UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 28, 2019September 26, 2020
OR
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                    to

Commission File Number 000-08822
CAVCO INDUSTRIES INC.
(Exact name of registrant as specified in its charter)
Delaware56-2405642
(State or other jurisdiction of
incorporation or organization)		(I.R.S. Employer
Identification No.)
Delaware56-2405642
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
3636 North Central Ave, Ste 1200
PhoenixArizona85012
(Address of principal executive offices, including zip code)
(602) (602) 256-6263
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, par value $0.01CVCOThe Nasdaq Stock Market LLC
(Nasdaq Global Select Market)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer☒Accelerated Filer☐
Non-accelerated Filer☐Smaller Reporting Company☐
Emerging Growth Company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the Registrantregistrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No ☒
As of January 24,October 23, 2020, 9,142,2819,188,162 shares of Registrant'sthe registrant's Common Stock, $.01 par value, were outstanding.




CAVCO INDUSTRIES, INC.
FORM 10-Q
December 28, 2019September 26, 2020
TABLE OF CONTENTS

Page
Item 1. Financial Statements
Consolidated Balance Sheets as of December 28, 2019September 26, 2020 (unaudited) and March 30, 201928, 2020
1
Consolidated Statements of Comprehensive Income (unaudited) for the three and ninesix months ended DecemberSeptember 26, 2020 and September 28, 2019 and December 29, 2018
2
Consolidated Statements of Cash Flows (unaudited) for the ninesix months ended DecemberSeptember 26, 2020 and September 28, 2019 and December 29, 2018
3
Notes to Consolidated Financial Statements
4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
3324
Item 3. Quantitative and Qualitative Disclosures About Market Risk
4432
Item 4. Controls and Procedures
4432
Item 1. Legal Proceedings
4433
Item 1A. Risk Factors
4534
Item 5. Other Information
4534
Item 6. Exhibits
4534
4635

Table of Contents

PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
CAVCO INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share amounts)
December 28,
2019		 March 30,
2019
(Unaudited)  September 26,
2020		March 28,
2020
ASSETS   ASSETS(Unaudited)
Current assets:   Current assets:
Cash and cash equivalents$216,882
 $187,370
Cash and cash equivalents$312,243 $241,826 
Restricted cash, current13,026
 12,148
Restricted cash, current16,691 13,446 
Accounts receivable, net39,411
 40,701
Accounts receivable, net36,852 42,800 
Short-term investments13,945
 12,620
Short-term investments16,589 14,582 
Current portion of consumer loans receivable, net37,151
 30,058
Current portion of consumer loans receivable, net39,023 32,376 
Current portion of commercial loans receivable, net15,433
 15,234
Current portion of commercial loans receivable, net13,261 14,657 
Current portion of commercial loans receivable from affiliates, netCurrent portion of commercial loans receivable from affiliates, net1,700 766 
Inventories110,144
 116,203
Inventories111,872 113,535 
Assets held for sale—
 3,061
Prepaid expenses and other current assets55,994
 44,654
Prepaid expenses and other current assets49,193 42,197 
Total current assets501,986
 462,049
Total current assets597,424 516,185 
Restricted cash350
 351
Restricted cash335 335 
Investments31,229
 32,137
Investments30,278 31,557 
Consumer loans receivable, net52,841
 56,727
Consumer loans receivable, net42,817 49,928 
Commercial loans receivable, net28,924
 27,772
Commercial loans receivable, net20,946 23,685 
Commercial loans receivable from affiliates, netCommercial loans receivable from affiliates, net5,571 7,457 
Property, plant and equipment, net71,407
 63,484
Property, plant and equipment, net77,836 77,190 
Goodwill and other intangibles, net89,962
 82,696
GoodwillGoodwill75,090 75,090 
Other intangibles, netOther intangibles, net14,736 15,110 
Operating lease right-of-use assets10,710
 —
Operating lease right-of-use assets17,477 13,894 
Total assets$787,409
 $725,216
Total assets$882,510 $810,431 
LIABILITIES AND STOCKHOLDERS' EQUITY   LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:   Current liabilities:
Accounts payable$27,050
 $29,305
Accounts payable$32,919 $29,924 
Accrued liabilities132,878
 125,181
Current portion of securitized financings and other1,862
 19,522
Accrued expenses and other current liabilitiesAccrued expenses and other current liabilities173,184 139,930 
Current portion of secured credit facilities and otherCurrent portion of secured credit facilities and other2,118 2,248 
Total current liabilities161,790
 174,008
Total current liabilities208,221 172,102 
Operating lease liabilities7,795
 —
Operating lease liabilities14,602 10,743 
Secured credit facilities and otherSecured credit facilities and other11,933 12,705 
Deferred income taxes8,439
 7,002
Deferred income taxes7,066 7,295 
Securitized financings and other14,125
 14,618
   
Stockholders' equity:   Stockholders' equity:
Preferred stock, $0.01 par value; 1,000,000 shares authorized; No shares issued or outstanding—
 —
Common stock, $0.01 par value; 40,000,000 shares authorized; Outstanding 9,141,191 and 9,098,320 shares, respectively91
 91
Preferred stock, $0.01 par value; 1,000,000 shares authorized; NaN shares issued or outstandingPreferred stock, $0.01 par value; 1,000,000 shares authorized; NaN shares issued or outstanding0 0 
Common stock, $0.01 par value; 40,000,000 shares authorized; Outstanding 9,188,162 and 9,173,242 shares, respectivelyCommon stock, $0.01 par value; 40,000,000 shares authorized; Outstanding 9,188,162 and 9,173,242 shares, respectively92 92 
Additional paid-in capital251,941
 249,447
Additional paid-in capital254,297 252,260 
Retained earnings343,143
 280,078
Retained earnings386,134 355,144 
Accumulated other comprehensive income (loss)85
 (28)
Accumulated other comprehensive incomeAccumulated other comprehensive income165 90 
Total stockholders' equity595,260
 529,588
Total stockholders' equity640,688 607,586 
Total liabilities and stockholders' equity$787,409
 $725,216
Total liabilities and stockholders' equity$882,510 $810,431 
See accompanying Notes to Consolidated Financial Statements

1
Table of Contents
CAVCO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands, except per share amounts)
(Unaudited)

Three Months EndedSix Months Ended
September 26,
2020		September 28,
2019		September 26,
2020		September 28,
2019
Net revenue$257,976 $268,675 $512,777 $532,717 
Cost of sales204,435 210,208 403,913 413,952 
Gross profit53,541 58,467 108,864 118,765 
Selling, general and administrative expenses35,453 36,083 70,776 71,347 
Income from operations18,088 22,384 38,088 47,418 
Interest expense(194)(302)(390)(788)
Other income, net1,702 5,173 3,578 7,987 
Income before income taxes19,596 27,255 41,276 54,617 
Income tax expense(4,547)(6,370)(9,553)(12,450)
Net income$15,049 $20,885 $31,723 $42,167 
Comprehensive income:
Net income$15,049 $20,885 $31,723 $42,167 
Reclassification adjustment for securities sold or matured7 0 33 2 
Applicable income taxes(2)0 (7)(1)
Net change in unrealized position of investments held3 29 62 140 
Applicable income taxes(1)(6)(13)(29)
Comprehensive income$15,056 $20,908 $31,798 $42,279 
Net income per share:
Basic$1.64 $2.29 $3.46 $4.63 
Diluted$1.62 $2.25 $3.42 $4.56 
Weighted average shares outstanding:
Basic9,182,945 9,119,835 9,178,609 9,111,260 
Diluted9,295,409 9,266,085 9,280,080 9,241,834 
 Three Months Ended Nine Months Ended
 December 28,
2019		 December 29,
2018		 December 28,
2019		 December 29,
2018
Net revenue$273,722
 $233,700
 $806,439
 $721,633
Cost of sales213,867
 184,679
 627,819
 571,720
Gross profit59,855
 49,021
 178,620
 149,913
Selling, general and administrative expenses36,844
 30,833
 108,191
 90,081
Income from operations23,011
 18,188
 70,429
 59,832
Interest expense(490) (923) (1,278) (2,836)
Other income, net2,211
 (318) 10,198
 3,604
Income before income taxes24,732
 16,947
 79,349
 60,600
Income tax expense(3,834) (3,563) (16,284) (11,949)
Net income$20,898
 $13,384
 $63,065
 $48,651
        
Comprehensive income:       
Net income$20,898
 $13,384
 $63,065
 $48,651
Reclassification adjustment for securities sold or matured15
 14
 17
 38
Applicable income taxes(3) (3) (4) (8)
Net change in unrealized position of investments held(14) 62
 126
 11
Applicable income taxes3
 (13) (26) (2)
Comprehensive income$20,899
 $13,444
 $63,178
 $48,690
        
Net income per share:       
Basic$2.29
 $1.47
 $6.91
 $5.36
Diluted$2.25
 $1.44
 $6.81
 $5.24
Weighted average shares outstanding:       
Basic9,138,202
 9,097,993
 9,120,241
 9,075,156
Diluted9,293,941
 9,270,220
 9,259,203
 9,282,178

See accompanying Notes to Consolidated Financial Statements

2
Table of Contents
CAVCO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Nine Months EndedSix Months Ended
December 28,
2019		 December 29,
2018		September 26,
2020		September 28,
2019
OPERATING ACTIVITIES   OPERATING ACTIVITIES
Net income$63,065
 $48,651
Net income$31,723 $42,167 
Adjustments to reconcile net income to net cash provided by operating activities:   Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization4,208
 3,468
Depreciation and amortization3,182 2,648 
Provision for credit losses138
 500
Provision for credit losses223 30 
Deferred income taxes1,407
 (732)Deferred income taxes(18)1,011 
Stock-based compensation expense2,268
 2,936
Stock-based compensation expense2,048 1,448 
Non-cash interest income, net(1,134) (660)Non-cash interest income, net(2,596)(694)
Gain on sale of property, plant and equipment, net(3,416) (39)
Loss (gain) on sale or retirement of property, plant and equipment, netLoss (gain) on sale or retirement of property, plant and equipment, net242 (3,370)
Gain on investments and sale of loans, net(11,801) (5,200)Gain on investments and sale of loans, net(9,597)(7,683)
Changes in operating assets and liabilities:   Changes in operating assets and liabilities:
Accounts receivable2,196
 (863)Accounts receivable5,948 (3,300)
Consumer loans receivable originated(121,637) (98,692)Consumer loans receivable originated(82,352)(80,259)
Proceeds from sales of consumer loans117,127
 96,679
Proceeds from sales of consumer loans80,589 77,182 
Principal payments on consumer loans receivable7,816
 9,681
Principal payments received on consumer loans receivablePrincipal payments received on consumer loans receivable6,974 4,759 
Inventories11,567
 (6,257)Inventories1,663 6,506 
Prepaid expenses and other current assets(676) (9,248)Prepaid expenses and other current assets11,536 322 
Commercial loans receivable487
 (20,556)Commercial loans receivable4,691 (1,409)
Accounts payable and accrued liabilities(3,295) (3,310)
Accounts payable and accrued expenses and other current liabilitiesAccounts payable and accrued expenses and other current liabilities20,353 4,235 
Net cash provided by operating activities68,320
 16,358
Net cash provided by operating activities74,609 43,593 
INVESTING ACTIVITIES   INVESTING ACTIVITIES
Purchases of property, plant and equipment(6,487) (6,318)Purchases of property, plant and equipment(3,773)(3,944)
Payments for Destiny Homes, net(15,937) —
Proceeds from sale of property, plant and equipment and assets held for sale73
 110
Payments for acquisition, netPayments for acquisition, net0 (15,937)
Proceeds from sale of property, plant and equipmentProceeds from sale of property, plant and equipment77 64 
Purchases of investments(4,648) (5,497)Purchases of investments(4,440)(2,751)
Proceeds from sale of investments8,126
 6,530
Proceeds from sale of investments8,054 4,260 
Net cash used in investing activities(18,873) (5,175)Net cash used in investing activities(82)(18,308)
FINANCING ACTIVITIES   FINANCING ACTIVITIES
Proceeds (payments) from exercise of stock options226
 (114)
Payments for exercise of stock optionsPayments for exercise of stock options(11)(311)
Proceeds from secured financings and other76
 392
Proceeds from secured financings and other64 75 
Payments on securitized financings and other(19,360) (6,112)Payments on securitized financings and other(918)(19,109)
Net cash used in financing activities(19,058) (5,834)Net cash used in financing activities(865)(19,345)
Net increase in cash, cash equivalents and restricted cash30,389
 5,349
Net increase in cash, cash equivalents and restricted cash73,662 5,940 
Cash, cash equivalents and restricted cash at beginning of the fiscal year199,869
 199,258
Cash, cash equivalents and restricted cash at beginning of the fiscal year255,607 199,869 
Cash, cash equivalents and restricted cash at end of the period$230,258
 $204,607
Cash, cash equivalents and restricted cash at end of the period$329,269 $205,809 
Supplemental disclosures of cash flow information:   Supplemental disclosures of cash flow information:
Cash paid for income taxes$15,901
 $15,845
Cash paid for income taxes$7,865 $13,073 
Cash paid for interest$604
 $1,912
Cash paid for interest$251 $473 
Supplemental disclosures of noncash activity:   Supplemental disclosures of noncash activity:
GNMA loans eligible for repurchaseGNMA loans eligible for repurchase$16,170 $704 
Right-of-use assets recognized$14,322
 $—
Right-of-use assets recognized$5,617 $13,464 
Operating lease obligations incurred$14,347
 $—
Operating lease obligations incurred$5,617 $13,489 
See accompanying Notes to Consolidated Financial Statements

3
Table of Contents
CAVCO INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited Consolidated Financial Statements of Cavco Industries, Inc. and its subsidiaries (collectively, the "Company" or "Cavco") have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") for Quarterly Reports on Form 10-Q and Article 10 of SEC Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP") have been condensed or omitted pursuant to such rules and regulations.
In the opinion of management, these financial statements include all adjustments, including normal recurring adjustments, that the Company believes are necessary to fairly state the results for the periods presented. Certain prior period amounts have been reclassified to conform to current period classification. The Company has evaluated subsequent events after the balance sheet date through the date of the filing of this report with the SEC,SEC; and except for the events set forth in Note 22 of the Consolidated Financial Statements Notes ("Notes") of the Company's Quarterly Report on Form 10-Q for the period ended September 26, 2020, there were no disclosable subsequent events.events requiring disclosure. These Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the Notes to the Consolidated Financial Statements included in the Company's 20192020 Annual Report on Form 10-K for the year ended March 30, 2019,28, 2020 filed with the SEC on May 28, 201927, 2020 ("Form 10-K").
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and the accompanying NotesNotes. The uncertainty created by the novel coronavirus COVID-19 ("COVID-19") have made such estimates more difficult and subjective. Due to the Consolidated Financial Statements ("Notes"). Actualthat and other uncertainties, actual results could differ from those estimates. The Consolidated Statements of Comprehensive Income and Consolidated Statements of Cash Flows for the interim periods are not necessarily indicative of the results or cash flows for the full year. The Company operates on a 52-53 week fiscal year ending on the Saturday nearest to March 31st of each year. Each fiscal quarter consists of 13 weeks, with an occasional fourth quarter extending to 14 weeks, if necessary, for the fiscal year to end on the Saturday nearest to March 31st. The Company's current fiscal year will end on March 28, 2020.April 3, 2021.
The Company operates principally in 2 segments: (1) factory-built housing, which includes wholesale and retail systems-built housing operations, and (2) financial services, which includes manufactured housing consumer finance and insurance. The Company designs and builds a wide variety of affordable manufactured homes, modular homes and park model RVs inthrough 20 factorieshomebuilding production lines located throughout the United States, which are sold to a network of independent distributors, community owners and developers and through the Company's 3940 Company-owned retail stores. Our financial services segment is comprised of a finance subsidiary, CountryPlace Acceptance Corp. ("CountryPlace"), and an insurance subsidiary, Standard Casualty Co. ("Standard Casualty"). CountryPlace is an approved Federal National Mortgage Association and Federal Home Loan Mortgage Corporation seller/servicer and a Government National Mortgage Association mortgage-backed securities issuer that offers conforming mortgages, non-conforming mortgages and home-only loans to purchasers of factory-built homes. Standard Casualty provides property and casualty insurance primarily to owners of manufactured homes.
4

Adoption of NewRecently Issued or Adopted Accounting Standards.
In February 2016,On March 29, 2020, the Company adopted the Financial Accounting Standards BoardBoard's ("FASB") issued Accounting Standards Update ("ASU") 2016-02, Leases ("Topic 842"). This guidance amends previous accounting considerations and treatments for leases to increase transparency and comparability among organizations by requiring the recognition of right-of-use ("ROU") assets and lease liabilities on the balance sheet for both finance leases and operating leases. For finance leases, the lessee recognizes interest expense and amortization of the ROU asset and for operating leases, the lessee recognizes straight-line lease expense.

Effective March 31, 2019, the Company adopted Topic 842 using the modified retrospective transition approach. This approach provides a method for recording existing leases at adoption, without restating comparative periods. The Company also elected to adopt the package of practical expedients provided in the guidance, which allowed the Company to retain the historical classification for each lease, and provided relief from reviewing existing or expired contracts to determine if they contain leases under the new guidance. In addition, an accounting policy election was made to account for non-lease and lease components as a single lease component for all asset classes. The Company also made an accounting policy election to exclude ROU assets and lease liabilities for leases with an initial term of twelve months or less from the Consolidated Balance Sheet.
As a result of such adoption, net operating lease ROU assets and lease liabilities of $13.0 million and $13.5 million, respectively, were added to the Company’s Consolidated Balance Sheet as of March 31, 2019. The difference between the additional lease assets and lease liabilities reflects existing accrued rent balances that were reclassified to the operating lease ROU asset as of March 31, 2019. The standard did not materially impact our consolidated Net income and had no impact on cash flows. See Note 9 for additional information.
Accounting Standards Issued But Not Yet Adopted.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). ASU 2016-13 changes the impairment model for most financial assets and certain other instruments which will now requireand requires a forward-looking impairment model based on expected losses rather than incurred losses. The guidance also requires increased disclosures.Company adopted the standard by recognizing the cumulative effect of initially applying the new credit loss standard as an adjustment to the opening balance of Retained earnings. The comparative information has not been restated and continues to be reported under the accounting standard in effect for the applicable prior periods. The cumulative effect of the changes made to our consolidated balance sheet at March 29, 2020 for the adoption of ASU 2016-13 will be effective beginningwas $733,000, net of taxes. The application of ASU 2016-13 increased our allowance for loan losses by $435,000 for commercial loans receivable and $528,000 for non-acquired consumer loans receivable. It had an insignificant impact to our allowance for credit losses for Accounts receivable, net.
The Company adopted ASU 2016-13 using the prospective transition approach for acquired consumer loans receivable assets that were previously accounted for under FASB Accounting Standards Codification ("ASC") 310-30, Loans and Debt Securities Acquired with the first quarterDeteriorated Credit Quality ("ASC 310-30"). The Company determined that $1.7 million of the Company's fiscal year 2021existing purchase discount for acquired consumer loans was related to credit factors and was reclassified to the allowance for loan loss upon adoption. The remaining discount on the acquired consumer loans was determined to be related to non-credit factors and will be applied using a modified retrospective transition method. While early adoption is permitted,accreted into interest income over the Company does not plan to early adopt the guidance. The Company is currently evaluating the effect ASU 2016-13 will have on the Company's Consolidated Financial Statements and disclosures.
From time to time, new accounting pronouncements are issued by the FASB and other regulatory bodies that are adopted by the Company aslife of the specified effective dates. Management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company's Consolidated Financial Statements upon adoption.loans.
For a description of other significant accounting policies used by the Company in the preparation of its Consolidated Financial Statements, please refer to Note 1 of the Notes to Consolidated Financial Statements included in the Form 10-K.

