------------------------|:-----------|:-----------| | Net revenue | 452,030 | 577,392 | (125,362) | (21.7)% | | Gross profit | 106,957 | 157,599 | (50,642) | (32.1)% | | Income from operations | 45,451 | 90,705 | (45,254) | (49.9)% | | Net income attributable to stockholders | 41,539 | 74,116 | (32,577) | (43.9)% | | Basic EPS | $4.80 | $8.32 | ($3.52) | (42.3)% | | Diluted EPS | $4.76 | $8.25 | ($3.49) | (42.3)% | Consolidated Statements of Comprehensive Income Highlights (Six Months Ended) | Metric | Sep 30, 2023 ($ in thousands) | Oct 1, 2022 ($ in thousands) | Change ($) | Change (%) | |:----------------------------------------|:------------------------------|:-----------------------------|:-----------|:-----------| | Net revenue | 927,905 | 1,165,730 | (237,825) | (20.4)% | | Gross profit | 224,836 | 302,323 | (77,487) | (25.6)% | | Income from operations | 101,650 | 169,293 | (67,643) | (40.0)% | | Net income attributable to stockholders | 87,896 | 133,718 | (45,822) | (34.3)% | | Basic EPS | $10.15 | $15.01 | ($4.86) | (32.4)% | | Diluted EPS | $10.05 | $14.88 | ($4.83) | (32.5)% | Consolidated Statements of Cash Flows The Consolidated Statements of Cash Flows detail the cash generated and used by operating, investing, and financing activities for the six months ended September 30, 2023, showing a net increase in cash, with a decrease in operating cash flow but a significant reduction in cash used for investing activities Consolidated Statements of Cash Flows Highlights (Six Months Ended) | Metric | Sep 30, 2023 ($ in thousands) | Oct 1, 2022 ($ in thousands) | Change ($) | |:--------------------------------------------------|:------------------------------|:-----------------------------|:-----------| | Net cash provided by operating activities | 160,200 | 162,942 | (2,742) | | Net cash used in investing activities | (6,421) | (34,933) | 28,512 | | Net cash used in financing activities | (42,240) | (39,224) | (3,016) | | Net increase in cash, cash equivalents & restricted cash | 111,539 | 88,785 | 22,754 | | Cash, cash equivalents & restricted cash at end of period | 395,029 | 348,119 | 46,910 | Notes to Consolidated Financial Statements (Unaudited) These notes provide detailed disclosures supporting the unaudited consolidated financial statements, covering accounting policies, segment information, acquisitions, and specific financial instrument details, offering context to the company's financial performance and position 1. Basis of Presentation These notes outline the basis of financial statement preparation, segment operations, and recent acquisition details - The financial statements are prepared in accordance with SEC rules for Form 10-Q, condensing certain GAAP disclosures[27] - The Company operates in two segments: factory-built housing (wholesale and retail) and financial services (manufactured housing consumer finance and insurance)[56] - Executed an amendment to acquire the remaining 30% ownership of Craftsman Homes, LLC for cash on December 31, 2023, reclassifying the noncontrolling interest as mandatorily redeemable[58] 2. Revenue from Contracts with Customers This section details the breakdown of net revenue by segment and source for the reported periods Net Revenue by Segment and Source (Six Months Ended) | Source | Sep 30, 2023 ($ in thousands) | Oct 1, 2022 ($ in thousands) | |:----------------------------------------|:------------------------------|:-----------------------------| | Factory-built housing: Home sales | 849,784 | 1,099,777 | | Factory-built housing: Delivery, setup & other | 41,391 | 32,422 | | Financial services: Insurance commissions | 1,916 | 2,426 | | Financial services: All other sources | 34,814 | 31,105 | | Total Net Revenue | 927,905 | 1,165,730 | 3. Restricted Cash This note provides a breakdown of restricted cash, distinguishing between current and non-current portions Restricted Cash Composition ($ in thousands) | Category | Sep 30, 2023 | Apr 1, 2023 | |:----------------------------------------------|:-------------|:------------|\ | Cash related to CountryPlace customer payments | 15,567 | 11,123 | | Other restricted cash | 2,198 | 940 | | Total Restricted Cash | 17,765 | 12,063 | | Less current portion | (17,180) | (11,728) | | Non-current Restricted Cash | 585 | 335 | 4. Investments This section details the composition of the company's investments and reports net investment gains or losses Investments