Cavco Industries' (CVCO) CEO Joe Stegmayer on Q1 2014 Results - Earnings Call Transcript

Aug. 2.14 | About: Cavco Industries, (CVCO)

Cavco Industries, Inc. (NASDAQ:CVCO)

Q1 2014 Earnings Conference Call

August 1, 2014 12:00 PM ET

Executives

Joseph H. Stegmayer – Chairman, President and Chief Executive Officer

Daniel L. Urness – Chief Financial Officer, Vice President and Treasurer

Analysts

Brendan Lynch – Sidoti & Company, LLC.

Daniel Moore – CJS Securities, Inc.

Wyatt Carr – Monarch Bay Securities

Albert Sebastian – Prospect Advisors

Operator

Good day, ladies and gentlemen, and welcome to the Cavco Industries, Inc. First Quarter Fiscal Year 2015 Earnings Conference Call and Webcast. 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. (Operator Instructions) As a reminder, this call is being recorded.

I’d now like to introduce your host for today’s conference, Joe Stegmayer, Chairman and CEO. Please go ahead, sir.

Joseph H. Stegmayer

Thank you, Danielle. Good morning, everyone. We’ll begin today with Dan Urness, our Chief Financial Officer, providing the financial review. I’ll make a few comments on the industry, what we’re seeing currently, and then we’ll be happy to take your questions. Dan?

Daniel L. Urness

Good day, everyone. Before we begin, we respectfully remind you that certain statements made on this call, either in our remarks or in our responses to questions, may not be historical in nature, and therefore are considered forward-looking. All statements and comments today are made within the context of the Safe Harbor rules.

All forward-looking statements are subject to risks and uncertainties, many of which are beyond our control. Our actual results or performance may differ materially from anticipated results or performance.

Cavco disclaims any obligation to update any forward-looking statements made on this call, and investors should not place any reliance on them. More complete information on this subject is included as part of our earnings release filed yesterday, and is available on our website and from other sources.

Net revenue for the first quarter of fiscal 2015 was $139.2 million, up approximately 3.9% compared to net revenue of $134 million during the first quarter of fiscal year 2014. The increase was mainly from higher home sales activity during the quarter.

Consolidated gross profit in the first fiscal quarter as a percentage of net revenue was 22.8% compared to 21.9% for last year’s first quarter. The increase is primarily from construction leverage on additional sales volume. Home sales in Q1 increased 3.4% to 2,439 units versus 2,358 homes sold last year.

Selling, general and administrative expenses in the fiscal 2015 first quarter as a percentage of net revenue was 16.0% compared to 16.8% during the same quarter last year. This improvement was from greater SG&A utilization on higher sales volume.

Net income attributable to capital stockholders for the first fiscal 2015 quarter was $5.8 million compared to net income of $1.8 million reported in the same quarter of the prior year.

However, the prior-year quarter was after a deduction of $2.0 million of net income attributable to redeemable non-controlling interest, which is approximately half of the difference.

As previously reported, Cavco purchased a non-controlling interest during the second quarter of fiscal year 2014, whereby Cavco has since owned 100% of its consolidated subsidiaries. Therefore, all of the fiscal 2015 first quarter consolidated net income is attributable to Cavco stockholders.

Net income per diluted share for the first quarter of fiscal year 2015 was $0.64 versus $0.26 during last year’s comparable quarter. Comparing the balance sheets for June 28, 2014 to March 29, 2014, cash was approximately $74 million at the end of the fiscal quarter compared to approximately $73 million three months earlier.

Accounts receivable grew $4.3 million from increased overall sales volume. Inventory also increased seasonally by $3.9 million in connection with higher sales and production levels.

Current deferred income taxes are lower, mainly from the utilization of NOL carry-forwards in the quarter. Also stockholders’ equity grew approximately 65% to $296.9 million as of June 28, 2014 compared to $179.8 million one year earlier on June 29, 2013, primarily from the buyout of all non-controlling interests during fiscal year 2014 and supplemented by earnings from operations.

