0000278166cvco:Fiscal2018Member2021-10-02
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended December 26, 2020October 2, 2021
OR
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☐ | 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)
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Delaware | 56-2405642 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
| | | | |
3636 North Central Ave, Ste 1200 |
| Phoenix | Arizona | 85012 | |
(Address of principal executive offices, including zip code) |
(602) 256-6263
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | |
Title of each class | Trading Symbol | Name of each exchange on which registered |
Common Stock, par value $0.01 | CVCO | The 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.
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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 registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of January 22,October 29, 2021, 9,192,2379,177,315 shares of the registrant's Common Stock, $.01 par value, were outstanding.
CAVCO INDUSTRIES, INC.
FORM 10-Q
December 26, 2020October 2, 2021
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 26, 2020 | | March 28, 2020 |
ASSETS | (Unaudited) | | |
Current assets: | | | |
Cash and cash equivalents | $ | 327,487 | | | $ | 241,826 | |
Restricted cash, current | 12,802 | | | 13,446 | |
Accounts receivable, net | 40,932 | | | 42,800 | |
Short-term investments | 16,966 | | | 14,582 | |
Current portion of consumer loans receivable, net | 42,091 | | | 32,376 | |
Current portion of commercial loans receivable, net | 15,649 | | | 14,657 | |
Current portion of commercial loans receivable from affiliates, net | 3,363 | | | 766 | |
Inventories | 110,624 | | | 113,535 | |
| | | |
Prepaid expenses and other current assets | 55,805 | | | 42,197 | |
Total current assets | 625,719 | | | 516,185 | |
Restricted cash | 335 | | | 335 | |
Investments | 35,485 | | | 31,557 | |
Consumer loans receivable, net | 39,501 | | | 49,928 | |
Commercial loans receivable, net | 16,563 | | | 23,685 | |
Commercial loans receivable from affiliates, net | 4,171 | | | 7,457 | |
Property, plant and equipment, net | 78,493 | | | 77,190 | |
Goodwill | 75,090 | | | 75,090 | |
Other intangibles, net | 14,550 | | | 15,110 | |
Operating lease right-of-use assets | 16,659 | | | 13,894 | |
Total assets | $ | 906,566 | | | $ | 810,431 | |
LIABILITIES AND STOCKHOLDERS' EQUITY | | | |
Current liabilities: | | | |
Accounts payable | $ | 25,176 | | | $ | 29,924 | |
Accrued expenses and other current liabilities | 186,026 | | | 139,930 | |
Current portion of secured credit facilities and other | 2,140 | | | 2,248 | |
Total current liabilities | 213,342 | | | 172,102 | |
Operating lease liabilities | 13,827 | | | 10,743 | |
Secured credit facilities and other | 10,847 | | | 12,705 | |
Deferred income taxes | 6,809 | | | 7,295 | |
Stockholders' equity: | | | |
Preferred stock, $0.01 par value; 1,000,000 shares authorized; NaN shares issued or outstanding | 0 | | | 0 | |
Common stock, $0.01 par value; 40,000,000 shares authorized; Outstanding 9,192,237 and 9,173,242 shares, respectively | 92 | | | 92 | |
Additional paid-in capital | 255,664 | | | 252,260 | |
Retained earnings | 405,835 | | | 355,144 | |
Accumulated other comprehensive income | 150 | | | 90 | |
Total stockholders' equity | 661,741 | | | 607,586 | |
Total liabilities and stockholders' equity | $ | 906,566 | | | $ | 810,431 | |
| | | | | | | | | | | |
| October 2, 2021 | | April 3, 2021 |
ASSETS | (Unaudited) | | |
Current assets | | | |
Cash and cash equivalents | $ | 224,291 | | | $ | 322,279 | |
Restricted cash, current | 19,850 | | | 16,693 | |
Accounts receivable, net | 72,038 | | | 47,396 | |
Short-term investments | 18,867 | | | 19,496 | |
Current portion of consumer loans receivable, net | 26,475 | | | 37,690 | |
Current portion of commercial loans receivable, net | 31,307 | | | 14,568 | |
Current portion of commercial loans receivable from affiliates, net | 294 | | | 4,664 | |
Inventories | 190,394 | | | 131,234 | |
Prepaid expenses and other current assets | 49,482 | | | 57,779 | |
Total current assets | 632,998 | | | 651,799 | |
Restricted cash | 335 | | | 335 | |
Investments | 35,650 | | | 35,010 | |
Consumer loans receivable, net | 32,124 | | | 37,108 | |
Commercial loans receivable, net | 36,685 | | | 20,281 | |
Commercial loans receivable from affiliates, net | 3,647 | | | 4,801 | |
Property, plant and equipment, net | 156,397 | | | 96,794 | |
Goodwill | 106,487 | | | 75,090 | |
Other intangibles, net | 35,404 | | | 14,363 | |
Operating lease right-of-use assets | 16,706 | | | 16,252 | |
Total assets | $ | 1,056,433 | | | $ | 951,833 | |
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST, AND STOCKHOLDERS' EQUITY | | | |
Current liabilities | | | |
Accounts payable | $ | 42,549 | | | $ | 32,120 | |
Accrued expenses and other current liabilities | 237,462 | | | 203,133 | |
Current portion of secured financings and other | 2,260 | | | 1,851 | |
Total current liabilities | 282,271 | | | 237,104 | |
Operating lease liabilities | 13,240 | | | 13,361 | |
Secured financings and other | 17,305 | | | 10,335 | |
Deferred income taxes | 9,373 | | | 7,393 | |
Redeemable noncontrolling interest | 1,128 | | | — | |
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; Issued 9,275,016 and 9,241,256 shares, respectively | 93 | | | 92 | |
Treasury stock, at cost; 98,201 and 6,600 shares, respectively | (21,877) | | | (1,441) | |
Additional paid-in capital | 259,116 | | | 253,835 | |
Retained earnings | 495,713 | | | 431,057 | |
Accumulated other comprehensive income | 71 | | | 97 | |
Total stockholders' equity | 733,116 | | | 683,640 | |
Total liabilities, redeemable noncontrolling interest and stockholders' equity | $ | 1,056,433 | | | $ | 951,833 | |
See accompanying Notes to Consolidated Financial Statements
CAVCO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands, except per share amounts)
(Unaudited)
| | | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Six Months Ended |
| | December 26, 2020 | | December 28, 2019 | | December 26, 2020 | | December 28, 2019 | | October 2, 2021 | | September 26, 2020 | | October 2, 2021 | | September 26, 2020 |
Net revenue | Net revenue | $ | 288,772 | | | $ | 273,722 | | | $ | 801,549 | | | $ | 806,439 | | Net revenue | $ | 359,543 | | | $ | 257,976 | | | $ | 689,965 | | | $ | 512,777 | |
Cost of sales | Cost of sales | 229,534 | | | 213,867 | | | 633,447 | | | 627,819 | | Cost of sales | 269,615 | | | 204,435 | | | 526,024 | | | 403,913 | |
Gross profit | Gross profit | 59,238 | | | 59,855 | | | 168,102 | | | 178,620 | | Gross profit | 89,928 | | | 53,541 | | | 163,941 | | | 108,864 | |
Selling, general and administrative expenses | Selling, general and administrative expenses | 35,414 | | | 36,844 | | | 106,190 | | | 108,191 | | Selling, general and administrative expenses | 45,372 | | | 35,453 | | | 86,204 | | | 70,776 | |
Income from operations | Income from operations | 23,824 | | | 23,011 | | | 61,912 | | | 70,429 | | Income from operations | 44,556 | | | 18,088 | | | 77,737 | | | 38,088 | |
Interest expense | Interest expense | (177) | | | (490) | | | (567) | | | (1,278) | | Interest expense | (203) | | | (194) | | | (367) | | | (390) | |
Other income, net | Other income, net | 2,243 | | | 2,211 | | | 5,821 | | | 10,198 | | Other income, net | 4,668 | | | 1,702 | | | 7,129 | | | 3,578 | |
Income before income taxes | Income before income taxes | 25,890 | | | 24,732 | | | 67,166 | | | 79,349 | | Income before income taxes | 49,021 | | | 19,596 | | | 84,499 | | | 41,276 | |
Income tax expense | Income tax expense | (6,189) | | | (3,834) | | | (15,742) | | | (16,284) | | Income tax expense | (11,338) | | | (4,547) | | | (19,770) | | | (9,553) | |
Net income | Net income | $ | 19,701 | | | $ | 20,898 | | | $ | 51,424 | | | $ | 63,065 | | Net income | 37,683 | | | 15,049 | | | 64,729 | | | 31,723 | |
Less: net income attributable to redeemable noncontrolling interest | | Less: net income attributable to redeemable noncontrolling interest | 73 | | | — | | | 73 | | | — | |
Net income attributable to Cavco common stockholders | | Net income attributable to Cavco common stockholders | $ | 37,610 | | | $ | 15,049 | | | $ | 64,656 | | | $ | 31,723 | |
| Comprehensive income: | | |
Comprehensive income | | Comprehensive income | |
Net income | Net income | $ | 19,701 | | | $ | 20,898 | | | $ | 51,424 | | | $ | 63,065 | | Net income | $ | 37,683 | | | $ | 15,049 | | | $ | 64,729 | | | $ | 31,723 | |
Reclassification adjustment for securities sold or matured | (13) | | | 15 | | | 20 | | | 17 | | |
Reclassification adjustment for securities sold | | Reclassification adjustment for securities sold | — | | | 7 | | | 1 | | | 33 | |
Applicable income taxes | Applicable income taxes | 3 | | | (3) | | | (4) | | | (4) | | Applicable income taxes | — | | | (2) | | | — | | | (7) | |
Net change in unrealized position of investments held | Net change in unrealized position of investments held | (6) | | | (14) | | | 56 | | | 126 | | Net change in unrealized position of investments held | (16) | | | 3 | | | (34) | | | 62 | |
Applicable income taxes | Applicable income taxes | 1 | | | 3 | | | (12) | | | (26) | | Applicable income taxes | 3 | | | (1) | | | 7 | | | (13) | |
Comprehensive income | Comprehensive income | $ | 19,686 | | | $ | 20,899 | | | $ | 51,484 | | | $ | 63,178 | | Comprehensive income | 37,670 | | | 15,056 | | | 64,703 | | | 31,798 | |
Less: comprehensive income attributable to redeemable noncontrolling interest | | Less: comprehensive income attributable to redeemable noncontrolling interest | 73 | | | — | | | 73 | | | — | |
Comprehensive income attributable to Cavco common stockholders | | Comprehensive income attributable to Cavco common stockholders | $ | 37,597 | | | $ | 15,056 | | | $ | 64,630 | | | $ | 31,798 | |
| Net income per share: | | |
Net income per share attributable to Cavco common stockholders | | Net income per share attributable to Cavco common stockholders | |
Basic | Basic | $ | 2.14 | | | $ | 2.29 | | | $ | 5.60 | | | $ | 6.91 | | Basic | $ | 4.09 | | | $ | 1.64 | | | $ | 7.03 | | | $ | 3.46 | |
Diluted | Diluted | $ | 2.12 | | | $ | 2.25 | | | $ | 5.54 | | | $ | 6.81 | | Diluted | $ | 4.06 | | | $ | 1.62 | | | $ | 6.97 | | | $ | 3.42 | |
Weighted average shares outstanding: | | | | | | | | |
Weighted average shares outstanding | | Weighted average shares outstanding | | | | | | | |
Basic | Basic | 9,190,254 | | | 9,138,202 | | | 9,182,491 | | | 9,120,241 | | Basic | 9,190,866 | | | 9,182,945 | | | 9,194,577 | | | 9,178,609 | |
Diluted | Diluted | 9,295,553 | | | 9,293,941 | | | 9,285,238 | | | 9,259,203 | | Diluted | 9,273,136 | | | 9,295,409 | | | 9,274,440 | | | 9,280,080 | |
See accompanying Notes to Consolidated Financial Statements
CAVCO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
| | | Nine Months Ended | | Six Months Ended |
| | December 26, 2020 | | December 28, 2019 | | October 2, 2021 | | September 26, 2020 |
OPERATING ACTIVITIES | OPERATING ACTIVITIES | | | | OPERATING ACTIVITIES | | | |
Net income | Net income | $ | 51,424 | | | $ | 63,065 | | Net income | $ | 64,729 | | | $ | 31,723 | |
Adjustments to reconcile net income to net cash provided by operating activities: | | |
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 amortization | Depreciation and amortization | 4,735 | | | 4,208 | | Depreciation and amortization | 3,190 | | | 3,182 | |
Provision for credit losses | Provision for credit losses | (1,082) | | | 138 | | Provision for credit losses | (74) | | | 223 | |
Deferred income taxes | Deferred income taxes | (272) | | | 1,407 | | Deferred income taxes | 1,987 | | | (18) | |
Stock-based compensation expense | Stock-based compensation expense | 2,935 | | | 2,268 | | Stock-based compensation expense | 2,417 | | | 2,048 | |
Non-cash interest income, net | Non-cash interest income, net | (2,984) | | | (1,134) | | Non-cash interest income, net | (770) | | | (2,596) | |
Loss (gain) on sale or retirement of property, plant and equipment, net | 220 | | | (3,416) | | |
(Gain) loss on sale or retirement of property, plant and equipment, net | | (Gain) loss on sale or retirement of property, plant and equipment, net | (41) | | | 242 | |
Gain on investments and sale of loans, net | Gain on investments and sale of loans, net | (14,964) | | | (11,801) | | Gain on investments and sale of loans, net | (12,555) | | | (9,597) | |
Changes in operating assets and liabilities: | | |
Changes in operating assets and liabilities, net of acquisitions | | Changes in operating assets and liabilities, net of acquisitions | |
Accounts receivable | Accounts receivable | 1,868 | | | 2,196 | | Accounts receivable | (3,136) | | | 5,948 | |
Consumer loans receivable originated | Consumer loans receivable originated | (124,058) | | | (121,637) | | Consumer loans receivable originated | (85,370) | | | (82,352) | |
Proceeds from sales of consumer loans | Proceeds from sales of consumer loans | 122,597 | | | 117,127 | | Proceeds from sales of consumer loans | 101,556 | | | 80,589 | |
Principal payments received on consumer loans receivable | Principal payments received on consumer loans receivable | 10,720 | | | 7,816 | | Principal payments received on consumer loans receivable | 6,875 | | | 6,974 | |
Inventories | Inventories | 2,911 | | | 11,567 | | Inventories | (19,980) | | | 1,663 | |
Prepaid expenses and other current assets | Prepaid expenses and other current assets | 10,913 | | | (676) | | Prepaid expenses and other current assets | 993 | | | 11,536 | |
Commercial loans receivable | Commercial loans receivable | 6,444 | | | 487 | | Commercial loans receivable | 3,331 | | | 4,691 | |
Accounts payable and accrued expenses and other current liabilities | Accounts payable and accrued expenses and other current liabilities | 20,159 | | | (3,295) | | Accounts payable and accrued expenses and other current liabilities | 16,935 | | | 20,353 | |
Net cash provided by operating activities | Net cash provided by operating activities | 91,566 | | | 68,320 | | Net cash provided by operating activities | 80,087 | | | 74,609 | |
INVESTING ACTIVITIES | INVESTING ACTIVITIES | | | | INVESTING ACTIVITIES | | | |
Purchases of property, plant and equipment | Purchases of property, plant and equipment | (5,816) | | | (6,487) | | Purchases of property, plant and equipment | (4,671) | | | (3,773) | |
Payments for acquisition, net | 0 | | | (15,937) | | |
Payments for acquisitions, net | | Payments for acquisitions, net | (151,309) | | | — | |
Proceeds from sale of property, plant and equipment | Proceeds from sale of property, plant and equipment | 118 | | | 73 | | Proceeds from sale of property, plant and equipment | 53 | | | 77 | |
Purchases of investments | Purchases of investments | (14,056) | | | (4,648) | | Purchases of investments | (6,251) | | | (4,440) | |
Proceeds from sale of investments | Proceeds from sale of investments | 14,656 | | | 8,126 | | Proceeds from sale of investments | 6,133 | | | 8,054 | |
Net cash used in investing activities | Net cash used in investing activities | (5,098) | | | (18,873) | | Net cash used in investing activities | (156,045) | | | (82) | |
FINANCING ACTIVITIES | FINANCING ACTIVITIES | | | | FINANCING ACTIVITIES | | | |
Proceeds from exercise of stock options | 469 | | | 226 | | |
Proceeds from (payments for) exercise of stock options | | Proceeds from (payments for) exercise of stock options | 2,865 | | | (11) | |
Proceeds from secured financings and other | Proceeds from secured financings and other | 64 | | | 76 | | Proceeds from secured financings and other | — | | | 64 | |
Payments on securitized financings and other | (1,984) | | | (19,360) | | |
Payments on secured financings and other | | Payments on secured financings and other | (1,122) | | | (918) | |
Payments for common stock repurchases | | Payments for common stock repurchases | (20,436) | | | — | |
Distributions to noncontrolling interest | | Distributions to noncontrolling interest | (180) | | | — | |
Net cash used in financing activities | Net cash used in financing activities | (1,451) | | | (19,058) | | Net cash used in financing activities | (18,873) | | | (865) | |
Net increase in cash, cash equivalents and restricted cash | 85,017 | | | 30,389 | | |
Net (decrease) increase in cash, cash equivalents and restricted cash | | Net (decrease) increase in cash, cash equivalents and restricted cash | (94,831) | | | 73,662 | |
Cash, cash equivalents and restricted cash at beginning of the fiscal year | Cash, cash equivalents and restricted cash at beginning of the fiscal year | 255,607 | | | 199,869 | | Cash, cash equivalents and restricted cash at beginning of the fiscal year | 339,307 | | | 255,607 | |
Cash, cash equivalents and restricted cash at end of the period | Cash, cash equivalents and restricted cash at end of the period | $ | 340,624 | | | $ | 230,258 | | Cash, cash equivalents and restricted cash at end of the period | $ | 244,476 | | | $ | 329,269 | |
Supplemental disclosures of cash flow information: | | | | |
Supplemental disclosures of cash flow information | | Supplemental disclosures of cash flow information | | | |
Cash paid for income taxes | Cash paid for income taxes | $ | 13,111 | | | $ | 15,901 | | Cash paid for income taxes | $ | 19,127 | | | $ | 7,865 | |
Cash paid for interest | Cash paid for interest | $ | 371 | | | $ | 604 | | Cash paid for interest | $ | 195 | | | $ | 251 | |
Supplemental disclosures of noncash activity: | | | | |
GNMA loans eligible for repurchase | $ | 21,366 | | | $ | 2,442 | | |
Right-of-use assets recognized | $ | 5,692 | | | $ | 14,322 | | |
Operating lease obligations incurred | $ | 5,692 | | | $ | 14,347 | | |
Supplemental disclosures of noncash activity | | Supplemental disclosures of noncash activity | | | |
Change in GNMA loans eligible for repurchase | | Change in GNMA loans eligible for repurchase | $ | (8,830) | | | $ | 16,170 | |
Right-of-use assets recognized and operating lease obligations incurred | | Right-of-use assets recognized and operating lease obligations incurred | $ | 2,205 | | | $ | 5,617 | |
Fair value of assets acquired under finance leases | | Fair value of assets acquired under finance leases | $ | 7,398 | | | $ | — | |
Finance lease obligations incurred | | Finance lease obligations incurred | $ | 6,043 | | | $ | — | |
See accompanying Notes to Consolidated Financial Statements
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, "we," "us," "our," 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 are necessary to fairly state the results for the periods presented. Certain prior period amounts have been reclassified to conform to current period classification. We have evaluated subsequent events after the balance sheet date through the date of the filing of this report with the SEC, and there were no disclosable subsequent events requiring disclosure.events. 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 our 20202021 Annual Report on Form 10-K for the year ended March 28, 2020April 3, 2021, filed with the SEC on May 27, 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 Notes to the Consolidated Financial Statements ("Notes").Notes. The uncertainty created by the novel coronavirus COVID-19 ("COVID-19")pandemic has made such estimates more difficult and subjective. Due to that 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 current fiscal year will end on April 3, 20212, 2022 and will include 5352 weeks.
