What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-02 compared with 2024-02-02 · 32 added, 73 removed, 150 unchanged (41% of the section changed)

37 unchanged sentences

("CountryPlace"), is an approved Federal National Mortgage Association and Federal Home Loan Mortgage Corporation seller/servicer, and a Government National Mortgage Association ("GNMA") mortgage-backed securities issuer that offers conforming mortgages, non-conforming mortgages and home-only loans to purchasers of factory-built homes.

Our insurance subsidiary, Standard Casualty Company ("Standard Casualty"), provides property and casualty insurance primarily to owners of manufactured homes.

Our insurance subsidiary, Standard Casualty, provides property and casualty insurance primarily to owners of manufactured homes.

We operate a total of 31 homebuilding production lines with domestic locations in Millersburg and Woodburn, Oregon;

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Company and Industry Outlook

According to data reported by the Manufactured Housing Institute, industry home shipments for the calendar year through November 2023 were 82,784, a decrease of 22.2% compared to 106,454 shipments in the same calendar period last year.

According to data reported by the Manufactured Housing Institute, industry home shipments for the calendar year through May 2024 were 42,650, an increase of 19.4% compared to 35,714 shipments in the same calendar period last year.

Higher interest rates and continued inflationary pressures have tempered industry demand.

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Consumer confidence is especially important among manufactured home buyers interested in our products for seasonal or retirement living.

We employ a concerted effort to identify niche market opportunities where our diverse product lines and flexible building capabilities provide us with a competitive advantage.

We employ a concerted effort to identify niche market opportunities where our diverse product lines and custom building capabilities provide us with a competitive advantage.

We are focused on building quality, energy efficient homes for the modern home buyer.

Our green building initiatives involve the creation of an energy efficient envelope resulting in lower utility costs, as well as the higher utilization of renewable materials in our manufacturing process.

Our green building initiatives involve the creation of an energy efficient envelope, including higher utilization of renewable materials and provide lower utility costs.

We also build homes designed to use alternative energy sources, such as solar.

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These shortages may also result in extended order backlogs, delays in the delivery of homes and reduced gross margins from home sales.

Our backlog at December 30, 2023 was $160 million compared to $170 million at September 30, 2023, a decrease of $10 million and down $267 million c ompared to $427 million at December 31, 2022.

Our backlog at June 29, 2024 was $232 million compared to $191 million at March 30, 2024 , an increase of $41 million and up $55 million c ompared to $177 million at July 1, 2023.

While it is difficult to predict the future of housing demand, employee availability, supply chain and Company performance and operations, maintaining an appropriately sized and well-trained workforce is key to meeting demand.

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Three Months Ended

($ in thousands, except revenue per home sold) December 30,

2023 December 31,

Factory-built housing $ 426,939 $ 481,193 $ (54,254) (11.3) %

Financial services 19,830 19,410 420 2.2 %

$ 446,769 $ 500,603 $ (53,834) (10.8) %

Factory-built homes sold

by Company-owned retail sales centers 1,026 748 278 37.2 %

to independent retailers, builders, communities and developers 3,134 3,694 (560) (15.2) %

4,160 4,442 (282) (6.3) %

Net factory-built housing revenue per home sold $ 102,630 $ 108,328 $ (5,698) (5.3) %

Nine Months Ended

($ in thousands, except revenue per home sold) December 30,

2023 December 31,

($ in thousands, except revenue per home sold) June 29,

Factory-built housing $ 458,048 $ 457,109 $ 939 0.2 %

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Net factory-built housing revenue per home sold $ 97,024 $ 99,762 $ (2,738) (2.7) %

Factory-built housing Net revenue decreased for the three and nine months ended December 30, 2023 due to lower home sales volume and lower home selling prices, partially offset by the addition of Solitaire Homes.

Factory-built housing Net revenue increased for the three months ended June 29, 2024 due to higher home sales volume, partially offset by lower home selling prices.

The decrease in lower selling prices was attributed to both our wholesale and retail channels, but whereas wholesale was small and generally showed relative stability.

The other component of lower product pricing is related to the product mix, where we saw a significant shift toward single section homes.

Net factory-built housing revenue per home sold is a volatile metric dependent upon several factors.

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Changes in the number of modules per home, the selection of different home types/models and optional home upgrades create changes in product mix, also causing fluctuations in this metric.