Composition ($ in thousands) | Category | Sep 30, 2023 | Apr 1, 2023 | |:----------------------------------|:-------------|:------------| | Available-for-sale debt securities | 19,821 | 18,555 | | Marketable equity securities | 10,121 | 9,989 | | Non-marketable equity investments | 4,923 | 5,073 | | Total Investments | 34,865 | 33,617 | | Less short-term investments | (14,358) | (14,978) | | Long-term Investments | 20,507 | 18,639 | Net Investment Gains/Losses on Marketable Equity Securities (Six Months Ended) | Metric | Sep 30, 2023 ($ in thousands) | Oct 1, 2022 ($ in thousands) | |:------------------------------------------------|:------------------------------|:-----------------------------| | Net (loss) gain recognized during the period | 275 | (2,575) | | Less: Net (gain) loss recognized on securities sold | (130) | 290 | | Unrealized (loss) gain recognized on securities still held | 145 | (2,285) | 5. Inventories This note provides a breakdown of inventory components, including raw materials, work in process, and finished goods Inventories Composition ($ in thousands) | Category | Sep 30, 2023 | Apr 1, 2023 | |:----------------|:-------------|:------------| | Raw materials | 85,663 | 92,045 | | Work in process | 28,290 | 29,022 | | Finished goods | 130,523 | 142,083 |\ | Total | 244,476 | 263,150 | 6. Consumer Loans Receivable This section details the composition of consumer loans receivable, including an analysis of the allowance for loan losses and geographic concentrations Consumer Loans Receivable Summary ($ in thousands) | Category | Sep 30, 2023 | Apr 1, 2023 | |:----------------------------------------|:-------------|:------------| | Loans held for investment, securitized | 18,756 | 21,000 | | Loans held for investment | 13,045 | 13,117 | | Loans held for sale | 5,208 | 10,846 | | Construction advances | 84 | 706 | | Deferred financing fees and other, net | (312) | (368) | | Allowance for loan losses | (1,045) | (1,153) | | Total Consumer Loans Receivable, net| 35,736 | 44,148 | | Less current portion | (10,503) | (17,019) | | Long-term Consumer Loans Receivable, net | 25,233 | 27,129 | Allowance for Consumer Loan Losses (Six Months Ended, $ in thousands) | Metric | Sep 30, 2023 | Oct 1, 2022 | |:-------------------------------------|:-------------|:------------| | Allowance at beginning of period | 1,153 | 2,115 | | Change in estimated loan losses, net | (108) | (376) | | Allowance at end of period | 1,045 | 1,739 | - 40% of consumer loans receivable concentrated in Texas and 14% in Florida as of September 30, 2023[68] 7. Commercial Loans Receivable This note provides a summary of commercial loans receivable, including their characteristics and geographic concentrations Commercial Loans Receivable Summary ($ in thousands) | Category | Sep 30, 2023 | Apr 1, 2023 | |:----------------------------------------|:-------------|:------------| | Loans receivable | 96,148 | 103,726 | | Allowance for loan losses | (1,497) | (1,586) | | Deferred financing fees, net | (183) | (163) | | Total Commercial Loans Receivable, net| 94,468 | 101,977 | | Less current portion | (50,542) | (44,054) | | Long-term Commercial Loans Receivable, net | 43,926 | 57,923 | Commercial Loans Receivable Characteristics | Metric | Sep 30, 2023 | Apr 1, 2023 | |:-------------------------------------|:-------------|:------------| | Weighted average contractual interest rate | 7.5% | 7.6% | | Weighted average months outstanding | 11 | 9 | - Concentrations of commercial loans receivable in New York (16%) and California (11%) as of September 30, 2023[71] - No commercial loans were considered watch list or nonperforming as of September 30, 2023, or April 1, 2023[95] 8. Property, Plant and Equipment, net This section details the composition of property, plant, and equipment, along with depreciation expense for the periods Property, Plant and Equipment, net ($ in thousands) | Category | Sep 30, 2023 | Apr 1, 2023 | |:--------------------------------|:-------------|:------------| | Buildings and improvements | 169,331 | 167,291 | | Machinery and equipment | 75,381 | 76,826 | | Land | 39,822 | 39,822 | | Construction in progress | 8,228 | 5,472 | | Accumulated depreciation | (69,098) | (61,133) | | Total PP&E, net | 223,664 | 228,278 | Depreciation Expense ($ in millions) | Period | Sep 30, 2023 | Oct 1, 2022 | |:-------------------------------------|:-------------|:------------| | Three