Investor Relations - Cavco Industries, Inc.

Cavco Industries, Inc.
NASDAQ: CVCO
Cavco 2015
Acquisitions
• Standard Insurance
• CountryPlace Mortgage
Cavco 2009
Acquisition
•
3 factories
Commercial
Lending
Acquisition
•
1 factory
6 Retail
Stores
Acquisition
•
5 Factories
•
49 Retail Stores
45 Retail
Stores
Acquisition
•
7 factories
3 Factories
19 Factories
2
Company Highlights
Cavco 2015
Cavco 2009
•
700 Employees
•
Serving 8 states
•
2.3% market share
•
3,700 Employees
•
Serving 40 states, Canada, Japan &
Mexico
(HUD)
•
$650+million market capitalization
(July 10, 2015)
•
2nd largest U.S. Builder
(HUD building code)
•
15% market share
(HUD building code)
3
AND…
• Commercial loan programs
• Mortgage origination & servicing
• Property & casualty insurance
• Top industry brands
•
Cavco Homes, Fleetwood Homes, Palm Harbor Homes,
Fairmont Homes and Chariot Eagle
• MHI Manufacturer of the Year- 6 consecutive years
(2010-2015, voted by peers)
• #13 on Forbes Best Small Companies – 2014
4
5
Manufactured Housing
Industry Profile
36 corporations
122 homebuilding factories
4,000 home sales centers
50,000 land-lease communities
75,000 full-time U.S. employees
For the first calendar quarter of 2015-manufactured
housing has accounted for
• 44% of all new homes sold under $200,000
• 71% of all new homes sold under $150,000
• 2 of every 3 manufactured homes are in rural areas
Source: Manufactured Housing Institute.
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Manufactured Housing Industry
Profile
7
70,000
64,000
60,000
55,000
52,000
50,000
147,000
131,000
131,000
193,000
169,000
118,000
82,000
50,000
50,000
96,000
100,000
349,000
373,000
353,000
363,000
150,000
251,000
254,000
211,000
171,000
188,000
198,000
200,000
218,000
250,000
233,000
300,000
245,000
350,000
304,000
400,000
340,000
Manufactured home industry – 30 year annual shipments
0
Source: Manufactured Housing Institute.
2005 includes approximately 17,000 units built for FEMA.
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Manufactured Housing Average Annual
Home Shipments
Since HUD code adopted 1976
207,000
20 year average 1995-2014
171,000
10 year average 2005-2014
77,000
5 year average
56,000
2005-2014
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Manufactured Home Shipments as a percent of
New Single-Family Home Sales
30%
28.7%
Sub-prime boom for
site built Housing
25%
20%
15%
10%
17.5%
14.4%
12.8%
12.9%
14.4%
13.4%
10.3%
12.3%
11.7%
10.1% 11%
10.8% 9.8%
14.7%
5%
10
Cavco Factory-Built Housing Segment
Revenue Potential correlated to
Cavco
Housing
160,000
Segment
Revenue
Potential
140,000
single-family home sales and
manufactured-home industry sales
$514m
$800m
$950m
$1.05b
$1.2b
$1.35b
437,000
2014
600,000
700,000
800,000
Industry
145,000
Cavco
27,000
Industry
130,000
Cavco
24,000
Industry
Cavco
21,000
Industry
103,000
Cavco
19,000
Cavco
Industry
88,000
0
16,000
20,000
Industry
40,000
64,344
60,000
Cavco
80,000
9,999
100,000
115,000
Potential Home Sales
120,000
900,000 1,000,000
New Single Family Home Sales Growth
Assumptions: Cavco market share held constant, and industry share
of new single-family home sales held constant
11
Status of Overall Challenges to the Industry
 Consumer confidence
 Unemployment and underemployment
 Financing availability, lack of secondary market
Economic Headwinds Diminishing
12
Status of Temporary Challenges
 Cavco’s manufactured home insurance subsidiary is
experiencing higher than normal Q1-16 claim activity
 Hail and wind damage to insured homes primary cause
 Record rain fall also causing flood-related claims
 70 counties declared disaster areas by TX Governor
 36 counties declared federal disaster areas
 Claims losses somewhat mitigated by reinsurance
Adverse 2015 Spring Storms in TX
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Critical component of U.S. housing needs
 Affordable housing
◦ Most affordable form of home ownership
◦ Ownership at monthly cost comparable to apartment rents
◦ Average retail sales price approximately $65,000 (home only)
 Custom and larger homes at better value than site built
◦ Rising raw material costs
◦ More efficient production process
◦ Precision built, with three layers of quality oversight nationally
administered by HUD
 Rural housing, communities and urban in-fill
◦ Cost-effective construction process
◦ Faster production through controlled building environment
 Green and alternative energy homes
◦ Rising energy costs
◦ Energy efficient materials and designs
Manufactured Housing Market
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Large and diverse markets
 First-time home buyers
 First move-up buyers
 Immigrants
 Baby boomers, empty nesters, and retirees
◦ Lifestyle oriented homebuyers – age-restricted
communities
 Second home and seasonal living
◦ Attractively priced, low maintenance alternative to onsite construction
Manufactured Home Owners
15
U.S. Demographic Indicators
US adult population estimated to expand by 12 million
