Cavco Industries, Inc. (CVCO) Q2 2015 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Cavco Industries, Incorporated Second Quarter Fiscal Year 2015 Earnings Call 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 conference call is being recorded. I would now like to introduce your host for today’s conference Mr. Joseph Stegmayer, Chairman and Chief Executive Officer. Sir, you may begin.

Thank you, Crystal and welcome everyone. We’ll begin with Dan Urness, our Chief Financial Officer’s operations report and make a few comments and we’ll be glad to take your questions. Dan?

Good day. 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. For our financial report, net revenue for the second quarter of fiscal 2015 was $139.3 million, up 7.3% compared to net revenue of $129.8 million during the second quarter of fiscal year 2014. The increase was mainly from a higher average home selling price during the quarter. Quarterly fluctuations in the average sales price is the result of the broad range of housing products sold by the company. Consolidated gross profit in the second fiscal quarter as a percentage of net revenue was 22.7% in line with recent quarters, but slightly lower than 23.0% in last year’s second quarter, which included certain multi-family housing projects that positively affected the gross margin percentage. Selling, general and administrative expenses in the fiscal 2015 second quarter as a percentage of net revenue was 16% compared to 17% during the same quarter last year. The improvement was from better SG&A utilization on higher sales volume. The effective income tax rate for the second fiscal quarter was approximately 37% compared to nearly 30% last year. Last year’s lower effective tax rate in the second quarter was a function of the redeemable non-controlling interest buyout, which required revaluation of deferred taxes. Also, the company recorded the benefit of certain tax credits in last year’s quarter further reducing the effective tax rate. Net income attributable to capital stockholders for the second fiscal 2015 quarter was $5.5 million compared to net income of $4.3 million reported in the same quarter of the prior year. However, the prior year included a deduction for $0.4 million of net income attributable to redeemable non-controlling interest. Net income per diluted share for the second quarter of fiscal year 2015 was $0.61 versus $0.50 during last year’s comparable quarter. Now comparing the balance sheets for September 27, 2014 to March 29, 2014, cash was nearly $81 million at the end of the fiscal quarter compared to approximately $73 million six months earlier. The inventory balance has generally increased in line with higher sales volumes during last six months. Current deferred income taxes are lower. However, from the utilization of NOL carry forwards during the six month period. And finally stockholders’ equity grew to $306.2 million as of September 27, 2014, up $15.8 million from the March 29, 2014 balance. Joe that completes the financial report.

Thanks, Dan. We’re pleased with Cavco’s performance in the quarter. While manufacturing housing shipments have not shown the growth we expected for this calendar year for the industry as a whole, sales are up pretty much in line with new single-family site build home sales, which have also recorded more modest sales activity than many analysts anticipated. We have experienced some improvements in certain markets that have previously been particular difficult including Florida, California and several other states. These are modest increases though nevertheless very welcome from geographic areas that were particularly hard hit by the recession and the overall decline in the housing market. We’ve recently introduced newly designed homes at home shows, which have been very well received by retailers. We believe that we have excellent product offerings in a broad range of price points. We have the ability to offer three strong brand names, each with different design and feature characteristics and is proven to help gain distribution and strengthen relationships with retail home centers, flat community operators and developers who work directly with home buyers. So again, we feel we’re very well positioned. And as the housing market job continues to improve, we’ll certainly feel will be a beneficiary to that improvement. Shifting topics for a moment, I will offer a few comments on the Skyline Corporation matter. Some of the people on this call maybe aware that on September 26 of this year, Cavco announced its interest in a transaction with Skyline. As we’re certain you can appreciate, we will not discuss anything that has not been publicly disclosed. And we must say it appears in public filings, we’d encourage you to read and which are readily available on the SEC and other websites. Skyline has reported annual losses before income taxes for seven consecutive fiscal years. These cumulative losses totaled approximately $122 million before income taxes, the majority of which were incurred by the manufactured housing segment. Skyline shareholders equity declined from approximately $178 million at the beginning of fiscal 2008 to $30 million at August 31, 2014. Skyline has exhausted cash position and recently borrowed $6.3 million on life insurance policies. Cavco has been transparent and collaborative in our approach to Skyline Board of Directors. We suggest that it would be worthwhile to discuss opportunities to maximize the value of Skyline’s business for its shareholders. Cavco specifically stated Skyline’s Board that we’re willing to explore a variety of alternatives to an all cash purchase of all outstanding shares, including the purchase of specific assets of the company or an asset backed operating loan. We are disappointed that Skyline has not responded to our request to meet in person, while Skyline has formed a special committee of the Board of Directors and engaged financial and legal advisors to assist in very strategic initiatives. The committee cannot responsibly do its job if it does not talk with Cavco and other interesting parties about all potential strategic proposals and other initiatives to improve operations and strengthen Skyline’s capitalization. We will remain ready and willing to meet with Skyline’s management, its best committee and/or its entire Board of Directors. Back to our routine matters, as we enter the historically slow winter season for housing, we are cautiously optimistic based on recent order activity and the feedback we are receiving from our distribution base for the months ahead. Of course improving lending environment, employment levels and consumer confidence levels would also have a positive impact on demand for manufactured homes and we do see improvement in several of these areas although on a fairly slow basis. With that Crystal, we’ll now take questions.