We operate principally in 2 segments: (1) factory-built housing, which includes wholesale and retail systems-builtfactory-built housing operations, and (2) financial services, which includes manufactured housing consumer finance and insurance. We design and build a wide variety of affordable manufactured homes, modular homes and park model RVs through 2026 homebuilding production lines located throughout the United States, which are sold to a network of independent distributors, community owners and developers and through our 4046 Company-owned retail stores. The financial services segment is comprised of a finance subsidiary, CountryPlace Acceptance Corp. ("CountryPlace"), and an insurance subsidiary, Standard Casualty Co.Company ("Standard Casualty"). CountryPlace is an approved Federal National Mortgage Association and Federal Home Loan Mortgage Corporation seller/servicer and a Government National Mortgage Association ("GNMA") 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.
Recently Issued or Adopted Accounting Standards.
On March 29, 2020,September 24, 2021, we adoptedacquired the Financial Accounting Standards Board's ("FASB") Accounting Standards Update ("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 financialbusiness and certain assets and certain other instrumentsliabilities of The Commodore Corporation ("Commodore"), including its six manufacturing facilities and requires a forward-looking impairment model based on expected losses rather than incurred losses. We adoptedtwo wholly-owned retail locations. The results of operations are included in our Consolidated Financial Statements from the standard by recognizing the cumulative effectdate of initially applying the new credit loss standard as an adjustmentacquisition. See Note 21.
In addition to the opening balance of Retained earnings. The comparative information has not been restated and continues to be reported under the accounting standard in effectbelow, 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 was $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.
ASU 2016-13 was adopted 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 Deteriorated Credit Quality ("ASC 310-30"). We determined that $1.7 million of the existing 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 accreted into interest income over the life of the loans.
For a description of other significant accounting policies we used in the preparation of our Consolidated Financial Statements, please refer to Note 1 of the Notes to Consolidated Financial Statements included in the Form 10-K.
Redeemable Noncontrolling Interest. In fiscal year 2017, we purchased a 50% interest in Craftsman Homes, LLC and Craftsman Homes Development, LLC (collectively known as “Craftsman" or the "Entities") from a third-party ("Seller"). Craftsman is a manufactured home street retailer in Nevada with four locations selling Company and other manufacturer branded homes. They also provide general construction to setup the home property and assist with multi-home developments and multi-family dwellings.
On July 4, 2021, we entered into an agreement (the "Craftsman Purchase Agreement") with the Seller to obtain the remaining 50% ownership in Craftsman, owned by the Seller, to be purchased over time. As provided in the Craftsman Purchase Agreement, 20% of the equity of Craftsman owned by the Seller was obtained as of July 4, 2021 by us for cash and, as a result, we obtained a controlling ownership interest. We accounted for this transaction as a business combination to be achieved in stages (see Note 21) and consolidated the entities while recognizing a noncontrolling interest for the remaining Seller ownership as discussed below.
The Craftsman Purchase Agreement calls for an additional 20% of the equity of Craftsman owned by the Seller to be purchased on December 31, 2023 by us for cash. As mandatory redemption of this ownership interest is required, $2.5 million for the fair value of this portion of the noncontrolling interest is recorded in the long-term liabilities section of the Consolidated Balance Sheet under the Secured financings and other caption. In each reporting period hereafter, until purchased by the Company, the mandatorily redeemable noncontrolling interest is adjusted to its current redemption value, based on a predetermined formula. Adjustments in the redemption value to the mandatorily redeemable noncontrolling interest are recorded to Interest expense.
After December 31, 2023, the Seller has the right to require Cavco to purchase all of Seller's remaining 10% ownership (“Put Right”) for an amount specified in the Agreement that is designed to approximate fair value. Likewise, Cavco has the right to require Seller to sell their remaining 10% ownership (“Call Right”) based on the same timing as described above for the Put Right. The purchase price to be payable by the Company for the purchase of Seller's remaining ownership pursuant to the exercise of the Put Right or the Call Right will be settled in cash. As redemption of this remaining ownership is not a current obligation, $1.2 million for the initial fair value of this portion of the noncontrolling interest is classified as a temporary equity mezzanine item between liabilities and stockholders' equity in the Consolidated Balance Sheet under the Redeemable noncontrolling interest caption. The amount of income attributable to this noncontrolling interest is included in the Consolidated Statements of Comprehensive Income on the face of the Consolidated Statements of Comprehensive Income.
2. Revenue from Contracts with Customers
The following table summarizes customer contract revenues disaggregated by reportable segment and source (in thousands):
| | | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Six Months Ended |
| | December 26, 2020 | | December 28, 2019 | | December 26, 2020 | | December 28, 2019 | | October 2, 2021 | | September 26, 2020 | | October 2, 2021 | | September 26, 2020 |
Factory-built housing | Factory-built housing | | | | | | | | Factory-built housing | | | | | | | |
U.S. Housing and Urban Development code homes | U.S. Housing and Urban Development code homes | $ | 222,684 | | | $ | 208,966 | | | $ | 609,853 | | | $ | 619,001 | | U.S. Housing and Urban Development code homes | $ | 285,947 | | | $ | 197,723 | | | $ | 548,337 | | | $ | 387,169 | |
Modular homes | Modular homes | 26,059 | | | 24,508 | | | 67,325 | | | 63,327 | | Modular homes | 31,386 | | | 20,483 | | | 58,003 | | | 41,266 | |
Park model RVs | Park model RVs | 8,296 | | | 10,219 | | | 31,045 | | | 34,831 | | Park model RVs | 9,728 | | | 9,027 | | | 19,399 | | | 22,749 | |
Other | Other | 13,783 | | | 13,413 | | | 41,656 | | | 41,405 | | Other | 15,033 | | | 13,734 | | | 28,638 | | | 27,873 | |
Net revenue from factory-built housing | 270,822 | | | 257,106 | | | 749,879 | | | 758,564 | | |
| | | 342,094 | | | 240,967 | | | 654,377 | | | 479,057 | |
Financial services | Financial services | | | | | | | | Financial services | | | | | | | |
Insurance agency commissions received from third-party insurance companies | Insurance agency commissions received from third-party insurance companies | 840 | | | 783 | | | 2,387 | | | 2,212 | | Insurance agency commissions received from third-party insurance companies | 850 | | | 777 | | | 1,723 | | | 1,547 | |
Other | Other | 17,110 | | | 15,833 | | | 49,283 | | | 45,663 | | Other | 16,599 | | | 16,232 | | | 33,865 | | | 32,173 | |
Net revenue from financial services | 17,950 | | | 16,616 | | | 51,670 | | | 47,875 | | |
Total Net revenue | $ | 288,772 | | | $ | 273,722 | | | $ | 801,549 | | | $ | 806,439 | | |
| | | 17,449 | | | 17,009 | | | 35,588 | | | 33,720 | |
| | | $ | 359,543 | | | $ | 257,976 | | | $ | 689,965 | | | $ | 512,777 | |
3. Restricted Cash
Restricted cash consisted of the following (in thousands):
| | | December 26, 2020 | | March 28, 2020 | | October 2, 2021 | | April 3, 2021 |
Cash related to CountryPlace customer payments to be remitted to third parties | Cash related to CountryPlace customer payments to be remitted to third parties | $ | 11,889 | | | $ | 12,740 | | Cash related to CountryPlace customer payments to be remitted to third parties | $ | 18,820 | | | $ | 16,049 | |
Other restricted cash | Other restricted cash | 1,248 | | | 1,041 | | Other restricted cash | 1,365 | | | 979 | |
| | $ | 13,137 | | | $ | 13,781 | | | 20,185 | | | 17,028 | |
Less current portion | | Less current portion | (19,850) | | | (16,693) | |
| | | $ | 335 | | | $ | 335 | |
Corresponding amounts for customer payments to be remitted to third parties are recorded in 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 26, 2020 | | March 28, 2020 | | December 28, 2019 | | March 30, 2019 | | October 2, 2021 | | September 26, 2020 |
Cash and cash equivalents | Cash and cash equivalents | $ | 327,487 | | | $ | 241,826 | | | $ | 216,882 | | | $ | 187,370 | | Cash and cash equivalents | $ | 224,291 | | | $ | 312,243 | |
Restricted cash, current | 12,802 | | | 13,446 | | | 13,026 | | | 12,148 | | |
Restricted cash | Restricted cash | 335 | | | 335 | | | 350 | | | 351 | | Restricted cash | 20,185 | | | 17,026 | |
Cash, cash equivalents and restricted cash per statement of cash flows | $ | 340,624 | | | $ | 255,607 | | | $ | 230,258 | | | $ | 199,869 | | |
| | | $ | 244,476 | | | $ | 329,269 | |
4. Investments
Investments consisted of the following (in thousands):
| | | December 26, 2020 | | March 28, 2020 | | October 2, 2021 | | April 3, 2021 |
Available-for-sale debt securities | Available-for-sale debt securities | $ | 16,673 | | | $ | 14,774 | | Available-for-sale debt securities | $ | 18,179 | | | $ | 14,946 | |
Marketable equity securities | Marketable equity securities | 13,987 | | | 9,829 | | Marketable equity securities | 16,566 | | | 17,600 | |
Non-marketable equity investments | Non-marketable equity investments | 21,791 | | | 21,536 | | Non-marketable equity investments | 19,772 | | | 21,960 | |
| | 52,451 | | | 46,139 | | | 54,517 | | | 54,506 | |
Less current portion | Less current portion | (16,966) | | | (14,582) | | Less current portion | (18,867) | | | (19,496) | |
| | $ | 35,485 | | | $ | 31,557 | | | $ | 35,650 | | | $ | 35,010 | |
Investments in marketable equity securities consist of investments in the common stock of industrial and other companies.
As of December 26, 2020 and March 28, 2020,Our non-marketable equity investments included contributions of $15.0 million tinclude o equity-method investments in community-based initiatives that buy and sell our homes and provide home-only financing to residents of certain manufactured home communities. Other non-marketable equity investments included investments incommunities and other distribution operations.
The amortized cost and fair value of our investments in available-for-sale debt securities, by security type are shown in the table below (in thousands).
| | | | | | | | | | | | | | | | | | | | | | | |
| October 2, 2021 | | April 3, 2021 |
| Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value |
Residential mortgage-backed securities | $ | 2,352 | | | $ | 2,365 | | | $ | 2,787 | | | $ | 2,804 | |
State and political subdivision debt securities | 7,942 | | | 8,023 | | | 7,239 | | | 7,345 | |
Corporate debt securities | 7,795 | | | 7,791 | | | 4,797 | | | 4,797 | |
| $ | 18,089 | | | $ | 18,179 | | | $ | 14,823 | | | $ | 14,946 | |
The following tables summarize our available-for-sale debt securities, gross unrealized gains and losses and fair value, aggregated by investment category (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| December 26, 2020 |
| Amortized Cost | | Gross Unrealized Gains | | Gross Unrealized Losses | | Fair Value |
Residential mortgage-backed securities | $ | 5,209 | | | $ | 45 | | | $ | (17) | | | $ | 5,237 | |
State and political subdivision debt securities | 6,156 | | | 151 | | | (1) | | | 6,306 | |
Corporate debt securities | 5,117 | | | 15 | | | (2) | | | 5,130 | |
| $ | 16,482 | | | $ | 211 | | | $ | (20) | | | $ | 16,673 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| 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 securities | 4,239 | | | 134 | | | (3) | | | 4,370 | |
Corporate debt securities | 5,021 | | | 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):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 26, 2020 |
| 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 | $ | 342 | | | $ | (9) | | | $ | 460 | | | $ | (8) | | | $ | 802 | | | $ | (17) | |
State and political subdivision debt securities | 321 | | | (1) | | | 0 | | | 0 | | | 321 | | | (1) | |
Corporate debt securities | 805 | | | (2) | | | 0 | | | 0 | | | 805 | | | (2) | |
| $ | 1,468 | | | $ | (12) | | | $ | 460 | | | $ | (8) | | | $ | 1,928 | | | $ | (20) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| March 28, 2020 |
| 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 | $ | 133 | | | $ | 0 | | | $ | 1,779 | | | $ | (26) | | | $ | 1,912 | | | $ | (26) | |
State and political subdivision debt securities | 601 | | | (2) | | | 101 | | | (1) | | | 702 | | | (3) | |
Corporate debt securities | 3,747 | | | (65) | | | 0 | | | 0 | | | 3,747 | | | (65) | |
| $ | 4,481 | | | $ | (67) | | | $ | 1,880 | | | $ | (27) | | | $ | 6,361 | | | $ | (94) | |
We are not aware of any changes to the securities or issuers that would indicate the losses above are indicative of credit impairment as of December 26, 2020. Further, we do not intend to sell the investments, and it is more likely than not that we will not be required to sell the investments, before recovery of their amortized cost.
The amortized cost and fair value of our 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 26, 2020 | | October 2, 2021 |
| | Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value |
Due in less than one year | Due in less than one year | $ | 601 | | | $ | 603 | | Due in less than one year | $ | 1,611 | | | $ | 1,618 | |
Due after one year through five years | Due after one year through five years | 8,335 | | | 8,375 | | Due after one year through five years | 11,807 | | | 11,792 | |
Due after five years through ten years | Due after five years through ten years | 1,025 | | | 1,097 | | Due after five years through ten years | 1,268 | | | 1,321 | |
Due after ten years | Due after ten years | 1,312 | | | 1,361 | | Due after ten years | 1,051 | | | 1,083 | |
Mortgage-backed securities | Mortgage-backed securities | 5,209 | | | 5,237 | | Mortgage-backed securities | 2,352 | | | 2,365 | |
| | $ | 16,482 | | | $ | 16,673 | | | $ | 18,089 | | | $ | 18,179 | |
We recognize investment gains and losses on available-for-sale debt securities when we sell or otherwise dispose of securities using the specific identification method. For the three and nine months ended December 26, 2020, there were 0 gross gains realized on the sale of available-for-sale debt securities and gross losses realized were $1,000 and $6,000, respectively.There were 0no gross gains or losses realized on the sale of available-for-sale debt securities during the three and ninesix months ended December 28, 2019.October 2, 2021. For the three and six months ended September 26, 2020, there were no gross gains realized on the sale of available-for-sale debt securities and gross losses realized were $5,000.