2. Revenue from Contracts with Customers
The following table summarizes customer contract revenues disaggregated by reportable segment and the source of revenue for the three and nine months ended December 28, 2019 and December 29, 2018 (in thousands):
Three Months EndedSix Months Ended
 September 26, 2020September 28, 2019September 26,
2020		September 28,
2019
Factory-built housing
     U.S. Housing and Urban Development code homes$197,723 $207,556 $387,169 $410,035 
     Modular homes20,483 19,412 41,266 38,819 
     Park model RVs9,027 11,751 22,749 24,612 
     Other (1)
13,734 13,971 27,873 27,992 
       Net revenue from factory-built housing240,967 252,690 479,057 501,458 
Financial services
     Insurance agency commissions received from third-party insurance companies777 274 1,547 1,429 
     Other (2)
16,232 15,711 32,173 29,830 
       Net revenue from financial services17,009 15,985 33,720 31,259 
Total Net revenue$257,976 $268,675 $512,777 $532,717 
(1)    Other factory-built housing revenue includes revenue from ancillary products and services including used homes, freight and other services.
(2)    Other financial services revenue includes consumer finance and insurance revenue that is not within the scope of ASU 2014-09, Revenue from Contracts with Customers ("Topic 606").
5
 Three Months Ended Nine Months Ended
 December 28, 2019 December 29, 2018 December 28, 2019 December 29, 2018
Factory-built housing       
     U.S. Housing and Urban Development code homes$208,966
 $174,068
 $619,001
 $545,071
     Modular homes24,508
 25,698
 63,327
 72,046
     Park model RVs10,219
 10,037
 34,831
 27,743
     Other (1)
13,413
 10,539
 41,405
 35,338
       Net revenue from factory-built housing257,106
 220,342
 758,564
 680,198
Financial services       
     Insurance agency commissions received from third-party insurance companies783
 704
 2,212
 1,979
     Other (2)
15,833
 12,654
 45,663
 39,456
       Net revenue from financial services16,616
 13,358
 47,875
 41,435
Total Net revenue$273,722
 $233,700
 $806,439
 $721,633
(1)Other factory-built housing revenue from ancillary products and services including freight, used homes and other services.
(2)
Other financial services revenue includes consumer finance and insurance revenue that is not within the scope of ASU 2014-09, Revenue from Contracts with Customers ("Topic 606").
3. Restricted Cash
Restricted cash consisted of the following (in thousands):
 December 28,
2019		 March 30,
2019
Cash related to CountryPlace customer payments to be remitted to third parties$12,352
 $10,426
Other restricted cash1,024
 2,073
 $13,376
 $12,499

September 26,
2020		March 28,
2020
Cash related to CountryPlace customer payments to be remitted to third parties$15,818 $12,740 
Other restricted cash1,208 1,041 
$17,026 $13,781 
Corresponding amounts for customer payments to be remitted to third parties are recorded in accounts payable and accrued liabilities for customer payments and deposits, respectively.Accounts payable.
The following table provides a reconciliation of Cash and cash equivalents and Restricted cash reported within the Consolidated Balance Sheets to the combined amounts shown on the Consolidated Statements of Cash Flows (in thousands):
 December 28,
2019		 March 30,
2019		 December 29,
2018		 March 31,
2018
Cash and cash equivalents$216,882
 $187,370
 $192,869
 $186,766
Restricted cash, current13,026
 12,148
 11,284
 11,228
Restricted cash350
 351
 454
 1,264
Cash, cash equivalents and restricted cash per statement of cash flows$230,258
 $199,869
 $204,607
 $199,258

September 26,
2020		March 28,
2020		September 28,
2019		March 30,
2019
Cash and cash equivalents$312,243 $241,826 $190,478 $187,370 
Restricted cash, current16,691 13,446 14,981 12,148 
Restricted cash335 335 350 351 
Cash, cash equivalents and restricted cash per statement of cash flows$329,269 $255,607 $205,809 $199,869 

4. Investments
Investments consisted of the following (in thousands):
 December 28,
2019		 March 30,
2019
Available-for-sale debt securities$10,391
 $13,408
Marketable equity securities13,473
 11,073
Non-marketable equity investments21,310
 20,276
 $45,174
 $44,757

September 26,
2020		March 28,
2020
Available-for-sale debt securities$12,676 $14,774 
Marketable equity securities12,791 9,829 
Non-marketable equity investments21,400 21,536 
46,867 46,139 
Less current portion(16,589)(14,582)
$30,278 $31,557 
The Company's investments in marketable equity securities consist of investments in the common stock of industrial and other companies.
As of December 28, 2019September 26, 2020 and March 30, 2019,28, 2020, non-marketable equity investments included contributions of $15.0 million toto equity-method investments in community-based initiatives that buy and sell ourthe Company's homes and provide home-only financing to residents of certain manufactured home communities. Other non-marketable equity investments included investments in other distribution operations.
The Company records investments in fixed maturity securities classified as available-for-sale at fair value and records the difference between fair value and cost in Accumulated other comprehensive income (loss).
6
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The following tables summarize the Company's available-for-sale debt securities, gross unrealized gains and losses and fair value, aggregated by investment category (in thousands):
September 26, 2020
Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value
Residential mortgage-backed securities$3,605 $55 $(19)$3,641 
State and political subdivision debt securities4,116 162 0 4,278 
Corporate debt securities4,746 15 (4)4,757 
$12,467 $232 $(23)$12,676 
 December 28, 2019
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Residential mortgage-backed securities$5,267
 $17
 $(48) $5,236
State and political subdivision debt securities3,695
 138
 (2) 3,831
Corporate debt securities1,321
 4
 (1) 1,324
 $10,283
 $159
 $(51) $10,391

 March 30, 2019
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
Residential mortgage-backed securities$6,625
 $3
 $(119) $6,509
State and political subdivision debt securities4,883
 117
 (17) 4,983
Corporate debt securities1,635
 3
 (19) 1,619
U.S. Treasury and government debt securities300
 —
 (3) 297
 $13,443
 $123
 $(158) $13,408


March 28, 2020
Amortized
Cost		Gross
Unrealized
Gains		Gross
Unrealized
Losses		Fair
Value
Residential mortgage-backed securities$5,400 $69 $(26)$5,443 
State and political subdivision debt securities4,239 134 (3)4,370 
Corporate debt securities5,021 5 (65)4,961 
$14,660 $208 $(94)$14,774 
The following tables show gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities had been in a continuous unrealized loss position (in thousands):
September 26, 2020
Less than 12 Months12 Months or LongerTotal
Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses
Residential mortgage-backed securities$462 $(8)$567 $(11)$1,029 $(19)
State and political subdivision debt securities250 0 0 0 250 0 
Corporate debt securities1,117 (4)0 0 1,117 (4)
$1,829 $(12)$567 $(11)$2,396 $(23)
March 28, 2020
Less than 12 Months12 Months or LongerTotal
Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses		Fair
Value		Unrealized
Losses
Residential mortgage-backed securities$133 $0 $1,779 $(26)$1,912 $(26)
State and political subdivision debt securities601 (2)101 (1)702 (3)
Corporate debt securities3,747 (65)0 0 3,747 (65)
$4,481 $(67)$1,880 $(27)$6,361 $(94)
7
Table of Contents
 December 28, 2019
 Less than 12 Months 12 Months or Longer Total
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
Residential mortgage-backed securities$399
 $—
 $2,896
 $(48) $3,295
 $(48)
State and political subdivision debt securities302
 (1) 102
 (1) 404
 (2)
Corporate debt securities299
 (1) 250
 —
 549
 (1)
 $1,000
 $(2) $3,248
 $(49) $4,248
 $(51)

 March 30, 2019
 Less than 12 Months 12 Months or Longer Total
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
Residential mortgage-backed securities$1,066
 $(9) $5,206
 $(110) $6,272
 $(119)
State and political subdivision debt securities353
 —
 2,319
 (17) 2,672
 (17)
Corporate debt securities243
 (8) 1,073
 (11) 1,316
 (19)
U.S. Treasury and government debt securities—
 —
 297
 (3) 297
 (3)
 $1,662
 $(17) $8,895
 $(141) $10,557
 $(158)

Based onThe Company is not aware of any changes to the Company's ability and intent to holdsecurities or issuers that would indicate the investments for a reasonable periodlosses above are indicative of time sufficient for a forecasted recoverycredit impairment as of fair value,September 26, 2020. Further, the Company does not consider anyintend to sell the investments, and it is more likely than not that the Company will not be required to be other-than-temporarily impaired assell the investments, before recovery of December 28, 2019.their amortized cost.
The amortized cost and fair value of the Company's investments in available-for-sale debt securities, by contractual maturity, are shown in the table below (in thousands). Expected maturities differ from contractual maturities as borrowers may have the right to call or prepay obligations, with or without penalties.
 December 28, 2019
 
Amortized
Cost
 
Fair
Value
Due in less than one year$471
 $472
Due after one year through five years2,081
 2,092
Due after five years through ten years262
 282
Due after ten years2,202
 2,309
Mortgage-backed securities5,267
 5,236
 $10,283
 $10,391

September 26, 2020
Amortized
Cost		Fair
Value
Due in less than one year$3,506 $3,515 
Due after one year through five years3,013 3,040 
Due after five years through ten years1,028 1,109 
Due after ten years1,315 1,371 
Mortgage-backed securities3,605 3,641 
$12,467 $12,676 
The Company recognizes investment gains and losses on available-for-sale debt securities when it sells or otherwise disposes of securities using the specific identification method. For the three and six months ended September 26, 2020, there were 0 gross gains realized on the sale of available-for-sale debt securities and gross losses realized were $5,000.There were no0 gross gains or losses realized on the sale of available-for-sale debt securities during the three and ninesix months ended DecemberSeptember 28, 2019 or December 29, 20182019..

The Company recognizes unrealized gains and losses on marketable equity securities from changes in market prices during the period as a component of earnings in the Consolidated Statements of Comprehensive Income. Net investment gains and losses on marketable equity securities for the three and nine months ended December 28, 2019 and December 29, 2018 were as follows (in thousands):
 Three Months Ended Nine Months Ended
 December 28,
2019		 December 29,
2018		 December 28,
2019		 December 29,
2018
Marketable equity securities:       
      Net gains (losses) on securities held$764
 $(2,996) $2,066
 $(1,698)
      Net gains (losses) on securities sold13
 11
 11
 (42)
      Total net gain (loss) on marketable equity securities$777
 $(2,985) $2,077
 $(1,740)

Three Months EndedSix Months Ended
September 26,
2020		September 28,
2019		September 26,
2020		September 28,
2019
Marketable equity securities:
      Net gains on securities held$1,278 $350 $3,275 $1,302 
      Net (losses) gains on securities sold(27)(1)6 (2)
$1,251 $349 $3,281 $1,300 
5. Inventories
Inventories consisted of the following (in thousands):
September 26,
2020		March 28,
2020
Raw materials$41,907 $35,691 
Work in process15,723 13,953 
Finished goods54,242 63,891 
$111,872 $113,535 
 December 28,
2019		 March 30,
2019
Raw materials$35,669
 $33,701
Work in process12,571
 12,212
Finished goods61,904
 70,290
 $110,144
 $116,203
8

Table of Contents
6. Consumer Loans Receivable
The following table summarizes consumer loans receivable (in thousands):
 December 28,
2019		 March 30,
2019
Loans held for investment (at Acquisition Date, defined below)$39,403
 $44,375
Loans held for investment (originated after Acquisition Date)20,839
 20,580
Loans held for sale19,839
 11,288
Construction advances12,626
 12,883
Consumer loans receivable92,707
 89,126
Deferred financing fees and other, net(2,284) (1,926)
Allowance for loan losses(431) (415)
 $89,992
 $86,785

September 26,
2020		March 28,
2020
Loans held for investment (at Acquisition Date, defined below)$35,692 $37,779 
Loans held for investment (originated after Acquisition Date)19,299 20,140 
Loans held for sale18,986 14,671 
Construction advances14,063 13,400 
88,040 85,990 
Deferred financing fees and other, net(2,290)(1,919)
Allowance for loan losses(3,910)(1,767)
81,840 82,304 
Less current portion(39,023)(32,376)
$42,817 $49,928 
The allowance for loan losses is developed at the loan level and allocated to specific individual loans or to impaired loans. A range of probable losses is calculated after giving consideration to, among other things, the loan characteristics and historical loss experience. The Company then makes a determinationacquired consumer loans receivable as part of the best estimate within the rangeits acquisition of loan losses.Palm Harbor Homes, Inc. in April 2011 ("Acquisition Date"). The allowance for loan losses reflects the Company's judgment of the probable loss exposure on its loans held for investment portfolio.

The On March 29, 2020 the Company adopted ASU 2016-13 using the prospective transition approach for acquired consumer loans receivable as part of its acquisition of Palm Harbor Homes, Inc. ("Palm Harbor") in April 2011 ("Acquisition Date"). As of the Acquisition Date, theassets that were previously accounted for under ASC 310-30. The Company determined that $1.7 million of the excess ofexisting purchase discount for such consumer loans was related to credit factors and was reclassified to the allowance for loan pool's scheduled contractual principal and interest payments over all cash flows expected as an amount that consists of interest that cannot be accreted into interest income (the non-accretable difference).loss upon adoption. The cash flow expectedremaining discount on the acquired consumer loans was determined to be collected in excess of the carrying value of the acquired loans consists of interest that isrelated to non-credit factors and will be accreted into interest income over the remaining life of the loans (accretable yield). Interest income on consumer loans receivable is recognized as Net revenue.
 December 28,
2019		 March 30,
2019
 (in thousands)
Loans held for investment (at Acquisition Date) – contractual amount$87,543
 $100,595
Purchase discount:   
Accretable(32,068) (36,672)
Non-accretable(16,026) (19,502)
Less loans reclassified as other assets(46) (46)
Total loans held for investment (at Acquisition Date), net$39,403
 $44,375

loans.
OverThe following table represents changes in the life of the consumer loans held for investment (at Acquisition Date), the Company estimates cash flows expected to be collected to determine if anestimated allowance for loan loss subsequentlosses, including related additions and deductions to the Acquisition Date is required. The weighted averages of assumptions used in the calculation of expected cash flows to be collected were as follows:
 December 28,
2019		 March 30,
2019
Prepayment rate16.6% 17.1%
Default rate1.3% 1.1%
Assuming there was a 1% (100 basis point) unfavorable variation from the expected level,allowance for each key assumption, the expected cash flows over the life of the portfolio, as of December 28, 2019, would decrease by approximately $817,000 and $2.3 million for the expected prepayment rate and expected default rate, respectively.
The changes in accretable yield on consumer loans receivable held for investment (at Acquisition Date) were as followsloan losses (in thousands):
 Three Months Ended Nine Months Ended
 December 28,
2019		 December 29,
2018		 December 28,
2019		 December 29,
2018
Balance at the beginning of the period$34,108
 $40,937
 $36,672
 $44,481
Accretion(1,606) (1,904) (5,086) (5,771)
Reclassifications (from) to non-accretable discount(434) (376) 482
 (53)
Balance at the end of the period$32,068
 $38,657
 $32,068
 $38,657

Three Months EndedSix Months Ended
September 26,
2020		September 28,
2019		September 26,
2020		September 28,
2019
Allowance for loan losses at beginning of period$4,012 $421 $1,767 $415 
Impact of adoption of ASU 2016-130 0 2,276 0 
Change in estimated loan losses, net(94)(6)67 0 
Charge-offs(8)0 (200)0 
Recoveries0 0 0 0 
Allowance for loan losses at end of period$3,910 $415 $3,910 $415 
TotalThe consumer loans held for investment had the following characteristics:
September 26,
2020		March 28,
2020
Weighted average contractual interest rate8.4 %8.4 %
Weighted average effective interest rate9.6 %9.3 %
Weighted average months to maturity163164
9
 December 28,
2019		 March 30,
2019
Weighted average contractual interest rate8.42% 8.49%
Weighted average effective interest rate9.18% 9.11%
Weighted average months to maturity163
 163
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The following table is a consolidated summary of the delinquency status of the outstanding amortized cost of consumer loans receivable (in thousands):
September 26,
2020		March 28,
2020
Current$84,852 $83,861 
31-to-60 days1,200 547 
61-to-90 days26 307 
91+ days1,962 1,275 
$88,040 $85,990 
The following tables disaggregates CountryPlace's gross consumer loans receivable for each class by portfolio segment and credit quality indicator as of the timeand fiscal year of origination (in thousands):
 December 28, 2019
 Consumer Loans Held for Investment      
 
Securitized
2005
 
Securitized
2007
 Unsecuritized 
Construction
Advances
 
Consumer Loans Held
For Sale
 Total
Asset Class           
Credit Quality Indicator (FICO® score)        
Home-only loans           
0-619$362
 $219
 $245
 $—
 $—
 $826
620-7197,319
 5,467
 10,873
 —
 —
 23,659
720+7,933
 4,660
 7,392
 —
 538
 20,523
Other46
 —
 339
 —
 —
 385
Subtotal15,660
 10,346
 18,849
 —
 538
 45,393
Conforming mortgages          
0-619—
 —
 83
 —
 —
 83
620-719—
 —
 2,402
 8,321
 12,173
 22,896
720+—
 —
 1,061
 4,305
 7,128
 12,494
Subtotal—
 —
 3,546
 12,626
 19,301
 35,473
Non-conforming mortgages          
0-61976
 277
 828
 —
 —
 1,181
620-719764
 3,820
 2,528
 —
 —
 7,112
720+1,115
 1,992
 230
 —
 —
 3,337
Other—
 —
 181
 —
 —
 181
Subtotal1,955
 6,089
 3,767
 —
 —
 11,811
Other loans—
 —
 30
 —
 —
 30
 $17,615
 $16,435
 $26,192
 $12,626
 $19,839
 $92,707



 March 30, 2019
 Consumer Loans Held for Investment      
 
Securitized
2005
 
Securitized
2007
 Unsecuritized 
Construction
Advances
 
Consumer Loans Held
For Sale
 Total
Asset Class           
Credit Quality Indicator (FICO® score)        
Home-only loans           
0-619$401
 $245
 $266
 $—
 $—
 $912
620-7198,448
 5,996
 10,266
 —
 —
 24,710
720+9,090
 5,419
 8,436
 —
 617
 23,562
Other47
 —
 390
 —
 —
 437
Subtotal17,986
 11,660
 19,358
 —
 617
 49,621
Conforming mortgages          
0-619—
 —
 83
 —
 460
 543
620-719—
 —
 2,202
 8,061
 6,885
 17,148
720+—
 —
 684
 4,822
 3,326
 8,832
Subtotal—
 —
 2,969
 12,883
 10,671
 26,523
Non-conforming mortgages          
0-61978
 344
 991
 —
 —
 1,413
620-719994
 4,008
 2,687
 —
 —
 7,689
720+1,238
 2,053
 369
 —
 —
 3,660
Other—
 —
 214
 —
 —
 214
Subtotal2,310
 6,405
 4,261
 —
 —
 12,976
Other loans—
 —
 6
 —
 —
 6
 $20,296
 $18,065
 $26,594
 $12,883
 $11,288
 $89,126

September 26, 2020
20212020201920182017PriorTotalMarch 28,
2020
Prime- FICO score 680 and greater$14,707 $8,496 $2,315 $1,523 $1,848 $25,991 $54,880 $55,513 
Near Prime- FICO score 620-6798,684 6,216 1,864 1,146 779 11,496 30,185 27,767 
Sub-Prime- FICO score less than 620100 89 0 0 86 1,991 2,266 2,142 
No FICO score152 0 29 0 0 528 709 568 
$23,643 $14,801 $4,208 $2,669 $2,713 $40,006 $88,040 $85,990 
Loan contracts secured by geographically concentrated collateral could experience higher rates of delinquencies, default and foreclosure losses than loan contracts secured by collateral that is more geographically dispersed. As of December 28, 2019September 26, 2020, 41%35% of the outstanding principal balance of consumer loans receivable portfolio was concentrated in Texas and 19% was concentrated in Florida. As of March 28, 2020, 36% of the outstanding principal balance of the consumer loans receivable portfolio was concentrated in Texas and 14% was concentrated in Florida. As of March 30, 2019, 44% of the outstanding principal balance of the consumer loans receivable portfolio was concentrated in Texas and 12%16% was concentrated in Florida. Other than Texas and Florida, no state had concentrations in excess of 10% of the principal balance of the consumer loans receivable as of December 28, 2019September 26, 2020 or March 30, 2019.28, 2020.
Collateral for repossessed loans is acquired through foreclosure or similar proceedings and is recorded at the estimated fair value of the home less the costs to sell. At repossession, the fair value of the collateral is determined based on the historical recovery rates of previously charged-off loans; the loan is charged off and the loss is recorded to the allowance for loan losses. On a monthly basis, the fair value of the collateral is adjusted to the lower of the amount recorded at repossession or the estimated sales price less estimated costs to sell, based on current information. Repossessed homes totaled approximately $1.1 million$931,000 and $1.5 million as of December 28, 2019September 26, 2020 and March 30, 2019,28, 2020, respectively, and are included in Prepaid expenses and other current assets in the Consolidated Balance Sheets. Foreclosure or similar proceedings in progress totaled approximately $1.0 million$240,000 and $1.5 million$560,000 as of December 28, 2019September 26, 2020 and March 30, 2019,28, 2020, respectively.