months ended | $4.3 | $3.8 | | Six months ended | $8.4 | $7.3 | 9. Leases This note outlines the company's lease balances and the present value of minimum lease payments for operating and finance leases Lease Balances ($ in thousands) | Category | Sep 30, 2023 | Apr 1, 2023 | |:--------------------------------|:-------------|:------------| | Operating lease ROU assets | 34,413 | 26,755 | | Finance lease assets | 6,044 | 6,088 | | Total Lease Assets | 40,457 | 32,843 | | Current Operating lease liabilities | 5,027 | 6,262 | | Current Finance lease liabilities | 78 | 347 | | Non-current Operating lease liabilities | 30,529 | 21,678 | | Non-current Finance lease liabilities | 6,127 | 5,896 | | Total Lease Liabilities | 41,761 | 34,183 | Present Value of Minimum Lease Payments (Fiscal 2024-Thereafter, $ in thousands) | Fiscal Year | Operating Leases | Finance Leases | Total | |:------------------------|:-----------------|:---------------|:------| | Remainder of fiscal 2024 | 3,254 | 178 | 3,432 | | Fiscal 2025 | 6,582 | 356 | 6,938 | | Fiscal 2026 | 6,160 | 356 | 6,516 | | Fiscal 2027 | 3,655 | 356 | 4,011 | | Fiscal 2028 | 3,141 | 356 | 3,497 | | Fiscal 2029 | 3,072 | 356 | 3,428 | | Thereafter | 18,140 | 10,230 | 28,370| | Total Payments | 44,004 | 12,188 | 56,192| | Less: Interest | (8,448) | (5,983) | (14,431)| | Present Value | 35,556 | 6,205 | 41,761| 10. Goodwill and Other Intangibles This section details the composition of goodwill and other intangible assets, including amortization expense and acquisition-related adjustments Goodwill and Other Intangibles, net ($ in thousands) | Category | Sep 30, 2023 Gross Carrying Amount | Sep 30, 2023 Net Carrying Amount | Apr 1, 2023 Gross Carrying Amount | Apr 1, 2023 Net Carrying Amount | |:------------------------------|:-----------------------------------|:---------------------------------|:----------------------------------|:--------------------------------| | Goodwill | 116,015 | 116,015 | 114,547 | 114,547 | | Trademarks and trade names | 16,980 | 16,980 | 16,980 | 16,980 | | State insurance licenses | 1,100 | 1,100 | 1,100 | 1,100 | | Customer relationships | 15,000 | 10,384 | 16,900 | 11,082 | | Other finite-lived intangibles| 1,114 | 541 | 1,114 | 628 | | Total | 150,209 | 145,020 | 150,641 | 144,337 | - Goodwill increased by $1.0 million due to fair value adjustments for the Solitaire Homes acquisition[78] Amortization Expense on Intangible Assets ($ in millions) | Period | Sep 30, 2023 | Oct 1, 2022 | |:-------------------|:-------------|:------------| | Three months ended | $0.4 | $0.5 | | Six months ended | $0.8 | $1.0 | 11. Accrued Expenses and Other Current Liabilities This note provides a breakdown of accrued expenses and other current liabilities, including salaries, customer deposits, and warranties Accrued Expenses and Other Current Liabilities ($ in thousands) | Category | Sep 30, 2023 | Apr 1, 2023 | |:---------------------------|:-------------|:------------| | Salaries, wages and benefits | 45,250 | 47,100 | | Customer deposits | 43,477 | 45,193 | | Estimated warranties | 33,015 | 31,368 | | Unearned insurance premiums| 30,449 | 27,901 | | Accrued volume rebates | 23,925 | 22,858 | | Other | 88,264 | 88,241 | | Total | 264,380 | 262,661 | 12. Warranties This section details the activity in the liability for estimated warranties, showing changes over the reported periods Activity in Liability for Estimated Warranties (Six Months Ended, $ in thousands) | Metric | Sep 30, 2023 | Oct 1, 2022 | |:-------------------------------------|:-------------|:------------| | Balance at beginning of period | 31,368 | 26,250 | | Charged to costs and expenses | 25,615 | 28,627 | | Payments and deductions | (23,968) | (24,036) | | Balance at end of period | 33,015 | 30,841 | 13. Other Liabilities This note outlines the composition of other liabilities, including finance lease payables and mandatorily redeemable noncontrolling interest Secured Financings and Other Obligations ($ in thousands) | Category | Sep 30, 2023 | Apr 1, 2023 | |:----------------------------------------|:-------------|:------------| | Finance lease payables | 6,205 | 6,243 | | Mandatorily redeemable noncontrolling interest | 2,442 | 2,268 | | Other secured financing | 2,067 | 2,379 | | Total | 10,714 | 10,890 | | Less current portion | (2,922) | (3,070) | | Long-term Other Liabilities | 7,792 | 7,820 | 14. Debt This section details