Cavco Industries, Inc.

Hello, and welcome to CAVCO Industries' first quarter fiscal year 2020. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press 5 and 0 on your touch-tone telephone. As a reminder, this conference is being recorded. I would now like to introduce your host for today's call, Mark Fusler. You may begin.

Good afternoon and thank you for joining us for Capco Industries' first quarter fiscal year 2020 earnings and conference call. During the call, you'll be hearing from Bill Boor, President and Chief Executive Officer, Dan Ernest, Executive Vice President and Chief Financial Officer, and Josh Barsetti, Chief Accounting Officer. Before we begin, we'd like to remind you that the comments made during this conference call by management may contain forward-looking statements under the provisions of the Private Securities Litigation Reform Act of 1995 including statements of expectations or assumptions about CAFCO's financial and operational performance, revenues, earnings per share, cash flow or use, cost savings and operational efficiencies. All forward-looking statements involve risks and uncertainties which could affect CAFCO's actual results and could cause its actual results to differ materially from those expressed in any forward-looking statements made by or on behalf of CAFCO. I encourage you to review CAFCO's filings with the Securities and Exchange Commission, including, without limitation, the company's most recent forms 10-K and 10-Q, which identify specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements. Some factors that may affect the company's results include, but are not limited to, the risk of litigation or regulatory action arising from the subpoenas we received from the SEC, Potential reputational damage that could result from these matters under inquiry, adverse industry conditions, our involvement in vertically integrated lines of business, including manufactured housing consumer finance, commercial finance, and insurance, market forces and housing demand fluctuations, our business and operations being concentrated in certain geographic regions, loss of any of our executive officers, federal government shutdowns, and extensive regulation affecting manufactured housing. This conference call also contains time-sensitive information that is only accurate as of the date of this broadcast, Tuesday, July 30th, 2019. CAFCO undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call, except as required by law. Now I'd like to turn the call over to Bill Boor, President and Chief Executive Officer. Bill?

Thanks, Mark, and welcome, everyone. The purpose of the call today is obviously to cover the quarterly results. However, we've had some interesting timing with the acquisition that was just communicated through a press release late yesterday. The acquisitions of Destiny Homes, a one-plant manufacturer in Moultrie, Georgia, and we expect it to close this Friday. We're really excited to welcome the employees to CAFCO, and we're very positive about how their products and their independent dealer network fit with our existing plants. Destinee produces a complimentary, moderate to high price point product relative to the existing CAFCO plants in that region. And the timing and signing of the definitive documents right here at the earnings release has been coincidental, but it does give us the opportunity to comment here about how the Destinee Homes plant will be a great addition to our system of manufacturing plants. I'd say that if the The good teamwork on both sides to get to this point in the process is any indication it's going to work out really well for both sides. And again, we couldn't be happier about the deal. Let's turn to the quarter, starting with the big picture. We remain in a period of solid demand, and the fundamentals that drive manufactured housing are very encouraging. First, the economy is strong. You can see this by indications such as consumer confidence in employment. Mortgage interest rates remain very attractive, which obviously supports home buying ability. Finally, there's no doubt that long-term demographics are driving household formations and demand for manufactured homes. We're continually encouraged by the GSE efforts to increase liquidity for both land-home and home-only financing. As expected, these programs will take time to become meaningful in size. They represent an important recognition of the quality and the value of manufactured homes and the role our industry should be enabled to play in improving access to affordable housing. There's a real need for our industry's products. The affordable housing situation is concerning. Manufactured housing has historically been a big part of the solution in rural areas. With attention being focused by the GSEs, HUD, and others, outdated perspectives are changing and we'll have opportunities to expand manufactured housing's impact. I wanted to briefly comment on the regulatory environment. We recognize and very much appreciate the efforts by HUD to modernize policies and processes so they're more cost-effective and efficient. HUD has also been actively shining a light on the manufactured housing industry as a solution. Along with others in the industry, we were able to display a home on the Mall in Washington, D.C. during HUD's Innovative Housing Showcase in June. It's a really good event. It gave legislators and others a firsthand understanding of the quality products being produced much more efficiently than by other means. Again, outdated and incorrect mindsets about MH are changing. As they do, zoning restrictions should be used to appropriately accommodate our products. And that's really about opening up market opportunities that have been closed to date. Turning to the quarter, I'd summarize it by saying this has been one of stability with continued healthy demand. As we've discussed on previous calls, there have been short-term supply chain dynamics that have made it difficult for folks to get a clear handle on underlying demand. We continue to believe that demand is strong for the reasons already cited. In recent quarters, it's been clear that the market has been concerned about falling backlogs, even though those backlogs have been large compared to what we consider optimal. This quarter, our sequential backlog stabilized at essentially the same overall level as last, approximately seven weeks. If we could dial in a constant backlog level, we'd pick three to four weeks. However, there's no such thing as a constant backlog level through time. And we're very happy to know that the orders are there and we can continue producing to meet the robust customer demand. By definition, the stable backlog this quarter means we're matching production to demand, which remains strong for our products. The supply chain inventory situation is improving as expected. We view these as near-term fluctuations and expect continued destocking where retail placements and inventories are still correcting. As Dan will discuss, our plants are doing a very good job of managing price and margin given input cost fluctuations and uncertainty. Most importantly, they continue the ongoing work of making sure our products are updated. and what the retailers and home buyers are looking for. Because in the end, this is a local business and I really applaud the people around our company that stay focused on the fundamentals which drive results like those we're proud to report on this quarter. With that, I'll turn it over to Dan Ernest to discuss the financial results. Thank you, Bill.