Thank you. (Operator Instructions). And our first question comes from Daniel Moore from CJS Securities. Your line is open.

Good afternoon.

Hi Dan.

The average selling price, a nice increase, 9%; maybe just talk a little bit about what drivers were there. And then conversely, according to NAHB, I mean shipments were up mid to high-single-digits, you were down a little bit; is that a function of geography or maybe you can just elaborate there?

Sure. Dan, with respect to average selling price, we are going to see fluctuations in that from time-to-time. And the reason is and also relate to the second part of your question, these low levels of production for the industry and certainly our low utilization levels, we’re trying to get jobs from a lot of market niches. And sometimes, we might get a job from a community operator who is buying higher priced units or from a project that’s building let’s say two storey modular units. And by nature those prices tend to be higher. Other quarters, other months, we might be getting more traditional entry level product business. So, it’s going to fluctuate somewhat. We don’t have a really reason we could tell you that any particular model is selling better than another. In some areas, we’re seeing higher price models becoming more popular. Florida for example which has the last several been very much a price oriented market where it’s trying to see some improvement in demand for higher price models that is homes that might be larger with more amenities. Largely, this is coming from the 55-plus, the empty nester, the snowbird and retiree markets if you will. So, we’re seeing some trends in that regard but none of these fluctuations in our average selling price can we tell you that it’s because of some mega trend that we have point to that is sustaining or we believe will be sustainable going forward. It’s too early to tell you.

That’s very helpful color. Obviously on a dollar basis, you’re right in line with market. Maybe talk a little bit about legislation. It’s been about nine months or more since the implementation of some of the latest Dodd-Frank changes. Can you attempt to quantify at all impact that you’ve seen on demand? And as you look out to ‘15, are there any potential pieces of legislation on the agenda or the horizon that might loosen potentially access to credit mortgage financing in your areas?

Right. The Dodd-Frank Act in the implementation of those requirements for the CFPB have probably dampened things somewhat. Certainly it has created a little bit of a confusion on the retail distributions. So, for example, historically as a consumer came to a retail sales center to look at buying homes, the sales person who is working with them could give him an idea. It was an approximation, but they could give an idea of what their monthly payment might be. Most people on this call know in our industry a lot of our buyers are payment-oriented buyers. They want to know to moving either a apartment or a substandard housing they want to move up to a better home. They want to know can I afford this, is the payment $400 a month, $450, $475, $500, $550 whatever it might be. And they typically are in the habit of asking that person are just when they to go to a car dealer and look at buying a car. They want to know what’s the monthly payment, am I going to able to afford it. Historically, the sales person could give him an idea. Well, this home you’re looking at would be approximately x dollars a month in payment. I can’t tell you exactly that will depend on your credit quality and the lenders, but that’s an approximation. Now they can’t even do that. They can’t approximate a payment to the buyer, they can’t direct a buyer to an individual finance company. So, they have to just kind of tell the buyer, well, you will have to talk to finance companies, there is the number of you can talk to. We can do it for you. And so that’s -- we’ll go through it eventually hopefully, but it’s certainly not convenient for the consumer, it’s not conducive to a kind of a smooth process, which is unfortunate. I don’t think these rules are helping anyone and I think in fact they’re stagnated or hurrying the consumer somewhat finding more information more readily. But that’s something we have to live with right now. In terms of trying to get regulatory relief from that, yes, we are trying to do that. We’ve spoken as an industry directly with the CFPB about interpretation of the Dodd-Frank rules and could they give us some relief from that. And we’ve also of course have legislative initiatives that are moving forward. And we have very good co-sponsorship of legislation that would change this and give our institute some relief from some of these provisions. And we have more than 100 co-sponsors in the house of bill to do just that. Obviously as you can imagine that right now legislation is not moving too swiftly in the house center with the election process going on. But we are hopeful that it requires legislative change that we can continue to move our bills forward after the election process is over.