We recognize 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 were as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| December 26, 2020 | | December 28, 2019 | | December 26, 2020 | | December 28, 2019 |
Marketable equity securities: | | | | | | | |
Net gains on securities held | $ | 1,857 | | | $ | 764 | | | $ | 5,132 | | | $ | 2,066 | |
Net gains on securities sold | 151 | | | 13 | | | 157 | | | 11 | |
| $ | 2,008 | | | $ | 777 | | | $ | 5,289 | | | $ | 2,077 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| October 2, 2021 | | September 26, 2020 | | October 2, 2021 | | September 26, 2020 |
Marketable equity securities | | | | | | | |
Net gain recognized during the period | $ | 243 | | | $ | 1,251 | | | $ | 1,939 | | | $ | 3,281 | |
Less: Net (gains) losses recognized on securities sold during the period | (143) | | | 27 | | | (279) | | | (6) | |
Unrealized gains recognized during the period on securities still held | $ | 100 | | | $ | 1,278 | | | $ | 1,660 | | | $ | 3,275 | |
5. Inventories
Inventories consisted of the following (in thousands):
| | | December 26, 2020 | | March 28, 2020 | | October 2, 2021 | | April 3, 2021 |
Raw materials | Raw materials | $ | 45,821 | | | $ | 35,691 | | Raw materials | $ | 78,810 | | | $ | 54,336 | |
Work in process | Work in process | 16,223 | | | 13,953 | | Work in process | 27,983 | | | 19,149 | |
Finished goods | Finished goods | 48,580 | | | 63,891 | | Finished goods | 83,601 | | | 57,749 | |
| | $ | 110,624 | | | $ | 113,535 | | | $ | 190,394 | | | $ | 131,234 | |
6. Consumer Loans Receivable
The following table summarizes consumer loans receivable (in thousands):
| | | | | | | | | | | |
| December 26, 2020 | | March 28, 2020 |
Loans held for investment (at Acquisition Date, defined below) | $ | 33,726 | | | $ | 37,779 | |
Loans held for investment (originated after Acquisition Date) | 17,873 | | | 20,140 | |
Loans held for sale | 22,014 | | | 14,671 | |
Construction advances | 13,923 | | | 13,400 | |
| 87,536 | | | 85,990 | |
Deferred financing fees and other, net | (2,525) | | | (1,919) | |
Allowance for loan losses | (3,419) | | | (1,767) | |
| 81,592 | | | 82,304 | |
Less current portion | (42,091) | | | (32,376) | |
| $ | 39,501 | | | $ | 49,928 | |
The Company acquired consumer loans receivable as part of the acquisition of Palm Harbor Homes, Inc. in April 2011 ("Acquisition Date"). The allowance for loan losses reflects our judgment of the probable loss exposure on loans held for investment. On March 29, 2020 we adopted ASU 2016-13 using the prospective transition approach for acquired consumer loans receivable assets that were previously accounted for under ASC 310-30. We determined that $1.7 million of the existing purchase discount for such consumer loans was related to credit factors and was reclassified to the allowance for loan losses upon adoption. The remaining discount on the acquired consumer loans was determined to be related to non-credit factors and will be accreted into interest income over the life of the loans. | | | | | | | | | | | |
| October 2, 2021 | | April 3, 2021 |
Loans held for investment, previously securitized | $ | 28,631 | | | $ | 31,949 | |
Loans held for investment | 16,207 | | | 18,690 | |
Loans held for sale | 10,253 | | | 15,587 | |
Construction advances | 7,485 | | | 13,801 | |
| 62,576 | | | 80,027 | |
Deferred financing fees and other, net | (1,178) | | | (2,041) | |
Allowance for loan losses | (2,799) | | | (3,188) | |
| 58,599 | | | 74,798 | |
Less current portion | (26,475) | | | (37,690) | |
| $ | 32,124 | | | $ | 37,108 | |
The following table represents changes in the estimated allowance for loan losses, including related additions and deductions to the allowance for loan losses (in thousands):
| | | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Six Months Ended |
| | December 26, 2020 | | December 28, 2019 | | December 26, 2020 | | December 28, 2019 | | October 2, 2021 | | September 26, 2020 | | October 2, 2021 | | September 26, 2020 |
Allowance for loan losses at beginning of period | Allowance for loan losses at beginning of period | $ | 3,910 | | | $ | 415 | | | $ | 1,767 | | | $ | 415 | | Allowance for loan losses at beginning of period | $ | 2,918 | | | $ | 4,012 | | | $ | 3,188 | | | $ | 1,767 | |
Impact of adoption of ASU 2016-13 | 0 | | | 0 | | | 2,276 | | | 0 | | |
Impact of adoption of Financial Accounting Standards Board's Accounting Standards Update 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13") | | Impact of adoption of Financial Accounting Standards Board's Accounting Standards Update 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13") | — | | | — | | | — | | | 2,276 | |
Change in estimated loan losses, net | Change in estimated loan losses, net | (491) | | | 16 | | | (424) | | | 16 | | Change in estimated loan losses, net | 210 | | | (94) | | | (57) | | | 67 | |
Charge-offs | Charge-offs | 0 | | | 0 | | | (200) | | | 0 | | Charge-offs | (329) | | | (8) | | | (332) | | | (200) | |
Recoveries | 0 | | | 0 | | | 0 | | | 0 | | |
Allowance for loan losses at end of period | Allowance for loan losses at end of period | $ | 3,419 | | | $ | 431 | | | $ | 3,419 | | | $ | 431 | | Allowance for loan losses at end of period | $ | 2,799 | | | $ | 3,910 | | | $ | 2,799 | | | $ | 3,910 | |
The consumer loans held for investment had the following characteristics:
| | | | | | | | | | | |
| December 26, 2020 | | March 28, 2020 |
Weighted average contractual interest rate | 8.4 | % | | 8.4 | % |
Weighted average effective interest rate | 9.5 | % | | 9.3 | % |
Weighted average months to maturity | 159 | | 164 |
| | | | | | | | | | | |
| October 2, 2021 | | April 3, 2021 |
Weighted average contractual interest rate | 8.2 | % | | 8.3 | % |
Weighted average effective interest rate | 8.8 | % | | 9.3 | % |
Weighted average months to maturity | 157 | | 162 |
The following table is a consolidated summary of the delinquency status of the outstanding amortized cost of consumer loans receivable (in thousands):
| | | | | | | | | | | |
| December 26, 2020 | | March 28, 2020 |
Current | $ | 84,200 | | | $ | 83,861 | |
31 to 60 days | 834 | | | 547 | |
61 to 90 days | 178 | | | 307 | |
91+ days | 2,324 | | | 1,275 | |
| $ | 87,536 | | | $ | 85,990 | |
| | | | | | | | | | | |
| October 2, 2021 | | April 3, 2021 |
Current | $ | 59,602 | | | $ | 76,378 | |
31 to 60 days | 110 | | | 508 | |
61 to 90 days | 2,502 | | | 21 | |
91+ days | 362 | | | 3,120 | |
| $ | 62,576 | | | $ | 80,027 | |
The following table disaggregates CountryPlace'stables disaggregate gross consumer loans receivable by credit quality indicator and fiscal year of origination (in thousands):
| | | December 26, 2020 | | | October 2, 2021 |
| | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | Total | | March 28, 2020 | | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | Prior | | Total |
Prime- FICO score 680 and greater | Prime- FICO score 680 and greater | $ | 21,087 | | | $ | 4,191 | | | $ | 1,832 | | | $ | 996 | | | $ | 1,761 | | | $ | 24,582 | | | $ | 54,449 | | | $ | 55,513 | | Prime- FICO score 680 and greater | $ | 6,664 | | | $ | 5,077 | | | $ | 2,776 | | | $ | 1,408 | | | $ | 765 | | | $ | 22,669 | | | $ | 39,359 | |
Near Prime- FICO score 620-679 | Near Prime- FICO score 620-679 | 11,502 | | | 4,074 | | | 1,809 | | | 1,141 | | | 614 | | | 10,875 | | | 30,015 | | | 27,767 | | Near Prime- FICO score 620-679 | 2,247 | | | 3,445 | | | 2,175 | | | 1,856 | | | 1,354 | | | 9,978 | | | 21,055 | |
Sub-Prime- FICO score less than 620 | Sub-Prime- FICO score less than 620 | 426 | | | 54 | | | 0 | | | 0 | | | 85 | | | 1,786 | | | 2,351 | | | 2,142 | | Sub-Prime- FICO score less than 620 | — | | | 21 | | | 53 | | | — | | | — | | | 1,547 | | | 1,621 | |
No FICO score | No FICO score | 151 | | | 0 | | | 28 | | | 0 | | | 0 | | | 542 | | | 721 | | | 568 | | No FICO score | — | | | 149 | | | 19 | | | 27 | | | — | | | 346 | | | 541 | |
| | $ | 33,166 | | | $ | 8,319 | | | $ | 3,669 | | | $ | 2,137 | | | $ | 2,460 | | | $ | 37,785 | | | $ | 87,536 | | | $ | 85,990 | | | $ | 8,911 | | | $ | 8,692 | | | $ | 5,023 | | | $ | 3,291 | | | $ | 2,119 | | | $ | 34,540 | | | $ | 62,576 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| April 3, 2021 |
| 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | Total |
Prime- FICO score 680 and greater | $ | 18,250 | | | $ | 3,575 | | | $ | 1,718 | | | $ | 971 | | | $ | 1,959 | | | $ | 23,375 | | | $ | 49,848 | |
Near Prime- FICO score 620-679 | 10,227 | | | 2,744 | | | 1,794 | | | 1,364 | | | 500 | | | 10,401 | | | 27,030 | |
Sub-Prime- FICO score less than 620 | 348 | | | 53 | | | — | | | — | | | 84 | | | 1,579 | | | 2,064 | |
No FICO score | 576 | | | — | | | 28 | | | — | | | — | | | 481 | | | 1,085 | |
| $ | 29,401 | | | $ | 6,372 | | | $ | 3,540 | | | $ | 2,335 | | | $ | 2,543 | | | $ | 35,836 | | | $ | 80,027 | |
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 26, 2020, 37% of the outstanding principal balance of consumer loans receivable portfolio was concentrated in Texas and 20% was concentrated in Florida. As of March 28, 2020,October 2, 2021, 36% of the outstanding principal balance of the consumer loans receivable portfolio was concentrated in Texas and 16%18% was concentrated in Florida. As of April 3, 2021, 35% of the outstanding principal balance of the consumer loans receivable portfolio was concentrated in Texas and 20% was concentrated in Florida. Other than Texas and Florida, no statestate had concentrations in excess of 10% of the principal balance of the consumer loans receivable as of December 26, 2020October 2, 2021 or March 28, 2020.April 3, 2021.
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. Repossessed homes totaled approximately $162,000$893,000 and $1.5 million$518,000 as of December 26, 2020October 2, 2021 and March 28, 2020,April 3, 2021, respectively, and are included in Prepaid expenses and other current assets in the Consolidated Balance Sheets. Foreclosure or similar proceedings in progress totaled approximately $606,000$927,000 and $560,000$1.1 million as of December 26, 2020October 2, 2021 and March 28, 2020,April 3, 2021, respectively.
7. Commercial Loans Receivable
The commercial loans receivable balance consists of two classes: (i) direct financing arrangements for the home product needs of our independent distributors, community owners and developers;developers and (ii) amounts loaned by us under participation financing programs.
Under the terms of the direct programs, we provide funds for financed home purchases by distributors, community owners 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.
Under the terms of the participation programs, we provide loans to independent floor plan lenders that then lend to distributors to finance their inventory purchases. The participation commercial loans 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 26, 2020 | | March 28, 2020 | | October 2, 2021 | | April 3, 2021 |
Direct loans receivable | $ | 40,653 | | | $ | 47,058 | | |
Participation loans receivable | 105 | | | 144 | | |
Loans receivable | | Loans receivable | $ | 73,006 | | | $ | 45,377 | |
Allowance for loan losses | Allowance for loan losses | (765) | | | (393) | | Allowance for loan losses | (826) | | | (816) | |
Deferred financing fees, net | Deferred financing fees, net | (247) | | | (244) | | Deferred financing fees, net | (247) | | | (247) | |
| | 39,746 | | | 46,565 | | | 71,933 | | | 44,314 | |
Less current portion of commercial loans receivable (including from affiliates), net | Less current portion of commercial loans receivable (including from affiliates), net | (19,012) | | | (15,423) | | Less current portion of commercial loans receivable (including from affiliates), net | (31,601) | | | (19,232) | |
| | $ | 20,734 | | | $ | 31,142 | | | $ | 40,332 | | | $ | 25,082 | |
The commercial loans receivable balance had the following characteristics:
| | | | | | | | | | | |
| December 26, 2020 | | March 28, 2020 |
Weighted average contractual interest rate | 6.1 | % | | 5.7 | % |
Weighted average months to maturity | 11 | | 10 |
The risk of loss is 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. Historically, we have been able to sell repossessed homes, thereby mitigating loss exposure. If a default occurs and collateral is lost, we are exposed to loss of the full value of the home loan. We evaluate the potential for loss from the commercial loan programs based on the borrower's risk rating, overall financial stability, historical experience and estimates of other economic factors. We have included considerations related to the COVID-19 pandemic when assessing our risk of loan loss and setting reserve amounts for the commercial finance portfolio as of December 26, 2020. | | | | | | | | | | | |
| October 2, 2021 | | April 3, 2021 |
Weighted average contractual interest rate | 6.3 | % | | 6.4 | % |
Weighted average months outstanding | 10 | | 11 |
The following table represents changes in the estimated allowance for loan losses, including related additions and deductions to the allowance for loan losses (in thousands):
| | | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Six Months Ended |
| | December 26, 2020 | | December 28, 2019 | | December 26, 2020 | | December 28, 2019 | | October 2, 2021 | | September 26, 2020 | | October 2, 2021 | | September 26, 2020 |
Balance at beginning of period | Balance at beginning of period | $ | 789 | | | $ | 163 | | | $ | 393 | | | $ | 180 | | Balance at beginning of period | $ | 785 | | | $ | 828 | | | $ | 816 | | | $ | 393 | |
Impact of adoption of ASU 2016-13 | Impact of adoption of ASU 2016-13 | 0 | | | 0 | | | 435 | | | 0 | | Impact of adoption of ASU 2016-13 | — | | | — | | | — | | | 435 | |
Change in estimated loan losses, net | Change in estimated loan losses, net | (24) | | | (1) | | | (63) | | | (18) | | Change in estimated loan losses, net | 41 | | | (39) | | | 10 | | | (39) | |
Loans charged off, net of recoveries | 0 | | | 0 | | | 0 | | | 0 | | |
Balance at end of period | Balance at end of period | $ | 765 | | | $ | 162 | | | $ | 765 | | | $ | 162 | | Balance at end of period | $ | 826 | | | $ | 789 | | | $ | 826 | | | $ | 789 | |
October 2, 2021 and April 3, 2021, there were no commercial loans considered watch list or nonperforming. The following table disaggregates our commercial loans receivable by credit quality indicator and fiscal year of origination (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 26, 2020 | | | | | | |
| | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Total | | March 28, 2020 | | | | |
Risk profile based on payment activity: | | | | |
Performing | | $ | 22,708 | | | $ | 10,394 | | | $ | 3,954 | | | $ | 2,180 | | | $ | 1,522 | | | $ | 40,758 | | | $ | 47,016 | | | | | |
Watch list | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 186 | | | | | |
Nonperforming | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | 0 | | | | | |
| | $ | 22,708 | | | $ | 10,394 | | | $ | 3,954 | | | $ | 2,180 | | | $ | 1,522 | | | $ | 40,758 | | | $ | 47,202 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | October 2, 2021 | | | | |
| | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | Prior | | Total | | | | |
Performing | | $ | 25,069 | | | $ | 35,259 | | | $ | 7,338 | | | $ | 2,669 | | | $ | 1,379 | | | $ | 1,292 | | | $ | 73,006 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | April 3, 2021 | | | | |
| | 2021 | | 2020 | | 2019 | | 2018 | | 2017 | | Prior | | Total | | | | |
Performing | | $ | 30,627 | | | $ | 8,677 | | | $ | 3,206 | | | $ | 1,864 | | | $ | 1,003 | | | $ | — | | | $ | 45,377 | | | | | |
At December 26, 2020,October 2, 2021, there were 0no commercial loans 90 days or more past due that were still accruing interest and we were not aware of any potential problem loans that would have a material effect on the commercial loans receivable balance.
As of December 26, 2020, 10.0%October 2, 2021, 34% of our outstanding commercial loans receivable principal balance was concentrated in Pennsylvania. As of April 3, 2021, 13% of our outstanding commercial loans receivable principal balance was concentrated in Arizona. As of March 28, 2020, 11.0% of the outstanding commercial loans receivable 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 December 26, 2020October 2, 2021 or March 28, 2020.April 3, 2021.
We had concentrations with one independent third-party and its affiliates that equaled 16.8%12% and 21.0%18% of the net commercial loans receivable principal balance outstanding, all of which was secured, as of December 26, 2020October 2, 2021 and March 28, 2020, respectively. The risks created by these concentrations have been considered in the determination of the adequacy of the allowance for loan losses.April 3, 2021.
8. Property, Plant and Equipment, net
Property, plant and equipment, net, consisted of the following (in thousands):
| | | December 26, 2020 | | March 28, 2020 | | October 2, 2021 | | April 3, 2021 |
Property, plant and equipment, at cost: | | | | |
Property, plant and equipment, at cost | | Property, plant and equipment, at cost | | | |
Land | Land | $ | 26,862 | | | $ | 26,827 | | Land | $ | 42,407 | | | $ | 28,314 | |
Buildings and improvements | Buildings and improvements | 54,710 | | | 52,011 | | Buildings and improvements | 108,577 | | | 71,827 | |
Machinery and equipment | Machinery and equipment | 33,163 | | | 30,984 | | Machinery and equipment | 45,628 | | | 34,146 | |
| | 114,735 | | | 109,822 | | | 196,612 | | | 134,287 | |
Accumulated depreciation | Accumulated depreciation | (36,242) | | | (32,632) | | Accumulated depreciation | (40,215) | | | (37,493) | |
| | $ | 78,493 | | | $ | 77,190 | | | $ | 156,397 | | | $ | 96,794 | |
Depreciation expense was $1.4 million for each of the three month periods ended Decemberending October 2, 2021 and September 26, 2020 and December 28, 2019.2020. Depreciation expense for the ninesix months ended DecemberOctober 2, 2021 and September 26, 2020 and December 28, 2019 was $4.2$2.9 million and $3.8$2.8 million, respectively.
Included in the amountsbalances above are certain assets under finance leases. See Note 9 of the Notes to the Consolidated Financial Statements included in the Form 10-K for additionalfurther information.
9. Leases
We lease certain production and retail locations, office space and equipment. During the period ended December 26, 2020,October 2, 2021, we executed various lease renewals including a five-year extension at oneand acquired certain assets under finance leases.
The following table provides information about the financial statement classification of our active manufacturing facilities, which increasedlease balances reported within the rightConsolidated Balance Sheets as of use assetOctober 2, 2021 and lease liability.April 3, 2021 (in thousands):
| | | | | | | | | | | | | | | | | |
| Classification | | October 2, 2021 | | April 3, 2021 |
ROU assets | | | | | |
Operating lease assets | Operating lease right-of-use assets | | $ | 16,706 | | | $ | 16,252 | |
Finance lease assets | Property, plant and equipment, net (1) | | 8,352 | | | 986 | |
Total lease assets | | | $ | 25,058 | | | $ | 17,238 | |
| | | | | |
Lease Liabilities | | | | | |
Current: | | | | | |
Operating lease liabilities | Accrued expenses and other current liabilities | | $ | 4,783 | | | $ | 4,184 | |
Finance lease liabilities | Current portion of secured credit facilities and other | | 401 | | | 71 | |
Non-current: | | | | | |
Operating lease liabilities | Operating lease liabilities | | 13,240 | | | 13,361 | |
Finance lease liabilities | Secured credit facilities and other | | 5,923 | | | 233 | |
Total lease liabilities | | | $ | 24,347 | | | $ | 17,849 | |
(1) Recorded net of accumulated amortization of $149,000 and $143,000 as of October 2, 2021 and April 3, 2021, respectively.