the company's debt structure, including its revolving credit facility and compliance with financial covenants - The company has a $50 million revolving credit facility expiring in 2027, with no outstanding borrowings as of September 30, 2023[106][129] - The company was in compliance with all financial covenants (Consolidated Total Leverage Ratio and Consolidated EBITDA) under the Credit Agreement[106][129] 15. Reinsurance and Insurance Loss Reserves This note provides information on the effects of reinsurance on premiums and the activity in reserves for claims and claims expense Effects of Reinsurance on Premiums (Six Months Ended, $ in thousands) | Metric | Sep 30, 2023 Written | Sep 30, 2023 Earned | Oct 1, 2022 Written | Oct 1, 2022 Earned | |:---------------------------|:---------------------|:--------------------|:--------------------|:-------------------|\ | Direct premiums | 20,446 | 18,047 | 14,896 | 14,388 | | Assumed premiums—nonaffiliated | 19,305 | 17,421 | 17,846 | 16,168 | | Ceded premiums—nonaffiliated | (12,565) | (12,565) | (8,643) | (8,643) | | Total | 27,186 | 22,903 | 24,099 | 21,913 | Activity in Reserve for Claims and Claims Expense (Six Months Ended, $ in thousands) | Metric | Sep 30, 2023 | Oct 1, 2022 | |:-------------------------------------|:-------------|:------------| | Balance at beginning of period | 10,939 | 8,149 | | Net incurred losses during the period| 19,663 | 16,586 | | Net claim payments during the period | (21,448) | (16,945) | | Balance at end of period | 9,154 | 7,790 | - Risk of loss is limited to $0.2 million per claim on typical policies after ceding $0.2 million of risk, with catastrophic loss coverage up to $100 million for occurrences exceeding $3.0 million[131] 16. Commitments and Contingencies This section details the company's commitments and contingencies, including repurchase agreements, construction-period mortgages, and legal matters - Maximum liability under repurchase agreements with financial institutions was approximately $157 million at September 30, 2023, down from $178 million at April 1, 2023[132] - Reserve for repurchase commitments decreased to $3.7 million at September 30, 2023, from $5.2 million at April 1, 2023[132] Construction-Period Mortgages ($ in thousands) | Metric | Sep 30, 2023 | Apr 1, 2023 | |:--------------------------------|:-------------|:------------| | Construction loan contract amount | 371 | 2,214 | | Cumulative advances | (84) | (706) | | Net | 287 | 1,508 | - Outstanding Interest Rate Lock Commitments (IRLCs) totaled $31.6 million notional amount as of September 30, 2023[133] - Management does not believe loss contingencies from pending legal matters are likely to have a material adverse effect on financial position, liquidity, or results of operations[134] 17. Stockholders' Equity and Redeemable Noncontrolling Interest This note details the changes in stockholders' equity and redeemable noncontrolling interest for the reported period Changes in Stockholders' Equity (Six Months Ended Sep 30, 2023, $ in thousands) | Metric | Common Stock Shares | Common Stock Amount | Treasury Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Total Equity | Redeemable Noncontrolling Interest | |:----------------------------------------|:--------------------|:--------------------|:---------------|:---------------------------|:------------------|:-------------------------------------|:-------------|:-----------------------------------| | Balance, April 1, 2023 | 9,337,125 | 93 | (164,452) | 271,950 | 869,310 | (615) | 976,286 | 1,219 | | Net income | — | — | — | — | 87,896 | — | 87,896 | 88 | | Common stock repurchases | — | — | (47,194) | — | — | — | (47,194) | — | | Conversion to mandatorily redeemable noncontrolling interest | — | — | — | — | — | — | — | (974) | | Balance, September 30, 2023 | 9,356,421 | 94 | (211,646) | 274,204 | 957,206 | (603) | 1,019,255| — | 18. Earnings Per Share This section provides a breakdown of basic and diluted earnings per share, along with the corresponding weighted average shares Earnings Per Share (Three Months Ended) | Metric | Sep 30, 2023 | Oct 1, 2022 | |:----------------------------------------|:-------------|:------------| | Net income attributable to stockholders | $41,539 | $74,116 | | Basic EPS | $4.80 | $8.32 | | Diluted EPS | $4.76 | $8.25 | | Basic Weighted average shares | 8,656,537 | 8,903,703 | | Diluted Weighted average shares | 