Very helpful. Maybe just one more. You talked about Florida and California modestly improving, maybe just talk about geographies Texas, Arizona, other Southern states. What are you seeing geography-by-geography, which areas are outpacing the market and which are a little bit lighter?

Sure. And of course Texas has been strong for our industry and certainly for cash flow as well for some time now and it continues to operate very well. Shipments year-to-date in Texas were up 18%. So, it’s certainly one of the strong. And that’s from a good year in the past year. With respect to Arizona, likewise, we’re seeing a nice increase. Year-to-date they are up 22% Arizona shipments are. But that’s we add from a very low base historically. So the shipments in Arizona by no means up to where anywhere near where they could be or where they have been even on an average basis over many years. But we’re finally starting to see some signs of life in this market. Nevada is another example. Nevada is really a two geographic state market; there is you have Northern Arizona and you have Southern Arizona, Las Vegas market. Well that market was pretty much dead for some time and now we’re starting to see some activity in that Southern Las Vegas, Nevada market that we’re benefiting from. We’re starting to ship homes up there again. Again it’s not a grounds well, but it shows certain improvement. But the numbers are so modest, the shipment numbers in Nevada that it doesn’t really show much in shipment levels. California shipments were up 20%, again from a low base and still way below their historical levels even if you eliminate the peaks of the boom and the 2,000. So, you eliminate those years, California has always been a very good state for manufacture houses. So many communities, planned lease communities in California and so many areas in the [England] Empire where manufacturer housing are appropriate. But gradually speaking that improved somewhat and we’ve benefited from that both in our Fleetwood California plant, as well as our Cavco Arizona plant. And in the Northwest, another area, I don’t want to go on too long here, but the Northwest is also an area we’ve had pretty good relative successful. Again it’s been a tough market, it’s comeback modestly, but our products tend to be doing very well in there. We have a good range of product at our Fleetwood and Palm Harbor brands in Oregon. So, shipments year-to-date in Oregon for example up 30%, once again from a very low base, so I don’t want to send the wrong long signal, but at least we’re seeing some movement. Washington somewhat less of an increase, but still a modest increase in shipments there. And again, we feel we got a very good product line there. And we shipped into Canada from those locations as well. And that business will slowdown as we enter the winter months, but has been fairly good and steady for us in the past several months. Hope that gives you a flavor of somewhat of geography.

It’s great color. I appreciate it. And thank you again for obviously all the good work and controlling costs and those issues that are within your control.

Thank you, Dan

Thank you. (Operator Instructions). And our next question comes from Brendan Lynch from Sidoti. Your line is open.

Good morning Joe, good morning Dan.

Good morning Brendan.

Some of the indicators that we monitor to gauge demand. Since you’ve indicated volumes should be improving, and Joe you touched on this a little bit. We see employment growth and consumer confidence improving, excess to financing does seem to be improving a little bit as well. And the magnitude of these improvements has been small. But still there seems to be a bit of a disconnect between these indicators and volume growth. And I just wanted to get your perspective on what maybe creating that disconnect. Maybe it’s just a lag or perhaps something else. I’d be interested in hearing what you think about that.