Joe, that completes the financial report.

Joseph H. Stegmayer

Okay, thank you, Dan. Well, certainly, we’re pleased with our performance and the results of operations for the quarter. It’s a good start to our fiscal 2015 year. And while we’d like to see greater help from the general economy, we’re glad to see that consumer confidence levels have been improving, which is a key indicator for our business we believe longer term.

Job creation remains a major challenge in many markets and it’s quite obvious as we look at shipment and registration of new homes in various states, the states with more robust economies such as Texas, where jobs are plentiful are doing quite well.

Texas shipments for the industry were up 24% through May of this year. And likewise, we’re doing well in Texas. Other states are more challenged; New Mexico shipments are flat from previous year. California is up somewhat, but still from a very, very low base. So, we need to see more job creation more uniformly across the country to really impact the shipment numbers more profoundly.

We do believe that, as one analyst put it, it’s not a question of whether manufactured housing shipments will increase; it’s a question of when. And we believe that all along and we still believe that to be the case. We thought 10% increase in shipment was achievable for calendar 2014, and we still have seven months to go, but it seems unlikely we’ll reach that goal as an industry given the fact that we’re up 5.2% through May on a calendar year basis in total industry shipments of homes.

We could see a considerable more improvement through the balance of the year, but again it looks like it might be difficult to get to that 10% number. Some of the larger factors, though, that we do feel bode well for us, of course, is demographics. As we’ve discussed before, the percent of 25 to 34 year old individuals living at home is approximately 13.9%. And that’s compared to 1980 to 2012 median average of 11.5%.

The difference being about 785,000 people, and those additional people are 25 to 34 year old age group that are now living at home moved out, they would create 320,000 households.

And the percentage of 25 to 34 year old married couples that reside in traditional apartments is at historical high of 19.3% versus 15% to 16% range in the period from 1992 to 2008. Arguably, this could be the result of the recessionary impact on individuals.

As the economy improves, and that percentage drops to more normalized levels, that could create another 300,000 single-family households. That combined with general population growth, the fact that new single-family home and existing home inventories are at 30-year lows and therefore the price of existing homes and new single-family homes is generally on upward trend, these are all good signs for the demand equation for new manufactured homes.

In many of our markets, in fact, the top 25 real estate markets in the country, many of which we’re involved in, the inventory of homes available for sale is at historical lows, four months actually in June in those top 25 markets. And that’s down from – or that’s compared to a national average of above 5.5 months.

So most of these factors are working in our favor. We feel very good about where we’re positioned, the products we have, the locations we have geographically. We’ll continue to look at expanding geographically, and adding some locations where we have gaps and where we’re not participating. What we feel in the major markets we’re now involved in gives us quite a bit of operating leverage and sales volume increase potential.

Some of the immediate challenges we face, labor availability, as we’ve tried to ramp up some plants in some of our better performing markets, we find sometimes it’s difficult to hire the numbers of people we need. And so we continue to work on that, continue to work on programs to recruit and retain people within the factories.

Price competition still could be termed aggressive in the marketplace, it’s certainly still a buyers’ market. Did improve somewhat over the past year or so, but it’s still a factor which will certainly improve as production rates increase for the industry as a whole.

And the Dodd-Frank Act and the SAFE Act, as we’ve discussed in previous calls, probably has tempered demand somewhat, especially for lower price point entry-level homes. Still and all, we feel again we’re in good position. We feel very positive about the balance of the year and certainly the outlook for calendar of 2015.

With that, Danielle, we’ll be happy to take any questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Your first question comes from Brendan Lynch from Sidoti. Your line is now open. Please, go ahead.

Brendan Lynch – Sidoti & Company, LLC.

Good morning, Joe. Good morning, Dan.

Joseph H. Stegmayer

Good morning.

Brendan Lynch – Sidoti & Company, LLC.