8,731,419 | 8,978,997 | Earnings Per Share (Six Months Ended) | Metric | Sep 30, 2023 | Oct 1, 2022 | |:----------------------------------------|:-------------|:------------| | Net income attributable to stockholders | $87,896 | $133,718 | | Basic EPS | $10.15 | $15.01 | | Diluted EPS | $10.05 | $14.88 | | Basic Weighted average shares | 8,663,430 | 8,910,933 | | Diluted Weighted average shares | 8,742,734 | 8,983,425 | 19. Fair Value Measurements This note presents a comparison of the book value and estimated fair value of the company's financial instruments Book Value vs. Estimated Fair Value of Financial Instruments (Sep 30, 2023, $ in thousands) | Financial Instrument | Book Value | Estimated Fair Value | |:---------------------------------|:-----------|:---------------------| | Available-for-sale debt securities | 19,821 | 19,821 | | Marketable equity securities | 10,121 | 10,121 | | Non-marketable equity investments| 4,923 | 4,923 | | Consumer loans receivable | 35,736 | 38,537 | | Commercial loans receivable | 94,468 | 86,328 | | Other secured financing | (2,067) | (1,972) | 20. Related Party Transactions This section details sales to and receivables from related parties for the reported periods Sales to Related Parties ($ in millions) | Period | Sep 30, 2023 | Oct 1, 2022 | |:-------------------|:-------------|:------------| | Three months ended | $16.0 | $20.1 | | Six months ended | $31.0 | $37.3 | - Receivables from related parties included $6.0 million of accounts receivable and $4.9 million of commercial loans outstanding as of September 30, 2023[168] 21. Acquisition This note provides details on the acquisition of Solitaire Homes, including the provisional fair values of acquired assets and liabilities - Acquired Solitaire Homes on January 3, 2023, for $110.8 million, including four manufacturing facilities and twenty-two retail locations[140] Provisional Fair Values of Acquired Assets and Liabilities (as of Jan 3, 2023, adjusted Sep 30, 2023, $ in thousands) | Category | Original Provisional | Adjustments | Adjusted Provisional | |:----------------------------------------|:---------------------|:------------|:---------------------| | Cash | 5,119 | (77) | 5,042 | | Investments | 334 | — | 334 | | Accounts receivable | 3,536 | (778) | 2,758 | | Inventories | 58,045 | (54) | 57,991 | | Property, plant and equipment | 36,109 | (70) | 36,039 | | Other current assets | 1,519 | — | 1,519 | | Intangible assets | 3,400 | — | 3,400 | | Total identifiable assets acquired | 108,062 | (979) | 107,083 | | Accounts payable and accrued liabilities| 11,251 | 21 | 11,272 | | Net identifiable assets acquired | 96,811 | (1,000) | 95,811 | | Goodwill | 13,970 | 1,000 | 14,970 | | Net assets acquired | 110,781 | — | 110,781 | - Goodwill increased by $1.0 million due to fair value adjustments during the measurement period[78][141] 22. Business Segment Information This section provides a breakdown of net revenue, income before income taxes, and total assets by the company's operating segments Net Revenue by Segment (Six Months Ended, $ in thousands) | Segment | Sep 30, 2023 | Oct 1, 2022 | |:------------------------|:-------------|:------------| | Factory-built housing | 891,175 | 1,132,199 | | Financial services | 36,730 | 33,531 | | Total Net Revenue | 927,905 | 1,165,730 | Income Before Income Taxes by Segment (Six Months Ended, $ in thousands) | Segment | Sep 30, 2023 | Oct 1, 2022 | |:------------------------|:-------------|:------------| | Factory-built housing | 112,051 | 170,146 | | Financial services | 287 | 1,975 | | Total Income Before Taxes | 112,338 | 172,121 | Total Assets by Segment (as of, $ in thousands) | Segment | Sep 30, 2023 | Apr 1, 2023 | |:------------------------|:-------------|:------------| | Factory-built housing | 1,168,127 | 1,107,555 | | Financial services | 200,664 | 200,420 | | Total Assets | 1,368,791| 1,307,975 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, including an overview of the business, industry outlook, and detailed analysis of revenue, gross profit, expenses, and liquidity Forward-Looking Statements This section outlines the nature of forward-looking statements and the factors that could influence future financial results - Forward-looking statements discuss financial performance, operating results, strategy, liquidity, industry outlook, economic conditions, potential acquisitions, and legal risks[124] - Factors