Cavco Industries, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to CABCODE Industries' second quarter fiscal year 2020 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask the question during the session, you will need to press star, then 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star, then 0. I would now like to hand the conference over to your speaker today, Mark Fusler, Director of Financial Reporting and Investor Relations. You may begin.

Good afternoon and thank you for joining us for Capco Industries' second quarter fiscal year 2020 earnings conference call. During this 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 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 Capco. I encourage you to review Capco'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 actions arising from the subpoenas we've received from the SEC, potential reputational damage that Capco may suffer as a result of 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 live broadcast, Tuesday, October 29, 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?

Thank you and welcome, everyone. In the second quarter, we continue to see strong operating results stemming from continuing strong consumer demand. As we've discussed in the past quarters, the fundamental drivers of manufactured housing industry are very encouraging, and that goes for both near-term economic drivers as well as long-term demographics. For several quarters now, we've been discussing the overbuild of retail inventory that occurred throughout the industry last year. That filled up basically full shipments from factories to retailers that would have occurred this year forward into calendar 2018. And it's made it difficult over the last few quarters to get a clear picture on underlying home buying demand because factory shipments slowed during the retail inventory correction. So factory orders have not been a good indicator of consumer demand for several quarters. As expected, during late summer and early fall, the correction has largely worked through the system. What we're now seeing is a more balanced set of shipment data. Our perspective is that home buyer demand has remained strong throughout this time. Industry factory shipment data is supporting this view. Adjusted for seasonality, the last two months showed a shipping pace that's actually above last year's total shipments. Two data points really are not a trend, but the point I'm trying to make is that as the dust is clearing on the inventory dynamic, we're seeing indications of continued strong demand. At CAFCO, we've had another quarter of stable backlogs. We ended the quarter at 137 million, which is up slightly on a sequential basis. This is a healthy backlog of about seven weeks on average, and that allows us to effectively plan production while still getting the customers home to them in a reasonable timeframe. We've now had three months since the Destiny acquisition closed, and everything's going very well there. This addition strengthens our product position in the southeast, and the people at Destiny, the plant, are very positive and energetic, and it's just been great to have them as part of CAFCO. Turning to financial services, the operations continue to contribute strong results. During this quarter, we have not experienced any major weather events in insurance, and as a result, claims have been lower year over year. We continue to diversify geographic exposure and steadily grow policies. On the lending side, we remain positive about the GSE efforts to increase liquidity for manufactured housing lending, although tangible progress has been limited. This is to be expected since programs such as MH Advantage and Choice Home will take time to gain momentum, and the home-only pilot programs may be getting slowed by broader GSE reform discussions. Still, none of those comments are intended to be pessimistic, and we remain encouraged by the directional support our industry is receiving in Washington and increasingly at the state and local level. With that, I'll turn it over to Dan to review the financial results.