7. Commercial Loans Receivable and Allowance for Loan Losses
The Company's commercial loans receivable balance consists of two classes: (i) direct financing arrangements for the home product needs of the Company's independent distributors, communities and developers; and (ii) amounts loaned by the Company under participation financing programs.
Under the terms of the direct programs, the Company provides funds for financed home purchases by independent distributors, communities and developers. The notes are secured by the homes as collateral and, in some instances, other security. Other terms of direct arrangements vary, depending on the needs of the borrower and the opportunity for the Company.
10
Table of Contents
Under the terms of the participation programs, the Company provides loans to independent floor plan lenders, representing a significant portion of the funds that such financiers then lend to distributors to finance their inventory purchases. The participation commercial loanloans receivables are unsecured general obligations of the independent floor plan lenders.
Commercial loans receivable, net consisted of the following, by class of financing notes receivable (in thousands):
 December 28,
2019		 March 30,
2019
Direct loans receivable$44,619
 $42,899
Participation loans receivable148
 495
Allowance for loan losses(162) (180)
Deferred financing fees, net(248) (208)
 $44,357
 $43,006

September 26,
2020		March 28,
2020
Direct loans receivable$42,336 $47,058 
Participation loans receivable175 144 
Allowance for loan losses(789)(393)
Deferred financing fees, net(244)(244)
41,478 46,565 
Less current portion of commercial loans receivable (including from affiliates), net(14,961)(15,423)
$26,517 $31,142 
The commercial loans receivable balance had the following characteristics:
September 26,
2020		March 28,
2020
Weighted average contractual interest rate6.1 %5.7 %
Weighted average months to maturity1110
 December 28,
2019		 March 30,
2019
Weighted average contractual interest rate6.1% 5.7%
Weighted average months to maturity10
 7
The Company evaluates the potential forrisk of loss from its participation loan programs based on the independent lender's overall financial stability, as well as historical experience, and has determined that an applicable allowance for loan losses was not needed at December 28, 2019 or March 30, 2019.
With respect to direct programs with communities and developers, borroweris spread over numerous borrowers. Borrower activity is monitored on a regular basis and contractual arrangements are in place to provide adequate loss mitigation in the event of a default. For direct programs with independent distributors, the risk of loss is spread over numerous borrowers. Borrower activity is monitored in conjunction with third-party service providers, where applicable, to estimate the potential for loss on the related notes receivable, considering potential exposures, including repossession costs, remarketing expenses, impairment of value and the risk of collateral loss. The Company has historically been able to sell repossessed homes, thereby mitigating loss exposure. If a default occurs and collateral is lost, the Company is exposed to loss of the full value of the home loan. IfThe Company evaluates the potential for loss from its commercial loan programs based on the borrower's risk rating, overall financial stability, historical experience and estimates of other economic factors. The Company determines that it is probable that the Company will be unable to collect all amounts due accordinghas included considerations related to the contractual termsCOVID-19 pandemic when assessing its risk of the loan agreement, a specificloss and setting reserve is determined and recorded within the estimated allowanceamounts for loan losses. The Company recorded an allowance for loan lossesits commercial finance portfolio as of $162,000 and $160,000 at December 28, 2019 and December 29, 2018, respectively.

September 26, 2020.
The following table represents changes in the estimated allowance for loan losses, including related additions and deductions to the allowance for loan losses applicable to the direct programs (in thousands):
Three Months EndedSix Months Ended
September 26,
2020		September 28,
2019		September 26,
2020		September 28,
2019
Balance at beginning of period$828 $191 $393 $180 
Impact of adoption of ASU 2016-130 0 435 0 
Change in estimated loan losses, net(39)(28)(39)(17)
Loans charged off, net of recoveries0 0 0 0 
Balance at end of period$789 $163 $789 $163 
11
 Three Months Ended Nine Months Ended
 December 28,
2019		 December 29,
2018		 December 28,
2019		 December 29,
2018
Balance at beginning of period$163
 $135
 $180
 $42
Change in estimated loan losses, net(1) 25
 (18) 118
Loans charged off, net of recoveries—
 —
 —
 —
Balance at end of period$162
 $160
 $162
 $160
Table of Contents
The following table disaggregates the Company's commercial loans receivable by credit quality indicator and the estimated allowance for loan losses for each classfiscal year of financing receivable by evaluation methodologyorigination (in thousands):
 Direct Commercial Loans Participation Commercial Loans
 December 28,
2019		 March 30,
2019		 December 28,
2019		 March 30,
2019
Commercial loans receivable:       
Collectively evaluated for impairment$16,186
 $18,018
 $—
 $—
Individually evaluated for impairment28,433
 24,881
 148
 495
 $44,619
 $42,899
 $148
 $495
Allowance for loan losses:       
Collectively evaluated for impairment$(162) $(180) $—
 $—
Individually evaluated for impairment—
 —
 —
 —
 $(162) $(180) $—
 $—

September 26, 2020
20212020201920182017TotalMarch 28,
2020
Risk profile based on payment activity:
Performing$18,860 $14,076 $5,699 $2,238 $1,570 $42,443 $47,016 
Watch list0 0 68 0 0 68 186 
Nonperforming0 0 0 0 0 0 0 
$18,860 $14,076 $5,767 $2,238 $1,570 $42,511 $47,202 
Loans are subject to regular review and are given management's attention whenever a problem situation appears to be developing. Loans with indicators of potential performance problems are placed on watch list status and are subject to additional monitoring and scrutiny. Nonperforming status includesAt September 26, 2020, there were 0 commercial loans accounted for on a non-accrual basis and accruing loans with principal payments 90 days or more past due. The Company's policy is to place loans on non-accrual status when interest is past due and remains unpaid 90 days or more or when there is a clear indication that the borrower is unable or unwilling to make payments as they become due. The Company will resume accrual of interest once these factors have been remedied. At December 28, 2019, there were no commercial loans 90 days or more past due that were still accruing interest. Payments received on non-accrual loans are recorded on a cash basis, first to interest and then to principal. At December 28, 2019, the Company was not aware of any potential problem loans that would have a material effect on the commercial loans receivable balance. Charge-offs occur when it becomes probable that outstanding amounts will not be recovered.
The following table disaggregatesAs of September 26, 2020, 10.5% of the Company's outstanding commercial loans receivable by classprincipal balance was concentrated in Arizona and credit quality indicator (in thousands):
 Direct Commercial Loans Participation Commercial Loans
 December 28,
2019		 March 30,
2019		 December 28,
2019		 March 30,
2019
Risk profile based on payment activity:       
Performing$44,619
 $42,899
 $148
 $495
Watch list—
 —
 —
 —
Nonperforming—
 —
 —
 —
 $44,619
 $42,899
 $148
 $495
10.0% was concentrated in California. As of
March 28, 2020,

The Company had concentrations11.0% of the Company's outstanding commercial loans receivables related to factory-built homesreceivable principal balance was concentrated in California. No other state had concentrations in excess of 10% of the principal balance of the consumer loans receivable as of September 26, 2020 or March 28, 2020.
The Company had concentrations with one independent third-party and its affiliates that equaled 17.9% and 21.0% of the net commercial loans receivables principal balance located in the following states:
 December 28,
2019		 March 30,
2019
California20.4% 21.1%
Arizona17.5% 16.3%

Additionally, atoutstanding, all of which was secured, as of September 26, 2020 and March 30, 2019, 10.4% of the commercial loans receivables principal balance was concentrated in Oregon. The28, 2020 respectively. The risks created by these concentrations have been considered in the determination of the adequacy of the allowance for loan losses.loss.
As of December 28, 2019 and March 30, 2019, the Company had concentrations with one independent third-party and its affiliates that equaled 19.8% and 22.0% of the commercial loans receivable principal balance outstanding, respectively, all of which was secured.
8. Property, Plant and Equipment, net
Property, plant and equipment, net, consisted of the following (in thousands):
 December 28,
2019		 March 30,
2019
Property, plant and equipment, at cost:   
Land$21,723
 $21,359
Buildings and improvements50,914
 42,976
Machinery and equipment30,150
 27,053
 102,787
 91,388
Accumulated depreciation(31,380) (27,904)
 $71,407
 $63,484

September 26,
2020		March 28,
2020
Property, plant and equipment, at cost:
Land$26,804 $26,827 
Buildings and improvements53,743 52,011 
Machinery and equipment32,286 30,984 
112,833 109,822 
Accumulated depreciation(34,997)(32,632)
$77,836 $77,190 
Depreciation expense was $1.4 million and $1.1$1.3 million for the three months ended DecemberSeptember 26, 2020 and September 28, 2019, and December 29, 2018, respectively. ForDepreciation expense for the ninesix months ended DecemberSeptember 26, 2020 and September 28, 2019 and December 29, 2018, depreciation expense was $3.8$2.8 million and $3.2$2.4 million, respectively.
Included in the amounts above are certain assets under finance leases. See Note 9 for additional information.
9. Leases
The Company leases certain production and retail locations, office space and equipment. The Company determines if a contract or arrangement is, or contains, a lease at inception. Lease agreements with an initial term of 12 months or less are not recorded onDuring the Consolidated Balance Sheet. Certain lease agreements include one or more options to renew, with renewal terms that can extend the lease term by one to three years or more. Generally, the exercise of lease renewal options is at the Company’s discretion. Some agreements also include options to purchase the leased property. The estimated life of assets and leasehold improvements is limited by the expected lease term, unless there is a transfer of title or purchase option thatperiod ended September 26, 2020, the Company is reasonably certain to exercise.
 Certainexecuted various lease renewals, including a five-year extension at one of the Company's lease agreements include rental payments adjusted periodically for inflation. These lease agreements do not contain any material residual value guarantees or material restrictive covenants.

 ROU assets representour active manufacturing facilities, which increased the right toof use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments in accordance with the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present valueliability.
12
Table of lease payments over the lease term. Since the Company’s leases do not provide a readily determinable implicit interest rate, the Company must estimate an incremental borrowing rate. In determining the estimated incremental borrowing rate, the Company considers the lease period and comparable market interest rates, as well as any other information available at the lease commencement date. The lease term includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options.
 The following table provides information about the financial statement classification of the Company's lease balances reported within the Consolidated Balance Sheets as of December 28, 2019 (in thousands):
 Classification December 28,
2019
ROU assets   
Operating lease assetsOperating lease right-of-use assets $10,710
Finance lease assets
Property, plant and equipment, net (1)
 1,675
Total lease assets  $12,385
    
Lease Liabilities   
Current:   
   Operating lease liabilitiesAccrued liabilities $3,809
   Finance lease liabilitiesCurrent portion of securitized financings and other 717
Non-current:   
   Operating lease liabilitiesOperating lease liabilities 7,795
   Finance lease liabilitiesSecuritized financings and other 303
Total lease liabilities  $12,624

Contents
(1) Recorded net of accumulated amortization of $99,000 as of December 28, 2019.
The following table provides information about the financial statement classification of the Company's lease expenses reported within the Consolidated Statements of Comprehensive Income for the three and nine months ended December 28, 2019 (in thousands):
    December 28, 2019
Lease Expense Category Classification Three Months Ended Nine Months Ended
Operating lease expense (1)
      
  Cost of sales $208
 $625
  Selling, general and administrative expenses 780
 2,309
Finance lease expense:      
   Amortization of leased assets Cost of sales 10
 29
   Interest on lease liabilities Interest expense 13
 40
Total lease expense   $1,011
 $3,003
(1) Excludes short-term and variable lease expenses, which are immaterial.
Cash payments for operating leases for the three and nine months ended December 28, 2019 were $890,000 and $2.5 million, respectively. Cash payments for finance leases for the three and nine months ended December 28, 2019 were $36,000 and $106,000, respectively.

The present value of the minimum payments for future fiscal years under non-cancelable leases as of December 28, 2019 wereSeptember 26, 2020 was as follows (in thousands):
Operating LeasesFinance LeasesTotal
Remainder of 2021$2,116 $37 $2,153 
20224,154 73 4,227 
20233,827 73 3,900 
20243,487 73 3,560 
20252,706 73 2,779 
20262,799 49 2,848 
Thereafter2,206 0 2,206 
21,295 378 21,673 
Less amount representing interest(2,612)(45)(2,657)
18,683 333 19,016 
Less current portion(4,081)(72)(4,153)
$14,602 $261 $14,863 
 Operating Leases Finance Leases Total
Remainder of 2020$880
 $666
 $1,546
20213,814
 79
 3,893
20222,882
 73
 2,955
20231,874
 73
 1,947
20241,529
 73
 1,602
Thereafter3,367
 122
 3,489
Total lease payments14,346
 1,086
 15,432
Less: Amount representing interest(2,742) (66) (2,808)
Present value of lease liabilities$11,604
 $1,020
 $12,624
The following table provides information about the weighted average remaining lease terms and weighted average discount rates as of December 28, 2019:

Remaining Lease Term (Years) Discount Rate
   Operating leases4.7 4.5%
   Finance leases2.3 5.0%

Operating Leases pre-Topic 842 adoption:
 The Company has non-cancelable operating leases with third parties, primarily for administrative and distribution center space and computer equipment. The Company's facility leases generally provide for periodic rent increases and many contain escalation clauses and renewal options. Rent expense for these third-party operating leases was $5.2 million for the fiscal year ended March 30, 2019 and $5.3 million for each of the fiscal years ended March 31, 2018 and April 1, 2017, and is included in Cost of sales and Selling, general and administrative expenses in the accompanying Consolidated Statements of Comprehensive Income.
 Future minimum lease commitments for future fiscal years under all non-cancelable operating leases having a remaining term in excess of one year as of March 30, 2019 were as follows (in thousands):
2020$2,292
20212,197
20221,389
20231,072
Thereafter1,372
Total remaining lease payments$8,322


10. Goodwill and Other Intangibles
Goodwill and other intangibles, net, consisted of the following (in thousands):
December 28, 2019 March 30, 2019September 26, 2020March 28, 2020
Gross
Carrying
Amount		 Accumulated
Amortization		 Net
Carrying
Amount		 Gross
Carrying
Amount		 Accumulated
Amortization		 Net
Carrying
Amount		Gross
Carrying
Amount		Accumulated
Amortization		Net
Carrying
Amount		Gross
Carrying
Amount		Accumulated
Amortization		Net
Carrying
Amount
Indefinite-lived:           Indefinite-lived:
Goodwill$74,665
 $—
 $74,665
 $72,920
 $—
 $72,920
Goodwill$75,090 $— $75,090 $75,090 $— $75,090 
Trademarks and trade names8,900
 —
 8,900
 7,200
 —
 7,200
Trademarks and trade names8,900 — 8,900 8,900 — 8,900 
State insurance licenses1,100
 —
 1,100
 1,100
 —
 1,100
State insurance licenses1,100 — 1,100 1,100 — 1,100 
Total indefinite-lived intangible assets84,665
 —
 84,665
 81,220
 —
 81,220
85,090 — 85,090 85,090 — 85,090 
Finite-lived:           Finite-lived:
Customer relationships11,300
 (6,305) 4,995
 7,100
 (5,970) 1,130
Customer relationships11,300 (6,780)4,520 11,300 (6,463)4,837 
Other1,424
 (1,122) 302
 1,384
 (1,038) 346
Other1,424 (1,208)216 1,424 (1,151)273 
$97,389
 $(7,427) $89,962
 $89,704
 $(7,008) $82,696
$97,814 $(7,988)$89,826 $97,814 $(7,614)$90,200 
Amortization expense recognized on intangible assets was $188,000$187,000 and $80,000$151,000 for the three months ending Decemberended September 26, 2020 and September 28, 2019, and December 29, 2018, respectively. Amortization expense recognized on intangible assets was $374,000 and $231,000 for the ninesix months ended DecemberSeptember 26, 2020 and September 28, 2019, and December 29, 2018 was $419,000 and $244,000, respectively.
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Table of Contents
11. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
 December 28,
2019		 March 30,
2019
Salaries, wages and benefits$24,412
 $25,257
Customer deposits20,437
 17,804
Unearned insurance premiums18,614
 18,305
Estimated warranties17,959
 17,069
Accrued volume rebates12,431
 10,412
Company repurchase options on certain loans sold6,178
 3,810
Insurance loss reserves5,411
 6,686
Accrued self-insurance5,259
 5,171
Operating lease liabilities3,809
 —
Reserve for repurchase commitments2,504
 2,362
Accrued taxes1,206
 1,767
Capital lease obligation—
 1,075
Other14,658
 15,463
 $132,878
 $125,181

September 26,
2020		March 28,
2020
Customer deposits$30,153 $22,055 
Salaries, wages and benefits29,375 25,885 
Company repurchase options on certain loans sold23,854 7,444 
Unearned insurance premiums21,907 20,614 
Estimated warranties17,805 18,678 
Accrued volume rebates11,040 9,801 
Insurance loss reserves6,887 5,582 
Accrued self-insurance5,827 5,112 
Operating lease liabilities4,081 4,170 
Accrued taxes3,247 1,908 
Reserve for repurchase commitments2,463 2,679 
Other16,545 16,002 
$173,184 $139,930 