For the three and nine months ended December 30, 2023, Financial services Net revenue increased primarily due to more insurance policies in force, partially offset by reduced revenue from loan sales.

For the three months ended June 29, 2024, Financial services Net revenue increased primarily due to more insurance policies in force, partially offset by reduced revenue from loan sales.

Three Months Ended

($ in thousands) December 30,

2023 December 31,

Factory-built housing $ 95,756 $ 122,923 $ (27,167) (22.1) %

Financial services 7,295 9,045 (1,750) (19.3) %

$ 103,051 $ 131,968 $ (28,917) (21.9) %

Gross profit as % of Net revenue

Consolidated 23.1 % 26.4 % N/A (3.3) %

Factory-built housing 22.4 % 25.5 % N/A (3.1) %

Financial services 36.8 % 46.6 % N/A (9.8) %

Nine Months Ended

($ in thousands) December 30,

2023 December 31,

($ in thousands) June 29,

Factory-built housing $ 103,510 $ 113,368 $ (9,858) (8.7) %

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Financial services (0.6) % 24.0 % N/A (24.6) %

Factory-built housing Gross profit and Gross profit percentage decreased primarily due to lower average selling price, partially offset by lower input costs.

Financial services Gross profit and Gross profit percentage for the three months decreased primarily due to fewer loan sales.

The nine months were negatively affected by lower loan sales and higher insurance claims from weather related events.

Factory-built housing Gross profit in dollars and as a percentage decreased primarily due to lower average selling price, partially offset by lower input costs.

Financial services Gross profit in dollars and as a percentage for the three months decreased due to higher insurance claims from extreme weather related events in Texas and New Mexico.

Selling, General and Administrative Expenses

Three Months Ended

($ in thousands) December 30,

2023 December 31,

Factory-built housing $ 57,854 $ 54,127 $ 3,727 6.9 %

Financial services 5,458 4,777 681 14.3 %

$ 63,312 $ 58,904 $ 4,408 7.5 %

Selling, general and administrative expenses as % of Net revenue 14.2 % 11.8 % N/A 2.4 %

Nine Months Ended

($ in thousands) December 30,

2023 December 31,

($ in thousands) June 29,

Factory-built housing $ 59,720 $ 56,021 $ 3,699 6.6 %

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Selling, general and administrative expenses as % of Net revenue 13.6 % 13.0 % N/A 0.6 %

Selling, general and administrative expenses increased for the three months primarily as a result of higher legal expenses, including SEC inquiry related expenses for the indemnification of a former officer, and the added cost of the Solitaire operations, partially offset by lower incentive compensation on reduced sales.

For the nine months, Selling, general and administrative expenses decreased primarily as a result of lower incentive compensation on reduced sales, partially offset by the addition of Solitaire.

Factory-built housing Selling, general and administrative expenses increased primarily as a result of increases in compensation including acquired retail locations, partially offset by reduced incentive compensation from lower earnings.

Financial services Selling, general and administrative expenses decreased for the three months primarily due to lower compensation cost.

Other Components of Net Income

Three Months Ended

($ in thousands) December 30,

2023 December 31,

Interest income $ 5,234 $ 3,581 $ 1,653 46.2 %

Interest expense (842) (216) 626 289.8 %

Other (expense) income, net (224) (348) N/M N/M

Income tax expense (7,920) (16,492) (8,572) (52.0) %

Effective tax rate 18.0 % 21.7 % N/A (3.70) %

Nine Months Ended

($ in thousands) December 30,

2023 December 31,

($ in thousands) June 29,

Interest income $ 5,511 $ 4,618 $ 893 19.3 %

5 unchanged sentences

Interest expense consists primarily of interest related to finance leases.

Interest income increased for the three and nine months ended December 30, 2023 primarily due to higher interest rates.

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

Income tax expense decreased for the three and nine months ended December 30, 2023 due to lower income before taxes.

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

Income tax expense decreased for the three months primarily due to lower profit before tax and a lower effective tax rate due to an increase in energy star tax credits.

Liquidity and Capital Resources

We believe that cash and cash equivalents at December 30, 2023, together with cash flow from operations, will be sufficient to fund our operations, cover our obligations and provide for growth for the next 12 months and into the foreseeable future.

We believe that cash and cash equivalents at June 29, 2024, together with cash flow from operations, will be sufficient to fund our operations, cover our obligations and provide for growth for the next 12 months and into the foreseeable future.

We maintain cash in U.S.