affecting results include manufactured housing and site-built housing industries, interest rates, inflation, labor and raw material costs, governmental regulations, and financing availability[124][146] Introduction This section serves as an introduction to management's discussion and analysis, referencing the unaudited consolidated financial statements - This section should be read in conjunction with the Company's unaudited Consolidated Financial Statements and related Notes in Part I, Item 1[147] Company Overview This section provides an overview of the company's business, including its product offerings, brand names, distribution channels, and financial services segment - Cavco Industries, Inc. designs and produces factory-built homes, park model RVs, vacation cabins, and factory-built commercial structures[148] - Homes are marketed under various brand names including Cavco, Fleetwood, Palm Harbor, and Solitaire, and distributed through independent and company-owned retailers (68 U.S. retail stores, 41 in Texas)[148][177] - Financial services segment includes CountryPlace Acceptance Corp. (mortgage seller/servicer and GNMA issuer) and Standard Casualty Company (property and casualty insurance for manufactured homes)[148] Company and Industry Outlook This section discusses the company's strategic outlook, industry trends, and factors influencing future performance, including market demographics and backlog - Manufactured housing consumer demographics (young adults and 55+) are growing, with 'first-time' and 'move-up' buyers being key segments[150] - Industry home shipments decreased by 27.0% through August 2023 due to higher interest rates and inflationary pressures[178] - The company maintains a conservative cost structure and strong balance sheet to capitalize on market opportunities and challenges[151] - Efforts are focused on developing secondary market opportunities for manufactured home-only loans and expanding home-only lending programs to grow sales and reduce exposure to independent lenders[152][180] - Backlog at September 30, 2023, was $170 million, a decrease of $481 million from October 1, 2022[154] - Fluctuations in material and labor costs, and potential shortages, may affect gross margins and production efficiency, though current period has not seen significant production halts[182] Results of Operations Net Revenue This section analyzes the company's net revenue by segment, detailing changes in factory-built housing and financial services revenue Net Revenue by Segment (Three Months Ended, $ in thousands) | Segment | Sep 30, 2023 | Oct 1, 2022 | Change ($) | Change (%) | |:------------------------|:-------------|:------------|:-----------|:-----------| | Factory-built housing | 434,066 | 559,602 | (125,536) | (22.4)% | | Financial services | 17,964 | 17,790 | 174 | 1.0% | | Total Net Revenue | 452,030 | 577,392 | (125,362)| (21.7)% | Net Revenue by Segment (Six Months Ended, $ in thousands) | Segment | Sep 30, 2023 | Oct 1, 2022 | Change ($) | Change (%) | |:------------------------|:-------------|:------------|:-----------|:-----------| | Factory-built housing | 891,175 | 1,132,199 | (241,024) | (21.3)% | | Financial services | 36,730 | 33,531 | 3,199 | 9.5% | | Total Net Revenue | 927,905 | 1,165,730| (237,825)| (20.4)% | - Factory-built housing net revenue decreased due to lower home sales volume and selling prices, partially offset by the Solitaire Homes acquisition[157] - Financial services net revenue increased primarily due to more insurance policies in force, partially offset by lower interest income from acquired consumer loan portfolios[158] Gross Profit This section analyzes the company's gross profit by segment, including gross profit percentages and factors affecting changes Gross Profit by Segment (Three Months Ended, $ in thousands) | Segment | Sep 30, 2023 | Oct 1, 2022 | Change ($) | Change (%) | |:------------------------|:-------------|:------------|:-----------|:-----------| | Factory-built housing | 100,507 | 149,665 | (49,158) | (32.8)% | | Financial services | 6,450 | 7,934 | (1,484) | (18.7)% | | Total Gross Profit | 106,957 | 157,599 | (50,642)| (32.1)% | Gross Profit as % of Net Revenue (Three Months Ended) | Segment | Sep 30, 2023 | Oct 1, 2022 | Change (%) | |:------------------------|:-------------|:------------|:-----------| | Consolidated | 23.7% | 27.3% | (3.6)% | | Factory-built housing | 23.2% | 