12. Warranties
Activity in the liability for estimated warranties was as follows (in thousands):
 Three Months Ended Nine Months Ended
 December 28,
2019		 December 29,
2018		 December 28,
2019		 December 29,
2018
Balance at beginning of period$18,563
 $16,905
 $17,069
 $16,638
Purchase accounting additions—
 —
 1,192
 —
Charged to costs and expenses7,269
 10,665
 21,855
 23,607
Payments and deductions(7,873) (10,028) (22,157) (22,703)
Balance at end of period$17,959
 $17,542
 $17,959
 $17,542

Three Months EndedSix Months Ended
September 26,
2020		September 28,
2019		September 26,
2020		September 28,
2019
Balance at beginning of period$18,538 $17,760 $18,678 $17,069 
Purchase accounting additions0 1,192 0 1,192 
Charged to costs and expenses6,232 6,765 12,579 14,586 
Payments and deductions(6,965)(7,154)(13,452)(14,284)
Balance at end of period$17,805 $18,563 $17,805 $18,563 
13. Debt and Finance Lease Obligations
Debt and finance lease obligations primarily consistedconsist of amounts related to loans sold that did not qualify for loan sale accounting treatmentsecured credit facilities at the Company's finance subsidiary and lease obligations in which it is expected that the Company will obtain ownership of a leased asset at the end of the lease term. The following table summarizes debt and finance lease obligations (in thousands):
September 26,
2020		March 28,
2020
Secured credit facilities$9,793 $10,474 
Other secured financings3,925 4,113 
Finance lease liabilities333 366 
14,051 14,953 
Less current portion(2,118)(2,248)
$11,933 $12,705 
 December 28,
2019		 March 30,
2019
2007-1 securitized financings (acquired as part of the Palm Harbor transaction)$—
 $18,364
Secured credit facilities10,842
 11,289
Other secured financings4,125
 4,487
Finance lease liabilities1,020
 —
 $15,987
 $34,140
14

Table of Contents
Prior to the Company's acquisition of Palm Harbor and CountryPlace, CountryPlace completed an initial securitization (2005-1) and a second securitized borrowing (2007-1). The Company repurchased these loan portfolios in January 2019 and August 2019, respectively, eliminating the related securitized financings.
Acquired securitized financings were recorded at fair value at the time of acquisition, which resulted in a discount, and subsequently are accounted for in a manner similar to FASB Accounting Standards Codification ("ASC") 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality to accrete the discount.
Prior to the repurchase, over the life of the loans, the Company estimated cash flows expected to be paid on the securitized financings. The Company evaluated at the balance sheet date whether the present value of its securitized financings, determined using the effective interest rate, had increased or decreased. The amount of accretable yield recognized on a prospective basis over the securitized financing's remaining life was adjusted by the present value of any subsequent change in cash flows expected to be paid.
The changes in accretable yield on securitized financings were as follows (in thousands):
 Three Months Ended Nine Months Ended
 December 28,
2019		 December 29,
2018		 December 28,
2019		 December 29,
2018
Balance at the beginning of the period$—
 $1,834
 $491
 $3,515
Accretion—
 (764) (577) (2,341)
Adjustment to cash flows—
 (2) 86
 (106)
Balance at the end of the period$—
 $1,068
 $—
 $1,068


The Company hasCompany's finance subsidiary entered into secured credit facilities with independent third partythird-party banks with draw periods from one to fifteen months and maturity dates of ten years after the expiration of the draw periods. This draw down period expired in September 2019.periods, which have now expired. The proceeds arewere used by the Company to originate and hold consumer home-only loans secured by manufactured homes, which are pledged as collateral to the facilities. Upon completion of the draw down period,periods, the facilities were converted into an amortizing loan based on a 20-year amortization period with a balloon payment due upon maturity.maturity. The maximum advance for loans under this program iswas 80% of the outstanding collateral principal balance, with the Company providing the remaining funds. As of December 28, 2019,September 26, 2020, the outstanding balance of the converted loans was $10.8$9.8 million at a weighted average interest rate of 4.91%.
See Note 9 for further discussion of the finance lease obligations.
14. Reinsurance
Standard Casualty is primarily a specialty writer of manufactured home physical damage insurance. Certain of Standard Casualty's premiums and benefits are assumed from and ceded to other insurance companies under various reinsurance agreements. The ceded reinsurance agreements provide Standard Casualty with increased capacity to write larger risks and maintain its exposure to loss within its capital resources. Standard Casualty remains obligated for amounts ceded in the event that the reinsurers do not meet their obligations. Substantially all of Standard Casualty's assumed reinsurance is with one entity.
The effects of reinsurance on premiums written and earned were as follows (in thousands):
Three Months Ended
September 26, 2020September 28, 2019
WrittenEarnedWrittenEarned
Direct premiums$4,915 $5,145 $4,179 $4,653 
Assumed premiums—nonaffiliated7,593 7,043 6,760 6,592 
Ceded premiums—nonaffiliated(2,853)(2,853)(3,029)(3,029)
$9,655 $9,335 $7,910 $8,216 
 Three Months Ended
 December 28, 2019 December 29, 2018
 Written Earned Written Earned
Direct premiums$4,654
 $4,756
 $4,190
 $4,304
Assumed premiums—nonaffiliate5,918
 6,676
 5,860
 6,385
Ceded premiums—nonaffiliate(3,071) (3,071) (3,475) (3,475)
Net premiums$7,501
 $8,361
 $6,575
 $7,214
Six Months Ended
September 26, 2020September 28, 2019
WrittenEarnedWrittenEarned
Direct premiums$10,680 $10,330 $9,212 $9,223 
Assumed premiums—nonaffiliated15,246 13,833 14,273 13,027 
Ceded premiums—nonaffiliated(6,055)(6,055)(6,016)(6,016)

$19,871 $18,108 $17,469 $16,234 
 Nine Months Ended
 December 28, 2019 December 29, 2018
 Written Earned Written Earned
Direct premiums$13,866
 $13,979
 $12,551
 $12,764
Assumed premiums—nonaffiliate20,191
 19,703
 19,074
 18,969
Ceded premiums—nonaffiliate(9,087) (9,087) (9,457) (9,457)
Net premiums$24,970
 $24,595
 $22,168
 $22,276

Typical insurance policies written or assumed by Standard Casualty have a maximum coverage of $300,000$300,000 per claim, of which Standard Casualty cedes $175,000$175,000 of the risk of loss per reinsurance. Therefore, Standard Casualty's risk of loss is limited to $125,000$125,000 per claim on typical policies, subject to the reinsurers meeting their obligations. After this limit, amounts are recoverable by Standard Casualty through reinsurance for catastrophic losses in excess of $1.5$1.5 million per occurrence, up to a maximum of $43.5 million in the aggregate.
Purchasing reinsurance contracts protects Standard Casualty from frequency and/or severity of losses incurred on insurance policies issued, such as in the case of a catastrophe that generates a large number of serious claims on multiple policies at the same time. Under these agreements, the Company may be required to repurchase and reestablish its reinsurance contracts for the remainder of the year to the extent that they have been utilized.
The Company has reinsurance reinstatement premium protection coverage, which will assist in reducing premium repurchase expense in the event of a catastrophic weather claim.

15. Income Taxes
The Company's deferred tax assets primarily result from financial statement accruals not currently deductible for tax purposes and differences in the acquired basis of certain assets, and its deferred tax liabilities primarily result from tax amortization of goodwill and other intangible assets.
The Company complies with the provisions of ASC 740, Income Taxes ("ASC 740"), which clarifies the accounting for income taxes by prescribing a minimum recognition threshold a tax position is required to meet before recognition in the financial statements. ASC 740 also provides guidance on derecognizing, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. The amount of unrecognized tax benefits recorded by the Company is insignificant and the impact on the effective tax rate if all unrecognized tax benefits were recognized would also be insignificant. The Company classifies interest and penalties related to unrecognized tax benefits in tax expense.
Income tax returns are filed in the U.S. federal jurisdiction and in several state jurisdictions. In general, the Company is no longer subject to examination by the Internal Revenue Service for years before fiscal year 2017 or state and local income tax examinations by tax authorities for years before fiscal year 2015. The Company believes that its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material change to the Company's financial position. The total amount of unrecognized tax benefit related to any particular tax position is not anticipated to change significantly within the next 12 months. The provision for income taxes generally represents income taxes paid or payable for the current year plus the change in deferred taxes during the year.
16. Commitments and Contingencies
Repurchase Contingencies. The Company is contingently liable under terms of repurchase agreements with financial institutions providing inventory financing for independent distributors of its products. These arrangements, which are customary in the industry, provide for the repurchase of products sold to distributors in the event of default by the distributor. The risk
15
Table of loss under these agreements is spread over numerous distributors. The price the Company is obligated to pay generally declines over the period of the agreement (Contents
generally 18 to 36 months, calculated from the date of sale to the distributor) and the risk of loss is further reduced by the resale value of the repurchased homes. The maximum amount for which the Company was contingently liable under such agreements approximated $77.2$77.6 million and $77.1$79.3 million at December 28, 2019September 26, 2020 and March 30, 2019,28, 2020, respectively, without reduction for the resale value of the homes. The Company applies ASC 460, Guarantees ("ASC 460"), and ASC 450-20, Loss Contingencies ("ASC 450-20"), to account for its liability for repurchase commitments. Under the provisions of ASC 460, the Company records the greater of the estimated value of the non-contingent obligation (accounted for pursuant to ASC 460) or a contingent liability for each repurchase arrangement (accounted for under the provisions of ASC 450-20). The Company recorded an estimated liabilityhad a reserve for repurchase commitments of $2.5 million and $2.4$2.7 million at December 28, 2019September 26, 2020 and March 30, 2019, respectively, related to the commitments pertaining to these agreements.28, 2020, respectively.
LettersLetter of Credit. To secure certain reinsurance contracts, Standard Casualty maintainsmaintained an irrevocable letter of credit of $11.0$11.0 million to provide assurance that Standard Casualty willwould fulfill its reinsurance obligations. ThisThe letter of credit is secured by certain of the Company's investments. There were no amounts outstanding against the letter of credit at either December 28, 2019 or March 30, 2019.was released on July 11, 2020.
Construction-Period Mortgages. CountryPlace funds construction-period mortgages through periodic advances during home construction. At the time of initial funding, CountryPlace commits to fully fund the loan contract in accordance with a predetermined schedule. Subsequent advances are contingent upon the performance of contractual obligations by the seller of the home and the borrower. Cumulative advances on construction-period mortgages are carried on the Consolidated Balance Sheets at the amount advanced less a valuation allowance and are included in Consumer loans receivable, net. The total loan contract amount, less cumulative advances, represents an off-balance sheet contingent commitment of CountryPlace to fund future advances.

Loan contracts with off-balance sheet commitments are summarized below (in thousands):
 December 28,
2019		 March 30,
2019
Construction loan contract amount$31,859
 $28,230
Cumulative advances(12,626) (12,883)
Remaining construction contingent commitment$19,233
 $15,347

September 26,
2020		March 28,
2020
Construction loan contract amount$39,094 $31,136 
Cumulative advances(14,063)(13,400)
$25,031 $17,736 
Representations and Warranties of Mortgages Sold. CountryPlace sells loans to Government-Sponsored Enterprises ("GSEs") and whole-loan purchasers and finances certain loans with long-term credit facilities secured by the respective loans. In connection with these activities, CountryPlace provides to the GSEs and whole-loan purchasers and lenders representations and warranties related to the loans sold or financed. These representations and warranties generally relate to the ownership of the loan, the validity of the lien securing the loan, the loan's compliance with the criteria for inclusion in the sale transactions, including compliance with underwriting standards or loan criteria established by the buyer, and CountryPlace's ability to deliver documentation in compliance with applicable laws. Generally, representations and warranties may be enforced at any time over the life of the loan. Upon a breach of a representation, CountryPlace may be required to repurchase the loan or to indemnify a party for incurred losses. Repurchase demands and claims for indemnification payments are reviewed on a loan-by-loan basis to validate if there has been a breach requiring repurchase. CountryPlace manages the risk of repurchase through underwriting and quality assurance practices and by servicing the mortgage loans to investor standards. The Company maintains a reserve for these contingent repurchase and indemnification obligations. This reserve of $1.3 million as of September 26, 2020 and $1.0 million as of DecemberMarch 28, 2019 and March 30, 2019,2020, included in Accrued expenses and other current liabilities, reflects management's estimate of probable loss. CountryPlace considers a variety of assumptions, including borrower performance (both actual and estimated future defaults), historical repurchase demands and loan default rates to estimate the liability for loan repurchases and indemnifications. During the ninesix months ended December 28, 2019,September 26, 2020, no claim request resulted in the execution of an indemnification agreement or in the repurchase of a loan.
Interest Rate Lock Commitments. In originating loans for sale, CountryPlace issues interest rate lock commitments ("IRLCs") to prospective borrowers. These IRLCs represent an agreement to extend credit to a loan applicant, whereby the interest rate on the loan is set prior to loan closing or sale. These IRLCs bind the Company to fund the approved loan at the specified rate regardless of whether interest rates or market prices for similar loans have changed between the commitment date and the closing date. As such, outstanding IRLCs are subject to interest rate risk and related loan sale price risk during the period from the date of the IRLC through the earlier of the loan sale date or IRLC expiration date. The loan commitments generally range between 30 and 180 days; however, borrowers are not obligated to close the related loans. As a result, the Company is subject to fallout risk related to IRLCs, which is realized if approved borrowers choose not to close on the loans within the terms of the IRLCs unless the commitment is successfully paired with another loan that may mitigate losses from fallout.
As of December 28, 2019,September 26, 2020, CountryPlace had outstanding IRLCs with a notional amount of $15.2$23.2 million,, which are recorded at fair value in accordance with ASC 815, Derivatives and Hedging ("ASC 815"). ASC 815 clarifies that the expected net future cash flows related to the associated servicing of a loan should be included in the measurement of all written loan commitments that are accounted for at fair value through earnings. The estimated fair value of IRLCs is recorded in Prepaid expenses and other current assets in the Consolidated Balance Sheets. The fair value of IRLCs is based on the value of the underlying loan adjusted for: (1) estimated cost to complete and originate the loan and (2) the estimated percentage of IRLCs that will result in closed loans. The initial and subsequent changes in the value of IRLCs are a component of gain (loss) on loans held for sale. During the three and nine months ended DecemberSeptember 26, 2020 and September 28, 2019, the Company recognized losses of $19,000 and $2,000, respectively, on outstanding IRLCs. During the six months ended September 26, 2020 and September 28, 2019, the Company recognized losses of $5,000$144,000 and $8,000$3,000, respectively, on outstanding IRLCs. During the three and nine months ended December 29, 2018, the Company recognized gains of $13,000 and $25,000, respectively, on outstanding IRLCs.

Forward Sales Commitments. CountryPlace manages the risk profiles of a portion of its outstanding IRLCs and mortgage loans held for sale by entering into forward sales of mortgage-backed securities ("MBS") and whole loan sale commitments. As of December 28, 2019,September 26, 2020, CountryPlace had $55.9$58.8 million in outstanding notional forward sales of MBSs and forward sales commitments. Commitments for forward sales of whole loans are typically in an amount proportionate with the amount of IRLCs expected to close in particular time frames, assuming no change in mortgage interest rates, for the respective loan products intended for whole loan sale.
16
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The estimated fair values of forward sales of MBS and forwardwhole loan sale commitments are based on quoted market values and are recorded within Prepaid expenses and other current assets in the Consolidated Balance Sheets. During the three and nine months ended DecemberSeptember 26, 2020 and September 28, 2019, the Company recognized gains of $118,000 and $49,000on forward sales of MBS and whole loan sale commitments, respectively. During the six months ended September 26, 2020 and September 28, 2019, the Company recognized gains of $79,000 $1.1 million and $163,000$84,000 on forward sales of MBS and whole loan sale commitments, respectively. The Company recognized losses of $304,000and $242,000 on forward sales and whole loan sale commitments during the three and nine months ended December 29, 2018, respectively.
Legal Matters. Since August 2018, the Company has been cooperating with an investigation by the SEC's enforcement staff inof the SEC's Los Angeles Regional Office regarding securities trading in another public company’s securitiespersonal and Company accounts directed by the Company, itsCompany's former Chief Executive Officer, and others outside the Company.Joseph Stegmayer. The Audit Committee of the Board of Directors conducted and completed an internal investigation led by independent legal counsel and other advisers to assessand, following the Company's trading. Thecompletion of its work in early 2019, the Audit Committee shared the results of the Audit Committee’sits work have been shared with the Company’sCompany's auditors, listing exchange and with the SEC staff. The Company has also made internal recordsdocuments and personnel available to the SEC staff and intends to continue cooperating with its investigation. The Company has been exploring the possibility of a settlement with the SEC staff, but at this time, the Company is unable to estimate the amount of a potential loss, if any.
Joseph D. Robles v. Cavco Industries, Inc., was filed in the Superior Court for the State of California, Riverside on this matter.  June 25, 2019 and Malik Griffin v. Fleetwood Homes, Inc., was filed in the Superior Court for the State of California, San Bernardino on September 19, 2019, seeking recovery on behalf of a putative class of current and former hourly employees for certain alleged wage-and-hour violations including, among other things: (i) alleged failure to comply with certain wage statement formatting requirements; (ii) alleged failure to compensate employees for straight-time and overtime hours worked; and (iii) alleged failure to provide employees with all requisite work breaks. All parties have agreed to jointly mediate both cases. The mediation is currently scheduled for January 27, 2021.
The Company is party to certain other legal proceedings that ariselawsuits in the ordinary course and are incidental to itsof business. CertainBased on management's present knowledge of the claims pending against the Company in these proceedings allege, among other things, breachfacts and (in certain cases) advice of contract, product liability and warranty, personal injury and employment. Although litigation is inherently uncertain, based on past experience and the information currently available, except as discussed above,outside counsel, management does not believe that the currentlyloss contingencies arising from pending and threatened litigation or claims willmatters are likely to have a material adverse effect on the Company's consolidated financial position, liquidity or results of operations.operations after taking into account any existing reserves included in Accrued expenses and other current liabilities in the Consolidated Balance Sheets. However, future events or circumstances that may currently be unknown to management will determine whether the resolution of pending or threatened litigation or claims will ultimately have a material effect on the Company's consolidated financial position, liquidity or results of operations in any future reporting periods.