Sure. I think that’s a very valid point. We are somewhat miffed by it or to as will be I’d say by it as well because all the indicators that analysts and people who follow housing industry in general have been talking about, economists, they’re all kind of in place, but a lot of them still really haven’t happened or haven’t happened to the extent that people expected. And I think that’s reflected in the construction industry overall for residential. That is the cycle. So, the return on the entry level buyer was much heralded at the beginning of this year and even mid this year by economists and analysts. And we’re seeing some of that but we’re not seeing any kind of sort of ground soil. The lenders’ willingness to extend credit borrowers and kind of the entry level sweet spot, the 600 to 700 FICO score range has gained a little bit of momentum. But again not -- it just hasn’t continued the way it started kind of midyear. We started seeing some of that but it really hasn’t gained any great momentum. So we think the basics are still out there, it’s just they seem to be taking some time to come to some sort of fruition. We feel very strongly that we’ll continue to see improvement in manufacturing housing shipments into next year. As I said we’re somewhat disappointed. We would have thought that manufacturing housing shipments this year would have approached 10% increase and it doesn’t look like we’ll get there as an industry. But I don’t think that -- and I think that only pushes the target forward a little bit. I don’t think it changes the game at all that is I think there is still a growing demand of things we’ve talked about in the past, we’ve talked about in our public filings are still all in place. There is a tremendous need for housing in that 55-plus, 11,000 people turn 65 everyday. They want to make changes in housing; they become empty nesters, they want different style house, they want different geographic area, they want different lifestyle, all those things are still there. And those demographics, we can’t change them because the economy is not cooperating with us. So I think the demographics are going to win in the end and we’re going to benefit from that. The same with that first time home buyer and the [money] generation. Yes, people can stay living with their parents for a while but eventually and some are may staying for long, long time. But eventually some of those are going to turn into wanting to buy or rent. And a lot of our developers and operators are buying homes to rent, not maybe a bigger market for us, it is an entry in the future. But again, I don’t think, right and things go away, I think it is not happening as fast as we would like to see them happen.

Great, that’s helpful. And that kind of leads into my second question, which was on your product segments. You discussed the retirees and the first time buyers and the opportunity that exist going forward. Can you just touch on how demand is currently among those two key demographics?

Demand among the first time buyer and 55-plus you are saying?

Yes.

We’re all -- I think as I say, I think it’s improving somewhat. We’re seeing and we’re told by the plant community operators who have a big stake in that senior 55-plus age group, we’re seeing it. They are seeing more traffic, they are seeing more people willing to buy versus rent. They’re seeing people that want to buy a little bit more expensive house to maybe the buyers of the past year or two. I’m not sure, we can put actual numbers on those demographics, but I think they are finding they can sell their house back where they came from, whether it’s Midwest or the Northeast as they move to Florida or in our case Central Plains state and the Western, Northwestern states as they come to Arizona and Southern California. There is a much more positive vibe, I get it anecdotally as I visit some of these areas. The people are even selling, they are selling their home or they’re getting comfortable with the fact, they’re not going to get the price to their home that they might have gotten back pre the subprime bust inside. But they are currently grips of that and they want to make that housing change. So, I’m not sure, but I can’t give any specific card numbers, but I think those markets are beginning to hatch a little bit. And it’s so or do we like but it’s beginning to take hold.

That’s very helpful. Thank you. And then just my final question, I understand you can’t speak on Skyline specifically, but I was interested in if you’re seeing any other opportunities amongst the other manufactured homebuilders specifically the smaller mom-and-pop shops that might be available to acquire perhaps any geographic regions that you would be interested in gaining exposure to and just to your appetite for such acquisitions going forward?

Right. Well, from an appetite standpoint, we’re certainly interested in growing our business and it’s our primary objective of course is to grow this business and we think we’re in good position to do so. We can do that by Greenfield that is de novo building plants or opening up factories that are sitting out there idle around the country and there are some of those. Where we can do the acquisition. Obviously the benefit from acquisition as you get a faster start. And presumably hopefully in some cases, you got a distribution base, not always because some of the companies might be, might have struggled too hard and they’ve loss some of the distribution. We’re looking sure, we’re looking all the time. People approach us, we approach individuals and companies and that will continue. We’re going to do it obviously on a prudent basis, it has to be obviously an attractive opportunity for the seller. And it has to be an attractive opportunity for us in terms of projected return and what it adds to the fold. And from a geographic standpoint, to third part of your question, there are areas in the country that we’re either not in at all or in a very most way. The Northeast for example, parts of the Midwest and certainly the essential Central Plain states are. Our plant in Idaho ships into Wyoming, Montana and the Dakotas, but there are other plants are closer to those market than us. So, we’ll continue to look at other areas we can fill in that would make some sense for us. And even in markets we’re currently in, it doesn’t mean we’re certainly not really following some of the existing markets we’re in. So, in the Southeast there are infill positions we could do there as well.

Great. Thank you very much.

You bet.

Thank you. And our next question comes from Mike DeRop from Robotti & Company. Your line is open. Mike DeRop - Robotti & Company: Hi, guys. Thank you for taking my question.