26.7% | (3.5)% | | Financial services | 35.9% | 44.6% | (8.7)% | Gross Profit by Segment (Six Months Ended, $ in thousands) | Segment | Sep 30, 2023 | Oct 1, 2022 | Change ($) | Change (%) | |:------------------------|:-------------|:------------|:-----------|:-----------| | Factory-built housing | 213,875 | 289,251 | (75,376) | (26.1)% | | Financial services | 10,961 | 13,072 | (2,111) | (16.1)% | | Total Gross Profit | 224,836 | 302,323 | (77,487)| (25.6)% | Gross Profit as % of Net Revenue (Six Months Ended) | Segment | Sep 30, 2023 | Oct 1, 2022 | Change (%) | |:------------------------|:-------------|:------------|:-----------| | Consolidated | 24.2% | 25.9% | (1.7)% | | Factory-built housing | 24.0% | 25.5% | (1.5)% | | Financial services | 29.8% | 39.0% | (9.2)% | - Financial services gross profit and percentage decreased due to higher insurance claims from Arizona and Texas weather-related events, partially offset by greater realized and unrealized gains on marketable equity securities[1] Selling, General and Administrative Expenses This section details the changes in selling, general and administrative expenses and the primary drivers behind these fluctuations Selling, General and Administrative Expenses ($ in thousands) | Period | Sep 30, 2023 | Oct 1, 2022 | Change ($) | Change (%) | |:-------------------|:-------------|:------------|:-----------|:-----------| | Three months ended | 61,506 | 66,894 | (5,388) | (8.1)% | | Six months ended | 123,186 | 133,030 | (9,844) | (7.4)% | - SG&A expenses decreased primarily from lower legal expenses, professional fees, and incentive compensation expense, partially offset by higher expenses reflecting the addition of Solitaire Homes[162] Other Components of Net Income This section provides an analysis of other components of net income, including interest income, interest expense, other income, and income tax expense Other Components of Net Income (Three Months Ended, $ in thousands) | Metric | Sep 30, 2023 | Oct 1, 2022 | Change ($) | Change (%) | |:-------------------|:-------------|:------------|:-----------|:-----------| | Interest income | 5,812 | 1,851 | 3,961 | 214.0% | | Interest expense | (257) | (233) | (24) | 10.3% | | Other income, net | 655 | 488 | 167 | (34.2)% | | Income tax expense | (10,088) | (18,613) | 8,525 | 45.8% | | Effective tax rate | 19.5% | 20.1% | N/A | (0.60)% | Other Components of Net Income (Six Months Ended, $ in thousands) | Metric | Sep 30, 2023 | Oct 1, 2022 | Change ($) | Change (%) | |:-------------------|:-------------|:------------|:-----------|:-----------| | Interest income | 10,430 | 3,165 | 7,265 | 229.5% | | Interest expense | (523) | (394) | (129) | 32.7% | | Other income, net | 781 | 57 | 724 | N/M | | Income tax expense | (24,354) | (38,229) | (13,875) | (36.3)% | | Effective tax rate | 21.7% | 22.2% | N/A | (0.50)% | - Interest income primarily from cash balances in money market accounts and commercial floorplan lending[3] - Other income, net, primarily consists of realized and unrealized gains/losses on corporate investments and gains/losses from the sale of property, plant and equipment[163] Liquidity and Capital Resources This section discusses the company's liquidity position, capital resources, and cash flow activities from operations, investing, and financing - Cash and cash equivalents at September 30, 2023, combined with operating cash flow, are expected to be sufficient to fund operations and growth for the next 12 months and foreseeable future[164] - Net cash provided by operating activities decreased primarily from lower net income, partially offset by reduced prepaid expenses and higher commercial loan principal payments[165] - Net cash used in investing activities decreased significantly, reflecting lower purchases of property, plant and equipment and strategic growth acquisitions[5][210] - Net cash used in financing activities was primarily for common stock repurchases[194] Loan Originations and Sales (Six Months Ended, $ in millions) | Metric | Sep 30, 2023 | Oct 1, 2022 | |:-------------------------------------|:-------------|:------------| | Consumer loan originations | $56.2 | $97.2 | | Proceeds from sales of consumer loans| $65.1 | $100.5 | | Commercial loan originations | $51.8 | $49.5 | | Proceeds from collection on commercial loans | $59.4 | $41.8 | Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes to the quantitative and qualitative