The present value of minimum payments for future fiscal years under non-cancelable leases as of December 26, 2020October 2, 2021 was as follows (in thousands): | | | | | | | | | | | | | | | | | |
| Operating Leases | | Finance Leases | | Total |
Remainder of 2022 | $ | 2,449 | | | $ | 206 | | | $ | 2,655 | |
2023 | 4,667 | | | 411 | | | 5,078 | |
2024 | 4,121 | | | 411 | | | 4,532 | |
2025 | 3,103 | | | 411 | | | 3,514 | |
2026 | 3,127 | | | 387 | | | 3,514 | |
2027 | 1,087 | | | 338 | | | 1,425 | |
Thereafter | 1,439 | | | 10,415 | | | 11,854 | |
| 19,993 | | | 12,579 | | | 32,572 | |
Less amount representing interest | (1,970) | | | (6,255) | | | (8,225) | |
| 18,023 | | | 6,324 | | | 24,347 | |
Less current portion | (4,783) | | | (401) | | | (5,184) | |
| $ | 13,240 | | | $ | 5,923 | | | $ | 19,163 | |
| | | | | | | | | | | | | | | | | |
| Operating Leases | | Finance Leases | | Total |
Remainder of 2021 | $ | 1,051 | | | $ | 19 | | | $ | 1,070 | |
2022 | 4,182 | | | 73 | | | 4,255 | |
2023 | 3,854 | | | 73 | | | 3,927 | |
2024 | 3,503 | | | 73 | | | 3,576 | |
2025 | 2,706 | | | 73 | | | 2,779 | |
2026 | 2,799 | | | 49 | | | 2,848 | |
Thereafter | 2,206 | | | 0 | | | 2,206 | |
| 20,301 | | | 360 | | | 20,661 | |
Less amount representing interest | (2,392) | | | (41) | | | (2,433) | |
| 17,909 | | | 319 | | | 18,228 | |
Less current portion | (4,082) | | | (71) | | | (4,153) | |
| $ | 13,827 | | | $ | 248 | | | $ | 14,075 | |
The following table provides information about the weighted average remaining lease terms and weighted average discount rates as of October 2, 2021: | | | | | | | | | | | |
| Remaining Lease Term (Years) | | Discount Rate |
Operating leases | 4.9 | | 4.5 | % |
Finance leases | 34.9 | | 4.5 | % |
10. Goodwill and Other Intangibles
Goodwill and other intangibles, net, consisted of the following (in thousands):
| | | December 26, 2020 | | March 28, 2020 | | October 2, 2021 | | April 3, 2021 |
| | 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 | | Indefinite-lived | | | | | | | | | | | |
Goodwill | Goodwill | $ | 75,090 | | | $ | — | | | $ | 75,090 | | | $ | 75,090 | | | $ | — | | | $ | 75,090 | | Goodwill | $ | 106,487 | | | $ | — | | | $ | 106,487 | | | $ | 75,090 | | | $ | — | | | $ | 75,090 | |
Trademarks and trade names | Trademarks and trade names | 8,900 | | | — | | | 8,900 | | | 8,900 | | | — | | | 8,900 | | Trademarks and trade names | 15,680 | | | — | | | 15,680 | | | 8,900 | | | — | | | 8,900 | |
State insurance licenses | State insurance licenses | 1,100 | | | — | | | 1,100 | | | 1,100 | | | — | | | 1,100 | | State insurance licenses | 1,100 | | | — | | | 1,100 | | | 1,100 | | | — | | | 1,100 | |
| | 85,090 | | | — | | | 85,090 | | | 85,090 | | | — | | | 85,090 | | | 123,267 | | | — | | | 123,267 | | | 85,090 | | | — | | | 85,090 | |
Finite-lived: | | |
Finite-lived | | Finite-lived | |
Customer relationships | Customer relationships | 11,300 | | | (6,938) | | | 4,362 | | | 11,300 | | | (6,463) | | | 4,837 | | Customer relationships | 25,400 | | | (7,413) | | | 17,987 | | | 11,300 | | | (7,097) | | | 4,203 | |
Other | Other | 1,424 | | | (1,236) | | | 188 | | | 1,424 | | | (1,151) | | | 273 | | Other | 1,924 | | | (1,287) | | | 637 | | | 1,424 | | | (1,264) | | | 160 | |
| | $ | 97,814 | | | $ | (8,174) | | | $ | 89,640 | | | $ | 97,814 | | | $ | (7,614) | | | $ | 90,200 | | | $ | 150,591 | | | $ | (8,700) | | | $ | 141,891 | | | $ | 97,814 | | | $ | (8,361) | | | $ | 89,453 | |
Changes in the carrying amount of Goodwill were as follows for the six months ended October 2, 2021 (in thousands). See Note 21 for further information.
| | | | | | | | |
Balance at beginning of period | | $ | 75,090 | |
Goodwill recognized on Craftsman acquisition | | 3,933 | |
Goodwill recognized on Commodore acquisition | | 27,464 | |
Balance at end of period | | $ | 106,487 | |
Amortization expense recognized on intangible assets was $186,000$166,000 and $188,000$187,000 for the three months ended DecemberOctober 2, 2021 and September 26, 2020, and December 28, 2019, respectively. Amortization expense recognized on intangible assets was $560,000$339,000 and $419,000$374,000 for the ninesix months ended DecemberOctober 2, 2021 and September 26, 2020, and December 28, 2019, respectively.
Expected amortization for future fiscal years is as follows (in thousands): | | | | | |
Remainder of fiscal year | $ | 1,985 | |
2023 | 3,291 | |
2024 | 1,749 | |
2025 | 1,686 | |
2026 | 1,666 | |
2027 | 1,577 | |
Thereafter | 6,670 | |
11. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
| | | December 26, 2020 | | March 28, 2020 | | October 2, 2021 | | April 3, 2021 |
Customer deposits | Customer deposits | $ | 34,373 | | | $ | 22,055 | | Customer deposits | $ | 49,219 | | | $ | 41,835 | |
Salaries, wages and benefits | Salaries, wages and benefits | 32,338 | | | 25,885 | | Salaries, wages and benefits | 44,161 | | | 37,737 | |
Estimated warranties | | Estimated warranties | 25,745 | | | 18,032 | |
Unearned insurance premiums | | Unearned insurance premiums | 24,498 | | | 22,643 | |
Accrued volume rebates | | Accrued volume rebates | 22,008 | | | 12,132 | |
Company repurchase options on certain loans sold | Company repurchase options on certain loans sold | 29,104 | | | 7,444 | | Company repurchase options on certain loans sold | 17,151 | | | 25,938 | |
Unearned insurance premiums | 21,223 | | | 20,614 | | |
Estimated warranties | 17,996 | | | 18,678 | | |
Accrued volume rebates | 12,063 | | | 9,801 | | |
Accrued self-insurance | 5,661 | | | 5,112 | | |
Insurance loss reserves | 5,351 | | | 5,582 | | |
Operating lease liabilities | 4,082 | | | 4,170 | | |
Reserve for repurchase commitments | 2,281 | | | 2,679 | | |
Accrued taxes | 2,212 | | | 1,908 | | |
| Other | Other | 19,342 | | | 16,002 | | Other | 54,680 | | | 44,816 | |
| | $ | 186,026 | | | $ | 139,930 | | | $ | 237,462 | | | $ | 203,133 | |
12. Warranties
Activity in the liability for estimated warranties was as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| December 26, 2020 | | December 28, 2019 | | December 26, 2020 | | December 28, 2019 |
Balance at beginning of period | $ | 17,805 | | | $ | 18,563 | | | $ | 18,678 | | | $ | 17,069 | |
| | | | | | | |
Purchase accounting additions | 0 | | | 0 | | | 0 | | | 1,192 | |
Charged to costs and expenses | 7,724 | | | 7,269 | | | 20,303 | | | 21,855 | |
Payments and deductions | (7,533) | | | (7,873) | | | (20,985) | | | (22,157) | |
Balance at end of period | $ | 17,996 | | | $ | 17,959 | | | $ | 17,996 | | | $ | 17,959 | |
13. Debt and Finance Lease Obligations
Debt and finance lease obligations primarily consist of secured credit facilities at our finance subsidiary and lease obligations for which it is expected that we will obtain ownership of the leased assets at the end of their lease term. The following table summarizes debt and finance lease obligations (in thousands):
| | | | | | | | | | | |
| December 26, 2020 | | March 28, 2020 |
Secured credit facilities | $ | 8,825 | | | $ | 10,474 | |
Other secured financings | 3,843 | | | 4,113 | |
Finance lease obligations | 319 | | | 366 | |
| 12,987 | | | 14,953 | |
Less current portion | (2,140) | | | (2,248) | |
| $ | 10,847 | | | $ | 12,705 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| October 2, 2021 | | September 26, 2020 | | October 2, 2021 | | September 26, 2020 |
Balance at beginning of period | $ | 19,344 | | | $ | 18,538 | | | $ | 18,032 | | | $ | 18,678 | |
Purchase accounting additions | 6,928 | | | — | | | 6,928 | | | — | |
Charged to costs and expenses | 7,994 | | | 6,232 | | | 17,119 | | | 12,579 | |
Payments and deductions | (8,521) | | | (6,965) | | | (16,334) | | | (13,452) | |
Balance at end of period | $ | 25,745 | | | $ | 17,805 | | | $ | 25,745 | | | $ | 17,805 | |
13. Debt, Finance Lease and Mandatorily Redeemable Noncontrolling Interest Obligations
The following table summarizes debt, finance lease and mandatorily redeemable noncontrolling interest obligations (in thousands):
| | | | | | | | | | | |
| October 2, 2021 | | April 3, 2021 |
Secured term loan | $ | 7,718 | | | $ | 8,210 | |
Finance lease obligations | 6,324 | | | 304 | |
Other secured financings | 3,052 | | | 3,672 | |
Mandatorily redeemable noncontrolling interest | 2,471 | | | — | |
| 19,565 | | | 12,186 | |
Less current portion | (2,260) | | | (1,851) | |
| $ | 17,305 | | | $ | 10,335 | |
We 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, which have now expired. The proceeds were used to originate and hold consumer home-only loans secured by manufactured homes, which arewere pledged as collateral to the facilities. Upon completion of the draw down periods, theThose facilities werehave since been converted into an amortizing loan with maturity dates starting in 2028 and payments based on a 20-year20 or 25-year amortization period, withresulting in 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. The outstanding balance of the converted loans was $8.8$7.7 million as of December 26, 2020October 2, 2021 and $10.5$8.2 million as of March 28, 2020,April 3, 2021 with a weighted average interest rate of 4.91%.
See Note 9 of the Notes to the Consolidated Financial Statements included in the Form 10-K for further discussion of the finance lease obligations.
14. Reinsurance and Insurance Loss Reserves
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. Standard Casualty remainsWe remain obligated for amounts ceded in the event that the reinsurers do not meet their obligations. Substantially all
The effects of reinsurance on premiums written and earned were as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended |
| December 26, 2020 | | December 28, 2019 |
| Written | | Earned | | Written | | Earned |
Direct premiums | $ | 5,420 | | | $ | 5,429 | | | $ | 4,654 | | | $ | 4,756 | |
Assumed premiums—nonaffiliated | 6,541 | | | 7,195 | | | 5,918 | | | 6,676 | |
Ceded premiums—nonaffiliated | (3,146) | | | (3,146) | | | (3,071) | | | (3,071) | |
| $ | 8,815 | | | $ | 9,478 | | | $ | 7,501 | | | $ | 8,361 | |
| | | Nine Months Ended | | Three Months Ended |
| | December 26, 2020 | | December 28, 2019 | | October 2, 2021 | | September 26, 2020 |
| | Written | | Earned | | Written | | Earned | | Written | | Earned | | Written | | Earned |
Direct premiums | Direct premiums | $ | 16,100 | | | $ | 15,759 | | | $ | 13,866 | | | $ | 13,979 | | Direct premiums | $ | 6,310 | | | $ | 6,323 | | | $ | 4,915 | | | $ | 5,145 | |
Assumed premiums—nonaffiliated | Assumed premiums—nonaffiliated | 21,787 | | | 21,028 | | | 20,191 | | | 19,703 | | Assumed premiums—nonaffiliated | 8,240 | | | 7,630 | | | 7,593 | | | 7,043 | |
Ceded premiums—nonaffiliated | Ceded premiums—nonaffiliated | (9,201) | | | (9,201) | | | (9,087) | | | (9,087) | | Ceded premiums—nonaffiliated | (3,714) | | | (3,714) | | | (2,853) | | | (2,853) | |
|
| $ | 28,686 | | | $ | 27,586 | | | $ | 24,970 | | | $ | 24,595 | |
| $ | 10,836 | | | $ | 10,239 | | | $ | 9,655 | | | $ | 9,335 | |
| | | | Six Months Ended |
| | | October 2, 2021 | | September 26, 2020 |
| | | Written | | Earned | | Written | | Earned |
Direct premiums | | Direct premiums | $ | 13,149 | | | $ | 12,319 | | | $ | 10,680 | | | $ | 10,330 | |
Assumed premiums—nonaffiliated | | Assumed premiums—nonaffiliated | 16,814 | | | 15,008 | | | 15,246 | | | 13,833 | |
Ceded premiums—nonaffiliated | | Ceded premiums—nonaffiliated | (7,361) | | | (7,361) | | | (6,055) | | | (6,055) | |
| |
| $ | 22,602 | | | $ | 19,966 | | | $ | 19,871 | | | $ | 18,108 | |
Typical insurance policies written or assumed by Standard Casualty have a maximum coverage of $300,000 per claim, of which Standard Casualty cedeswe cede $150,000 of the risk of loss per reinsurance. Therefore, Standard Casualty'sour risk of loss is limited to $150,000 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 $2 million per occurrence, up to a maximum of $55 million in the aggregate.aggregate for that occurrence.
Standard Casualty establishes reserves for claims and claims expense on reported and unreported claims of non-reinsured losses. The following details the activity in the reserve for the six months ended October 2, 2021 and September 26, 2020 (in thousands): | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| October 2, 2021 | | September 26, 2020 | | October 2, 2021 | | September 26, 2020 |
Balance at beginning of period | $ | 8,348 | | | $ | 6,730 | | | $ | 7,451 | | | $ | 5,582 | |
Net incurred losses during the year | 7,282 | | | 7,477 | | | 15,257 | | | 13,460 | |
Net claim payments during the year | (8,280) | | | (7,320) | | | (15,358) | | | (12,155) | |
Balance at end of period | $ | 7,350 | | | $ | 6,887 | | | $ | 7,350 | | | $ | 6,887 | |
15. Commitments and Contingencies
Repurchase Contingencies. The Company isWe are contingently liable under terms of repurchase agreements with financial institutions providing inventory financing forto independent distributors of itsour 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 maximum amount for which we were liable under such agreements approximated $70.8$95.7 million and $79.3$74.2 million at December 26, 2020October 2, 2021 and March 28, 2020,April 3, 2021, respectively, without a reduction for the resale value of the homes. We apply ASC 460, Guarantees, and ASC 450-20, Loss Contingencies, to account for the repurchase commitment liability.homes that are repurchased. We had a reserve for repurchase commitments of $2.3 million and $2.7 million at December 26, 2020October 2, 2021 and March 28, 2020, respectively.
Letter of Credit. To secure certain reinsurance contracts, Standard Casualty maintained an irrevocable letter of credit of $11.0$2.3 million to provide assurance that Standard Casualty would fulfill its reinsurance obligations. The letter of credit was released on July 11, 2020.at April 3, 2021.
Construction-Period Mortgages. CountryPlace fundsWe fund construction-period mortgages through periodic advances during home construction. At the time of initial funding, CountryPlace commitswe commit 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 26, 2020 | | March 28, 2020 | | October 2, 2021 | | April 3, 2021 |
Construction loan contract amount | Construction loan contract amount | $ | 41,763 | | | $ | 31,136 | | Construction loan contract amount | $ | 22,466 | | | $ | 37,628 | |
Cumulative advances | Cumulative advances | (13,923) | | | (13,400) | | Cumulative advances | (7,485) | | | (13,801) | |
| | $ | 27,840 | | | $ | 17,736 | | | $ | 14,981 | | | $ | 23,827 | |
Representations and Warranties of Mortgages Sold. CountryPlace sells We sell loans to Government-Sponsored Enterprises ("GSEs") and whole-loan purchasers and financesfinance certain loans with long-term credit facilities secured by the respective loans. In connection with these activities, CountryPlace provideswe provide to the GSEs and whole-loan purchasers and lenders representations and warranties related to the loans sold or financed. Upon a breach of a representation, CountryPlacewe may be required to repurchaserepurchase the loan or to indemnify a party for incurred losses. During the nine months ended December 26, 2020, the Company executed indemnification agreements to cover 20% of the losses experienced over the next two years related to 5 loans that were impacted by COVID-19. We maintain a reserve for these contingent repurchase and indemnification obligations.obligations. This reserve of $1.3$1.2 million as of December 26, 2020October 2, 2021 and $1.0 million as of March 28, 2020,April 3, 2021, included in Accrued expenses and other current liabilities, reflects management's estimate of probable loss. There were 0no claim requests that resulted in the execution of an indemnification agreement or in the repurchase of a loan during the ninesix months ended December 26, 2020.October 2, 2021.
Interest Rate Lock Commitments. In originating loans for sale, CountryPlace issueswe issue 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 CountryPlaceus 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 of December 26, 2020, CountryPlaceOctober 2, 2021, we had outstanding IRLCs with a notional amount of $24.5 million, which are recorded at fair value in accordance with ASC 815, Derivatives and Hedging.$29.5 million. During the three months ended DecemberOctober 2, 2021 and September 26, 2020, and December 28, 2019, we recognized gains of $57,000 and recognized losses of $5,000 and $19,000, respectively, on outstanding IRLCs. DuringFor the ninesix months ended DecemberOctober 2, 2021 and September 26, 2020, we recognized gains of $42,000 and December 28, 2019, we recognized losses of $87,000 and $8,000$144,000, respectively., respectively, on outstanding IRLCs.
Forward Sales Commitments. CountryPlace managesWe manage the risk profiles of a portion of itsthe outstanding IRLCs and mortgage loans held for sale by entering into forward sales of mortgage-backed securities ("MBS") and whole loan sale commitments.commitments (collectively "Commitments"). As of December 26, 2020, CountryPlaceOctober 2, 2021, we had $68.9$33.5 million in outstanding notional forward sales Commitments. We recognized non-cash gains of MBSs$79,000 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.
The estimated fair values of forward sales of MBS and whole loan sale commitments are based on quoted market values and are recorded within Prepaid expenses and other current assets$118,000 in the Consolidated Balance Sheets. second quarter of 2022 and 2021, respectively.During the threesix months ended DecemberOctober 2, 2021 and September 26, 2020, and December 28, 2019, we recognized losses of $318,000 $268,000 and gains of $79,000, respectively,$1.1 millionon forward sales of MBS and whole loan sale commitments. During the nine months ended December 26, 2020 and December 28, 2019, we recognized gains of$816,000 and $163,000,respectively,on forward sales of MBS and whole loan sale commitments., respectively.