between 2015 and 2020
Home ownership rises with age
◦ Over 75% of the population age 55+ are home
owners
◦ Population of 55+ projected to increase 26% from
2015-2030
Gen Y (age 18-39) is approximate 86 million in 2015
◦ Late-stage Gen Y in peak household formation and
home-buying years
Favorable Demographic Trends
Source:
World Bank and U.S. Census Bureau
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The two largest and fastest growing demographics are
prime buyers of manufactured homes
 51 to 69 year olds (Baby Boom)
 21 to 35 year olds (Echo Boom)
Baby Boom
1946-1964
4.5
Births
(millions)
Echo Boom
1980-1994
4
3.5
3
1946
1949
1952
1955
1958
1961
1964
1967
1970
1973
1976
1979
1982
1985
1988
1991
1994
2.5
U.S. Birth Rates
Source: Census Bureau
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o
Solid balance sheet and liquidity position
o
No significant land investment reducing capital
requirements/risk
o
Well positioned in affordable housing market
o
Geographic growth opportunities via acquisition or internal
expansion
o
Demonstrated ability to adjust to market conditions: profitable
in all but one year during entire housing/economic downturn
o
Substantial sales growth with modest capital spending
o
Considerable operating and financial leverage as Cavco is
currently profitable at only 55% utilization of capacity
NASDAQ symbol: CVCO
Investment Considerations
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Certain statements contained in this release are forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, Section 21E of the Securities and Exchange Act of 1934 and the Private Securities
Litigation Reform Act of 1995. In general, all statements that are not historical in nature are forward-looking.
Forward-looking statements are typically included, for example, in discussions regarding the manufactured housing
and site-built housing industries; our financial performance and operating results; and the expected effect of
certain risks and uncertainties on our business, financial condition and results of operations. All forward-looking
statements are subject to risks and uncertainties, many of which are beyond our control. As a result, our actual
results or performance may differ materially from anticipated results or performance. Factors that could cause such
differences to occur include, but are not limited to: adverse industry conditions; our ability to successfully integrate
past acquisitions, including the recent acquisitions of Fairmont Homes and Chariot Eagle, and any future acquisition
or attain the anticipated benefits of such acquisitions; the risk that any past or future acquisition may adversely
impact our liquidity; involvement in vertically integrated lines of business, including manufactured housing
consumer finance and insurance; a constrained consumer financing market; curtailment of available financing for
retailers in the manufactured housing industry; our participation in certain wholesale and retail financing programs
for the purchase of our products by industry distributors and consumers may expose us to additional risk of credit
loss; significant warranty and construction defect claims; our contingent repurchase obligations related to
wholesale financing; market forces and declining housing demand; net losses in certain prior periods can be no
assurance that we will generate income in the future; a write-off of all or part of our goodwill; the cyclical and
seasonal nature of our business; limitations on our ability to raise capital; competition; our ability to maintain
relationships with independent distributors; our business and operations being concentrated in certain geographic
regions; labor shortages; pricing and availability of raw materials; unfavorable zoning ordinances; loss of any of
our executive officers; organizational document provisions delaying or making a change in control more difficult;
volatility of stock price; general deterioration in economic conditions and continued turmoil in the credit markets;
increased costs of healthcare benefits for employees; governmental and regulatory disruption; information
technology failures and data security breaches; extensive regulation affecting manufactured housing; together with
all of the other risks described in our filings with the Securities and Exchange Commission. Readers are specifically
referred to the Risk Factors described in Item 1A of the 2014 Form 10-K, as may be amended from time to time,
which identify important risks that could cause actual results to differ from those contained in the forward-looking
statements. Cavco expressly disclaims any obligation to update any forward-looking statements contained in this
release, whether as a result of new information, future events or otherwise. Investors should not place any reliance
on any such forward-looking statements.
Forward Looking Statements
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