disclosures about market risk previously reported in the Form 10-K - No material changes from the quantitative and qualitative disclosures about market risk previously disclosed in the Form 10-K[212] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2023, and there were no material changes in internal control over financial reporting during the fiscal quarter (a) Disclosure Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures as evaluated by management - Disclosure controls and procedures were evaluated and deemed effective as of September 30, 2023, by the President and Chief Executive Officer and Chief Financial Officer[213] (b) Changes in Internal Control Over Financial Reporting This section reports on any material changes in the company's internal control over financial reporting occurred during the fiscal quarter ended September 30, 2023 - No material changes in the Company's internal control over financial reporting occurred during the fiscal quarter ended September 30, 2023[8] PART II. OTHER INFORMATION Item 1. Legal Proceedings Information regarding legal proceedings is incorporated by reference from Note 16 to the Consolidated Financial Statements, indicating no material adverse effect is expected from pending matters - Information on legal matters is incorporated by reference from Note 16 to the Consolidated Financial Statements[198] - Management does not believe loss contingencies arising from pending matters are likely to have a material adverse effect on consolidated financial position, liquidity, or results of operations[134] Item 1A. Risk Factors Readers are directed to carefully consider the risk factors discussed in Part I, Item 1A of the company's Form 10-K, as these could materially affect the business, financial condition, or future results - Readers should carefully consider risk factors discussed in Part I, Item 1A of the Form 10-K, as they could materially affect the business, financial condition, or future results[215] Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities The company repurchased common stock during the second quarter of fiscal year 2024 under a $100 million stock repurchase program approved in August 2023. No officers or directors adopted or terminated 10b5-1 trading arrangements Issuer Purchases of Equity Securities This section details the company's common stock repurchase activities under its approved program - A $100 million stock repurchase program was approved on August 1, 2023[216] Common Stock Repurchases (July 2, 2023 to Sep 30, 2023) | Period | Total Shares Purchased | Average Price Paid Per Share | Total Shares Purchased as Part of Program | |:--------------------------------------|:-----------------------|:-----------------------------|:------------------------------------------| | July 2, 2023 to August 5, 2023 | — | $— | — | | August 6, 2023 to September 2, 2023 | — | — | — | | September 3, 2023 to September 30, 2023 | 172,941 | $270.51 | 172,941 | - Approximate dollar value of shares that may yet be purchased under the program was $88,949 thousand as of September 30, 2023[200] Rule 10b5-1 Plan Adoptions and Modifications This section confirms that no officers or directors adopted or terminated 10b5-1 trading arrangements during the three months ended September 30, 2023 - No officers or directors adopted or terminated any 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended September 30, 2023[200] Item 5. Other Information This section states that all other items required under Part II are omitted due to their inapplicability - All other items required under Part II are omitted because they are not applicable[219] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including equity incentive plans, restricted stock unit awards, and certifications Selected Exhibits Filed | No. | Description | |:--------|:-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------| | 10.1* | Exhibit Cavco Industries, Inc. 2023 Omnibus Equity Incentive Plan | | 10.1.1* | Form of Cavco Industries, Inc. 2023 Omnibus Equity Incentive Plan Restricted Stock Unit Award | | 31.1 | Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | 31.2 | Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | 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 | SIGNATURES - The report was signed by William C. Boor (Principal Executive Officer) and Allison K. Aden (Principal Financial Officer) on November 3, 2023[15][204]