Legal Matters. Since 2018,On September 2, 2021, the SEC filed a civil complaint in the United States District Court, District of Arizona, naming the Company has been cooperatingalong with an investigation by the enforcement staffCompany’s former Chairman, President & Chief Executive Officer and the Company’s former Chief Financial Officer, alleging violations of the SEC's Los Angeles Regional Office regarding securitiesantifraud and internal accounting control provisions of the Securities Exchange Act of 1934 based on trading in personal and Company accountsthe shares of another company directed by the Company's former Chief Executive Officer, Joseph Stegmayer.CEO that resulted in an unrealized gain of approximately $260,000. In the prior year, the Company recorded an accrual relating to this loss contingency. The Audit Committee of the Board of Directors conductedSEC action follows an internal investigation led by independent legal counsel and other advisers and, following the completion of its workthat began in early 2019, the Audit Committee shared the results of its work with the Company's auditors, listing exchange and the SEC staff. We have also made documents and personnel available to the SEC staff and we intend to continue cooperating with its investigation. We have been exploring the possibility of a settlement with the SEC staff but, at this time, we are unable to assess the probability of that outcome or reasonably estimate the amount of a potential loss, if any.
Joseph D. Robles v. Cavco Industries, Inc. ("Robles"),was filed in the Superior Court for the State of California, Riverside on June 25, 2019 and Malik Griffin v. Fleetwood Homes, Inc. ("Griffin"), was filed in the Superior Court for the State of California, San Bernardino on September 19, 2019, each 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. On November 24, 2020, Robles dismissed his separate action in the Riverside County Superior Court and Griffin filed an amended complaint adding Robles as a named plaintiff to the action in the San Bernardino County Superior Court. A joint mediation occurred on January 27, 2021 where the Parties failed to reach a settlement or resolution to the matter
2018. The Company isfiled a summary judgment to dismiss on November 2, 2021. While the Company cannot predict with certainty the resolution of this matter, we do not believe that this proceeding will have a material adverse effect on the Company’s Consolidated Financial Statements.
We are party to certain other lawsuits in the ordinary course of business. Based on management's present knowledge of the facts and, (inin certain cases)cases, advice of outside counsel, management does not believe that loss contingencies arising from pending matters are likely to have a material adverse effect on our consolidated financial position, liquidity or results of operations after taking into account any existing reserves, which reserves are 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 our consolidated financial position, liquidity or results of operations in any future reporting periods.
16. Stockholders' Equity and Redeemable Noncontrolling Interest
The following table represents changes in stockholders' equity attributable to Cavco's stockholders and redeemable noncontrolling interest for each quarterly period during the ninesix months ended December 26, 2020October 2, 2021 (dollars in thousands):
| | | Additional paid-in capital | | Retained earnings | | Accumulated other comprehensive income | | Total | | Equity Attributable to Cavco Stockholders | |
| | Common Stock | | | | Treasury Stock | | Additional paid-in capital | | Retained earnings | | Accumulated other comprehensive income | | Total | | | Redeemable Noncontrolling Interest |
| | Shares | | Amount | | | Common Stock | | |
Balance, March 28, 2020 | 9,173,242 | | | $ | 92 | | | $ | 252,260 | | | $ | 355,144 | | | $ | 90 | | | $ | 607,586 | | |
Cumulative effect of implementing ASU 2016-13, net | — | | | 0 | | | 0 | | | (733) | | | 0 | | | (733) | | |
| | | Shares | | Amount | | Treasury Stock | | Additional paid-in capital | | Retained earnings | | Accumulated other comprehensive income | | Total | | | Redeemable Noncontrolling Interest |
Balance, April 3, 2021 | | Balance, April 3, 2021 | 9,241,256 | | | $ | 92 | | | |
Net income | Net income | — | | | 0 | | | 0 | | | 16,674 | | | 0 | | | 16,674 | | Net income | — | | | — | | | |
Other comprehensive income, net | | Other comprehensive income, net | — | | | — | | | — | | | — | | | — | | | (13) | | | (13) | | | | — | |
Issuance of common stock under stock incentive plans | Issuance of common stock under stock incentive plans | 3,822 | | | 0 | | | (533) | | | 0 | | | 0 | | | (533) | | Issuance of common stock under stock incentive plans | 4,465 | | | — | | | — | | | 136 | | | — | | | — | | | 136 | | | | — | |
Stock-based compensation | Stock-based compensation | — | | | 0 | | | 945 | | | 0 | | | 0 | | | 945 | | Stock-based compensation | — | | | — | | | — | | | 1,100 | | | — | | | — | | | 1,100 | | | | — | |
Common stock repurchases | | Common stock repurchases | — | | | — | | | (12,842) | | | — | | | — | | | — | | | (12,842) | | | | — | |
Balance, July 3, 2021 | | Balance, July 3, 2021 | 9,245,721 | | | $ | 92 | | | $ | (14,283) | | | $ | 255,071 | | | $ | 458,103 | | | $ | 84 | | | $ | 699,067 | | | | $ | — | |
Initial value of noncontrolling interest upon transaction | | Initial value of noncontrolling interest upon transaction | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | 1,235 | |
Net income | | Net income | — | | | — | | | — | | | — | | | 37,610 | | | — | | | 37,610 | | | | 73 | |
Other comprehensive income, net | Other comprehensive income, net | — | | | 0 | | | 0 | | | 0 | | | 68 | | | 68 | | Other comprehensive income, net | — | | | — | | | — | | | — | | | — | | | (13) | | | (13) | | | | — | |
Balance, June 27, 2020 | 9,177,064 | | | $ | 92 | | | $ | 252,672 | | | $ | 371,085 | | | $ | 158 | | | $ | 624,007 | | |
Net income | — | | | 0 | | | 0 | | | 15,049 | | | 0 | | | 15,049 | | |
Issuance of common stock under stock incentive plans | Issuance of common stock under stock incentive plans | 11,098 | | | 0 | | | 522 | | | 0 | | | 0 | | | 522 | | Issuance of common stock under stock incentive plans | 29,295 | | | 1 | | | — | | | 2,728 | | | — | | | — | | | 2,729 | | | | — | |
Stock-based compensation | Stock-based compensation | — | | | 0 | | | 1,103 | | | 0 | | | 0 | | | 1,103 | | Stock-based compensation | — | | | — | | | — | | | 1,317 | | | — | | | — | | | 1,317 | | | | — | |
Other comprehensive income, net | — | | | 0 | | | 0 | | | 0 | | | 7 | | | 7 | | |
Balance, September 26, 2020 | 9,188,162 | | | $ | 92 | | | $ | 254,297 | | | $ | 386,134 | | | $ | 165 | | | $ | 640,688 | | |
Net income | — | | | 0 | | | 0 | | | 19,701 | | | 0 | | | 19,701 | | |
Issuance of common stock under stock incentive plans | 4,075 | | | 0 | | | 480 | | | 0 | | | 0 | | | 480 | | |
Stock-based compensation | — | | | 0 | | | 887 | | | 0 | | | 0 | | | 887 | | |
Other comprehensive loss, net | — | | | 0 | | | 0 | | | 0 | | | (15) | | | (15) | | |
Balance, December 26, 2020 | 9,192,237 | | | $ | 92 | | | $ | 255,664 | | | $ | 405,835 | | | $ | 150 | | | $ | 661,741 | | |
Common stock repurchases | | Common stock repurchases | — | | | — | | | (7,594) | | | — | | | — | | | — | | | (7,594) | | | | — | |
Distributions | | Distributions | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | (180) | |
Balance, October 2, 2021 | | Balance, October 2, 2021 | 9,275,016 | | | $ | 93 | | | $ | (21,877) | | | $ | 259,116 | | | $ | 495,713 | | | $ | 71 | | | $ | 733,116 | | | | $ | 1,128 | |
| | |
The following table represents changes in stockholders' equity attributable to Cavco's stockholders and redeemable noncontrolling interest for each quarterly period during the ninesix months ended December 28, 2019September 26, 2020 (dollars in thousands):
| | Additional paid-in capital | | Retained earnings | | Accumulated other comprehensive income (loss) | | Total | |
| Common Stock | | |
| Shares | | Amount | | |
Balance, March 30, 2019 | 9,098,320 | | | $ | 91 | | | $ | 249,447 | | | $ | 280,078 | | | $ | (28) | | | $ | 529,588 | | |
Net income | — | | | 0 | | | 0 | | | 21,282 | | | 0 | | | 21,282 | | |
Issuance of common stock under stock incentive plans | 13,304 | | | 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, 2019 | 9,111,624 | | | $ | 91 | | | $ | 248,825 | | | $ | 301,360 | | | $ | 61 | | | $ | 550,337 | | |
Net income | — | | | 0 | | | 0 | | | 20,885 | | | 0 | | | 20,885 | | |
Issuance of common stock under stock incentive plans | 15,842 | | | 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, 2019 | 9,127,466 | | | $ | 91 | | | $ | 250,584 | | | $ | 322,245 | | | $ | 84 | | | $ | 573,004 | | |
Net income | — | | | 0 | | | 0 | | | 20,898 | | | 0 | | | 20,898 | | |
Issuance of common stock under stock incentive plans | 13,725 | | | 0 | | | 537 | | | 0 | | | 0 | | | 537 | | |
Stock-based compensation | — | | | 0 | | | 820 | | | 0 | | | 0 | | | 820 | | |
Other comprehensive income, net | — | | | 0 | | | 0 | | | 0 | | | 1 | | | 1 | | |
Balance, December 28, 2019 | 9,141,191 | | | $ | 91 | | | $ | 251,941 | | | $ | 343,143 | | | $ | 85 | | | $ | 595,260 | | |
| | | | Equity Attributable to Cavco Stockholders | |
| | | | Treasury Stock | | Additional paid-in capital | | Retained earnings | | Accumulated other comprehensive income | | Total | | | Redeemable Noncontrolling Interest |
| | | Common Stock | | |
| | | Shares | | Amount | | |
Balance, March 28, 2020 | | Balance, March 28, 2020 | 9,173,242 | | | $ | 92 | | | $ | — | | | $ | 252,260 | | | $ | 355,144 | | | $ | 90 | | | $ | 607,586 | | | | $ | — | |
Cumulative effect of implementing ASU 2016-13, net | | Cumulative effect of implementing ASU 2016-13, net | — | | | — | | | — | | | — | | | (733) | | | — | | | (733) | | | | — | |
Net income | | Net income | — | | | — | | | — | | | — | | | 16,674 | | | — | | | 16,674 | | | | — | |
Other comprehensive income, net | | Other comprehensive income, net | — | | | — | | | — | | | — | | | — | | | 68 | | | 68 | | | | — | |
Issuance of common stock under stock incentive plans | | Issuance of common stock under stock incentive plans | 3,822 | | | — | | | — | | | (533) | | | — | | | — | | | (533) | | | | — | |
Stock-based compensation | | Stock-based compensation | — | | | — | | | — | | | 945 | | | — | | | — | | | 945 | | | | — | |
Balance, June 27, 2020 | | Balance, June 27, 2020 | 9,177,064 | | | $ | 92 | | | $ | — | | | $ | 252,672 | | | $ | 371,085 | | | $ | 158 | | | $ | 624,007 | | | | $ | — | |
Net income | | Net income | — | | | — | | | — | | | — | | | 15,049 | | | — | | | 15,049 | | | | — | |
Other comprehensive income, net | | Other comprehensive income, net | — | | | — | | | — | | | — | | | — | | | 7 | | | 7 | | | | — | |
Issuance of common stock under stock incentive plans | | Issuance of common stock under stock incentive plans | 11,098 | | | — | | | — | | | 522 | | | — | | | — | | | 522 | | | | — | |
Stock-based compensation | | Stock-based compensation | — | | | — | | | — | | | 1,103 | | | — | | | — | | | 1,103 | | | | — | |
Balance, September 26, 2020 | | Balance, September 26, 2020 | 9,188,162 | | | $ | 92 | | | $ | — | | | $ | 254,297 | | | $ | 386,134 | | | $ | 165 | | | $ | 640,688 | | | | $ | — | |
|
17. Earnings Per Share
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 | | Three Months Ended | | Six Months Ended |
| | December 26, 2020 | | December 28, 2019 | | December 26, 2020 | | December 28, 2019 | | October 2, 2021 | | September 26, 2020 | | October 2, 2021 | | September 26, 2020 |
Net income | $ | 19,701 | | | $ | 20,898 | | | $ | 51,424 | | | $ | 63,065 | | |
Weighted average shares outstanding: | | | | | | | | |
Net income attributable to Cavco common stockholders | | Net income attributable to Cavco common stockholders | $ | 37,610 | | | $ | 15,049 | | | $ | 64,656 | | | $ | 31,723 | |
Weighted average shares outstanding | | Weighted average shares outstanding | | | | | | | |
Basic | Basic | 9,190,254 | | | 9,138,202 | | | 9,182,491 | | | 9,120,241 | | Basic | 9,190,866 | | | 9,182,945 | | | 9,194,577 | | | 9,178,609 | |
Effect of dilutive securities | Effect of dilutive securities | 105,299 | | | 155,739 | | | 102,747 | | | 138,962 | | Effect of dilutive securities | 82,270 | | | 112,464 | | | 79,863 | | | 101,471 | |
Diluted | Diluted | 9,295,553 | | | 9,293,941 | | | 9,285,238 | | | 9,259,203 | | Diluted | 9,273,136 | | | 9,295,409 | | | 9,274,440 | | | 9,280,080 | |
Net income per share: | | | | | | | | |
Net income per share attributable to Cavco common stockholders | | Net income per share attributable to Cavco common stockholders | | | | | | | |
Basic | Basic | $ | 2.14 | | | $ | 2.29 | | | $ | 5.60 | | | $ | 6.91 | | Basic | $ | 4.09 | | | $ | 1.64 | | | $ | 7.03 | | | $ | 3.46 | |
Diluted | Diluted | $ | 2.12 | | | $ | 2.25 | | | $ | 5.54 | | | $ | 6.81 | | Diluted | $ | 4.06 | | | $ | 1.62 | | | $ | 6.97 | | | $ | 3.42 | |
Anti-dilutive common stock equivalents excluded from the computation of diluted earnings per share for the three months ended DecemberOctober 2, 2021 and September 26, 2020 were 2,808 and December 28, 2019 were 26,601 and 14,482,20,582, respectively. Anti-dilutive common stock equivalents excluded from the computation of diluted earnings per share for the ninesix months ended DecemberOctober 2, 2021 and September 26, 2020 were 5,417 and December 28, 2019 were 26,357 and 29,971,30,182, respectively. In addition, outstanding restricted share awards excluded from the calculation
18. Fair Value Measurements
The book value and estimated fair value of our financial instruments were as follows (in thousands):
| | | December 26, 2020 | | March 28, 2020 | | October 2, 2021 | | April 3, 2021 |
| | Book Value | | Estimated Fair Value | | Book Value | | Estimated Fair Value | | Book Value | | Estimated Fair Value | | Book Value | | Estimated Fair Value |
Available-for-sale debt securities | Available-for-sale debt securities | $ | 16,673 | | | $ | 16,673 | | | $ | 14,774 | | | $ | 14,774 | | Available-for-sale debt securities | $ | 18,179 | | | $ | 18,179 | | | $ | 14,946 | | | $ | 14,946 | |
Marketable equity securities | Marketable equity securities | 13,987 | | | 13,987 | | | 9,829 | | | 9,829 | | Marketable equity securities | 16,566 | | | 16,566 | | | 17,600 | | | 17,600 | |
Non-marketable equity investments | Non-marketable equity investments | 21,791 | | | 21,791 | | | 21,536 | | | 21,536 | | Non-marketable equity investments | 19,772 | | | 19,772 | | | 21,960 | | | 21,960 | |
Consumer loans receivable | Consumer loans receivable | 81,592 | | | 96,313 | | | 82,304 | | | 97,395 | | Consumer loans receivable | 58,599 | | | 65,641 | | | 74,798 | | | 86,209 | |
Interest rate lock commitment derivatives | 77 | | | 77 | | | 164 | | | 164 | | |
Forward loan sale commitment derivatives | (195) | | | (195) | | | (1,011) | | | (1,011) | | |
| Commercial loans receivable | Commercial loans receivable | 39,746 | | | 38,300 | | | 46,565 | | | 46,819 | | Commercial loans receivable | 71,933 | | | 70,363 | | | 44,314 | | | 42,379 | |
Secured financings and other | Secured financings and other | (12,987) | | | (12,493) | | | (14,953) | | | (15,592) | | Secured financings and other | (19,565) | | | (19,454) | | | (12,186) | | | (12,340) | |
|
See Note 19, Fair Value Measurements, and the Fair Value of Financial Instruments caption in Note 1, Summary of Significant Accounting Policies, in the Form 10-K for more information on the methodologies we use in determining fair value.
Assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| December 26, 2020 |
| Total | | Level 1 | | Level 2 | | Level 3 |
| | | | | | | |
Residential mortgage-backed securities (1) | $ | 5,237 | | | $ | 0 | | | $ | 5,237 | | | $ | 0 | |
State and political subdivision debt securities (1) | 6,306 | | | 0 | | | 6,306 | | | 0 | |
Corporate debt securities (1) | 5,130 | | | 0 | | | 5,130 | | | 0 | |
Marketable equity securities (2) | 13,987 | | | 13,987 | | | 0 | | | 0 | |
Interest rate lock commitment derivatives (3) | 77 | | | 0 | | | 0 | | | 77 | |
Forward loan sale commitment derivatives (3) | (195) | | | 0 | | | 0 | | | (195) | |
Mortgage servicing rights (4) | 831 | | | 0 | | | 0 | | | 831 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| March 28, 2020 |
| Total | | Level 1 | | Level 2 | | Level 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.
(4)Changes 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 nine months ended December 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):
| | | | | | | | | | | | | | | | | | | | | | | |
| December 26, 2020 |
| Total | | Level 1 | | Level 2 | | Level 3 |
Loans held for investment | $ | 59,167 | | | $ | 0 | | | $ | 0 | | | $ | 59,167 | |
Loans held for sale | 23,223 | | | 0 | | | 0 | | | 23,223 | |
Construction advances | 13,923 | | | 0 | | | 0 | | | 13,923 | |
Commercial loans receivable | 38,300 | | | 0 | | | 0 | | | 38,300 | |
Secured financings and other | (12,493) | | | 0 | | | (12,493) | | | 0 | |
Non-marketable equity investments | 21,791 | | | 0 | | | 0 | | | 21,791 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| March 28, 2020 |
| Total | | Level 1 | | Level 2 | | Level 3 |
Loans held for investment | $ | 68,503 | | | $ | 0 | | | $ | 0 | | | $ | 68,503 | |
Loans held for sale | 15,492 | | | 0 | | | 0 | | | 15,492 | |
Construction advances | 13,400 | | | 0 | | | 0 | | | 13,400 | |
Commercial loans receivable | 46,819 | | | 0 | | | 0 | | | 46,819 | |
Secured financings and other | (15,592) | | | 0 | | | (15,592) | | | 0 | |
Non-marketable equity investments | 21,536 | | | 0 | | | 0 | | | 21,536 | |
NaN impairment charges were recorded during the nine months ended December 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.activities. MSRs are initially recorded at fair value. Changes in fair value subsequent | | | | | | | | | | | |
| October 2, 2021 | | April 3, 2021 |
Number of loans serviced with MSRs | 4,533 | | | 4,647 | |
Weighted average servicing fee (basis points) | 34.39 | | | 33.57 | |
Capitalized servicing multiple | 73.7 | % | | 45.9 | % |
Capitalized servicing rate (basis points) | 25.36 | | | 15.42 | |
Serviced portfolio with MSRs (in thousands) | $ | 586,547 | | | $ | 593,939 | |
MSRs (in thousands) | $ | 1,488 | | | $ | 916 | |
19. Employee Benefit Plans
As part of the Commodore acquisition, we entered into a Transition Services Agreement ("TSA") with the seller whereby we lease Commodore employees from the seller while we transition them to our payroll systems. Expenses related to the initial capitalizationTSA totaled $1.4 million for the three and six months ended October 2, 2021.