17
17.
Table of Contents
16. Stockholders' Equity
The following table represents changes in stockholders' equity for each quarterly period during the ninesix months ended December 28, 2019September 26, 2020 (dollars in thousands):
Additional paid-in capitalRetained earningsAccumulated other comprehensive incomeTotal
Common Stock
SharesAmount
Balance, March 28, 20209,173,242 $92 $252,260 $355,144 $90 $607,586 
Cumulative effect of implementing ASU 2016-13, net— 0 0 (733)0 (733)
Net income— 0 0 16,674 0 16,674 
Issuance of common stock under stock incentive plans3,822 0 (533)0 0 (533)
Stock-based compensation— 0 945 0 0 945 
Other comprehensive income, net— 0 0 0 68 68 
Balance, June 27, 20209,177,064 $92 $252,672 $371,085 $158 $624,007 
Net income— 0 0 15,049 0 15,049 
Issuance of common stock under stock incentive plans11,098 0 522 0 0 522 
Stock-based compensation— 0 1,103 0 0 1,103 
Other comprehensive income, net— 0 0 0 7 7 
Balance, September 26, 20209,188,162 $92 $254,297 $386,134 $165 $640,688 
18
Table of Contents
     Additional paid-in capital Retained earnings Accumulated other comprehensive income (loss) Total
 Common Stock    
 Shares Amount    
Balance, March 30, 20199,098,320
 $91
 $249,447
 $280,078
 $(28) $529,588
Net income—
 —
 —
 21,282
 —
 21,282
Issuance of common stock under stock incentive plans13,304
 —
 (1,252) —
 —
 (1,252)
Stock-based compensation—
 —
 630
 —
 —
 630
Other comprehensive income, net—
 —
 —
 —
 89
 89
Balance, June 29, 20199,111,624
 $91
 $248,825
 $301,360
 $61
 $550,337
Net income—
 —
 —
 20,885
 —
 20,885
Issuance of common stock under stock incentive plans15,842
 —
 941
 —
 —
 941
Stock-based compensation—
 —
 818
 —
 —
 818
Other comprehensive income, net—
 —
 —
 —
 23
 23
Balance, September 28, 20199,127,466
 $91
 $250,584
 $322,245
 $84
 $573,004
Net income—
 —
 —
 20,898
 —
 20,898
Issuance of common stock under stock incentive plans13,725
 —
 537
 —
 —
 537
Stock-based compensation—
 —
 820
 —
 —
 820
Other comprehensive income, net—
 —
 —
 —
 1
 1
Balance, December 28, 20199,141,191
 $91
 $251,941
 $343,143
 $85
 $595,260

The following table represents changes in stockholders' equity for each quarterly period during the ninesix months ended December 29, 2018September 28, 2019 (dollars in thousands):
     Additional paid-in capital Retained earnings Accumulated other comprehensive income (loss) Total
 Common Stock    
 Shares Amount    
Balance, March 31, 20189,044,858
 $90
 $246,197
 $209,381
 $1,438
 $457,106
Cumulative effect of implementing ASU 2016-01, net—
 —
 —
 1,621
 (1,621) —
Cumulative effect of implementing Topic 606, net—
 —
 —
 454
 —
 454
Net income—
 —
 —
 19,691
 —
 19,691
Issuance of common stock under stock incentive plans16,448
 1
 (2,169) —
 —
 (2,168)
Stock-based compensation—
 —
 599
 —
 —
 599
Other comprehensive income, net—
 —
 —
 —
 5
 5
Balance, June 30, 20189,061,306
 $91
 $244,627
 $231,147
 $(178) $475,687
Net income—
 —
 —
 15,576
 —
 15,576
Issuance of common stock under stock incentive plans36,053
 —
 1,995
 —
 —
 1,995
Stock-based compensation—
 —
 1,516
 —
 —
 1,516
Other comprehensive loss, net—
 —
 —
 —
 (26) (26)
Balance, September 29, 20189,097,359
 $91
 $248,138
 $246,723
 $(204) $494,748
Net income—
 —
 —
 13,384
 —
 13,384
Issuance of common stock under stock incentive plans961
 —
 59
 —
 —
 59
Stock-based compensation—
 —
 821
 —
 —
 821
Other comprehensive income, net—
 —
 —
 —
 60
 60
Balance, December 29, 20189,098,320
 $91
 $249,018
 $260,107
 $(144) $509,072


Additional paid-in capitalRetained earningsAccumulated other comprehensive income (loss)Total
Common Stock
SharesAmount
Balance, March 30, 20199,098,320 $91 $249,447 $280,078 $(28)$529,588 
Net income— 0 0 21,282 0 21,282 
Issuance of common stock under stock incentive plans13,304 0 (1,252)0 0 (1,252)
Stock-based compensation— 0 630 0 0 630 
Other comprehensive income, net— 0 0 0 89 89 
Balance, June 29, 20199,111,624 $91 $248,825 $301,360 $61 $550,337 
Net income— 0 0 20,885 0 20,885 
Issuance of common stock under stock incentive plans15,842 0 941 0 0 941 
Stock-based compensation— 0 818 0 0 818 
Other comprehensive loss, net— 0 0 0 23 23 
Balance, September 28, 20199,127,466 $91 $250,584 $322,245 $84 $573,004 
18. Stock-Based Compensation
The Company maintains stock incentive plans whereby stock option grants or awards of restricted stock may be made to certain officers, directors and key employees. The plans, which are shareholder approved, permit the award of up to 1,650,000 shares of the Company's common stock, of which 235,065 shares were still available for grant as of December 28, 2019. Upon option exercise, new shares of the Company's common stock are issued and when restricted stock vests, restricted stock shares issued become unrestricted. Awards may not be granted below 100% of the fair market value of the Company's common stock at the date of grant and generally expire seven years from the date of grant. Stock options and awards of restricted stock vest over a defined period or based on certain performance criteria, as determined by the plan administrator (the Compensation Committee of the Board of Directors, which consists of independent directors), but typically is no more than five years. The stock incentive plans provide for accelerated vesting of stock options and removal of restrictions on restricted stock awards upon a change in control (as defined in the plans).
Stock-based compensation charged against income for the three and nine months ended December 28, 2019 was $820,000 and $2.3 million, respectively. The Company recorded stock-based compensation expense of $821,000 and $2.9 million for the three and nine months ended December 29, 2018, respectively.
As of December 28, 2019, total unrecognized compensation cost related to stock options was approximately $6.1 million and the related weighted-average period over which it is expected to be recognized is approximately 2.83 years.
Stock Options. The fair value of each stock option award is estimated on the date of the grant using the Black-Scholes-Merton option pricing model, which requires the input of assumptions. The Company estimates the risk-free interest rate based on the U.S. Treasury security rate in effect at the time of the grant. The expected life of the options, volatility and dividend rates are estimated based on historical data. 
The following table summarizes stock option activity for the nine months ended December 28, 2019:
Number
of Options
Outstanding at March 30, 2019411,111
Granted74,750
Exercised(66,572)
Canceled or expired(1,000)
Outstanding at December 28, 2019418,289
Exercisable at December 28, 2019212,290

Restricted Stock Awards. The fair value of restricted stock awards is estimated as the closing price of the Company's common stock on the date of grant. A summary of restricted stock award activity is as follows:
 Number of Shares
 Performance-Based Awards Service-Based Awards Total
Outstanding at March 30, 2019—
 —
 —
Awarded7,305
 4,650
 11,955
Released—
 (400) (400)
Canceled or expired—
 —
 —
Outstanding at December 28, 20197,305
 4,250
 11,555
Unvested target stock awards that may vest based upon performance conditions through fiscal year 20227,305
    


19.17. Earnings Per Share
Basic earnings per common share is computed based on the weighted-average number of common shares outstanding during the reporting period. Diluted earnings per common share is computed based on the combination of dilutive common share equivalents, comprised of shares issuable under the Company's stock-based compensation plans and the weighted-average number of common shares outstanding during the reporting period. Dilutive common share equivalents include the dilutive effect of in-the-money options to purchase shares, which is calculated based on the average share price for each period using the treasury stock method. The following table sets forth the computation of basic and diluted earnings per share (dollars in thousands, except per share amounts):
 Three Months Ended Nine Months Ended
 December 28,
2019		 December 29,
2018		 December 28,
2019		 December 29,
2018
Net income$20,898
 $13,384
 $63,065
 $48,651
Weighted average shares outstanding:       
Basic9,138,202
 9,097,993
 9,120,241
 9,075,156
Effect of dilutive securities155,739
 172,227
 138,962
 207,022
Diluted9,293,941
 9,270,220
 9,259,203
 9,282,178
Net income per share:       
Basic$2.29
 $1.47
 $6.91
 $5.36
Diluted$2.25
 $1.44
 $6.81
 $5.24

Three Months EndedSix Months Ended
September 26,
2020		September 28,
2019		September 26,
2020		September 28,
2019
Net income$15,049 $20,885 $31,723 $42,167 
Weighted average shares outstanding:
Basic9,182,945 9,119,835 9,178,609 9,111,260 
Effect of dilutive securities112,464 146,250 101,471 130,574 
Diluted9,295,409 9,266,085 9,280,080 9,241,834 
Net income per share:
Basic$1.64 $2.29 $3.46 $4.63 
Diluted$1.62 $2.25 $3.42 $4.56 
Anti-dilutive common stock equivalents excluded from the computation of diluted earnings per share for the three and nine months ended DecemberSeptember 26, 2020 and September 28, 2019 were 14,48220,582 and 29,971,22,536, respectively. Anti-dilutive common stock equivalents excluded from the computation of diluted earnings per share for the six months ended September 26, 2020 and September 28, 2019 were 30,182 and 42,401, respectively. In addition, 7,305 14,405 and 11,450outstanding restricted share awards were excluded from the calculation of diluted earnings per share for both the three and ninesix months ended DecemberSeptember 26, 2020 and September 28, 2019, respectively, because the underlying performance criteria had not yet been met. For the three and nine months ended December 29, 2018, anti-dilutive common stock equivalents excluded from the computation
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Table of diluted earnings per share were 21,894 and 8,115, respectively.Contents
20.18. Fair Value Measurements
The book value and estimated fair value of the Company's financial instruments were as follows (in thousands):
September 26, 2020March 28, 2020
Book
Value		Estimated
Fair Value		Book
Value		Estimated
Fair Value
Available-for-sale debt securities$12,676 $12,676 $14,774 $14,774 
Marketable equity securities12,791 12,791 9,829 9,829 
Non-marketable equity investments21,400 21,400 21,536 21,536 
Consumer loans receivable81,840 98,045 82,304 97,395 
Interest rate lock commitment derivatives21 21 164 164 
Forward loan sale commitment derivatives123 123 (1,011)(1,011)
Commercial loans receivable41,478 41,144 46,565 46,819 
Securitized financings and other(14,051)(13,638)(14,953)(15,592)
 December 28, 2019 March 30, 2019
 
Book
Value
 
Estimated
Fair Value
 
Book
Value
 
Estimated
Fair Value
Available-for-sale debt securities (1)
$10,391
 $10,391
 $13,408
 $13,408
Marketable equity securities (1)
13,473
 13,473
 11,073
 11,073
Non-marketable equity investments (2)
21,310
 21,310
 20,276
 20,276
Consumer loans receivable (3)
89,992
 103,141
 86,785
 101,001
Interest rate lock commitment derivatives (4)
3
 3
 11
 11
Forward loan sale commitment derivatives (4)
104
 104
 (59) (59)
Commercial loans receivable (5)
44,357
 44,313
 43,006
 43,582
Securitized financings and other (6)
(15,987) (19,448) (34,140) (38,101)

(1)For Level 1 classified securities, the fair value is based on quoted market prices. The fair value of Level 2 securities is based on other inputs, as further described below.
(2)The fair value approximates book value based on the non-marketable nature of the investments.

(3)Includes consumer loans receivable held for investment, held for sale and construction advances. The fair value of the loans held for investment is based on the discounted value of the remaining principal and interest cash flows. The fair value of the loans held for sale is estimated based on recent GSE mortgage-backed bond prices. The fair value of the construction advances approximates book value and the sales price of these loans.
(4)The fair values are based on changes in GSE mortgage-backed bond prices and, additionally for IRLCs, pull through rates.
(5)The fair value is estimated using market interest rates of comparable loans.
(6)The fair value is estimated using recent public transactions of similar asset-backed securities.
In accordance with ASC 820, See Note 19, Fair Value Measurements and Disclosures ("ASC 820"), fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price)Fair Value of Financial Instruments caption in Note 1, Summary of Significant Accounting Policies in the principal or most advantageous marketForm 10-K for the asset or liability in an orderly transaction between market participantsmore information on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
Level 1 –Quoted prices in active markets for identical assets or liabilities.
Level 2 –Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 –Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The Company utilizes the market approach to measure fair value for its financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
Whenmethodologies the Company uses observable market prices for identical securities that are traded in less active markets, it classifies such securities as Level 2. When observable market prices for identical securities are not available, the Company prices its marketable debt instruments using non-binding market consensus prices that are corroborated with observable market data; quoted market prices for similar instruments; or pricing models, such as a discounted cash flow model, with all significant inputs derived from or corroborated with observable market data. Non-binding market consensus prices are based on the proprietary valuation models of pricing providers or brokers. These valuation models incorporate a number of inputs, including non-binding and binding broker quotes; observable market prices for identical or similar securities; and the internal assumptions of pricing providers or brokers that use observable market inputs and, to a lesser degree, unobservable market inputs.determining fair value.
Assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):
September 26, 2020
TotalLevel 1Level 2Level 3
Residential mortgage-backed securities (1)
$3,641 $0 $3,641 $0 
State and political subdivision debt securities (1)
4,278 0 4,278 0 
Corporate debt securities (1)
4,757 0 4,757 0 
Marketable equity securities (2)
12,791 12,791 0 0 
Interest rate lock commitment derivatives (3)
21 0 0 21 
Forward loan sale commitment derivatives (3)
123 0 0 123 
Mortgage servicing rights (4)
1,058 0 0 1,058 
 December 28, 2019
 Total Level 1 Level 2 Level 3
Residential mortgage-backed securities (1)
$5,236
 $—
 $5,236
 $—
State and political subdivision debt securities (1)
3,831
 —
 3,831
 —
Corporate debt securities (1)
1,324
 —
 1,324
 —
Marketable equity securities (2)
13,473
 13,473
 —
 —
Interest rate lock commitment derivatives (3)
3
 —
 —
 3
Forward loan sale commitment derivatives (3)
104
 —
 —
 104
Mortgage servicing rights (4)
1,263
 —
 —
 1,263


March 28, 2020
TotalLevel 1Level 2Level 3
Residential mortgage-backed securities (1)
$5,443 $0 $5,443 $0 
State and political subdivision debt securities (1)
4,370 0 4,370 0 
Corporate debt securities (1)
4,961 0 4,961 0 
Marketable equity securities (2)
9,829 9,829 0 0 
Interest rate lock commitment derivatives (3)
164 0 0 164 
Forward loan sale commitment derivatives (3)
(1,011)0 0 (1,011)
Mortgage servicing rights (4)
1,225 0 0 1,225 

(1)Unrealized gains or losses on investments are recorded in Accumulated other comprehensive income at each measurement date.
(2)Unrealized gains or losses on investments are recorded in earnings at each measurement date.
(3)Gains or losses on derivatives are recorded in earnings through Cost of sales.
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Table of Contents
 March 30, 2019
 Total Level 1 Level 2 Level 3
U.S Treasury and government debt securities(1)
$297
 $—
 $297
 $—
Residential mortgage-backed securities (1)
6,509
 —
 6,509
 —
State and political subdivision debt securities (1)
4,983
 —
 4,983
 —
Corporate debt securities (1)
1,619
 —
 1,619
 —
Marketable equity securities (2)
11,073
 11,073
 —
 —
Interest rate lock commitment derivatives (3)
11
 —
 —
 11
Forward loan sale commitment derivatives (3)
(59) —
 —
 (59)
Mortgage servicing rights (4)
1,372
 —
 —
 1,372
(1)Unrealized gains or losses on investments are recorded in Accumulated other comprehensive income (loss) at each measurement date.
(2)Unrealized gains or losses on investments are recorded in earnings at each measurement date.
(3)Gains or losses on derivatives are recognized in current period earnings through Cost of sales.
(4)Changes in the fair value of mortgage servicing rights are recognized in the current period earnings through Net revenue.
NaNChanges in the fair value of mortgage servicing rights are recorded in earnings through Net revenue.
NaN transfers between Level 1, Level 2 or Level 3 occurred during the ninesix months ended December 28, 2019. The Company's policy regarding the recording of transfers between levels is to record any such transfers at the end of the reporting period.September 26, 2020.
Financial instruments for which fair value is disclosed but not required to be recognized in the balance sheet on a recurring basis are summarized below (in thousands):
September 26, 2020
TotalLevel 1Level 2Level 3
Loans held for investment$64,043 $0 $0 $64,043 
Loans held for sale19,939 0 0 19,939 
Construction advances14,063 0 0 14,063 
Commercial loans receivable41,144 0 0 41,144 
Securitized financings and other(13,638)0 (13,638)0 
Non-marketable equity investments21,400 0 0 21,400 
 December 28, 2019
 Total Level 1 Level 2 Level 3
Loans held for investment$69,932
 $—
 $—
 $69,932
Loans held for sale20,583
 —
 —
 20,583
Loans held—construction advances12,626
 —
 —
 12,626
Commercial loans receivable44,313
 —
 —
 44,313
Securitized financings and other(19,448) —
 (19,448) —
Non-marketable equity investments21,310
 —
 —
 21,310


March 28, 2020
TotalLevel 1Level 2Level 3
Loans held for investment$68,503 $0 $0 $68,503 
Loans held for sale15,492 0 0 15,492 
Construction advances13,400 0 0 13,400 
Commercial loans receivable46,819 0 0 46,819 
Securitized financings and other(15,592)0 (15,592)0 
Non-marketable equity investments21,536 0 0 21,536 
 March 30, 2019
 Total Level 1 Level 2 Level 3
Loans held for investment$76,319
 $—
 $—
 $76,319
Loans held for sale11,799
 —
 —
 11,799
Loans held—construction advances12,883
 —
 —
 12,883
Commercial loans receivable43,582
 —
 —
 43,582
Securitized financings and other(38,101) —
 (38,101) —
Non-marketable equity investments20,276
 —
 —
 20,276


No recent sales have been executed in an orderly market of manufactured home loan portfolios with comparable product features, credit characteristics or performance. Therefore, loans held for investment are measured using Level 3 inputs that are calculated using estimated discounted future cash flows from the evaluation of loan credit quality and performance history to determine expected prepayments and defaults on the portfolio, discounted with rates considered to reflect current market conditions. Loans held for sale are measured at the lower of cost or fair value using inputs that consist of quoted market prices for mortgage-backed securities or investor purchase commitments for similar types of loan commitments on hand from investors. These loans are held for relatively short periods, typically no more than 45 days. As a result, changes in loan-specific credit risk are not a significant component of the change in fair value and changes are largely driven by changes in interest rates or investor yield requirements. The cost of loans held for sale was lower than the fair value as of December 28, 2019. As noted above, activity in the manufactured housing asset-backed securities market is infrequent with no reliable market price information. As such, to determine the fair value of securitized financings, management evaluates the credit quality and performance history of the underlying loan assets to estimate the expected prepayment of the debt and credit spreads, based on market activity for similar rated bonds from other asset classes with similar durations.
The Company records impairment losses on long-lived assets held for sale when the fair value of such long-lived assets is below their carrying values. The Company records impairment charges on long-lived assets used in operations when events and circumstances indicate that long-lived assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than their carrying amounts. NaN impairment charges were recorded during the ninesix months ended December 28, 2019.September 26, 2020.
Mortgage Servicing. Mortgage Servicing Rights ("MSRs") are the rights to receive a portion of the interest coupon and fees collected from the mortgagors for performing specified mortgage servicing activities, which consist of collecting loan payments, remitting principal and interest payments to investors, managing escrow accounts, performing loss mitigation activities on behalf of investors and otherwise administering the loan servicing portfolio. MSRs are initially recorded at fair value. Changes in fair value subsequent to the initial capitalization are recorded in the Company's resultsearnings.
September 26,
2020		March 28,
2020
Number of loans serviced with MSRs4,671 4,688 
Weighted average servicing fee (basis points)31.81 31.12 
Capitalized servicing multiple56.49 %67.19 %
Capitalized servicing rate (basis points)17.97 20.91 
Serviced portfolio with MSRs (in thousands)$588,955 $585,777 
Mortgage servicing rights (in thousands)$1,058 $1,225 
21
Table of operations. The Company recognizes MSRs on all loans sold to investors that meet the requirements for sale accounting and for which servicing rights are retained.Contents
The Company applies fair value accounting to MSRs, with all changes in fair value recorded to Net revenue in accordance with ASC 860-50, Servicing Assets and Liabilities. The fair value of MSRs is based on the present value of the expected future cash flows related to servicing these loans. The revenue components of the cash flows are servicing fees, interest earned on custodial accounts and other ancillary income. The expense components include operating costs related to servicing the loans (including delinquency and foreclosure costs) and interest expenses on servicer advances that are consistent with the assumptions major market participants use in valuing MSRs. The expected cash flows are primarily impacted by prepayment estimates, delinquencies and market discounts. Generally, the value of MSRs is expected to increase when interest rates rise and decrease when interest rates decline, due to the effect those changes in interest rates have on prepayment estimates. Other factors noted above as well as the overall market demand for MSRs may also affect the valuation.
 December 28,
2019		 March 30,
2019
Number of loans serviced with MSRs4,632
 4,557
Weighted average servicing fee (basis points)31.12
 31.59
Capitalized servicing multiple70.53% 77.97%
Capitalized servicing rate (basis points)21.95
 24.63
Serviced portfolio with MSRs (in thousands)$575,313
 $556,934
Mortgage servicing rights (in thousands)$1,263
 $1,372