Sure Mike from Robotti & Company. Mike DeRop - Robotti & Company: Thanks, thanks. I was just wondering if you could -- you guys have had success selling into MH communities. I was just wondering if you could discuss what you’re doing to grow the sales outside of the communities. Is it anything new from that perspective of how you’re approaching those sales? And maybe further on that, what are you doing to grow the knowledge of the brands and the value proposition you offer whether it be sort of like advertising or social media or any other avenues?

Sure. From the standpoint of distribution other than communities, yes, I’m glad to point that out. We are very proud of our independent dealer distribution base. And it’s one of the things that Cavco’s always had a strong base out here in the South Western in United States. But one of the major tractions where we made the acquisition of Fleetwood Homes was their long standing and excellent reputation with a wide and model home centers, independent retailers throughout their markets, throughout the country basically. And we’ve been able to not only preserve those dealers, post the acquisition, but we’ve actually been able to expand our position with many of those retailers and add new retailers to boo. So, it’s been very successful and our independent dealer base is still the major distribution model for our company. We’ve increased our business with community operators who are very important. But our independent dealer base is very diverse and handle a lot of different products. And what we’ve been able to do to other part of your questions, we’ve been able to bring other products. And so a Fleetwood dealer might be interested in a Palm Harbor product a little bit higher price point or design Palm Harbor offers. The same with Cavco products, we’ve been able to offer those same dealers a broader range of product, which has helped I think tremendously. It helps the retailer. They can have a broader range of product to offer consumers, they can capture more of their market in the area and they like that. Combining that with the ability we can fore plan the home then we inventory finance for them when fore plan was not readily available that’s developed some loyalties relationships with retailers as well. To your point about advertising and reaching out extremely important and most of what we do there is you mentioned social media. We spend a lot of time effort and money in the Internet world. We have very, very advanced we think progressive for our industry websites. I think if you look at our Palm Harbor and Fleetwood Cavco websites, you will see a lot of models pictures. We have very active websites that we’re participating with our independent retail base. And our own Palm Harbor retail stores is very active in a consumer focused website presence. We’re very recently focused because housing is a regional business and which show different homes to different areas. We spend a lot of effort trying to optimize search engine so we stand tall when it comes to people looking for manufacturing homes. Obviously we have some, we have competitors that are larger than we, who probably have greater resources, but we think we stand pretty well with those competitors and get a lot of leads frankly from those sources. Most of this, historically in our industry, most of the business for independent retailers, retailers in general comes by referral and we continue to work on that. So, retailer does a good job to the consumer; obviously they tell their friends and relatives; people come over and visit their new home; they wanted to know how they got their; they’re amazed that they can be in this three bed and two bed home, for less than they are paying, less than their friends are paying for an apartment, that’s smaller and that word spreads. And if the customer is satisfied and happy with their experience, and the installations, delivery installation and follow up service after the sale, they are going to refer customers too. Many retailers have referral programs. Our contribution to that as a manufacturer is to make sure we service the home well after the sale, which we emphasize enormously. And that service after the sale makes sure the customers is happy with their warranty service, happy with all the cosmetic issues and any other issues with their home. We take care of them quickly. And we measure that customer satisfaction rating all the time. We have customers’ satisfaction surveys and indexes we do. We measure our people in plans on that basis. Mike DeRop - Robotti & Company: Okay, great. Thank you. And then Freddie Mac’s entry into lending to manufactured housing communities, what is your assessment of that may impact the industry over time? And I guess, I’m just wondering sort of lower borrowing cost at the community level. What does that mean; is there any potential that that freeze up capital to be able to expand parks or possibly even begin new developments; is that in the realm of possibility?

Yes, I think it could do all those things. I think anytime capital, availability of capital and capital at attractive rates becomes available to an industry like the community business, it’s very welcome. I think what it’ll do, it can make, it can in cause maybe community operators to expand their current facility and more spaces if you will in that community. It could add, it could conceivably bring them to expanding in general. If they get financing or refinancing for their existing community and they can use some of those funds to expand elsewhere, it could cause some of that expansion. It will also probably provide some transition of ownership. So if some new ownership can mange using Freddie Mac funds to buy a community, they might bring new life to that community. So for example, we might have an older ownership, mom and pop ownership of community or two communities or for several let’s say, but there pretty much just cup and coupons if you collecting rents and they are very happy with their cash flow, but they’re not about to make any major improvement to the community or to expand it. New order ship comes in, do just that, which is always beneficial. New homes then start to be moved into the community and you see resurgence of that community. And that means replacement of homes, not a like cycle carriers where homes are gradually replaced, it doesn’t mean homes are not suitable for habitation, it might be. But people community want a newer more modern home and that holder home gets pulled out and put to some other use, but new home goes up in that community. And gradually that community -- that happens over time, just as -- and the site subdivision will happen over time. And I think the entry of capital for community lending can help make some of those things happen. Mike DeRop - Robotti & Company: Okay, thanks. And I just wanted to also ask. Could you remind us of the potential impact of higher interest rates on the business and how that puts the manufactured housing on a competitive basis just from your perspective?