I wanted to dig a little deeper into the volume growth year-over-year. It was a bit weaker than I had been anticipating. Do you attribute this is in part maybe to a tougher comp? Or you mentioned about the weakness in the industry. I’m just trying to gauge what we can expect going forward.

And I would have thought with your exposure to Texas, what you mentioned was particularly strong for the industry that we would have seen more growth. So, if you could just give us some more color on that, that would be helpful.

Joseph H. Stegmayer

Sure. I’d be glad to. Well, Brendan, I think your first comment hit the nail on the head is really we were expecting better volume growth ourselves internally. It’s really a function of industry shipments not being where we thought they would be. And we believe we’re getting our share.

In fact, we track market share as closely as we can. The statistics are tremendously – accurate at times, but and certainly not timely. But we believe our market share is improving in most markets. So, we’re doing well from that standpoint.

We acquired new points, what we call new points of distribution, so we’re expanding our distribution base in a fairly challenging environment. That is – new distributors being added, yet we have been able to increase our penetration of existing distribution.

So, it really boils down to overall demand. You’re right about Texas. Texas has been good, and we’ve been doing very, very well in Texas. Our plants there are performing better than our combined average in terms of utilization.

Certainly, our sales volume is quite brisk there. And it also happens to be a state where we have the greatest number of our own company-owned retail stores, which are have also been improving their performance.

Brendan Lynch – Sidoti & Company, LLC.

Great. And then in terms of the operating margin expansion, that was fairly significant on a relatively modest increase in revenue. Is this just fixed cost leverage, or are there other components that are contributing to the margin expansion?

Daniel L. Urness

Well, the fixed cost leverage in our business is certainly real. But if you look back over several quarters, it does fluctuate from time-to-time; lot has to do with product mix. So, this was a relatively strong quarter, but not our strongest from a margin standpoint. The continued expansion in revenue growth generally improves that trend, yes.

Brendan Lynch – Sidoti & Company, LLC.

Great. And then, just one other question on pricing trends. Are you seeing buyers choosing more options or choosing larger homes at this point? Or are you still experiencing kind of on a separate issue, are you still experiencing a lot of competition in terms of pricing from competitors in the market?

Joseph H. Stegmayer

Right. Yeah. It’s a combination really, Brendan. That’s a tough one to answer because it depends on the market. We have seen some improvement in average selling price in certain markets. For example in Florida, we’re seeing demand improve gradually for somewhat higher-priced, more ammenitized home than has been the case for the last couple of years.

Still, the bias is towards truly affordable price point in general across all markets. Again, we’re seeing some pockets of improvement in certain areas. So, it’s a mixed bag, but I’d say it certainly is not decidedly towards higher price point at this point.

We think that will improve again with the improvement in employment picture and as consumer confidence continues to increase, because the 55-plus age group demographic is one that will tend to buy the more ammenitized home in the Sunbelt areas, Florida, Arizona, California, Southern Texas and the Carolinas, if they feel confident or if they’re able to sell their existing site build home back in their home state.

So, that generally drives higher price point product. And we’re seeing some of the community operators who cater to that 55-plus age-restricted community buyer. We’re seeing them start to order some more elaborate or more ammenitized homes, somewhat larger homes.

Brendan Lynch – Sidoti & Company, LLC.

Great. Thank you for the color.

Joseph H. Stegmayer

Thanks.

Operator

Thank you. And our next question comes from Daniel Moore from CJS Securities. Your line is now open. Please, go ahead.

Daniel Moore – CJS Securities, Inc.

Good morning. Thanks for taking the questions. Just looking at SG&A, your expense controls were even more so than typically exceptionally strong. Can you keep SG&A essentially or roughly flat year-over-year if industry shipment volumes do not improve into the back half of the year?

Joseph H. Stegmayer

Yes, Dan, and thanks for joining and your question. I think the answer is yes, generally. We think we’re going to get economies of scale in SG&A as business improves. We certainly have a lot more capacity utilized. And as that happens, our SG&A will go up in tandem. One mitigating factor that is we compensate most of our people based on profitability of the business.