Commodore participates in the IAM National Pension Fund, a multiemployer defined benefit plan. Participation in this plan is available to all hourly employees who are recordedmembers of the participating collective bargaining unit. Once the TSA ends, we will contribute to the plan a specified amount per hour worked for each eligible employee. Benefits under this plan are based on a fixed monthly benefit rate per year of credited service. The risks of participating in earnings.this multiemployer plan differ from single-employer plans. The potential risks include, but are not limited to, the use of the Company's contributions to provide benefits to employees of other participating employers, the Company becoming obligated for other participating employers' unfunded obligations and, upon the Company's withdrawal from the plan, the Company being required to pay the plan an amount based on the underfunded status of the plan, referred to as a withdrawal liability.
| | | | | | | | | | | |
| December 26, 2020 | | March 28, 2020 |
Number of loans serviced with MSRs | 4,663 | | | 4,688 | |
Weighted average servicing fee (basis points) | 31.81 | | | 31.12 | |
Capitalized servicing multiple | 44.23 | % | | 67.19 | % |
Capitalized servicing rate (basis points) | 14.07 | | | 20.91 | |
Serviced portfolio with MSRs (in thousands) | $ | 590,433 | | | $ | 585,777 | |
MSRs (in thousands) | $ | 831 | | | $ | 1,225 | |
19.20. Related Party Transactions
We have non-marketable equity investments in other distribution operations outside of Company-owned retail locations.stores. In the ordinary course of business, we sell homes and lend to certain of these operations through our commercial lending programs. For the three and six months ended December 26, 2020 and December 28, 2019,October 2, 2021, the total amount of sales to non-consolidated related parties was $11.2$14.0 millionand$13.3 $28.8 million, respectively. For the ninethree and six months ended DecemberSeptember 26, 2020, and December 28, 2019, the total amount of sales to non-consolidated related parties was $34.2 millionand $37.110.3 million and $23.0 million, respectively. As of December 26, 2020,October 2, 2021, receivables from non-consolidated related parties included $3.9 million of accounts receivable and $7.5$3.9 million of commercial loans outstanding. As of March 28, 2020,April 3, 2021, receivables from non-consolidated related parties included $1.7included $4.7 million of accounts receivable and $8.2$9.5 million of commercial loans outstanding.
20.21. Acquisitions
Craftsman Homes, LLC and Craftsman Development, LLC Acquisition
In fiscal year 2017, we purchased a 50% ownership interest in Craftsman for $1.3 million to expand our retail presence in Nevada. At the time of Destinythe acquisition of that ownership, we concluded that we were not considered to be the primary beneficiary and therefore did not consolidate the Entities. Since the date of acquisition, we have recorded a non-marketable equity investment for the ownership, with changes to that investment for earnings and distributions from the Entities.
On July 4, 2021, we obtained an additional 20% ownership interest in the Entities utilizing the same pre-tax income multiple as the 2017 purchase. As we now have a controlling interest, we have consolidated the Entities and remeasured the Entities' assets and liabilities to fair value, including our previous equity investment of $2.9 million in the Entities. As a result of the remeasurement, we recorded a gain of $3.3 million in Other income, net in the Consolidated Statements of Comprehensive Income.
The purchase price on July 4, 2021 for 20% ownership was $2.5 million, valuing the Entities at $12.4 million. 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 date and will be finalized upon completion of the analysis of the fair values of Craftsman's assets and specified liabilities. We expect to finalize these amounts as soon as possible but no later than one year from the acquisition date.
| | | | | |
| July 4, 2021 |
Cash | $ | 6,466 | |
Accounts receivable | 577 | |
Inventories | 7,393 | |
Property, plant and equipment | 189 | |
Other current assets | 846 | |
Intangible assets(1) | 2,980 | |
Total identifiable assets acquired | 18,451 | |
Accounts payable and accrued liabilities | 10,028 | |
Net identifiable assets acquired | 8,423 | |
Goodwill(2) | 3,933 | |
Net assets acquired | $ | 12,356 | |
(1) Includes $3.0 million assigned to trademarks and trade names, which are considered indefinite lived intangible assets and are not subject to amortization.
(2) Attributable to the Factory-built housing segment, all of which will be deductible for income tax purposes.
We recorded a Redeemable noncontrolling interest for the remaining 30% ownership. As 20% of this is considered mandatorily redeemable per the Agreement, $2.5 million for the fair value of this portion of the noncontrolling interest is recorded in the long-term liabilities section of the Consolidated Balance Sheet under the Secured financings and other caption. As we are not currently obligated for the redemption of the remaining 10% ownership, $1.2 million for the initial fair value of this portion of the noncontrolling interest is classified as a temporary equity mezzanine item between liabilities and stockholders’ equity in the Consolidated Balance Sheet under the Redeemable noncontrolling interest caption.
Since the acquisition date, Craftsman contributed Net revenue of $4.5 million for the three and six months ended October 2, 2021. Craftsman increased consolidated Net income on the Consolidated Statements of Comprehensive Income for the three and six months ended October 2, 2021 by $243,000. Net income from the Craftsman acquisition included required purchase accounting adjustments whereby home product inventory is recorded at fair value upon acquisition.
Commodore Homes Acquisition
On August 2, 2019, the CompanySeptember 24, 2021, we purchased certain manufactured housing assets and assumed certain liabilities of Destiny Homes, which operates oneCommodore, including its six manufacturing facility locatedfacilities and two wholly-owned retail locations. In addition to manufacturing, Commodore also participates in Moultrie, Georgiacommercial lending operations with its dealers. The transaction was accounted for as a business combination and produces and distributes manufactured and modular homes through a networkthe results of independent retailersoperations have been included in the Southeastern United States, further expandingaccompanying Consolidated Financial Statements since the date of acquisition.
The acquisition of Commodore brings beneficial geographic addition to our reach.footprint with strong operations in the Northeast/Midwest/Mid-Atlantic markets and provides a platform for future growth, with the potential for cost and revenue synergies.
The acquisition-date fair value of the total consideration was $156.1 million, which was paid in cash and is subject to future adjustments upon the finalization of closing financial statements. We have expensed $2.7 million in acquisition related deal costs in Selling, general and administrative expense in the Consolidated Statements of Comprehensive Income, and have not 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 allocationis still preliminary due to the short duration since the acquisition date and have not made any purchase accounting adjustments during fiscalwill be finalized upon completion of the analysis of the fair values of Commodore's assets and specified liabilities. We expect to finalize these amounts as soon as possible but no later than one year 2021.from the acquisition date.
| | | | | |
| September 24, 2021 |
Cash | $ | 619 | |
Accounts receivable | 20,930 | |
Commercial loans | 30,960 | |
Inventories | 31,787 | |
Property, plant and equipment(1) | 57,606 | |
Other current assets | 534 | |
Intangible assets(2) | 18,400 | |
Total identifiable assets acquired | 160,836 | |
Accounts payable and accrued liabilities | 32,249 | |
Net identifiable assets acquired | 128,587 | |
Goodwill(3) | 27,464 | |
Net assets acquired | $ | 156,051 | |
(1) Includes assets acquired under finance leases. See Note 9 for additional information.
(2) Includes $11.8 million assigned to customer-related intangibles, subject to a useful life of 11 years amortized on a straight-line basis; $3.8 million assigned to trademarks and trade names, which are considered indefinite lived intangible assets and are not subject to amortization; $2.3 million for acquired sales order backlogs that will be amortized over the period to produce the associated backlog; and $0.5 million for a covenant not to compete from the sellers, amortized on a straight-line basis over the term of 5 years.
(3) Attributable to the Factory-built housing segment, all of which will be deductible for income tax purposes.
Since the acquisition date, Commodore contributed Net revenue of $4.4 million for the three and six months ended October 2, 2021. Commodore decreased consolidated Net income on the Consolidated Statements of Comprehensive Income for the three and six months ended October 2, 2021 by $645,000. The Net loss from the Commodore acquisition included required purchase accounting adjustments whereby home product inventory is recorded at fair value upon acquisition.
Pro Forma Impact of AcquisitionAcquisitions. The following table presents supplemental pro forma information as if the acquisition of Destiny Homes hadabove acquisitions occurred on March 31, 201929, 2020 (in thousands, except per share data):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| December 26, 2020 | | December 28, 2019 | | December 26, 2020 | | December 28, 2019 |
Net revenue | $ | 288,772 | | | $ | 273,722 | | | $ | 801,549 | | | $ | 817,674 | |
Net income | 19,701 | | | 20,898 | | | 51,424 | | | 63,868 | |
Diluted net income per share | 2.12 | | | 2.25 | | | 5.54 | | | 6.90 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended |
| October 2, 2021 | | September 26, 2020 | | October 2, 2021 | | September 26, 2020 |
Net revenue | $ | 444,303 | | | $ | 327,491 | | | $ | 856,054 | | | $ | 635,061 | |
Net income attributable to Cavco common stockholders | 38,331 | | | 20,665 | | | 66,161 | | | 37,494 | |
Diluted net income per share | 4.13 | | | 2.22 | | | 7.13 | | | 4.04 | |
21.22. Business Segment Information
We operate principally in 2 segments: (1) factory-built housing, which includes wholesale and retail systems-builtfactory-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 taxesprovides selected financial data by segment (in thousands):
| | | Three Months Ended | | Nine Months Ended | | Three Months Ended | | Six Months Ended |
| | December 26, 2020 | | December 28, 2019 | | December 26, 2020 | | December 28, 2019 | | October 2, 2021 | | September 26, 2020 | | October 2, 2021 | | September 26, 2020 |
Net revenue: | | | | | | | | |
Net revenue | | Net revenue | | | | | | | |
Factory-built housing | Factory-built housing | $ | 270,822 | | | $ | 257,106 | | | $ | 749,879 | | | $ | 758,564 | | Factory-built housing | $ | 342,094 | | | $ | 240,967 | | | $ | 654,377 | | | $ | 479,057 | |
Financial services | Financial services | 17,950 | | | 16,616 | | | 51,670 | | | 47,875 | | Financial services | 17,449 | | | 17,009 | | | 35,588 | | | 33,720 | |
| | $ | 288,772 | | | $ | 273,722 | | | $ | 801,549 | | | $ | 806,439 | | | $ | 359,543 | | | $ | 257,976 | | | $ | 689,965 | | | $ | 512,777 | |
| Income before income taxes: | | |
Income before income taxes | | Income before income taxes | |
Factory-built housing | Factory-built housing | $ | 18,752 | | | $ | 19,247 | | | $ | 54,654 | | | $ | 66,023 | | Factory-built housing | $ | 46,893 | | | $ | 17,452 | | | $ | 80,452 | | | $ | 35,902 | |
Financial services | Financial services | 7,138 | | | 5,485 | | | 12,512 | | | 13,326 | | Financial services | 2,128 | | | 2,144 | | | 4,047 | | | 5,374 | |
| | $ | 25,890 | | | $ | 24,732 | | | $ | 67,166 | | | $ | 79,349 | | | $ | 49,021 | | | $ | 19,596 | | | $ | 84,499 | | | $ | 41,276 | |
| | | | | | | | | | | |
| October 2, 2021 | | April 3, 2021 |
Total assets: | | | |
Factory-built housing | $ | 819,879 | | | $ | 711,579 | |
Financial services | 236,554 | | | 240,254 | |
| $ | 1,056,433 | | | $ | 951,833 | |
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; our financial performance and operating results; the expected effect of certain risks and uncertainties on our 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 pandemic ("COVID-19") pandemic;or any other pandemic or outbreak; labor shortages and the pricing and availability of raw materials; 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 our 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. We do 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 our actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements, many of which are beyond our control. To the extent that our assumptions and expectations differ from actual results, our 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 our results and cause them to materially differ from those contained in the forward-looking statements include, without limitation, those discussed in Risk Factors in Part I, Item 1A of our 20202021 Annual Report on Form 10-K filed with the Securities and Exchange Commission ("Form 10-K").
Introduction
The following should be read in conjunction with Cavco Industries, Inc. and its subsidiaries' (collectively, "we," "us," "our," 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 our Consolidated Financial Statements.
Company Overview
Headquartered in Phoenix, Arizona, we design and produce factory-built housing products primarily distributed through a network of independent and Company-owned retailers, planned community operators and residential developers. We are one of the largest producers of manufactured homes in the United States, based on reported wholesale shipments,shipments. Our products are marketed under a variety of brand names including Cavco, Fleetwood, Palm Harbor, Nationwide, Fairmont, Friendship, Chariot Eagle, Destiny, Commodore, Colony, Pennwest, R-Anell, Manorwood and Destiny.Midcountry. We are also one of the leading producers of park model RVs, vacation cabins and systems-builtfactory-built commercial structures, as well as modular homes built primarily under the Nationwide Homes brand.structures. Our finance subsidiary, CountryPlace Acceptance Corp. ("CountryPlace"), is an approved Federal National Mortgage Association 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. Our insurance subsidiary, Standard Casualty Co.Company ("Standard Casualty"), provides property and casualty insurance to owners of manufactured homes.
We operate 2026 homebuilding production lines located in Millersburg and Woodburn, Oregon; Riverside, California; Nampa, Idaho; Riverside, California; Phoenix and Goodyear, Arizona; Austin, Fort Worth, Seguin and Waco, Texas; Montevideo, Minnesota; Dorchester, Wisconsin; Nappanee and Goshen, Indiana; Lafayette, Tennessee; Douglas and Moultrie, Georgia; Shippenville and Emlenton, Pennsylvania; Martinsville and Rocky Mount, Virginia; Douglas and Moultrie, Georgia;Cherryville, North Carolina; 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, our homes are sold through 4046 Company-owned U.S. retail locations.
In April 2020, the Company shut down production and closed its Lexington, Mississippi manufacturing facility, finalizing production in June 2020. However, we remain available to serve wholesale customers previously served by the Lexington facility from our other production linesIncluded in the southeast.above figures are two recent acquisitions. On July 4, 2021, we purchased an additional 20% ownership in Craftsman Homes, LLC and Craftsman Homes Development, LLC (collectively known as “Craftsman") in addition to our existing 50% ownership, making us controlling owner. Craftsman is a manufactured home street retailer with four locations in Nevada selling Company and other manufacturer branded homes. They also provide general construction to setup the home property and assist with multi-home developments and multi-family dwellings. The production facility hastransaction was accounted for as a business combination achieved in stages and the results of operations have been placed onincluded in the marketaccompanying Consolidated Financial Statements since the date of the acquisition of the additional 20% interest, with a reduction for sale.the earnings of the noncontrolling shareholder.
On September 24, 2021, we purchased certain manufactured housing assets and assumed certain liabilities of The Commodore Corporation ("Commodore"), including its six manufacturing facilities and two wholly-owned retail locations. In addition to manufacturing, Commodore also participates in commercial lending operations with its dealers. 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.
Company and Industry Outlook
According to data reported by the Manufactured Housing Institute, industry home shipments decreased 1.3%increased 14.3% for the first 118 months of calendar year 20202021 compared to the same period in the prior year.year, which was impacted by shutdowns related to COVID-19. However, we did not experience any significant factory shutdowns in the prior year period, in contrast to certain other industry participants.
The industry offers solutions to the affordable housing crisis and these industry shipment numbers havedo not representedrepresent demand; instead, they represent the industry's ability to produce in the current environment. The average price per square foot for a manufactured home is lower than a site-built home. Also, based on the relatively low cost associated with manufactured home ownership, our products have traditionally competed with rental housing's monthly payment affordability.
The two largest manufactured housing consumer demographics, young adults and those who are age 55 and older, are both growing. "First-timeFirst-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 limited in their ability to qualify for a new home loanare particularly affected by their particularperiods of low employment statusrates and down payment capability.underemployment. Consumer confidence as an indicator of retirement security, is especially important among manufactured home buyers interested in our products for seasonal or retirement living.
We seek out niche market opportunities where our 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.
We maintain a conservative cost structure in an effort to build added value into our homes and we work diligently to maintain a solid financial position. Our balance sheet strength, including the position in cash and cash equivalents, helps avoid liquidity problems and enables us to act effectively as market opportunities or challenges present themselves.
We continue to make certain commercial loan programs available to members of our wholesale distribution chain. Under direct commercial loan arrangements, we provide funds for financed home purchases by distributors, community owners and developers. In addition, we provide loans to independent floor plan lenders that then lend to distributors to finance their inventory purchasesdevelopers (see Note 7 to the Consolidated Financial Statements). Our involvement in commercial loans helps to increase the availability of manufactured home financing to distributors, community owners and developers and provides additional opportunity for product exposure to potential home buyers. While these initiatives support our ongoing efforts to expand product distribution, they do expose us to risks associated with the creditworthiness of this customer base and our inventory financing partners. We have included considerations related to the COVID-19 pandemic when assessing the risks of loan loss and setting reserve amounts for the commercial finance portfolio.
The lack of an efficient secondary market for manufactured home-only loans and the limited number of institutions providing such loans results in higher borrowing costs for home-only loans and continues to constrain industry growth. We work directly with other industry participants to develop secondary market opportunities for manufactured home-only loan portfolios and expand lending availability in the industry. Additionally, we continue to invest in community-based lending initiatives that provide home-only financing to new residents of certain manufactured home communities. Our mortgage subsidiaryWe also developsdevelop and investsinvest in home-only lending programs to grow sales of homes through traditional distribution points. We believe that growing our investment and participation in home-only lending may provide additional sales growth opportunities for our financial services segment, as well as provide a means that could lead to increased home sales for our factory-built housing operations.