Well, I’m glad you asked that one, Mike, because that is an important one and it’s some that’s kind of intuitive. When rates increase, our product really does better. Historically, the synergies have found these better years when rates were relatively high. So why is that? It’s really because our proposition becomes even better. As rates move up for housing and general, the rates in manufactured housing don’t tend to rise quite [intangibly]. In fact, our channel rates already tend to be right now they’re considerably higher than conventional mortgage rates. But and there is good reason for that. Lower balance loans, so that their interest rate has to be higher to compensate the lender to service those loans. The fact that there is no front-end fees typically in that certainly how large fees closing costs those sorts of things, there is no prepayment on a personal property loan and for manufacturing home. So, and the cost generally servicing the loan is even more because the credit quality of the customer requires a little bit more attention. So our rates tend to be higher. But when mortgage rates for conventional financing move up, channel rates don’t move up in tandem. They’re already sufficient to do what needs to be done and to attract capital. So, our proposition becomes even better. So right now, I think one of the reasons we’re not doing, as well as we possibly could as an industry is because rates are very low. And because people are still able to buy a more expensive home probably a site build home that they couldn’t buy if rates were much higher or even somewhat higher. And we talked about this in the past, we certainly lost a lot of our buyers in the manufactured housing industry when the subprime boom was going on. We’re not losing as many too that issue now. But I still think with rates where they are, there are some buyers that are enable to buy a home that they obviously couldn’t afford if interest rates were higher and may their monthly payment go upward. So, I think you’ll see as rates are to move up, I think you’ll see that be a benefit to our industry not the hinderers. Mike DeRop - Robotti & Company: Okay, great. Thanks very much again I appreciate everything.

You bet. Thank you Mike.

Thank you. And we have a follow-up from Daniel Moore from CJS Securities. Your line is open.

Thank you again. We’ve talked about this and I think you’ve addressed it in prior calls, but cash balance continues to grow and when the recovery picks up your cash balances like an additional ball pretty quickly. On the flip side we were seeing a little bit of increased volatility in the equity markets and stock get below 70 for period. Would you consider or why not consider opportunistically putting in a buyback just to take advantage of periods when and if the market gives you a little bit of an opportunity?

And we certainly will consider share buybacks. We actually have an authorization in place that’s still valid and Board authorized. So we can move up to purchase stock we think it’s appropriate and we will do so. Frankly, we’ve been focused primarily on funds available for lending as I mentioned earlier in this call we’ve been doing foreplanned lending for our retail distribution base and community operators. And it’s a good business provide something that some of our competition doesn’t have. It provides ease of doing business with us for those buyers. And frankly it can be a spread for us versus our money in treasuries. So, we certainly reserve money for that. And obviously we want to conserve some cash for the expansion that where the previous questions asked about acquisitions or other expansions. But you are right, we expect to continue to generate cash and while it’s a good problem to have we’ll recognize, we’d have to address it. I think stock buybacks, cash dividends or things we will look at in the future. It’s obviously this past several years, given the economy, given the housing market it’s not been something, it’s been on the front end of our thinking, because we want to preserve and expand what we have and expand our base of operations and position ourselves as well. As we get a little more mature in this cycle and things even more stabilized, I think a lot of those things become or both of these issues I should say become more relevant or more pushed I might say to the quite burner.

Understood. Appreciate the color. We’re saying that obviously as we see the life of that recovery, we would anticipate that the returns on that the investments of buying back your stock might not be as attractive as they are today. I appreciate the color as always.

I understood. Thank you for the comment.

Thank you. And I’m showing no further questions from our phones lines. I’d like to turn the call back over to management for any closing remarks.

Well, thank you Crystal. I’m appreciate every joining us for very good questions and we feel again very good about how we’re positioned, we think things will gradually come back and we’re going to be able to take advantage of it. And we appreciate your patience and your support. And we look forward to reporting further progress. Thank you today for joining us.

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