So, SG&A is somewhat variable on the upside as business improves and profitability improves. But that is largely mitigated or diffused by other improvements in SG&A. So, in some sense, you don’t necessarily see a drop substantially. But I think you will see the economies of scale as we improve. Dan, do you want add any specifics to that?

Daniel L. Urness

And just a reference point, our SG&A as a percentage of revenue was 16% this quarter. As we mentioned, that’s almost our lowest in recent quarters. We were at 15.9% in earlier quarter. Again, we’re going to have some fluctuation in that number due to some of the factors Joe described.

Just for historical reference point, if you go back to when our company was only a manufacturing concern, we were below 10% in the best years and that was in the 2005/2006 time period. We don’t expect to get to those levels again, Dan. We’ve added since that time retail business which is a higher S&GA component of the consolidated financials and the financial services group.

The finance company and the insurance business also have higher SG&A as a percentage of revenue. So, while we don’t expect to get down to those historic lows for the company, we think that there is room for improvement with higher sales volume.

Daniel Moore – CJS Securities, Inc.

Very helpful. Focusing a little on financial services, it still grew 10% year-over-year. What’s driving that given the slowdown in volumes and shipments? And can you continue to generate that type of growth if volumes are tempered a bit, say, more like mid-single digits?

Joseph H. Stegmayer

Yes. We’ve been able to increase market share in our insurance business. We’ve entered new geographic markets with our Standard Casualty Company. And this business, for those of you who are perhaps new to Cavco, is a business we acquired about three-and-a-half years ago now, and primarily insures manufactured homes, typical property coverages, and we have a concentration of business around the Southwest where we’ve been expanding that stretch into Arizona, for example, and we’ve acquired quite a few new policies in Arizona and a couple of other states.

So, we do think there’s more room to grow that business. We do it very cautiously and conservatively. Our underwriting standards are quite high. We avoid – try to avoid concentration of risk in any one geographic area. Obviously, we do that through a variety of mechanisms, looking at ZIP codes and concentration of business in any given community or any given town. So, we’re going to be careful about expanding that business, but we do think there is significant growth potential there.

The finance business itself, the mortgage company, frankly, has had some headwinds recently. We think that’s because of, again, the rising interest rate environment we saw at the tail end of last calendar year, and then perhaps to some extent, some of the Dodd-Frank and SAFE Act implementation that occurred in the beginning of this year. But we’re starting to see our backlogs, so to speak, of loan volume improve, and so we think we have some further growth potential in that business through the balance of this year.

And long term, we feel very positive about that finance business. It’s a great business. We have a large servicing portfolio and we have a good origination platform and excellent servicing capability. So, we think there’s room to grow that business in the longer term.

Daniel Moore – CJS Securities, Inc.

And that dovetail is going to be my last question. You mentioned Dodd-Frank in the prepared remarks as well. It’s been six months to seven months, what are you hearing from dealers, both your internal dealers and your dealer partners, and how significant an impact is that having on their sales capabilities and the buyers’ ability to get a mortgage?

Joseph H. Stegmayer

Right. And Dan, we only hear kind of anecdotal, there’s no statistical information that I’ve seen at this point. I’m some of the mortgage companies might have it internally, but haven’t published anything that I have noticed. But it’s certainly what you hear is that it certainly slowed things down. But in the end, I think retailers will adjust to this, they need to – their sales approach, their marketing approach and their guidance of the customer to lenders has to change in the new rules. In fact, they can’t direct consumers anymore to any particular lender. They have to leave that up to the consumer, which makes it a little bit more difficult for the consumers.

That’s an unfortunate law in that respect actually, because now the consumer has to kind of fend for themselves to try to find finance companies and try to talk to them before the retail operator could help them navigate through that field of finance companies. Wouldn’t necessarily have to be their own finance company, it could be an independent finance company, but at least they could direct them and give them some estimates on what their payment might be in a given home, now they can’t do that.