COVID-19 Impact and Strategy
In March 2020, the World Health Organization declared COVID-19 a global pandemic. As our business was considered essential, we continued to operate substantially all of our homebuilding and retail sales facilities while working to follow COVID-19 health guidelines. We have worked to minimize exposure and transmission risks by implementing enhanced facility cleaning, social distancing and related protocols while continuing to serve our customers. Operational efficiencies have declined due to managingfrom hiring challenges, higher and largely unpredictable factory employee absenteeism hiring challenges and other inefficiencies from building material supply shortages. Accordingly, our total average plant capacity utilization rate was approximately 75% during the third fiscal quarter of 2021, which has improved from approximately 65% during the second fiscal quarter of 2021, but is lower than pre-pandemic levels2022, which remains consistent with that of more than 80%.our first quarter of fiscal 2022.
Sales order activity remained exceptionallyHousing demand remains strong duringas well-qualified individuals continue pursuing home-ownership, bolstered by the third 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 reducedlow home loan interest rates. Increased orders outpacedHome order rates are starting to gradually decline from the challenging production environment duringextreme highs we saw in the quarter, raising orderpast few quarters, but still remain above pre-COVID rates, which were considered to be strong.
Our backlogs 310%at October 2, 2021 were $1.1 billion, up $315 million or 39.8% compared to $472$792 million at December 26, 2020, July 3, 2021, and up $787 million or 245.4%compared to $115 million at December 28, 2019 and $321 million at September 26, 2020. The backlog ofThese increases include $279 million attributable to the Commodore acquisition. Backlog excludes home orders excludes orders that have been paused or canceled at the request of the customer. Distributors
Key housing building materials include wood and wood products, gypsum wallboard, steel, windows, appliances, insulation and other petroleum-based products. Pricing and availability of certain raw materials have recently been volatile due to a number of factors in the current environment. We continue to monitor and react to inflation in these materials by maintaining a focus on our product pricing in response to higher materials costs, but such increases may cancel orders priorlag behind the escalation of such costs. Availability of these products has not caused a production halt in the current period, but we have experienced periodic shutdowns in other periods and shortages of primary building materials have caused production inefficiencies as we have needed to production without penalty. After production of a particular home has commenced,change processes in response to 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.delay in materials.
TheWhile it is difficult to predict the future of housing demand, employee availability, supply chain and Company performance and operations, maintaining an appropriately sized and well-trained workforce is key to increasing production to meet increased demand, and we face challenges in overcoming labor-related difficulties in the current environment to increase home production. We continually review the wage rates of our production employees, and have established other monetary incentive and benefit programs, with a goal of providing competitive compensation. We also provide leadership training to new managers and other employees in supervisory roles to enhance communication and improve the oversight and motivation of other employees, more extensively use online recruiting tools, update our recruitment brochures and improve the appearance and appeal of our manufacturing facilities to improve the recruitment and retention of qualified production employees and reduce annualized turnover rates. Regardless, we believe our ability to recruit the workforce we need to meet the overall need for affordable housing continues to improve.
In 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 operationswe continue to assist customers in need and serviceby servicing existing loans and insurance policies whileand 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 Companyus to cash flow decreasesdeficits if customers do not make contractual monthly payments of principal and interest in a timely manner. Our primary investor,For certain loans serviced for Ginnie Mae and Freddie Mac, and home-only loans serviced for certain other investors, we must remit scheduled monthly principal and/or interest payments and principal curtailments regardless of whether monthly mortgage payments are collected from borrowers. 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. WhileAlthough monthly collections of principal and interest from borrowers has normallyhave exceeded scheduled principal and interest payments owed to investors, thismandatory extended forbearance under the Coronavirus Aid, Relief and Economic Security Act and certain other regulations related to COVID-19 could be negatively impacted given various stateimpact cash obligations in the future.
Results of Operations
Net Revenue.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | |
($ in thousands, except revenue per home sold) | October 2, 2021 | | September 26, 2020 | | Change |
Factory-built housing | $ | 342,094 | | | $ | 240,967 | | | $ | 101,127 | | | 42.0 | % |
Financial services | 17,449 | | | 17,009 | | | 440 | | | 2.6 | % |
| $ | 359,543 | | | $ | 257,976 | | | $ | 101,567 | | | 39.4 | % |
Factory-built homes sold | | | | | | | |
by Company-owned retail sales centers | 710 | | | 763 | | | (53) | | (6.9) | % |
to independent retailers, builders, communities & developers | 2,887 | | | 2,664 | | | 223 | | | 8.4 | % |
| 3,597 | | | 3,427 | | | 170 | | | 5.0 | % |
Net factory-built housing revenue per home sold | $ | 95,105 | | | $ | 70,314 | | | $ | 24,791 | | | 35.3 | % |
| | | | | | | |
| Six Months Ended | | | | |
($ in thousands, except revenue per home sold) | October 2, 2021 | | September 26, 2020 | | Change |
Factory-built housing | $ | 654,377 | | | $ | 479,057 | | | $ | 175,320 | | | 36.6 | % |
Financial services | 35,588 | | | 33,720 | | | 1,868 | | | 5.5 | % |
| $ | 689,965 | | | $ | 512,777 | | | $ | 177,188 | | | 34.6 | % |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Factory-built homes sold | | | | | | | |
by Company-owned retail sales centers | 1,433 | | | 1,515 | | | (82) | | (5.4) | % |
to independent retailers, builders, communities & developers | 5,864 | | | 5,261 | | | 603 | | | 11.5 | % |
| 7,297 | | | 6,776 | | | 521 | | | 7.7 | % |
Net factory-built housing revenue per home sold | $ | 89,678 | | | $ | 70,699 | | | $ | 18,979 | | | 26.8 | % |
In the factory-built housing segment, the increase in Net revenues was primarily due to an increase in the average sales price and local emergency orders in lightthe number of COVID-19.units sold. The higher home prices were driven by product price increases and a shift toward more multi-section homes. Home sales volume increased from higher factory capacity utilization.
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. We continue to focus on developing order volume growth opportunities by working to improve our production capabilities and adjusting product offerings. We strive to balance the production levels and workforce size with the demand for our product offerings to maximize efficiencies. We continually review wage rates of our production employees and have established other monetary incentive programs to ensure competitive compensation. We are also working to more extensively use online recruiting tools, update recruitment brochures and improve the appearance and appeal of our manufacturing facilities in order to improve the recruitment and retention of qualified production employees and reduce annualized turnover rates. Maintaining an appropriately sized and well-trained workforce is key to increasing production to meet increased demand. We face a major challenge in overcoming labor-related difficulties in the COVID-19 environment to increase home production.
Results of Operations
Net Revenue.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | |
($ in thousands, except revenue per home sold) | December 26, 2020 | | December 28, 2019 | | Change |
Net revenue: | | | | | | | |
Factory-built housing | $ | 270,822 | | | $ | 257,106 | | | $ | 13,716 | | | 5.3 | % |
Financial services | 17,950 | | | 16,616 | | | 1,334 | | | 8.0 | % |
| $ | 288,772 | | | $ | 273,722 | | | $ | 15,050 | | | 5.5 | % |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Total homes sold | 3,603 | | | 3,865 | | | (262) | | | (6.8) | % |
| | | | | | | |
Net factory-built housing revenue per home sold | $ | 75,166 | | | $ | 66,522 | | | $ | 8,644 | | | 13.0 | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended | | | | |
($ in thousands, except revenue per home sold) | December 26, 2020 | | December 28, 2019 | | Change |
Net revenue: | | | | | | | |
Factory-built housing | $ | 749,879 | | | $ | 758,564 | | | $ | (8,685) | | | (1.1) | % |
Financial services | 51,670 | | | 47,875 | | | 3,795 | | | 7.9 | % |
| $ | 801,549 | | | $ | 806,439 | | | $ | (4,890) | | | (0.6) | % |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Total homes sold | 10,379 | | | 11,453 | | | (1,074) | | | (9.4) | % |
| | | | | | | |
Net factory-built housing revenue per home sold | $ | 72,250 | | | $ | 66,233 | | | $ | 6,017 | | | 9.1 | % |
In the factory-built housing segment, the increase in Net revenue for the three months ended December 26, 2020 was primarily due to higher home selling prices resulting from pricing increases implemented because of rising input costs. These gains were partially offset by lower home sales volume during the third fiscal quarter, as production inefficiencies from challenges related to the COVID-19 pandemic continue to limit factory delivery volume.
The decrease for the nine months ended December 26, 2020 was primarily from lower home sales volume related to the production inefficiencies previously discussed, partially offset by higher home selling prices compared to last year. Note that Destiny Homes was purchased in August 2019 and 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, community ownerscommunities and developers ("Wholesale") and sales of homes to consumers by Company-owned retail centers ("Retail").stores. Wholesale sales prices are primarily comprised of the home and the cost to ship the home from a manufacturinghomebuilding facility to the home-site. Retail home prices include these items plusand 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. Other factors include fluctuationsOur homes are constructed in one or more floor sections ("modules") which are then installed on the customer's site. Changes in the number of modules per home, the selection of different home types/models and optional home upgrades create changes in product mix, also causing fluctuations in this metric. The table below presents the resultmix of home buyer tastesmodules and preferences as they select home types/models, as well as optional home upgrades when purchasing the home.
As discussed above, changes to the proportion of home sales among the distribution channels between reporting periods impact the overall net revenue per home sold. Forhomes sold for the three and ninesix months ended DecemberOctober 2, 2021 and September 26, 2020, we sold 2,835 and 2020:8,096 homes Wholesale, respectively, and 768 and 2,283 homes Retail, respectively. For the three and nine months ended December 28, 2019, we sold 3,158 and 9,222 homes Wholesale, respectively, and 707 and 2,231 homes Retail, respectively.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | |
| October 2, 2021 | | September 26, 2020 | | Change |
| Modules | | Homes | | Modules | | Homes | | Modules | | Homes |
U.S. Housing and Urban Development code homes | 5,548 | | | 3,154 | | | 5,030 | | | 2,979 | | | 10.3 | % | | 5.9 | % |
Modular homes | 519 | | | 254 | | | 484 | | | 223 | | | 7.2 | % | | 13.9 | % |
Park model RVs | 189 | | | 189 | | | 225 | | | 225 | | | (16.0) | % | | (16.0) | % |
| 6,256 | | | 3,597 | | | 5,739 | | | 3,427 | | | 9.0 | % | | 5.0 | % |
| | | | | | | | | | | |
| Six Months Ended | | | | |
| October 2, 2021 | | September 26, 2020 | | Change |
| Modules | | Homes | | Modules | | Homes | | Modules | | Homes |
U.S. Housing and Urban Development code homes | 11,200 | | | 6,430 | | | 9,911 | | | 5,844 | | | 13.0 | % | | 10.0 | % |
Modular homes | 987 | | | 480 | | | 950 | | | 438 | | | 3.9 | % | | 9.6 | % |
Park model RVs | 387 | | | 387 | | | 494 | | | 494 | | | (21.7) | % | | (21.7) | % |
| 12,574 | | | 7,297 | | | 11,355 | | | 6,776 | | | 10.7 | % | | 7.7 | % |
Financial services segment revenue increased primarily due to unrealized gains on marketable equity securities in the insurance subsidiary's portfolio, which were $1.0 million and $2.7 million for the three and nine months ended December 26, 2020, respectively, compared to $0.3 million and $0.6 million in unrealized gains in the comparable prior year periods, respectively. In addition, higher volume in home loan sales and more insurance policies in force in the current year compared to the prior year, were positive contributors. These overall increases were partially offset by lower interest income earned on the acquired consumer loan portfolios that continue to amortize.amortize and changes in the value of the marketable equity securities in the financial services portfolio. For the three and six months ended October 2, 2021, we recognized unrealized losses on marketable equity securities of $0.5 million and $0.1 million, respectively. For the three and six months ended September 26, 2020, we recognized gains of $0.7 million and $1.7 million, respectively.
Gross Profit.
| | | Three Months Ended | | | Three Months Ended | |
($ in thousands) | ($ in thousands) | December 26, 2020 | | December 28, 2019 | | Change | ($ in thousands) | October 2, 2021 | | September 26, 2020 | | Change |
Gross profit: | | | | | | |
Factory-built housing | Factory-built housing | $ | 47,031 | | | $ | 48,793 | | | $ | (1,762) | | | (3.6) | % | Factory-built housing | $ | 82,299 | | | $ | 46,155 | | | $ | 36,144 | | | 78.3 | % |
Financial services | Financial services | 12,207 | | | 11,062 | | | 1,145 | | | 10.4 | % | Financial services | 7,629 | | | 7,386 | | | 243 | | | 3.3 | % |
| | $ | 59,238 | | | $ | 59,855 | | | $ | (617) | | | (1.0) | % | | $ | 89,928 | | | $ | 53,541 | | | $ | 36,387 | | | 68.0 | % |
| Gross profit as % of Net revenue: | | |
Gross profit as % of Net revenue | | Gross profit as % of Net revenue | |
Consolidated | Consolidated | 20.5 | % | | 21.9 | % | | N/A | | (1.4) | % | Consolidated | 25.0 | % | | 20.8 | % | | N/A | | 4.2 | % |
Factory-built housing | Factory-built housing | 17.4 | % | | 19.0 | % | | N/A | | (1.6) | % | Factory-built housing | 24.1 | % | | 19.2 | % | | N/A | | 4.9 | % |
Financial services | Financial services | 68.0 | % | | 66.6 | % | | N/A | | 1.4 | % | Financial services | 43.7 | % | | 43.4 | % | | N/A | | 0.3 | % |
| | | | Six Months Ended | |
($ in thousands) | | ($ in thousands) | October 2, 2021 | | September 26, 2020 | | Change |
Factory-built housing | | Factory-built housing | $ | 148,572 | | | $ | 93,147 | | | $ | 55,425 | | | 59.5 | % |
Financial services | | Financial services | 15,369 | | | 15,717 | | | (348) | | | (2.2) | % |
| | | $ | 163,941 | | | $ | 108,864 | | | $ | 55,077 | | | 50.6 | % |
| Gross profit as % of Net revenue | | Gross profit as % of Net revenue | |
Consolidated | | Consolidated | 23.8 | % | | 21.2 | % | | N/A | | 2.6 | % |
Factory-built housing | | Factory-built housing | 22.7 | % | | 19.4 | % | | N/A | | 3.3 | % |
Financial services | | Financial services | 43.2 | % | | 46.6 | % | | N/A | | (3.4) | % |
| | | | | | | | | | | | | | | | | | | | | | | |
| Nine Months Ended | | | | |
($ in thousands) | December 26, 2020 | | December 28, 2019 | | Change |
Gross profit: | | | | | | | |
Factory-built housing | $ | 140,178 | | | $ | 149,567 | | | $ | (9,389) | | | (6.3) | % |
Financial services | 27,924 | | | 29,053 | | | (1,129) | | | (3.9) | % |
| $ | 168,102 | | | $ | 178,620 | | | $ | (10,518) | | | (5.9) | % |
| | | | | | | |
Gross profit as % of Net revenue: | | | | | | | |
Consolidated | 21.0 | % | | 22.1 | % | | N/A | | (1.1) | % |
Factory-built housing | 18.7 | % | | 19.7 | % | | N/A | | (1.0) | % |
Financial services | 54.0 | % | | 60.7 | % | | N/A | | (6.7) | % |
Factory-built housing gross profit increased primarily due to increased home sales volume and higher average sales prices. We continue to monitor and react to inflation in building material prices by maintaining a focus on our product pricing; however, product price increases may lag behind the escalation of building material costs. While lumber and other lumber related product market prices have begun to decline, we have seen most other product prices increase, offsetting those declines. Gross profit as a percentage of Net revenue decreased foralso increased from a shift toward more multi-section homes.
For the three and nine months ended December 26, 2020October 2, 2021, Financial services gross profit increased primarily due to lower weather-related claims volume, partially offset by unrealized losses on marketable equity securities. For the six months ended October 2, 2021, gross profit decreased primarily due tohigher material costsweather-related claims volume in the first quarter and lower sales volume resulting from the production inefficiencies caused by the COVID-19 pandemic.unrealized losses on marketable equity securities.
In the financial services segment, Gross profit as a percentage of Net revenue increased for the three months ended December 26, 2020 due to
lower weather-related claims volume and higher unrealized gains on marketable equity securities. However, for the nine months ended December 26, 2020, Gross profit as a percentage of Net revenue decreased as a result of higher weather-related claims volume at our insurance subsidiary and lower interest income earned on the acquired consumer loan portfolios that continue to amortize.
Selling, General and Administrative Expenses.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | |
($ in thousands) | December 26, 2020 | | December 28, 2019 | | Change |
Selling, general and administrative expenses: | | | | | | | |
Factory-built housing | $ | 30,575 | | | $ | 32,017 | | | $ | (1,442) | | | (4.5) | % |
Financial services | 4,839 | | | 4,827 | | | 12 | | | 0.2 | % |
| $ | 35,414 | | | $ | 36,844 | | | $ | (1,430) | | | (3.9) | % |
| | | | | | | |
Selling, general and administrative expenses as % of Net revenue: | 12.3 | % | | 13.5 | % | | N/A | | (1.2) | % |
| | | Nine Months Ended | | | Three Months Ended | |
($ in thousands) | ($ in thousands) | December 26, 2020 | | December 28, 2019 | | Change | ($ in thousands) | October 2, 2021 | | September 26, 2020 | | Change |
Selling, general and administrative expenses: | | | | | | |
Factory-built housing | Factory-built housing | $ | 92,037 | | | $ | 94,348 | | | $ | (2,311) | | | (2.4) | % | Factory-built housing | $ | 40,347 | | | $ | 30,725 | | | $ | 9,622 | | | 31.3 | % |
Financial services | Financial services | 14,153 | | | 13,843 | | | 310 | | | 2.2 | % | Financial services | 5,025 | | | 4,728 | | | 297 | | | 6.3 | % |
| | $ | 106,190 | | | $ | 108,191 | | | $ | (2,001) | | | (1.8) | % | | $ | 45,372 | | | $ | 35,453 | | | $ | 9,919 | | | 28.0 | % |
Selling, general and administrative expenses as % of Net revenue | | Selling, general and administrative expenses as % of Net revenue | 12.6 | % | | 13.7 | % | | N/A | | (1.1) | % |
| Selling, general and administrative expenses as % of Net revenue: | 13.2 | % | | 13.4 | % | | N/A | | (0.2) | % | |
| | | Six Months Ended | |
($ in thousands) | | ($ in thousands) | October 2, 2021 | | September 26, 2020 | | Change |
Factory-built housing | | Factory-built housing | $ | 75,844 | | | $ | 61,462 | | | $ | 14,382 | | | 23.4 | % |
Financial services | | Financial services | 10,360 | | | 9,314 | | | 1,046 | | | 11.2 | % |
| | | $ | 86,204 | | | $ | 70,776 | | | $ | 15,428 | | | 21.8 | % |
Selling, general and administrative expenses as % of Net revenue | | Selling, general and administrative expenses as % of Net revenue | 12.5 | % | | 13.8 | % | | N/A | | (1.3) | % |
Selling, general and administrative expenses related to factory-built housing decreasedincreased between periods primarily from higher salary and incentive-based compensation expense and deal costs related to the Commodore acquisition which were $2.1 million and $2.4 million for the three and six months ended October 2, 2021, respectively. This was partially offset by a reduction in legal expenses and the amortization of the additional directorDirector and officer ("D&O")Officer insurance premium, partially offset by increased corporate-related expenses. During the three months ended December 26, 2020, we incurred $0.7 million in expenses related to the SEC inquiry, but also received a $0.4 million insurance recovery of prior expenses, resulting in a net expense of $0.3 million during the period compared to $0.9 million in expenseadded in the third quarter of fiscal year 2020. For the nine months ended December 26, 2020, we recorded a net expense of $0.1 million for SEC inquiry related expenses compared to $2.5 million in expense in the comparable prior year period.
As the amortization of the additional D&O insurance premium has now been completed, the three months ended December 26, 2020 contains no related expense while the prior year period included a2019, which was $2.1 million charge. For the nine months ended December 26, 2020, additional D&O insurance premium amortization wasand $4.2 million versus $6.3 million for the three and six months ended September 26, 2020, respectively, with no expense in the priorcurrent year period..
In Financial services, Selling, general and administrative expenses increased for the three and nine months ended December 26, 2020 primarily from greater recognition of deferred origination costs on higher salaryloan sales and incentive-basedhigher compensation expense.
Interest expense was $0.2 million and $0.5 million for the three months ended December 26, 2020 and December 28, 2019, respectively. For the nine months ended December 26, 2020 and December 28, 2019, Interest expense was $0.6 million and $1.3 million, respectively. Other Components of Net Income.
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | | | |
($ in thousands) | October 2, 2021 | | September 26, 2020 | | Change |
Interest expense | $ | 203 | | | $ | 194 | | | $ | 9 | | | 4.6 | % |
Other income, net | 4,668 | | | 1,702 | | | 2,966 | | | 174.3 | % |
Income tax expense | 11,338 | | | 4,547 | | | 6,791 | | | 149.4 | % |
Effective tax rate | 23.1 | % | | 23.2 | % | | N/A | | (0.1) | % |
| | | | | | | |
| Six Months Ended | | | | |
($ in thousands) | October 2, 2021 | | September 26, 2020 | | Change |
Interest expense | $ | 367 | | | $ | 390 | | | $ | (23) | | | (5.9) | % |
Other income, net | 7,129 | | | 3,578 | | | 3,551 | | | 99.2 | % |
Income tax expense | 19,770 | | | 9,553 | | | 10,217 | | | 107.0 | % |
Effective tax rate | 23.4 | % | | 23.1 | % | | N/A | | 0.3 | % |
Interest expense consists primarily of debt service on CountryPlace'sthe financings of manufactured home-only loans and interest related to finance leases. The decrease is primarily the result of a reduction in securitized bond interest expense, as we exercised our right to repurchase the 2007-1 securitized loan portfolio in August 2019, thereby eliminating the related interest expense. This decrease is partially offset by increases in interest expense from secured credit facilities at CountryPlace.
Other Income, net.
Other income, net primarily consists of realized and unrealized gains and losses on corporate marketable equity investments, interest income related to commercial loansloan receivable balances, interest income earned on cash balances and gains and losses from the sale of property, plant and equipment. Other income, net was $2.2During the year, we also recognized a non-cash gain of $3.3 million for eachon the remeasurement of the three month periods ended December 26, 2020assets and December 28, 2019.
For the nine months ended December 26, 2020 and December 28, 2019, Other income, net was $5.8 million and $10.2 million, respectively. The decline was primarily due to a $3.4 million net gain on the saleliabilities of idle land that was recorded in the prior year period, as well as a reduction in interest earned in the current periods on cash and commercial loan receivables, given the 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 $6.2 million and $3.8 million for the three months ended December 26, 2020 and December 28, 2019, respectively, for an effective income tax rate of 23.9% and 15.5%, respectively. Income tax expense for the nine months ended December 26, 2020 and December 28, 2019 was $15.7 million and $16.3 million, respectively, for effective income tax rates of 23.4% and 20.5%, respectively. The lower effective tax rates for prior year periods were primarily due to tax benefits from the exercise of stock options, which provided a benefit of $0.5 million in the nine months ended December 26, 2020 comparedCraftsman. See Note 21 to the $1.3 million in the same period last year, and a catch up of tax credits that were enacted as part of the 2020 Appropriations Bill. Certain of these credits were extended as part of the 2021 Consolidated Appropriations Act that was signed into law after quarter end on December 27, 2020. We are currently evaluating the impact this will have in future periods.Financial Statements for further information.
Liquidity and Capital Resources
We believe that cash and cash equivalents at December 26, 2020,October 2, 2021, together with cash flow from operations, will be sufficient to fund our operations and provide for growth for the next 12 months and into the foreseeable future. We maintain cash in U.S. Treasury and other money market funds, some of which are in excess of federally insured limits. We expect 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 our liquidity and capital resources. Because of our sufficient cash position, we have not historically sought external sources of liquidity, with the exception of certain credit facilities for the home-only lending programs. However,Regardless, depending on our operating results and strategic opportunities, we may need to seek additional or alternative sources of financing.financing in the future. 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 us to reevaluate our long-term operating plans to make more efficient use of our existing capital resources.resources at such time. The exact nature of any changes to the Company'sour plans that would be considered depends on various factors, such as conditions in the factory-built housing industry and general economic conditions outside of our 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 our insurance subsidiary are generally not available to satisfy the claims of Cavco or its legal subsidiaries. We believe that stockholders' equity at ourthe insurance subsidiary remains sufficient and we do not believe that itsthe 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 DecemberOctober 2, 2021 and September 26, 2020, and December 28, 2019, respectively:
| | | Nine Months Ended | | | Six Months Ended | |
(in thousands) | (in thousands) | December 26, 2020 | | December 28, 2019 | | $ Change | (in thousands) | October 2, 2021 | | September 26, 2020 | | $ Change |
Cash, cash equivalents and restricted cash at beginning of the fiscal year | Cash, cash equivalents and restricted cash at beginning of the fiscal year | $ | 255,607 | | | $ | 199,869 | | | $ | 55,738 | | Cash, cash equivalents and restricted cash at beginning of the fiscal year | $ | 339,307 | | | $ | 255,607 | | | $ | 83,700 | |
Net cash provided by operating activities | Net cash provided by operating activities | 91,566 | | | 68,320 | | | 23,246 | | Net cash provided by operating activities | 80,087 | | | 74,609 | | | 5,478 | |
Net cash used in investing activities | Net cash used in investing activities | (5,098) | | | (18,873) | | | 13,775 | | Net cash used in investing activities | (156,045) | | | (82) | | | (155,963) | |
Net cash used in financing activities | Net cash used in financing activities | (1,451) | | | (19,058) | | | 17,607 | | Net cash used in financing activities | (18,873) | | | (865) | | | (18,008) | |
Cash, cash equivalents and restricted cash at end of the period | Cash, cash equivalents and restricted cash at end of the period | $ | 340,624 | | | $ | 230,258 | | | $ | 110,366 | | Cash, cash equivalents and restricted cash at end of the period | $ | 244,476 | | | $ | 329,269 | | | $ | (84,793) | |
Net cash provided by operating activities increased during the nine months ended December 26, 2020primarily from higher net income and proceeds from consumer loan sales, which were $101.6 million this year compared to $80.6 million in the nine months ended December 28, 2019 primarily due to more customer deposits received as a resultprevious year. This increase was partially offset by rising costs of our raw materials and higher order rates, higher collections on commercial loans receivables andpurchases of such materials, the timing of collections on accounts receivable and commercial loans receivable and payments on Accounts payablepayable and Accrued expenses and other current liabilities.
Consumer loan originations increased by $2.5$3.0 million to $124.1$85.4 million for the ninesix months ended December 26, 2020October 2, 2021 from $121.6$82.4 million for the ninesix months ended December 28, 2019. Proceeds from sales of consumer loans provided $122.6 million in cash compared to $117.1 million in the previous year.September 26, 2020.
We have enteredenter into commercial loan arrangements with distributors, communities and developers under which we provide funds for financing homes. In addition, we enter into commercial loan arrangements with certain distributors of our products under which we provide funds for Wholesalewholesale purchases. In addition, we have entered into direct commercial loan arrangements with distributors, community owners and developers under which we provide funds for financing homes. We have also invested in community-based lending initiatives that provide home-only financing to new residents of certain manufactured home communities. For additional information regarding our commercial loans receivable, see Note 7 to the Consolidated Financial Statements. Further, we have investedinvest in and developeddevelop 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. Decreased lending activity provided cash of $3.3 million while the prior period net activity provided $4.7 million in cash.
InvestingNet cash used in investing activities consistconsists of buying and selling debt and marketable equity securities in our Financial Services segment, purchases of property, plant and equipment and funding strategic growth acquisitions. Greater cash was used in the current period for the purchase of Craftsman and Commodore.
Net cash used in financing activities for investing activities in the prior yearcurrent period was primarily used to fundfor the acquisitionrepurchase of Destiny Homes.
Financing activities used $17.6 million less cash during the period compared to the same period last year as we repurchased the 2007-1 securitized loan portfolio in August 2019.common stock.
CountryPlaceWe entered into secured credit facilities with independent third-party banks. The proceeds were usedbanks to facilitate the origination of consumer home-only loans to be held for investment, secured by the manufactured homes which were subsequently pledged as collateral to the facilities. Upon completion of the draw down periods, these facilities were converted into an amortizing loan based on a 20-year20 or 25-year amortization period with a balloon payment due upon maturity. As of December 26, 2020,October 2, 2021, the outstanding balance of the converted loans was $8.8$7.7 million with a weighted average interest rate of 4.91%.
Contractual Commitments and Contingencies. There were no material changes to the contractual obligations as set forth in our Annual Report on Form 10-K.
Critical Accounting Policies
On March 29, 2020, we adopted Accounting Standards Update 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which changes the impairment model for most financial assets and certain other instruments. We adopted the standard by recognizing the cumulative effect of initially applying the new credit loss standardExcept as an adjustment to the opening balance of Retained earnings. Refer todescribed in Note 1 toto the Consolidated Financial Statements for additional discussion. There, there have been no other significant changes to our critical accounting policies during the ninesix months ended December 26, 2020,October 2, 2021, as compared to those disclosed in Part II, Item 7 of our 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 pronouncements.
Other Matters
Related Party Transactions. See Note 1920 to the Consolidated Financial Statements for a discussion of our related party transactions.
Off Balance Sheet Arrangements
See Note 15 to the Consolidated Financial Statements for a discussion of our 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 its Principal Financial Officer, of the effectiveness of its 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 its Principal Financial Officer concluded that, as of December 26, 2020,October 2, 2021, 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 26, 2020October 2, 2021 which have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Information regarding reportable legal proceedings is containedSee the information under the "Legal Matters" caption in Part I, Item 3,Note Legal Proceedings15, in the Form 10-K. The following describes legal proceedings, if any, that became reportable during the period ended December 26, 2020, and, if applicable, amends and restates descriptions of previously reported legal proceedings in which there have been material developments during such quarter.
Since 2018, the Company has been cooperating with an investigation by the enforcement staff of the SEC's Los Angeles Regional Office regarding securities trading in personal and Company accounts directed by the Company's former Chief Executive Officer, Joseph Stegmayer. The Audit Committee of the Board of Directors conducted an internal investigation led by independent legal counsel and other advisers and, following the completion of its work in early 2019, the Audit Committee shared the results of its work with the Company's auditors, listing exchange and with the SEC staff. We have also made documents and personnel available to the SEC staff and we intend to continue cooperating with its investigation.
As previously disclosed in September 2020, the SEC staff issued a Wells Notice to Dan Urness, the Company's ChiefConsolidated Financial Officer and Principal Financial Officer and Principal Accounting Officer at the time, 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. Also, as previously disclosed in November 2020, the SEC staff issued a Wells Notice to the Company stating that they intend to recommend an enforcement action against the Company in connection with the SEC's investigation. We have been exploring the possibility of a settlement with the SEC staff in connection with the matter but, at this time, we are unable to assess the probability of that outcome or reasonably estimate the amount of a potential loss, if any.Statements, which is incorporated herein by reference.
Joseph D. Robles v. Cavco Industries, Inc. ("Robles"), was filed in the Superior Court for the State of California, Riverside on June 25, 2019 and Malik Griffin v. Fleetwood Homes, Inc. ("Griffin"), was filed in the Superior Court for the State of California, San Bernardino on September 19, 2019, each 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. On November 24, 2020, Robles dismissed his separate action in the Riverside County Superior Court and Griffin filed an amended complaint adding Robles as a named plaintiff to the action in the San Bernardino County Superior Court. A joint mediation occurred on January 27, 2021 where the Parties failed to reach a settlement or resolution to the matter.
The Company is party to certain other lawsuits in the ordinary course of business. Based on management's present knowledge of the facts and (in certain cases) advice of outside counsel, management does not believe that loss contingencies arising from pending matters are likely to have a material adverse effect on the Company's consolidated financial position, liquidity or results of 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.
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 our 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 us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
33Issuer Purchases of Equity Securities
On October 27, 2020, the Company's Board of Directors approved a $100 million stock repurchase program, which was announced on a Current Report on Form 8-K filed with the Securities and Exchange Commission on October 29, 2020, and that may be used to purchase its outstanding common stock. The repurchases may be made in the open market or in privately negotiated transactions in compliance with applicable state and federal securities laws and other legal requirements. The level of repurchase activity is subject to market conditions and other investment opportunities. The repurchase program does not obligate us to acquire any particular amount of common stock and may be suspended or discontinued at any time. The repurchase program is funded using our available cash. The following table sets forth repurchases of our common stock during the second quarter of fiscal year 2022:
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Period | | Total Number of Shares Purchased | | Average Price Paid Per Share | | Total Number of Shares Purchased as Part of the Publically Announced Program | | Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program (in thousands) |
July 4, 2021 to August 7, 2021 | | — | | | $ | — | | | — | | | $ | 85,717 | |
August 8, 2021 to September 4, 2021 | | — | | | — | | | — | | | 85,717 | |
September 5, 2021 to October 2, 2021 | | 30,300 | | | 250.63 | | | 30,300 | | | 78,123 | |
| | 30,300 | | | | | 30,300 | | | |
Item 5. Other Information
There is noItem 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
On November 2, 2021, the Company entered into a Severance Agreement with Allison K. Aden, the Company’s Chief Financial Officer.
The Severance Agreement provides for certain payments and other information requiredbenefits to be disclosed underprovided upon termination without Cause (as defined in the Severance Agreement). In the event of a qualifying termination, Ms. Aden will receive: (a) a severance payment equal to the sum of: (i) one year of her current base salary plus (ii) her annual target bonus for the year of termination; (b) a pro-rated bonus, for the period of time Ms. Aden was employed and worked during the fiscal year, equal to her annual target bonus amount as of the year of termination; and (c) COBRA benefits coverage for up to twelve (12) months following termination.
In addition, upon a termination without Cause (as defined in the Severance Agreement) during the period six months prior to or within twelve months following a Change in Control, Ms. Aden will be entitled to the payments and benefits described above and all outstanding equity awards will immediately vest in full, provided however, that any award subject to performance goals shall vest at the target levels of performance.
The payment of severance benefits described above is conditioned upon the delivery and non-revocation of a customary release and is subject to customary provisions regarding confidentiality of information.
A copy of the Severance Agreement is filed as Exhibit 10.1 to this item whichreport and is incorporated by reference herein.
Also on November 2, 2021, the Company entered into a Change in Control Agreement with certain officers of the Company, including Paul W. Bigbee, the Company's Chief Accounting Officer.
The Change in Control Agreement provides for certain payments and other benefits to be provided upon termination without Cause (as defined in the Change in Control Agreement) during the period six months prior to or within twelve months following a Change in Control (as defined in the Change in Control Agreement). In the event of a Change in Control and qualifying termination, the respective officer will receive: (a) a severance payment equal to the sum of: (i) one year of the officer's current base salary plus (ii) the annual target bonus for the year of termination; (b) a pro-rated bonus, for the period of time the officer was not previously disclosed.employed and worked during the fiscal year, equal to the officer’s annual target bonus amount as of the year of termination (c) all outstanding equity awards will immediately vest in full, provided however, that any award subject to performance goals shall vest at the target levels of performance; and (d) COBRA benefits coverage for up to twelve (12) months following termination.
The payment of the severance benefits is conditioned upon the officer's execution and non-revocation of a customary release and is subject to customary provisions regarding confidentiality of information.
The form of Change in Control Agreement is filed as Exhibit 10.2 to this report and is incorporated herein by reference.
Item 6. Exhibits
| Exhibit No. | Exhibit No. | | Exhibit | Exhibit No. | | Exhibit | |
| | | (1) | | |
| | | (1) | | |
| | | (2) | Asset Purchase Agreement, dated July 23, 2021, by and among Commodore Homes, LLC, The Commodore Corporation, TCC Clarion Limited Partnership, TCC Pennwest, LLC and each of the individual equityholders named therein, and Barry S. Shein, in his capacity as Sellers' representative | |
| | (1) | | | (1) | | |
| | (1) | | | (1) | | |
| | (2) | | | (3) | | |
101.INS | 101.INS | | The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document. | 101.INS | | The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document. | |
101.SCH | 101.SCH | | Inline XBRL Taxonomy Extension Schema Document | 101.SCH | | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL | 101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document | 101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | 101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document | 101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | 101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document | 101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | 101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document | 101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | 104 | | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) | 104 | | Cover 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) Exhibit 10.1 to Current Report on Form 8-K filed on July 26, 2021, incorporated by reference.
(3) Furnished herewith.
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.
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Cavco Industries, Inc. | | | |
Registrant | | | |
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Signature | | Title | Date |
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/s/ William C. Boor | | Director, President and Chief Executive Officer | January 29,November 5, 2021 |
William C. Boor | | (Principal Executive Officer) | |
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/s/ Paul BigbeeAllison K. Aden | | Executive Vice President, Chief AccountingFinancial Officer & Treasurer | January 29,November 5, 2021 |
Paul BigbeeAllison K. Aden | | (Principal Financial and Accounting Officer) | |
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