21.19. Related Party Transactions
The Company has non-marketable equity investments in other distribution operations outside of Company-owned retail locations. In the ordinary course of business, the Company sells homes and lends to certain of these operations through its commercial lending programs. For the three and nine months ended DecemberSeptember 26, 2020 and September 28, 2019, the total amount of sales to related parties were $13.3was $10.3 million and $37.110.4 million, respectively. TotalFor the six months ended September 26, 2020 and September 28, 2019, the total amount of sales to related parties for the three was $23.0 millionand nine months ended December 29, 2018 were $9.0 million and $30.2$23.8 million, respectively. As of December 28, 2019September 26, 2020, receivables from related parties included $2.9 million of accounts receivable and March 30, 2019, there were a total of $8.3 million and $6.2$7.3 million of commercial loans outstanding with certainoutstanding. As of March 28, 2020, receivables from related parties respectively.included $1.7 million of accounts receivable and $8.2 million of commercial loans outstanding.
22.20. Acquisition of Destiny Homes
On August 2, 2019, the Company purchased certain manufactured housing assets and assumed certain liabilities of Destiny Homes, which operates one manufacturing facility located in Moultrie, Georgia and produces and distributes manufactured and modular homes through a network of independent retailers in the Southeastern United States, further expanding the Company’sCompany's reach. The transaction was accounted for as a business combination and the results of operations have been included in the accompanying Consolidated Financial Statements since the date of acquisition.
The acquisition-date fair value of the total consideration was $16.5 million, which is subject to future adjustments. Neither Destiny Homes nor the Company incurred debt in connection with the purchase or subsequent operations.
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands). Certain estimated values are not yet finalized and are subject to change, which could be significant. The allocation of the purchase price is still preliminary due to the short duration since the acquisition dateallocation and will be finalized upon completion of the analysis of the fair values of Destiny Home’s assets and specified liabilities. The Company will finalize the amounts recognized as it obtains the information necessary to complete the analysis. We expect to finalize these amounts as soon as possible but no later than one year from the acquisition date.
 August 2,
2019
Accounts receivable$908
Inventories5,508
Property, plant and equipment, net5,244
Other current assets3,296
Intangible assets (1)
5,940
Total identifiable assets acquired20,896
Accounts payable and accrued liabilities(6,174)
Net identifiable assets acquired14,722
Goodwill1,745
Net assets acquired$16,467
(1) Includes $1.7 million assigned to trademarks and trade names, which are considered indefinite lived intangible assets and arehas not subject to amortization and $4.2 million assigned to a customer-related intangible subject to a useful life of 10 years amortized on a straight-line basis.

Since the acquisition date, Destiny Homes contributed Net revenue of $11.2 million and $17.6 million for the three and nine months ended December 28, 2019, respectively. Destiny Homes increased consolidated Net income on the Company's Consolidated Statements of Comprehensive Income for the three and nine months ended December 28, 2019 by $168,000 and $32,000, respectively. Net income from the Destiny Homes acquisition included requiredmade any purchase accounting adjustments whereby home product inventory is recorded at fair value upon acquisition. This had the effect of eliminating profits from the related home sales after the acquisition date.during fiscal year 2021.
Pro Forma Impact of Acquisition. The following table presents supplemental pro forma information as if the acquisition of Destiny Homes had occurred on April 1, 2018March 31, 2019 (in thousands, except per share data):
 Three Months Ended Nine Months Ended
 December 28,
2019		 December 29,
2018		 December 28,
2019		 December 29,
2018
Net revenue$273,722
 $245,742
 $817,674
 $757,112
Net income20,898
 14,832
 63,868
 52,296
Diluted net income per share2.25
 1.60
 6.90
 5.63

Three Months EndedSix Months Ended
 September 26,
2020		September 28,
2019		September 26,
2020		September 28,
2019
Net revenue$257,976 $270,239 $512,777 $543,951 
Net income15,049 21,165 31,723 43,807 
Diluted net income per share1.62 2.28 3.42 4.74 
23.21. Business Segment Information
The Company operates principally in 2 segments: (1) factory-built housing, which includes wholesale and retail systems-built housing operations and (2) financial services, which includes manufactured housing consumer finance and insurance. The following table details Net revenue and Income before income taxes by segment (in thousands):
Three Months EndedSix Months Ended
September 26,
2020		September 28,
2019		September 26,
2020		September 28,
2019
Net revenue:
Factory-built housing$240,967 $252,690 $479,057 $501,458 
Financial services17,009 15,985 33,720 31,259 
$257,976 $268,675 $512,777 $532,717 
Income before income taxes:
Factory-built housing$17,452 $22,463 $35,902 $46,776 
Financial services2,144 4,792 5,374 7,841 
$19,596 $27,255 $41,276 $54,617 
 Three Months Ended Nine Months Ended
 December 28,
2019		 December 29,
2018		 December 28,
2019		 December 29,
2018
Net revenue:       
Factory-built housing$257,106
 $220,342
 $758,564
 $680,198
Financial services16,616
 13,358
 47,875
 41,435
 $273,722
 $233,700
 $806,439
 $721,633
        
Income before income taxes:       
Factory-built housing$19,247
 $14,562
 $66,023
 $53,050
Financial services5,485
 2,385
 13,326
 7,550
 $24,732
 $16,947
 $79,349
 $60,600
22

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22. Subsequent Events
On October 27, 2020, the Company’s Board of Directors approved a $100 million stock repurchase program that may be used to purchase its outstanding common stock. This program replaces a previously standing $10 million authorization, which is now canceled.
The purchases may be made in the open market or one or more privately negotiated transactions in compliance with applicable securities laws and other legal requirements. The actual timing, number and value of shares repurchased under the program will be determined by the Company in its discretion and will depend on a number of factors, including market conditions, applicable legal requirements and other strategic capital needs and opportunities. The plan does not obligate Cavco to acquire any particular amount of common stock and may be suspended or discontinued at any time.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
Statements in this Report on Form 10-Q include "forward-looking statements," within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Private Securities Litigation Reform Act of 1995. Forward-looking statements are often characterized by the use of words such as "believes," "estimates," "expects," "projects," "may," "will," "intends," "plans," or "anticipates," or by discussions of strategy, plans or intentions. Forward-looking statements are typically included, for example, in discussions regarding the manufactured housing and site-built housing industries; the Company's financial performance and operating results; the expected effect of certain risks and uncertainties on the Company's business, financial condition and results of operations; economic conditions and consumer confidence; operational and legal risks; how the Company may be affected by the novel coronavirus COVID-19 ("COVID-19") pandemic; governmental regulations and legal proceedings; the availability of favorable consumer and wholesale manufactured home financing; market interest rates and Company investments and the ultimate outcome of the Company's commitments and contingencies. Forward-looking statements contained in this Report on Form 10-Q speak only as of the date of this report or, in the case of any document incorporated by reference, the date of that document. The Company does not intend to publicly update or revise any forward-looking statement contained in this Report on Form 10-Q or in any document incorporated herein by reference to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time.
Forward-looking statements involve risks, uncertainties and other factors that may cause the Company's actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements.statements, many of which are beyond our control. To the extent that the Company's assumptions and expectations differ from actual results, the Company's ability to meet such forward-looking statements, including the ability to generate positive cash flow from operations, may be significantly hindered. Factors that could affect the Company's results and cause them to materially differ from those contained in the forward-looking statements include, without limitation, those discussed in Risk Factors described in this Report and in Risk Factors in Part I, Item 1A of the Company's 20192020 Annual Report on Form 10-K ("Form 10-K"), which Risk Factors are incorporated herein.
Introduction
The following should be read in conjunction with Cavco Industries, Inc. and its subsidiaries' (collectively, the "Company" or "Cavco") Consolidated Financial Statements and the related Notes that appear in Item 1 of this Report. References to "Note" or "Notes" pertain to the Notes to the Company's Consolidated Financial Statements.
Company Overview
Headquartered in Phoenix, Arizona, the Company designs and produces factory-built homes primarily distributed through a network of independent and Company-owned retailers, planned community operators and residential developers. The Company is one of the largest producers of manufactured homes in the United States, based on reported wholesale shipments, marketed under a variety of brand names including Cavco, Fleetwood, Palm Harbor, Fairmont, Friendship, Chariot Eagle Lexington and Destiny. The Company is also one of the leading producers of park model RVs, vacation cabins and systems-built commercial structures, as well as modular homes.homes built primarily under the Nationwide Homes brand. Cavco's finance subsidiary, CountryPlace Acceptance Corp. ("CountryPlace"), is an approved Federal National Mortgage Association ("Fannie Mae") and Federal Home Loan Mortgage Corporation ("Freddie Mac") seller/servicer and a Government National Mortgage Association ("Ginnie Mae") mortgage-backed securities issuer that offers conforming mortgages, non-conforming mortgages and home-only loans to purchasers of factory-built homes. OurCavco's insurance subsidiary, Standard Casualty Co. ("Standard Casualty"), provides property and casualty insurance to owners of manufactured homes.
Company Growth
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From its inception in 1965, Cavco traditionally served affordable housing markets in the southwestern United States principally through manufactured home production. During the period from 1997 to 2000, Cavco was purchased by, and became a wholly-owned subsidiary of, Centex Corporation, which operated the Company until 2003, when Cavco became a stand-alone publicly-held company traded on the Nasdaq Global Select Market under the ticker symbol CVCO.
The Company has strategically expanded its factory operations and related business activities primarily through the acquisition of industry competitors. This has enabled Cavco to meet the needs of the affordable housing market on a national basis.

The purchase of the Fleetwood and Palm Harbor assets in August 2009 and April 2011, respectively, increased home production and distribution capabilities and provided for vertical integration through entry into financial services businesses specific to the Company's industry. These transactions expanded the Company's geographic reach at a national level by adding factories and retail locations serving the Northwest, West, South, South Central and Mid-Atlantic regions.
The purchases of Chariot Eagle, Fairmont, Lexington and Destiny, in March 2015, May 2015, April 2017 and August 2019, respectively, provided additional operating capacity, increased home production capabilities and further strengthened the Company's market in certain areas of the United States and several provinces in Canada.
The Company operates 20 homebuilding facilitiesproduction lines located in Millersburg and Woodburn, Oregon; Nampa, Idaho; Riverside, California; Phoenix and Goodyear, Arizona; Austin, Fort Worth, Seguin and Waco, Texas; Montevideo, Minnesota; Nappanee, Indiana; Lafayette, Tennessee; Lexington, Mississippi; Martinsville and Rocky Mount, Virginia; Douglas and Moultrie, Georgia; and Ocala and Plant City, Florida. The majority of the homes produced are sold to, and distributed by, independently owned and controlled retail operations located throughout the United States and Canada. In addition, the Company's homes are sold through 3940 Company-owned U.S. retail locations.
Our operations are generally managedIn April 2020, the Company shut down production and closed its Lexington, Mississippi manufacturing facility, finalizing production in June 2020. However, the Company remains available to serve wholesale customers previously served by the Lexington facility from its other production lines in the southeast. The production facility has been placed on the market for sale.
Company and Industry Outlook
According to data reported by the Manufactured Housing Institute, industry home shipments decreased 1.4% for the first 8 months of calendar year 2020 compared to the same period in the prior year. The industry offers solutions to the affordable housing crisis. The average price per square foot for a decentralized basis,manufactured home is lower than a site-built home. Also, based on the relatively low cost associated with oversight from themanufactured home office. This decentralization enablesownership, the Company's operatorsproducts have traditionally competed with rental housing's monthly payment affordability. With respect to the flexibility to adapt to local marketgeneral rise in demand for rental housing, during fiscal year 2020, the Company realized a larger proportion of orders and interest from developers and community owners for new manufactured homes intended for use as rental homes, alternative dwelling units and seasonal living.
The two largest manufactured housing consumer demographics, young adults and those who are age 55 and older, are both growing. First-time and "move-up" buyers of affordable homes are historically among the largest segments of new manufactured home purchasers. Included in this group are lower-income households that may be more customer focused and have the autonomy to make swift decisions, while still being held accountable for operational and financial performance.
The Company regularly reviews its product offerings throughout the organization and strives to improve designs, production methods and marketing strategies. The Company continues to focus on gaining operational efficiencies among its operations, all of which have organic growth potential.
Company Outlook
The Company maintains a conservative cost structurelimited in an effort to build added value into its homes and has worked diligently to maintain a solid financial position. Our balance sheet strength, including our position in cash and cash equivalents, should help us avoid liquidity problems and enable us to act effectively as market opportunities present themselves.
The Company's manufacturing facilities are strategically positioned across the United States, and utilize local market research to design homes to meet the demands of its customers. The Company has thetheir ability to customize floor plansqualify for a new home loan by their particular employment status and designs to fulfill specific needs and interests. By offering a full rangedown payment capability. Consumer confidence, as an indicator of homes from entry-level models to large custom homes and with the ability to engineer designs in-house, the Company can accommodate virtually any customer request. In addition to homes builtretirement security, is especially important among manufactured home buyers interested in accordance with the National Manufacturing Home Construction and Safety Standards ("HUD code") promulgated by the U.S. Department of Housing and Urban Development ("HUD"), the Company also constructs modular homes that conform to state and local codes, park model RVs and cabins and light commercial buildings at many of its manufacturing facilities.our products for seasonal or retirement living.
The Company seeks out niche market opportunities where its diverse product lines and custom building capabilities provide a competitive advantage. Our green building initiatives involve the creation of an energy efficient envelope and higher utilization of renewable materials. These homes provide environmentally-friendly maintenance requirements, typically lower utility costs and sustainability.
The Company also buildsmaintains a conservative cost structure in an effort to build added value into its homes designedand has worked diligently to use alternative energy sources, such as solarmaintain a solid financial position. The balance sheet strength, including the position in cash and wind. From bamboo flooringcash equivalents, helps avoid liquidity problems and tankless water heaters to solar-powered homes, the Company's products are diverse and tailored to a wide range of consumer interests. Innovation in housing design is a forte ofenable the Company and it continues to introduce new models at competitive price points with expressive interiors and exteriors that complement home styles in the areas in which they are located.

Based on the relatively low cost associated with manufactured home ownership, the Company's products have traditionally competed with rental housing's monthly payment affordability. Rental housing activity is reported to have continued to increase in recent years, which has contributed to a decline in tenant housing vacancy rates and a corresponding rise in rental rates. These factors, among otheract effectively as market and economic factors, may cause some renters to become buyers of affordable-housing alternatives, including manufactured homes.
Further, with respect to the general rise in demand for rental housing, the Company has realized a larger proportion of orders and interest from developers and community owners for new manufactured homes intended for use as rental homes, alternative dwelling units and seasonal living. The Company is responsive to the unique product requirements of these buyers and values the opportunity to provide units that are well suited for these purposes.
Cavco maintains a backlog of orders from its network of licensed distributors, communities and developers. Distributors may cancel orders prior to production without penalty. Accordingly, until the production of a particular unit has commenced, the Company does not consider its backlog to be firm orders. The backlog of sales orders at December 28, 2019 was $115 million in total compared to $166 million at December 29, 2018. While order backlog levels vary per factory, the current backlog level in total is considered healthy. A healthy backlog is indicative of the general ability to coordinate efficient factory production schedules, timely obtain raw materials based on product mix and achieve the unit completion timeframe expectations of our customers. The Company's backlog at December 29, 2018 was elevated as a result of excessive order volume from industry distributors. The high order rates may have been driven in part by wholesale distribution chain concerns about maintaining adequate inventory levels in a period where distributors may have perceived underlying affordable housing demand to be accelerating faster than expected.opportunities or challenges present themselves.
The Company continues to focus on developing order volume growth opportunities by working to increase its production capabilities and adjusting product offerings as appropriate. The Company strives to manage its production levels and workforce size in order to meet the demand for its product offerings while ensuring efficient use of its production capabilities. The Company continually reviews wage rates of its production employees and has established other monetary incentive programs to ensure competitive compensation. The Company is working to more extensively use on-line recruiting tools, update recruitment brochures and improve the appearance and appeal of its production facilities in order to improve the recruitment and retention of qualified production employees and reduce annualized turnover rates. Even with these challenges, the Company believes its ability to help meet the overall need for affordable housing continues to improve.
The Company participates inmake certain commercial loan programs withavailable to members of the Company's independent wholesale distribution chain. Under these programs, the Company provides a significant amount of the funds that independent financiers then lend to distributors to finance retail inventories of its products. In addition, the Company has entered into direct commercial loan arrangements with distributors, communities and developers under which the Company provides funds for financing homes (see Note 7 to the Consolidated Financial Statements). The Company's involvement in commercial loans helps to increase the availability of manufactured home financing to distributors, communities and developers. Participation in wholesale financing is helpful to these customers and provides additional opportunity for product exposure to potential home buyers. These initiatives support the Company's ongoing efforts to expand product distribution. However, these initiatives do expose the Company to risks associated with the creditworthiness of this customer base and the Company's inventory financing partners. The Company has included considerations related to the COVID-19 pandemic when assessing its risks of loan loss and setting reserve amounts for its commercial finance portfolio.
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Table of Contents

The lack of an efficient secondary market for manufactured homehome-only loans and the limited number of institutions lending to manufactured home buyers resultproviding such loans results in higher interest ratesborrowing costs for home-only loans secured by manufactured homes compared to those for site-built homes. Thisand continues to constrain industry growth. The Company is working directly with other industry participants to develop secondary market opportunities for manufactured homehome-only loan portfolios and expand lending availability in the industry. Additionally, the Company continues to invest in community-based lending initiatives that provide home-only financing to new residents of certain manufactured home communities. Our mortgage subsidiary also develops and invests in home-only lending programs to grow sales of homes through traditional distribution points. The Company believes that growing its investment and participation in home-only lending may provide additional sales growth opportunities for the financial services segment, as well as provide a means that could lead to increased home sales for its factory-built housing operations.
COVID-19 Impact and Strategy
In March 2020, the World Health Organization declared COVID-19 a global pandemic. As the business was considered essential, the Company continued to operate substantially all of its homebuilding and retail sales facilities while working to follow COVID-19 health guidelines. The Company has worked to minimize exposure and transmission risks by implementing enhanced facility cleaning, social distancing and related protocols while continuing to serve its customers. Operational efficiencies declined from adjusting home production processes to comply with health guidelines, managing higher factory employee absenteeism, limited new-hire availability and certain building material supply shortages. Accordingly, the Company's total average plant capacity utilization rate was approximately 65% during the second fiscal quarter of 2021, ending the quarter at approximately 70%. This is lower than pre-pandemic levels of more than 80%.
Sales order activity has continued to improve during the second fiscal quarter of 2021 to the point where home sales order rates were nearly 65% higher than the comparable prior year quarter. Increased order volume is the result of a higher number of well-qualified home buyers making purchase decisions, supported by reduced home loan interest rates. Increased orders outpaced the challenging production environment during the quarter, raising order backlogs 134% to $321 million at September 26, 2020, compared to $137 million at September 28, 2019 and $157 million at June 27, 2020. The backlog of home orders excludes orders that have been paused or canceled at the request of the customer. Distributors may cancel orders prior to production without penalty. After production of a particular home has commenced, the order becomes non-cancelable and the distributor is obligated to take delivery of the home. Accordingly, until production of a particular home has commenced, we do not consider order backlog to be firm orders.
The financial services segment has also maintained operations since the onset of the COVID-19 pandemic, largely through the implementation of work-from-home solutions. In addition to accepting and processing new applications for home loans and insurance policies, the financial services operations continue to assist customers in need and service existing loans and insurance policies while complying with state and federal regulations regarding loan forbearance, home foreclosures and policy cancellations. Because of these economic conditions, loan loss reserves were increased at the end of fiscal year 2020 and continue to be adjusted as considered appropriate.
Certain loans serviced by CountryPlace for investors expose the Company to cash flow decreases if customers do not make contractual monthly payments of principal and interest in a timely manner. Our primary investor, Ginnie Mae, permits cash obligations on loans in forbearance from COVID-19 to be offset by other incoming cash flows from loans such as loan pre-payments. While monthly collections of principal and interest from borrowers has normally exceeded scheduled principal and interest payments owed to investors, this could be negatively impacted given various state and local emergency orders in light of COVID-19.
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Table of Contents
It is difficult to predict the future impacts of the COVID-19 pandemic on housing demand, employee availability, supply chain and Company performance and operations. The Company continues to focus on developing order volume growth opportunities by working to improve its production capabilities and adjusting product offerings. The Company strives to balance the production levels and workforce size with the demand for its product offerings to maximize efficiencies. The Company continually reviews wage rates of its production employees and has established other monetary incentive programs to ensure competitive compensation. The Company is also working through industry trade associations to encourage favorable legislativemore extensively use on-line recruiting tools, update recruitment brochures and Government-Sponsored Enterprise ("GSE") actionimprove the appearance and appeal of its manufacturing facilities in order to addressimprove the mortgage financing needsrecruitment and retention of buyers of affordable homes. Federal law requires the GSEsqualified production employees and reduce annualized turnover rates. Maintaining an appropriately sized and well-trained workforce is key to comply withincreasing production to meet increased demand. The Company faces a "Duty to Serve" the underserved markets specifiedmajor challenge in overcoming labor-related difficulties in the Federal Housing Enterprises Financial SafetyCOVID-19 environment to increase home production.
Results of Operations
Net Revenue.
 Three Months Ended
 ($ in thousands, except homes sold and revenue per home sold)September 26,
2020		September 28,
2019		Change% Change
Net revenue:
Factory-built housing$240,967 $252,690 $(11,723)(4.6)%
Financial services17,009 15,985 1,024 6.4 %
$257,976 $268,675 $(10,699)(4.0)%
Total homes sold3,427 3,781 (354)(9.4)%
Net factory-built housing revenue per home sold$70,314 $66,832 $3,482 5.2 %
 Six Months Ended
 ($ in thousands, except homes sold and revenue per home sold)September 26,
2020		September 28,
2019		Change% Change
Net revenue:
Factory-built housing$479,057 $501,458 $(22,401)(4.5)%
Financial services33,720 31,259 2,461 7.9 %
$512,777 $532,717 $(19,940)(3.7)%
Total homes sold6,776 7,588 (812)(10.7)%
Net factory-built housing revenue per home sold$70,699 $66,086 $4,613 7.0 %
In the factory-built housing segment, the decrease in Net revenue was primarily due to 9% and Soundness Act of 1992, as amended by the Housing and Economic Recovery Act of 2008. Manufactured housing is one of the specified underserved markets. In December 2017, Fannie Mae and Freddie Mac released their final Underserved Markets Plans that describe, with specificity, the actions they will take over a three-year period to fulfill their "Duty to Serve" obligations. These plans became effective on January 1, 2018. Each of the three-year plans offers an enhanced mortgage loan product through their "MH Advantage" and "ChoiceHome" programs, respectively, that were announced in the latter part of calendar 2018. Small-scale pilot programs for the purchase of home-only loans are also included in the GSE’s Underserved Markets Plans. Implementation of various aspects of the GSE’s Underserved Markets Plans are subject to approval by their regulator, the Federal Housing Finance Agency, and their approval is not assured. Expansion of the secondary market for lending through the GSEs could support further demand for housing, as lending options would likely become more affordable to11% lower home buyers. Although some progress has been made in this area, meaningful positive impact in the form of increased home orders has yet to be realized.
On January 25, 2018, HUD announced a top-to-bottom review of its manufactured housing rules as part of a broader effort to identify regulations that may be ineffective, overly burdensome, or excessively costly given the critical need for affordable housing. In addition, on June 25, 2019, President Trump signed an Executive Order directing federal agencies to work together to alleviate barriers that impede the production of affordable housing. The Executive Order created a White House Council on Eliminating Regulatory Barriers to Affordable Housing, consisting of members from eight federal agencies and chaired by the HUD Secretary. While there has been no timeline established, if certain changes are made, the Company may be able to serve a broader range of home buyers.
The insurance subsidiary is subject to adverse effects from excessive policy claims that may occur during periods of inclement weather, including seasonal spring storms or fall hurricane activity in Texas where most of its policies are underwritten. Where applicable, losses from catastrophic events are somewhat limited by reinsurance contracts in place as part of the Company's loss mitigation structure.
As disclosed in Part II, Item 1, Legal Proceedings, the Company and Joseph Stegmayer, the Company's former Chairman, President and Chief Executive Officer, received subpoenas from the Securities and Exchange Commission's ("SEC") Division of Enforcement seeking documents related to trading in stock of another public company. The Company expects to continue to incur expenses related to this matter that may materially impact the Company's earnings. Those costs include, among other items, advancement of expenses for Mr. Stegmayer pursuant to his indemnity agreement with the Company. The Audit Committee of the Board of Directors (the "Audit Committee") conducted and completed an internal investigation led by independent legal counsel and other advisers in relation to this inquiry. The results of this investigation have been shared with the Company's auditors, listing exchange and the SEC staff. The Company has also made internal records and personnel available to the SEC staff and intends to continue cooperating with the SEC on this matter.

As a result of this inquiry, the Company incurred $0.9 million and $2.5 million in legal and other expensessales volume during the three and ninesix months ended December 28, 2019, respectively, and expects to continue to incur related costs pertaining to this matter. During the third quarter of fiscal year 2019, the Company also reviewed the sufficiency of its insurance coverage and as a result, Cavco's Board of Directors made a decision to purchase additional director and officer ("D&O") liability insurance coverage.September 26, 2020, respectively. These new 22-month policiesdeclines were implemented December 21, 2018. Total premiums paid during the third quarter of fiscal year 2019 for these policies were $15.3 million. As a result, the Company recorded $2.1 million and $6.3 million of additional D&O policy premium expense during the three and nine months ended December 28, 2019, respectively, and expects to incur approximately $2.1 million per quarter in Selling, general and administrative expense from the amortization of these policy premiums through the second quarter of fiscal year 2021. Any additional adjustments are expected to be in the normal course of maintaining adequate D&O insurance for the Company.
Industry Overview
According to data reportedpartially offset by the Manufactured Housing Institute, industryhigher home shipments decreased 2.9% for the first 11 months of calendar year 2019 compared to the same period in the prior year. Some of this decrease was the result of the industry's production of disaster-relief homes for the Federal Emergency Management Agency during calendar year 2018 that did not repeat in calendar year 2019. During calendar year 2018, the manufactured housing industry shipped approximately 97,000 HUD code manufactured homes, an increase of 4.3% over the approximately 93,000 units shipped in 2017. Through 2018, annual shipments have increased each year since calendar year 2009 when 50,000 HUD code manufactured homes were shipped, the lowest level since the industry began recording statistics in 1959. While shipments of HUD code manufactured homes have improved in recent years, the industry continues to operate at relatively low levels compared to historical shipment statistics.
"First-time" and "move-up" buyers of affordable homes are historically among the largest proportion of new manufactured home purchasers. The Company believes that employment rates among these groups and other potential home buyers who favor affordable housing are strong. Additionally, improved consumer confidence is evident among manufactured home buyers interested in the Company's products for seasonal or retirement living that may have been previously concerned about financial stability, and now appear to be less hesitant to commit to a new home purchase. The Company believes sales growth is most achievable when employment and consumer confidence levels are strong.
The two largest manufactured housing consumer demographics, young adults and those who are age 55 and older, are both growing. The U.S. adult population is estimated to expand by approximately 11.8 million between 2020 and 2025. Young adults born from 1976 to 1995, often referred to as Gen Y, represent a large segment of the population. Late-stage Gen Y is approximately 2.2 million people larger than the next age category born from 1966 to 1975, Gen X, and is considered to be in the peak home-buying years. Gen Y represents prime first-time home buyers who may be attracted by the affordability, sustainability, diversity and location flexibility of factory-built homes. The age 55 and older category is reported to be the fastest growing segment of the U.S. population. This group is similarly interested in the value proposition; however, they are also motivated by the energy efficiency and low maintenance requirements of systems-built homes, and by the lifestyle offered by planned communities specifically designed for homeowners that fall into this age group.

Results of Operations
Three and nine months ended December 28, 2019 compared to December 29, 2018
Net Revenue.
Net revenue consisted of the following for the three and nine months ended December 28, 2019 and December 29, 2018, respectively (dollars in thousands, except net factory-built housing revenue per home sold):
 Three Months Ended    
 December 28,
2019		 December 29,
2018		 Change % Change
Net revenue:       
Factory-built housing$257,106
 $220,342
 $36,764
 16.7%
Financial services16,616
 13,358
 3,258
 24.4%
 $273,722
 $233,700
 $40,022
 17.1%
        
Total homes sold3,865
 3,447
 418
 12.1%
        
Net factory-built housing revenue per home sold$66,522
 $63,923
 $2,599
 4.1%
 Nine Months Ended    
 December 28,
2019		 December 29,
2018		 Change % Change
Net revenue:       
Factory-built housing$758,564
 $680,198
 $78,366
 11.5%
Financial services47,875
 41,435
 6,440
 15.5%
 $806,439
 $721,633
 $84,806
 11.8%
        
Total homes sold11,453
 10,870
 583
 5.4%
        
Net factory-built housing revenue per home sold$66,233
 $62,576
 $3,657
 5.8%
The increase in Net revenue from the factory-built housing segment for the three and nine months ended December 28, 2019selling prices compared to the same periods last year was from improved home sales volume, including homes sold from the newly acquired Destiny Homes, changes in product mix and higher average home selling prices compared to the prior year. Net revenue from the operations ofNote that Destiny Homes was $11.2 millionpurchased in August 2019 and $17.6 million for the three and nine months ended December 28, 2019, respectively.

Lexington Homes was closed in June 2020.
Net factory-built housing revenue per home sold is a volatile metric dependent upon several factors. A primary factor is the price disparity between sales of homes to independent distributors, builders, communities and developers ("Wholesale") and sales of homes to consumers by Company-owned retail centers ("Retail"). Wholesale sales prices are primarily comprised of the home and the cost to ship the home from a homebuildingmanufacturing facility to the home-site. Retail home prices include these items andplus retail markup, as well as items that are largely subject to home buyer discretion, including, but not limited to, installation, utility connections, site improvements, landscaping and additional services. Changes to the proportion of home sales among these distribution channels between reporting periods impacts the overall net revenue per home sold. For the nine months ended December 28, 2019, the Company sold 9,222 homes Wholesale and 2,231 homes Retail versus 8,891 homes Wholesale and 1,979 homes Retail in the comparable prior year period. Further,Other factors include fluctuations in net factory-built housing revenue per home sold are the result of changes in product mix, which results fromthe result of home buyer tastes and preferences as they select home types/models, as well as optional home upgrades when purchasing the home. These selections vary regularly based on consumer interests, local housing preferences and economic circumstances. Our product prices are also periodically adjusted for
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As discussed above, changes to the cost and availabilityproportion of raw materials included in, and labor used to produce, each home. For these reasons,home sales among the Company has experienced, and expects to continue to experience, volatility indistribution channels between reporting periods impact the overall net factory-built housing revenue per home sold. For the three and six months ended September 26, 2020, the Company sold 2,664 and 5,261 homes Wholesale, respectively, and 763 and 1,515 homes Retail, respectively. For the three and six months ended September 28, 2019, the Company sold 3,006 and 6,064 homes Wholesale, respectively, and 775 and 1,524 homes Retail, respectively.
Financial services segment revenue increased for the three and nine months ended December 28, 2019, from greater unrealized gains on investments in the insurance subsidiary’s portfolio, an increasedue to higher volume in home loan sales compared to the prior year period, additional interest income on commercial loans outstanding and more insurance policies in force in the current year compared to the prior year. TheAlso, the three and six months ended September 26, 2020 include $0.7 million and $1.7 million, respectively, of unrealized gains on marketable equity securities in the insurance subsidiary's portfolio, compared to $0.2 million in unrealized gains in each of the prior year periods. These overall increase isincreases were partially offset by lower interest income earned on the acquired consumer loan portfolios that continue to amortize.
Gross Profit.
Gross profit consisted of the following for the three and nine months ended December 28, 2019 and December 29, 2018, respectively (in thousands):
 Three Months Ended
($ in thousands)September 26,
2020		September 28,
2019		$ Change% Change
Gross profit:
Factory-built housing$46,155 $48,639 $(2,484)(5.1)%
Financial services7,386 9,828 (2,442)(24.8)%
$53,541 $58,467 $(4,926)(8.4)%
Gross profit as % of Net revenue:
Consolidated20.8 %21.8 %N/A(1.0)%
Factory-built housing19.2 %19.2 %N/A— %
Financial services43.4 %61.5 %N/A(18.1)%
 Six Months Ended
($ in thousands)September 26,
2020		September 28,
2019		$ Change% Change
Gross profit:
Factory-built housing$93,147 $100,774 $(7,627)(7.6)%
Financial services15,717 17,991 (2,274)(12.6)%
$108,864 $118,765 $(9,901)(8.3)%
Gross profit as % of Net revenue:
Consolidated21.2 %22.3 %N/A(1.1)%
Factory-built housing19.4 %20.1 %N/A(0.7)%
Financial services46.6 %57.6 %N/A(11.0)%
 Three Months Ended    
 December 28,
2019		 December 29,
2018		 $ Change % Change
Gross profit:       
Factory-built housing$48,793
 $41,730
 $7,063
 16.9%
Financial services11,062
 7,291
 3,771
 51.7%
 $59,855
 $49,021
 $10,834
 22.1%
        
Gross profit as % of Net revenue:       
Consolidated21.9% 21.0% N/A
 0.9%
Factory-built housing19.0% 18.9% N/A
 0.1%
Financial services66.6% 54.6% N/A
 12.0%
 Nine Months Ended    
 December 28,
2019		 December 29,
2018		 $ Change % Change
Gross profit:       
Factory-built housing$149,567
 $127,414
 $22,153
 17.4%
Financial services29,053
 22,499
 6,554
 29.1%
 $178,620
 $149,913
 $28,707
 19.1%
        
Gross profit as % of Net revenue:       
Consolidated22.1% 20.8% N/A
 1.3%
Factory-built housing19.7% 18.7% N/A
 1.0%
Financial services60.7% 54.3% N/A
 6.4%

Factory-built housing gross profit and grossGross profit as a percentage of net salesNet revenue for the three and nine months ended December 28, 2019increased primarily from changes in product mix, while continuing to benefit from generally lower commodity prices.
Financial services gross profit for the three and nine months ended December 28, 2019 increased from greater home loan sales, increased interest income on commercial loans outstanding, more insurance policies in force in the current yearmonth period was flat as compared to the priorsame period last year, and decreased weather relatedfor the six months ended September 26, 2020, primarily due to lower sales volume and production inefficiencies caused by the COVID-19 pandemic.
In the financial services segment, Gross profit as a percentage of Net revenue decreased as a result of higher weather-related claims volume at our insurance subsidiary. This was partially offset bysubsidiary and lower interest income earned on the acquired consumer loan portfolios that continue to amortize. As a percentage
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Table of net revenue, financial services gross profit improved primarily from lower claims expense at our insurance subsidiary from less storm activity in the current year as compared to the prior year.Contents
Selling, General and Administrative Expenses.
Selling, general and administrative expenses consisted of the following for the three and nine months ended December 28, 2019 and December 29, 2018, respectively (in thousands):
 Three Months Ended
($ in thousands)September 26,
2020		September 28,
2019		$ Change% Change
Selling, general and administrative expenses:
Factory-built housing$30,725 $31,580 $(855)(2.7)%
Financial services4,728 4,503 225 5.0 %
$35,453 $36,083 $(630)(1.7)%
Selling, general and administrative expenses as % of Net revenue:13.7 %13.4 %N/A0.3 %

 Six Months Ended
($ in thousands)September 26,
2020		September 28,
2019		$ Change% Change
Selling, general and administrative expenses:
Factory-built housing$61,462 $62,331 $(869)(1.4)%
Financial services9,314 9,016 298 3.3 %
$70,776 $71,347 $(571)(0.8)%
Selling, general and administrative expenses as % of Net revenue:13.8 %13.4 %N/A0.4 %
 Three Months Ended    
 December 28,
2019		 December 29,
2018		 $ Change % Change
Selling, general and administrative expenses:       
Factory-built housing$32,017
 $26,782
 $5,235
 19.5%
Financial services4,827
 4,051
 776
 19.2%
 $36,844
 $30,833
 $6,011
 19.5%
        
Selling, general and administrative expenses as % of Net revenue:13.5% 13.2% N/A
 0.3%
 Nine Months Ended    
 December 28,
2019		 December 29,
2018		 $ Change % Change
Selling, general and administrative expenses:       
Factory-built housing$94,348
 $77,752
 $16,596
 21.3%
Financial services13,843
 12,329
 1,514
 12.3%
 $108,191
 $90,081
 $18,110
 20.1%
        
Selling, general and administrative expenses as % of Net revenue:13.4% 12.5% N/A
 0.9%
Selling, general and administrative expenses related to factory-built housing fordecreased between periods primarily from a reduction in legal expenses, partially offset by increased corporate-related expenses. During the three months ended December 28, 2019 included amortization of $2.1 million in premiums for additional D&O insurance purchased bySeptember 26, 2020, the Company and $0.9incurred $0.5 million in expenses related to the Company's response to the SEC inquiry, inquiry. However, the Company also received a $0.8 million insurance recovery of prior expenses, resulting in a net benefit of $0.3 million during the period compared to $0.7 million and $1.3$0.8 million in such costs, respectively, forexpense in the threesecond quarter of fiscal year 2020. For the six months ended December 29, 2018, as well as greater sales commissions and incentive-based compensation from improved results.
Selling, general and administrative expenses related to factory-built housing for the nine months ended December 28, 2019 included amortization of $6.3 million in premiums for additional D&O insurance purchased bySeptember 26, 2020, the Company and $2.5recorded a net benefit of $0.2 million in expenses related to the Company's response to the for SEC inquiry related expenses compared to $0.7$1.6 million and $1.3 million in such costs, respectively, forexpense in the nine months ended December 29, 2018, as well as greater sales commissions and incentive-based compensation from improved results.comparable prior year period.
Selling, general and administrative expenses related to financial services increased for the threedue to increases in salaries and nine months ended December 28, 2019, primarily from higher salary and incentive-based compensation expense.

employee related expenses.
Interest Expense.
Interest expense was $0.5$0.2 million and $0.9$0.3 million for the three months ended DecemberSeptember 26, 2020 and September 28, 2019, and December 29, 2018, respectively. For the ninesix months ended DecemberSeptember 26, 2020 and September 28, 2019, and December 29, 2018, Interest expense was $1.3$0.4 million and $2.8$0.8 million, respectively. Interest expense consists primarily of debt service on the CountryPlace financings of manufactured home-only loans and interest related to finance leases. The decrease for the three and nine months ended December 28, 2019 is primarily the result of a reduction in securitized bond interest expense, as the Company exercised its right to repurchase the 2005-1 and 2007-1 securitized loan portfoliosportfolio in January and August 2019, respectively, thereby eliminating the related interest expense. These decreases wereThis decrease is partially offset by increases in interest expense related tofrom secured credit facilities and finance leases.at CountryPlace.
Other Income, net.
Other income, net was $2.2$1.7 million and $0.3$5.2 million for the three months ended DecemberSeptember 26, 2020 and September 28, 2019, and December 29, 2018, respectively. The threeFor the six months ended DecemberSeptember 26, 2020 and September 28, 2019, includes unrealized gains on corporate investments of $0.3 million compared to losses of $2.1 million for the three months ended December 29, 2018. The current year period also includes an increase in interest income from larger Cash and cash equivalents balances compared to the same period last year.
For the nine months ended December 28, 2019 and December 29, 2018, Other income, net was $10.2$3.6 million and $3.6$8.0 million, respectively. The nine months ended December 28, 2019 includes $1.4 million in
Other income primarily consists of realized and unrealized gains and losses on corporate marketable equity investments, comparedinterest income related to commercial loans receivable balances, interest income earned on cash balances and gains and losses from the sale of $1.0 million for the nine months ended December property, plant and equipment.
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Other income, net, declined primarily due to a $3.4 million net gain on the sale of idle land and an increasethat was recorded in the prior year period, as well as a reduction in interest incomeearned in the current periods on larger Cashcash and cash equivalents balances compared tocommercial loan receivables, given the same period last year.
Income Before Income Taxes.
Income before income taxes consisted of the following for the three and nine months ended December 28, 2019 and December 29, 2018, respectively (in thousands):

 Three Months Ended    
 December 28,
2019		 December 29,
2018		 $ Change % Change
Income before income taxes:       
Factory-built housing$19,247
 $14,562
 $4,685
 32.2%
Financial services5,485
 2,385
 3,100
 130.0%
 $24,732
 $16,947
 $7,785
 45.9%
 Nine Months Ended    
 December 28,
2019		 December 29,
2018		 $ Change % Change
Income before income taxes:       
Factory-built housing$66,023
 $53,050
 $12,973
 24.5%
Financial services13,326
 7,550
 5,776
 76.5%
 $79,349
 $60,600
 $18,749
 30.9%
lower interest rate environment. These declines were partially offset by increases in unrealized gains on corporate marketable equity securities.
Income tax expense.
Income tax expense was $3.8was $4.5 million and $3.6$6.4 million for the three months ended DecemberSeptember 26, 2020 and September 28, 2019, and December 29, 2018, respectively, for an effective income tax rate for the 2020 third quarter of 15.5% compared to an effective tax rate of 21.0% for the same period last year. The lower effective tax rate in the current period is mainly from a benefit of $1.7 million for the recognition of certain tax credits under the 2020 Appropriations Bill that was signed into law on December 20, 2019.

For the nine months ended December 28, 2019 and December 29, 2018, Income tax expense was $16.3 million and $11.9 million, respectively, for an effective income tax rate of 20.5%23.2% and 23.4%, respectively. Income tax expense for the six months ended September 26, 2020 and September 28, 2019 was $9.6 million and $12.5 million, respectively, for an effective income tax rate of 23.1% compared to an effective tax rate of 19.7%22.8% for the nine months ended December 29, 2018.same period last year. The lowerhigher effective tax rate infor the prior year relatessix month period was primarily due to greaterlower tax benefits from the exercise of stock options, as the nine months ended December 29, 2018 includedwhich provided a benefit of $2.3$0.7 million compared to a benefit of $1.3the $0.9 million forin the nine months ended December 28, 2019.same period last year.
Liquidity and Capital Resources
The Company believes that cash and cash equivalents at December 28, 2019,September 26, 2020, together with cash flow from operations, will be sufficient to fund its operations and provide for growth for the next 12 months and into the foreseeable future. The Company maintains cash in U.S. Treasury and other money market funds, some of which are in excess of federally insured limits. The Company expects to continue to evaluate potential acquisitions of, or strategic investments in, businesses that are complementary to the Company, as well as other expansion opportunities. Such transactions may require the use of cash and have other impacts on the Company's liquidity and capital resources. The recent acquisition of Destiny Homes did not have a significant impact on our liquidity or capital resources. Because of the Company's sufficient cash position, the Company has not historically sought external sources of liquidity, with the exception of certain credit facilities for its home-only lending programs. However, depending on the Company's operating results and strategic opportunities, it may need to seek additional or alternative sources of financing. There can be no assurance that such financing would be available on satisfactory terms, if at all. If this financing were not available, it could be necessary for the Company to reevaluate its long-term operating plans to make more efficient use of its existing capital resources. The exact nature of any changes to the Company's plans that would be considered depends on various factors, such as conditions in the factory-built housing industry and general economic conditions outside of the Company's control.
State insurance regulations restrict the amount of dividends that can be paid to stockholders of insurance companies. As a result, the assets owned by the Company's insurance subsidiary are generally not available to satisfy the claims of Cavco or its legal subsidiaries. The Company believes that stockholders' equity at its insurance subsidiary remains sufficient and does not believe that its ability to pay ordinary dividends to Cavco will be restricted per state regulations.
The following is a summary of the Company's cash flows for the ninesix months ended DecemberSeptember 26, 2020 and September 28, 2019, and December 29, 2018, respectively (in thousands):respectively:
Six Months Ended
($ in thousands)September 26,
2020		September 28,
2019		$ Change
Cash, cash equivalents and restricted cash at beginning of the fiscal year$255,607 $199,869 $55,738 
Net cash provided by operating activities74,609 43,593 31,016 
Net cash used in investing activities(82)(18,308)18,226 
Net cash used in financing activities(865)(19,345)18,480 
Cash, cash equivalents and restricted cash at end of the period$329,269 $205,809 $123,460 
30
 Nine Months Ended  
 December 28,
2019		 December 29,
2018		 $ Change
Cash, cash equivalents and restricted cash at beginning of the fiscal year$199,869
 $199,258
 $611
Net cash provided by operating activities68,320
 16,358
 51,962
Net cash used in investing activities(18,873) (5,175) (13,698)
Net cash used in financing activities(19,058) (5,834) (13,224)
Cash, cash equivalents and restricted cash at end of the period$230,258
 $204,607
 $25,651
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Net cash provided by operating activities increased during the ninesix months ended December 28, 2019,September 26, 2020 compared to the ninesix months ended December 29, 2018,September 28, 2019 primarily from increased profitability from improved home sales volumedue to more customer deposits received as a result of higher order rates, higher collections on accounts receivables and a lower inventory balance.commercial loans receivables and the timing of payments on Accounts payable and Accrued expenses and other current liabilities.
Consumer loan originations increased by $22.9$2.1 million to $121.6$82.4 million for the ninesix months ended December 28, 2019September 26, 2020 from $98.7$80.3 million for the ninesix months ended December 29, 2018.September 28, 2019. Proceeds from sales of consumer loans provided $117.1$80.6 million in cash, compared to $96.7$77.2 million in the previous year.

With respect to consumer lending for the purchase of manufactured housing, states may classify manufactured homes for both legal and tax purposes as personal property rather than real estate. As a result, financing for the purchase of manufactured homes is characterized by shorter loan maturities and higher interest rates. Unfavorable changes in these factors may have material negative effects on the Company's results of operations and financial condition. See Item IA, "Risk Factors" in the Company's Form 10-K.
Cavco has entered into commercial loan arrangements with certain distributors of its products under which the Company provides funds for Wholesale purchases. In addition, the Company has entered into direct commercial loan arrangements with distributors, communities and developers under which the Company provides funds for financing homes. The Company has also invested in community-based lending initiatives that provide home-only financing to new residents of certain manufactured home communities (seecommunities. For additional information regarding our commercial loans receivable, see Note 7 to the Consolidated Financial Statements). Statements. Further, the Company has invested in and developed home-only loan pools and lending programs to attract third party financier interest in order to grow sales of new homes through traditional distribution points.
Investing activities consist of buying and selling bonds and marketable equity securities in our Financial Services segment and funding strategic growth acquisitions. The Company received $2.1 million more in net proceeds from investments for the six months ended September 26, 2020 compared to the same period last year, and Net cash for investing activities in the prior year was primarily used to fund the acquisition of Destiny Homes, which operates a manufactured and modular housing factory in Moultrie, Georgia.Homes.
Financing activities used $13.2$18.5 million moreless cash during the period compared to the same period last year as the Company repurchased the 2007-1 securitized loan portfolio in August 2019, eliminating the related securitized financings.2019.
Financings. In August 2019, the Company repurchased the 2007-1 securitized loan portfolio, leaving no further securitized financing balance outstanding.
The Company hasCompany's finance subsidiary entered into secured credit facilities with independent third party banks with draw periods from one to fifteen months and maturity dates of ten years after the expiration of the draw periods. This draw down period expired in September 2019.third-party banks. The proceeds arewere used byto facilitate the Company to originate and holdorigination of consumer home-only loans to be held for investment, secured by the manufactured homes which arewere subsequently pledged as collateral to the facilities. Upon completion of the draw down period, theperiods, these facilities were converted into an amortizing loan based on a 20-year amortization period with a balloon payment due upon maturity. The maximum advance for loans under this program was 80% of the outstanding collateral principal balance, with the Company providing the remaining funds. As of December 28, 2019,September 26, 2020, the outstanding balance of the converted loans was $10.8$9.8 million at a weighted average interest rate of of 4.91%.
Contractual Commitments and Contingencies.Other than the Company's repurchase of the 2007-1 securitized loan portfolio, which is discussed above, there There were no material changes to the contractual obligations as set forth in the Company's Annual Report on Form 10-K.
Critical Accounting Policies
On March 31, 2019,29, 2020, the Company adopted ASU No. 2016-02,Accounting Standards Update 2016-13, LeasesFinancial Instruments - Credit Losses (Topic 842)326): Measurement of Credit Losses on Financial Instruments, , which provideschanges the impairment model for most financial assets and certain other instruments. The Company adopted the standard by recognizing the cumulative effect of initially applying the new guidance for lease recognition and electedcredit loss standard as an adjustment to use the modified retrospective approach to account for prior periods.opening balance of Retained earnings. Refer to Note 1 to the Consolidated Financial Statements for additional discussion. There have been no other significant changes to the Company's critical accounting policies during the ninesix months ended December 28, 2019,September 26, 2020, as compared to those disclosed in Part II, Item 7 of the Company's Form 10-K, under the heading "Critical Accounting Policies," which provides a discussion of the critical accounting policies that management believes affect its more significant judgments and estimates used in the preparation of the Company's Consolidated Financial Statements.
Recent Accounting Pronouncements
See Note 1 to the Consolidated Financial Statements for a discussion of recently issued and adopted accounting pronouncementspronouncements.
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Other Matters
Related Party Transactions. See Note 2119 to the Consolidated Financial Statements for a discussion of the Company's related party transactions.

Off Balance Sheet Arrangements
See Note 1615 to the Consolidated Financial Statements for a discussion of the Company's off-balance sheet commitments, which discussion is incorporated herein by reference.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes from the quantitative and qualitative disclosures about market risk previously disclosed in the Form 10-K.
Item 4. Controls and Procedures
(a) Disclosure Controls and Procedures
The Company carried out an evaluation, under the supervision and with the participation of the Company's management, including its President and Chief Executive Officer and Chiefits Principal Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, the Company's President and Chief Executive Officer and Chiefits Principal Financial Officer concluded that, as of December 28, 2019,September 26, 2020, its disclosure controls and procedures were effective.
(b) Changes in Internal Control over Financial Reporting
There have been no changes in the Company's internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the fiscal quarter ended December 28, 2019,September 26, 2020, which have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Information regarding reportable legal proceedings is contained in Part I, Item 3, Legal Proceedings, in the Form 10-K. The following describes legal proceedings, if any, that became reportable during the period ended December 28, 2019,September 26, 2020, and, if applicable, amends and restates descriptions of previously reported legal proceedings in which therethere have been material developments during such quarter.
Since August 2018, the Company has been cooperating with an investigation by the SEC's enforcement staff inof the SEC's Los Angeles Regional Offices regarding securities trading in another public company’s securitiespersonal and Company accounts directed by the Company, itsCompany's former Chief Executive Officer and others outside the Company.CEO, Joseph Stegmayer. The Audit Committee of the Board of Directors conducted and completed an internal investigation led by independent legal counsel and other advisers to assessand, following the Company's trading. Thecompletion of its work in early 2019, the Audit Committee shared the results of the Audit Committee’sits work have been shared with the Company’sCompany's auditors, listing exchange and with the SEC staff. The Company has also made internal recordsdocuments and personnel available to the SEC staff and intends to continue cooperating with its investigation. The Company has been exploring the possibility of a settlement with the SEC staff in connection with the matter, but at this time, the Company is unable to estimate the amount of a potential loss, if any. The Company is hopeful that an amicable resolution can be reached in the coming months. As noted in the Company’s September 24, 2020 Form 8-K filing, the SEC staff that week issued a Wells Notice to Dan Urness, the Company's Chief Financial Officer and prior Principal Financial Officer and Principal Accounting Officer, in connection with its investigation, noting that it intends to recommend an enforcement action against him. Rather than have this be a distraction to the Company, Mr. Urness has gone on leave to focus on his response to the Wells Notice. Paul Bigbee, the Company’s Chief Accounting Officer since June 2020, is now serving as its Principal Financial Officer and Principal Accounting Officer.
As a result of the ongoing SEC investigation, the Company incurred $1.1 million in expenses and also received a $1.3 million insurance reimbursement of prior expenses, resulting in a net benefit of $0.2 million for the six months ended September 26, 2020 compared to $1.6 million in expenses during the six months ended September 28, 2019. The Company expects to continue to incur costs relating to this matter. During the third quarter of fiscal year 2019, the Company also reviewed the sufficiency of its insurance coverage and, based on that work, Cavco's Board of Directors made a decision to purchase additional director and officer ("D&O") liability insurance coverage with 22-month terms for a total premium of $15.3 million (which cost was evenly amortized over the terms of the policies). As a result, the Company recorded $4.2 million of additional D&O policy premium expense during each of the six months ended September 26, 2020 and September 28, 2019. With the conclusion of the amortization through the second quarter of fiscal year 2021, the additional D&O liability insurance premiums have now been fully amortized. D&O renewal premiums are now in the ordinary course of business.
Joseph D. Robles v. Cavco Industries, Inc., was filed in the Superior Court for the State of California, Riverside on June 25, 2019 and Malik Griffin v. Fleetwood Homes, Inc., was filed in the Superior Court for the State of California, San Bernardino on September 19, 2019, seeking recovery on behalf of a putative class of current and former hourly employees for certain alleged wage-and-hour violations, including, among other things: (i) alleged failure to comply with certain wage statement formatting requirements; (ii) alleged failure to compensate employees for straight-time and overtime hours worked; and (iii) alleged failure to provide employees with all requisite work breaks. All parties have agreed to jointly mediate both cases. The mediation is currently scheduled for January 27, 2021.
The Company is party to certain other legal proceedings that ariselawsuits in the ordinary course and are incidental to the Company'sof business. CertainBased on management's present knowledge of the claims pending against the Company in these proceedings allege, among other things, breachfacts and (in certain cases) advice of contract, construction defect, deceptive trade practices, unfair insurance practices, product liability and warranty, personal injury and employment. Although litigation is inherently uncertain, based on past experience and the information currently available, except as discussed above,outside counsel, management does not believe that the currentlyloss contingencies arising from pending and threatened litigation or claims willmatters are likely to have a material adverse effect on the Company's consolidated financial position, liquidity or results of operations.operations after taking into account any existing reserves included in Accrued expenses and other current liabilities in the Consolidated Balance Sheets. However, future events or circumstances that may currently be unknown to management will determine whether the resolution of pending or threatened litigation or claims will ultimately have a material effect on the Company's consolidated financial position, liquidity or results of operations in any future reporting periods.

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Item 1A. Risk Factors
In addition to the other information set forth in this Report, you should carefully consider the factors discussed in Part I, Item 1A, Risk Factors, in the Form 10-K, which could materially affect the Company's business, financial condition or future results. The risks described in this Report and in the Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to the Company or that it currently deems to be immaterial also may materially adversely affect the Company's business, financial condition and/or operating results.
Item 5. Other Information
ThereThe following disclosure is provided pursuant to Item 5.02 (Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers) of Form 8-K:
Item 5.02    Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
On October 26, 2020, Paul Bigbee, 52, the Company’s Chief Accounting Officer, was appointed the Company’s Principal Financial Officer and Principal Accounting Officer.
Prior to joining the Company, Mr. Bigbee was Vice President, Financial Audit (2018 to 2019) for Caesars Entertainment in Las Vegas, Nevada. From 2006 to 2018, he held various positions of increasing responsibility at Starwood Hotels & Resorts in Scottsdale, Arizona, including: Controller, Global Sales & Marketing; Global Internal Audit Leader; Corporate Audit/Timeshare; and Senior Director, Financial Reporting and Development Support.
As previously disclosed on Form 8-K dated September 25, 2020, Dan Urness, the Company’s Chief Financial Officer and Principal Accounting Officer has taken a leave of absence. As of October 26, 2020, Mr. Urness is no other information required to be disclosed under this item which was not previously disclosed.longer designated the Company’s Principal Financial Officer and Principal Accounting Officer.
Item 6. Exhibits
Exhibit No.Exhibit
31.1
(1)
31.2
(1)
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(2)
101.INSThe instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCHInline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
101.LABInline XBRL Taxonomy Extension Label Linkbase Document
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

All other items required under Part II are omitted because they are not applicable.

(1) Filed herewith.
(2) Furnished herewith.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Cavco Industries, Inc.
Registrant
Cavco Industries, Inc.SignatureTitleDate
Registrant
SignatureTitleDate
/s/ William C. BoorPresident and Chief Executive OfficerJanuary 31,October 30, 2020
William C. Boor(Principal Executive Officer)
/s/ Daniel L. UrnessPaul BigbeeExecutive Vice President, Chief FinancialAccounting Officer and TreasurerJanuary 31,October 30, 2020
Daniel L. UrnessPaul Bigbee(Principal Financial and Accounting Officer)

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