So, it kind of slows the sales process. But again, I think most good retailers will accommodate that over time, it’s a training issue with their people. So, ultimately, I don’t think it’s going to be an obstacle that will dramatically change the equation for our business. But it certainly is a hindrance, and I don’t think it’s a benefit to the consumer. And it’d be good if we can get some relief from the SAFE Act, particularly for manufactured housing, which we’re certainly trying to do with the House Bill 1779.

Daniel Moore – CJS Securities, Inc.

Does it make it more difficult for consumers to find you from your mortgage company’s perspective?

Joseph H. Stegmayer

Possibly. But what most lenders are doing, certainly we’re doing is we’re providing a lot more point-of-sale pieces at the retail locations, so they can post that, consumers can look at it. The salesperson the home salesperson catches, direct them to call any one company. They can just show them what’s available.

And so, yes, I think from the standpoint of our marketing, we’re trying to be more diligent about materials at those sales centers, posters, banners, that sort of thing. And obviously be really responsive when it comes to people calling us and guiding them through the process and giving them ideas on what price any given price point home might be in terms of monthly payment, which the lender can do.

The lender can still quote all those numbers and estimate them for the buyer. So it’s a question of trying to make sure that your flag is out there, so to speak, and very obvious to the buyer, and we’re certainly doing that.

Daniel Moore – CJS Securities, Inc.

Got it, very good. I’ll ask one more. Housing starts have picked up a little bit recently. How well does that typically correlate to future demand for manufactured housing? And you talked about in the prepared remarks things have slowed a bit, 10% probably a challenge. Do you think we can get back to a 10% growth rate, if not in the back half, over the next few quarters, if not – if not for the full year? Or do you see sort of the mid-single digits probably weighing the day for the next quarter or two?

Joseph H. Stegmayer

Well, for the next quarter, I think we’re probably in the single digits. We don’t see anything changing short term. But can we see that 10% plus improvement in the latter part of the year, possibly. It’s just been very difficult obviously to predict. And obviously, most of the factors that we have, they’re outside of our control. But we do believe we’ll continue to increase our penetration. We think shipment is going to improve somewhat. So, I think the short answer is, yes. On the balance of the year, in the next couple of months, I don’t see things changing much from this mid-single digit kind of range.

Housing starts, to your point on housing starts, it should be a good indicator. Obviously, if housing starts lead to home sales. The site builders are accurately predicting what their sales are going to be and starting a house construction on that basis. If it comes through to fruition in terms of home sales, it certainly will be good for us too. I don’t – I never looked at housing starts as a key indicator, but obviously it’s a leading indicator, but it really in the end depends on home sales, on new single-family home sales.

Unidentified Analyst

Great color. Appreciate it. Thank you.

Joseph H. Stegmayer

Thank you, Dan.

Operator

Thank you. And your next question comes from Wyatt Carr from Monarch Bay Securities. Your line is now open. Please go ahead.

Wyatt Carr – Monarch Bay Securities

Hi, Joe and Dan, and congratulations on the quarter. Just a couple of questions. You mentioned that you’re having some labor availability difficulties and yet Bill Gross is commenting on wages being stagnant or people being underemployed. Are you seeing that and what can we look for in wages going forward?

Joseph H. Stegmayer

Right, good question, Wyatt. We think there probably will be – there is and probably will continue to be some upward pressure on wages. We certainly have been looking at that across the board and our companies have been increasing either base wage or incentive compensation arrangements to some extent. However, I would quickly add, I don’t think that’s going to be a major factor in our business. We control labor very well.

And in fact one could argue that it might be a factor in our favor because since we do control labor much better the use of labor hours, much better in a factory than we’ve done in the construction site as labor rates increase generally across the country and across the spectrum of jobs, we’ll have an increasing advantage vis-à-vis other users of labor, that is we’ll use (indiscernible) better and more efficiently.