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Such transactions may require the use of cash and have other impacts on our liquidity and capital resources.

We believe we have sufficient liquid resources including our $50.0 million Revolving Credit Facility, of which no amounts were outstanding at December 30, 2023.

Regardless, depending on our operating results and strategic opportunities, we may choose to seek additional or alternative sources of financing in the future.

We believe we have sufficient liquid resources including our $50 million Revolving Credit Facility, which may be increased from time to time through an additional $50 million of term loan tranches and no amounts were outstanding at June 29, 2024.

Depending on our operating results and strategic opportunities, we may choose to seek additional or alternative sources of financing in the future.

There can be no assurance that such financing would be available on satisfactory terms, if at all.

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We believe that stockholders' equity at the insurance subsidiary remains sufficient and do not believe that the ability to pay ordinary dividends to Cavco at anticipated levels will be restricted per state regulations.

The following is a summary of the Company's cash flows for the nine months ended December 30, 2023 and December 31, 2022, respectively:

Nine Months Ended

(in thousands) December 30,

2023 December 31,

The following is a summary of the Company's cash flows for the three months ended June 29, 2024 and July 1, 2023, respectively:

Three Months Ended

(in thousands) June 29,

2023 $ Change

1 unchanged sentence

Net cash provided by operating activities 47,393 82,293 (34,900)

Net cash used in investing activities (26,543) (29,199) 2,656

Net cash (used in) provided by investing activities (5,349) 2,086 (7,435)

Net cash used in financing activities (31,863) (1,490) (30,373)

Cash, cash equivalents and restricted cash at end of the period $ 378,937 $ 366,379 $ 12,558

Net cash provided by operating activities decreased primarily from lower Net income, partially offset by changes in working capital, and higher principal payments received on commercial loans.

Consumer loan originations decreased $61.3 million to $74.3 million for the nine months ended December 30, 2023 from $135.6 million for the nine months ended December 31, 2022, and proceeds from sales of consumer loans decreased $64.3 million to $81.8 million for the nine months ended December 30, 2023 from $146.1 million for the nine months ended December 31, 2022.

Commercial loan originations increased $12.3 million to $83.5 million for the nine months ended December 30, 2023 from $71.2 million for the nine months ended December 31, 2022.

Net cash provided by operating activities decreased primarily from lower Net income and lower principal payments received on commercial loans, partially offset by fewer consumer loans being generated in the period.

Consumer loan originations decreased $15.9 million to $20.8 million for the three months ended June 29, 2024 from $36.7 million for the three months ended July 1, 2023, and proceeds from sales of consumer loans decreased $40.8 million to $1.6 million for the three months ended June 29, 2024 from $42.4 million for the three months ended July 1, 2023.

Commercial loan originations decreased $1.9 million to $26.8 million for the three months ended June 29, 2024 from $28.7 million for the three months ended July 1, 2023.

Proceeds from the collection on commercial loans provided $22.4 million this year, compared to $25.2 million in the prior year, a net increase of $2.8 million.

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and funding strategic growth acquisitions in our Factory-built Housing segment.

Cash used in the prior year period reflects the purchase of our plant facilities in Hamlet, North Carolina and cash used in the current year was primarily used for acquisitions.

Net cash used in financing activities was primarily for the repurchase of common stock.

Cash provided in the prior year period reflects the proceeds from the sale of property, plant and equipment and cash used in the current year was primarily used for acquisitions of property, plant and equipment.

Net cash used in financing activities in the three months ended June 29, 2024 was primarily for the repurchase of common stock.

Obligations and Commitments.

1 unchanged sentence

Critical Accounting Estimates

There have been no significant changes to our critical accounting estimates during the nine months ended December 30, 2023, as compared to those disclosed in Part II, Item 7 of the Form 10-K, under the heading "Critical Accounting Estimates," which provides a discussion of the critical accounting estimates that management believes are critical to the Company's operating results or may affect significant judgments and estimates used in the preparation of the Company's Consolidated Financial Statements.

There have been no significant changes to our critical accounting estimates during the three months ended June 29, 2024, as compared to those disclosed in Part II, Item 7 of the Form 10-K, under the heading "Critical Accounting Estimates," which provides a discussion of the critical accounting estimates that management believes are critical to the Company's operating results or may affect significant judgments and estimates used in the preparation of the Company's Consolidated Financial Statements.

Quantitative and Qualitative Disclosures About Market Risk

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis