0000278166cvco:Fiscal2018Member2021-10-02

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~July 3,~~October 2, 2021


☐			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)

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.


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 ~~July 30,~~October 29, 2021, ~~9,187,030~~9,177,315 shares of the registrant's Common Stock, $.01 par value, were outstanding.

CAVCO INDUSTRIES, INC.

FORM 10-Q

~~July 3,~~October 2, 2021

TABLE OF CONTENTS


			Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of ~~July 3,~~October 2, 2021 (unaudited) and April 3, 2021			1
Consolidated Statements of Comprehensive Income (unaudited) for the three and six months ended ~~July 3,~~October 2, 2021 and ~~June 27,~~September 26, 2020			2
Consolidated Statements of Cash Flows (unaudited) for the ~~three~~six months ended ~~July 3,~~October 2 , 2021 and ~~June 27,~~September 2 6 , 2020			3
Notes to Consolidated Financial Statements			4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			1823
Item 3. Quantitative and Qualitative Disclosures About Market Risk			2432
Item 4. Controls and Procedures			2532
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			2633
Item 1A. Risk Factors			2633
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			2633
Item 5. Other Information			2633
Item 6. Exhibits			2735
SIGNATURES			2836

Table of Contents

PART 1. FINANCIAL INFORMATION

Item 1. Financial Statements

CAVCO INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share amounts)


		July 3, 2021		April 3, 2021			October 2, 2021		April 3, 2021
ASSETS	ASSETS	(Unaudited)				ASSETS	(Unaudited)
Current assets	Current assets					Current assets
Cash and cash equivalents	Cash and cash equivalents	$	329,753	$	322,279	Cash and cash equivalents	$	224,291	$	322,279
Restricted cash, current	Restricted cash, current	16,728		16,693		Restricted cash, current	19,850		16,693
Accounts receivable, net	Accounts receivable, net	51,054		47,396		Accounts receivable, net	72,038		47,396
Short-term investments	Short-term investments	19,749		19,496		Short-term investments	18,867		19,496
Current portion of consumer loans receivable, net	Current portion of consumer loans receivable, net	32,429		37,690		Current portion of consumer loans receivable, net	26,475		37,690
Current portion of commercial loans receivable, net	Current portion of commercial loans receivable, net	16,500		14,568		Current portion of commercial loans receivable, net	31,307		14,568
Current portion of commercial loans receivable from affiliates, net	Current portion of commercial loans receivable from affiliates, net	2,113		4,664		Current portion of commercial loans receivable from affiliates, net	294		4,664
Inventories	Inventories	150,917		131,234		Inventories	190,394		131,234
Prepaid expenses and other current assets	Prepaid expenses and other current assets	48,621		57,779		Prepaid expenses and other current assets	49,482		57,779
Total current assets	Total current assets	667,864		651,799		Total current assets	632,998		651,799
Restricted cash	Restricted cash	335		335		Restricted cash	335		335
Investments	Investments	38,192		35,010		Investments	35,650		35,010
Consumer loans receivable, net	Consumer loans receivable, net	35,095		37,108		Consumer loans receivable, net	32,124		37,108
Commercial loans receivable, net	Commercial loans receivable, net	21,245		20,281		Commercial loans receivable, net	36,685		20,281
Commercial loans receivable from affiliates, net	Commercial loans receivable from affiliates, net	4,730		4,801		Commercial loans receivable from affiliates, net	3,647		4,801
Property, plant and equipment, net	Property, plant and equipment, net	97,981		96,794		Property, plant and equipment, net	156,397		96,794
Goodwill	Goodwill	75,090		75,090		Goodwill	106,487		75,090
Other intangibles, net	Other intangibles, net	14,190		14,363		Other intangibles, net	35,404		14,363
Operating lease right-of-use assets	Operating lease right-of-use assets	16,150		16,252		Operating lease right-of-use assets	16,706		16,252
Total assets	Total assets	$	970,872	$	951,833	Total assets	$	1,056,433	$	951,833
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST, AND STOCKHOLDERS' EQUITY						LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST, AND STOCKHOLDERS' EQUITY
Current liabilities	Current liabilities					Current liabilities
Accounts payable	Accounts payable	$	30,175	$	32,120	Accounts payable	$	42,549	$	32,120
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	210,190		203,133		Accrued expenses and other current liabilities	237,462		203,133
Current portion of secured financings and other	Current portion of secured financings and other	1,822		1,851		Current portion of secured financings and other	2,260		1,851
Total current liabilities	Total current liabilities	242,187		237,104		Total current liabilities	282,271		237,104
Operating lease liabilities	Operating lease liabilities	13,085		13,361		Operating lease liabilities	13,240		13,361
Secured financings and other	Secured financings and other	9,927		10,335		Secured financings and other	17,305		10,335
Deferred income taxes	Deferred income taxes	6,606		7,393		Deferred income taxes	9,373		7,393
Redeemable noncontrolling interest						Redeemable noncontrolling interest	1,128		—
Stockholders' equity	Stockholders' equity					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; Issued 9,245,721 and 9,241,256 shares, respectively		92		92
Treasury stock, at cost; 67,901 and 6,600 shares, respectively		(14,283)		(1,441)
Preferred stock, $0.01 par value; 1,000,000 shares authorized; No shares issued or outstanding						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						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						Treasury stock, at cost; 98,201 and 6,600 shares, respectively	(21,877)		(1,441)
Additional paid-in capital	Additional paid-in capital	255,071		253,835		Additional paid-in capital	259,116		253,835
Retained earnings	Retained earnings	458,103		431,057		Retained earnings	495,713		431,057
Accumulated other comprehensive income	Accumulated other comprehensive income	84		97		Accumulated other comprehensive income	71		97
Total stockholders' equity	Total stockholders' equity	699,067		683,640		Total stockholders' equity	733,116		683,640
Total liabilities and stockholders' equity		$	970,872	$	951,833
Total liabilities, redeemable noncontrolling interest and stockholders' equity						Total liabilities, redeemable noncontrolling interest and stockholders' equity	$	1,056,433	$	951,833