So we’re not concerned about modest increase in labor rates. We do need to watch it so that we make sure we’re competitive and can attract people. But I don’t think labor as a percent of our revenues, for example, is going to be severely impacted. It might move up somewhat but I think it will – pricing of our homes will move up in tandem. So I don’t think we’ll see a significant increase as a percent of sales over time.

Wyatt Carr – Monarch Bay Securities

Okay, great. And then just some color on the number of independent dealers and company owned. I noticed that the number of homes sold for company-owned centers was virtually flat year-over-year and independent retailers moved up nicely. Obviously, the selling price had to move up among company-owned retail centers to get to your kind of revenue number you got to (indiscernible) company-owned and independent?

Daniel L. Urness

We’ve had some increase, Wyatt, in the independent side. We’ve always worked to maintain and then even improve our market penetration and our market share there. So there has been some improvement. We’ve stayed fairly flat on the company-owned retail sales center side. The interesting thing that you mentioned was to get to these volumes and then you maybe even been thinking about the average sales price.

And I would just point out that the average sales price for the company-owned retail sales centers is going to be higher because that’s going to be the retail price of the home versus the volume that you see going to the independent retailers, builders, communities and developers.

That’s wholesale and the wholesale price is going to be obviously lower without the retail mark-up. So, we get both in mark-ups actually. One of the benefits of having a retail group is that we get the retail mark-up in addition to the wholesale price for each of the homes. But that I guess provides just a little bit of color on how that works out and addresses a little bit about what you’re seeing.

Wyatt Carr – Monarch Bay Securities

Okay. And then on the macro that you’re talking about the overall growth of the industry looking more like 5% versus 10% that you have been hoping for. But it also looks like you’ve been taking some share. Are there any markets that you feel that you haven’t taken share in or that you can – that there is share availability?

Joseph H. Stegmayer

Sure. There are certain markets in the country where we’re not really participating or not effectively participating. And by effectively participating, we refer to the fact that we might be able to ship to certain states, but if there’s competitors that are closer to us in significant number that is, they will have a freight advantage.

So, for example, we have operations in the Mid-Atlantic States, in Virginia, and then down South through Georgia and Florida. We don’t have operations in the Northeast. We ship into New Jersey. We ship into some of the New England states from time to time. But there are other manufacturers who have consumers in Pennsylvania, even New York who are closer to us. And so that’s a market we don’t get a very good penetration in.

The Midwest, similarly. We have a plant in Tennessee. We can ship into some parts of the lower Midwest you might even say. But when it gets to the Upper Midwest and the Central Midwest, further out West, we’re not a significant factor again because we’re not pretty competitive.

So, there are markets we’ve looked at from time to time, we’ll continue to look at. In existing markets, yes, there’s still opportunity to gain share, certainly. I mean, we think there is significant opportunities in markets – in our prime markets, California, Northwest or the Southeast. So, I think we have a combination of opportunities in existing markets as well as some new markets we can look at.

Wyatt Carr – Monarch Bay Securities

Okay. And lastly, plant utilization. Have you maintained the number of shifts, added shifts, or much change there in the utilization?

Joseph H. Stegmayer

We’ve improved somewhat our utilization, though we’re a far cry from where we really need to be. It varies, of course, by plant. Texas utilization, as I mentioned earlier, is a little bit better. Here in Arizona, it’s somewhat lower. California, it’s lower. So, it certainly varies, but we’ve improved that.

Our business and our industry generally operates on one shift. There’s not any one –certainly no one in the industry substantially operates on more than one shift and hasn’t, not historically. A lot of reasons for that, which I won’t go into here. So most of the time utilization numbers are characterized by one-shift, five-day a week kind of model.

And we have quite a lot of room to grow yet in that respect, as does the industry, as evidenced by the fact that there’s 123 factories, and those factories are probably operating at 50% or less of the – their actual production capacity.

Wyatt Carr – Monarch Bay Securities

Okay, great. Thank you very much.

Joseph H. Stegmayer

Thank you, Wyatt.

Operator

Thank you. (Operator Instructions) And your next question comes from Albert Sebastian from Prospect Advisors. Your line is now open. Please go ahead.

Albert Sebastian – Prospect Advisors

Good morning, gentlemen.

Joseph H. Stegmayer

Good morning.

Albert Sebastian – Prospect Advisors

Just a question on the cash. I got on the call a little bit late, so apologies if you’ve already addressed it. But it doesn’t seem like you’ve generated much cash in the quarter. Can you give a little detail on that and what’s your outlook might be for the remainder of the year on your cash generation?

Daniel L. Urness

Sure, Al. In looking at the balance sheet, the balances of accounts receivable and inventories where you’ll see that cash going. So, it’s the seasonally higher quarter this quarter and it’s typical for us to increase our inventory levels at our company-owned stores.

That sort of transcends down to the factory level where inventory levels will increase as well to accommodate those higher order levels. So it’s common and typical for inventory balance to increase during this quarter, and it certainly did this quarter. And that’s part of the use of cash this quarter.

And then, the accounts receivable balance increased just in tandem with sales increases. So, those are kind of common themes that you’ll see this time of year, and they certainly took place this time.

As far as cash generation, our cash generation remains strong as a company. The expectation is that we’ll continue to have that happen throughout the rest of the quarters for the year. So, what – you see that kind of seasonally tail off this quarter or have those adjustments related to inventory and accounts receivable, that’s just a seasonal impact and not a long-term effect on cash.

Albert Sebastian – Prospect Advisors

Thank you.

Joseph H. Stegmayer

And Al – and just to add to that, folks, you will see our accounts receivable number move from time to time. We participate and offer a number of inventory finance programs for our customers and so that could swing the customer pays down their inventory line, or we add a new customer or a new customer for refinance that could increase. But all of that goes into a very productive avenue in that. We’re generally doing business because we’re offering that financing, so we’re increasing our sales.

And we get a margin on that loan, if you will, that inventory finance loan through the customers. So it’s a good use of our cash. So that’s a positive thing when you see our – generally when you see our accounts receivable increases.

Not an issue of accounts receivable stretching out in what you’d consider a normal – or a typical fashion. Our accounts receivable terms are very short and we return our receivables very quickly. It’s only where we make the specific programs which are profitable programs for us to finance inventory on a medium-term basis where you see accounts receivable move up.

Albert Sebastian – Prospect Advisors

Okay, great. Thanks for the detail, Joe. Thank you.

Joseph H. Stegmayer

Okay.

Operator

Thank you. And we do have a follow-up from Daniel Moore from CJS Securities. Your line is now open. Please go ahead.

Daniel Moore – CJS Securities

Dan, do you happen to have operating profit by segments? If not, we can wait for the Q, but I wanted to see if you had that available?

Daniel L. Urness

Yes. We do and we’re going to be issuing that quarterly report next week. So in the meantime, what we expect that we’re going to report is that the – again, this is excluding general corporate charges. So, it won’t entirely add up.

Daniel Moore – CJS Securities

Right.

Daniel L. Urness

For factory-built housing, $10.7 million is what we expect and then about $1.5 million for financial services.

Daniel Moore – CJS Securities

Very good. Thank you.

Operator

Thank you. And I’m not showing any further questions at this time. I would now like to turn the call back to Joe Stegmayer for any further remarks.

Joseph H. Stegmayer

Thank you, Danielle, and thank you everyone for joining. We will be available for any follow-up questions. Please feel free to call us and contact us. And we look forward to talk to you again in a few months. Thank you. Good day.

Operator

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude today’s program. You may all disconnect. Everyone have a great day.

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Cavco (NASDAQ:CVCO): FQ1 EPS of $0.64 in-line. Revenue of $139.2M (+3.9% Y/Y) misses by $11.3M.