See accompanying Notes to Consolidated Financial Statements

Table of Contents

CAVCO INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands, except per share amounts)

(Unaudited)


		Three Months Ended			Three Months Ended						Six Months Ended
			July 3, 2021			June 27, 2020			October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020
Net revenue	Net revenue		$	330,422		$	254,801	Net revenue	$	359,543	$	257,976	$	689,965	$	512,777
Cost of sales	Cost of sales		256,409			199,478		Cost of sales	269,615		204,435		526,024		403,913
Gross profit	Gross profit		74,013			55,323		Gross profit	89,928		53,541		163,941		108,864
Selling, general and administrative expenses	Selling, general and administrative expenses		40,832			35,323		Selling, general and administrative expenses	45,372		35,453		86,204		70,776
Income from operations	Income from operations		33,181			20,000		Income from operations	44,556		18,088		77,737		38,088
Interest expense	Interest expense		(164)			(196)		Interest expense	(203)		(194)		(367)		(390)
Other income, net	Other income, net		2,461			1,876		Other income, net	4,668		1,702		7,129		3,578
Income before income taxes	Income before income taxes		35,478			21,680		Income before income taxes	49,021		19,596		84,499		41,276
Income tax expense	Income tax expense		(8,432)			(5,006)		Income tax expense	(11,338)		(4,547)		(19,770)		(9,553)
Net income	Net income		$	27,046		$	16,674	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		$	27,046		$	16,674	Net income	$	37,683	$	15,049	$	64,729	$	31,723
Reclassification adjustment for securities sold	Reclassification adjustment for securities sold		1			26		Reclassification adjustment for securities sold	—		7		1		33
Applicable income taxes	Applicable income taxes		0			(5)		Applicable income taxes	—		(2)		—		(7)
Net change in unrealized position of investments held	Net change in unrealized position of investments held		(18)			59		Net change in unrealized position of investments held	(16)		3		(34)		62
Applicable income taxes	Applicable income taxes		4			(12)		Applicable income taxes	3		(1)		7		(13)
Comprehensive income								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
			$	27,033		$	16,742

Net income per share
Net income per share attributable to Cavco common stockholders								Net income per share attributable to Cavco common stockholders
Basic	Basic		$	2.94		$	1.82	Basic	$	4.09	$	1.64	$	7.03	$	3.46
Diluted	Diluted		$	2.92		$	1.80	Diluted	$	4.06	$	1.62	$	6.97	$	3.42
Weighted average shares outstanding	Weighted average shares outstanding							Weighted average shares outstanding
Basic	Basic		9,198,229			9,174,182		Basic	9,190,866		9,182,945		9,194,577		9,178,609
Diluted	Diluted		9,276,529			9,264,661		Diluted	9,273,136		9,295,409		9,274,440		9,280,080

See accompanying Notes to Consolidated Financial Statements

Table of Contents

CAVCO INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)


		Three Months Ended					Six Months Ended
		July 3, 2021		June 27, 2020			October 2, 2021		September 26, 2020
OPERATING ACTIVITIES	OPERATING ACTIVITIES					OPERATING ACTIVITIES
Net income	Net income	$	27,046	$	16,674	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	1,576		1,613		Depreciation and amortization	3,190		3,182
Provision for credit losses	Provision for credit losses	(239)		(884)		Provision for credit losses	(74)		223
Deferred income taxes	Deferred income taxes	(783)		406		Deferred income taxes	1,987		(18)
Stock-based compensation expense	Stock-based compensation expense	1,100		945		Stock-based compensation expense	2,417		2,048
Non-cash interest income, net	Non-cash interest income, net	(394)		(2,186)		Non-cash interest income, net	(770)		(2,596)
Gain (loss) on sale or retirement of property, plant and equipment, net		(35)		289
(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	(5,579)		(4,982)		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	(3,659)		4,629		Accounts receivable	(3,136)		5,948
Consumer loans receivable originated	Consumer loans receivable originated	(42,706)		(47,356)		Consumer loans receivable originated	(85,370)		(82,352)
Proceeds from sales of consumer loans	Proceeds from sales of consumer loans	49,631		39,271		Proceeds from sales of consumer loans	101,556		80,589
Principal payments received on consumer loans receivable	Principal payments received on consumer loans receivable	3,929		3,261		Principal payments received on consumer loans receivable	6,875		6,974
Inventories	Inventories	(19,683)		7,139		Inventories	(19,980)		1,663
Prepaid expenses and other current assets	Prepaid expenses and other current assets	2,801		7,128		Prepaid expenses and other current assets	993		11,536
Commercial loans receivable	Commercial loans receivable	(243)		2,556		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	11,513		7,189		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	24,275		35,692		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	(2,593)		(1,856)		Purchases of property, plant and equipment	(4,671)		(3,773)

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	38		5		Proceeds from sale of property, plant and equipment	53		77
Purchases of investments	Purchases of investments	(4,429)		(1,160)		Purchases of investments	(6,251)		(4,440)
Proceeds from sale of investments	Proceeds from sale of investments	3,368		3,116		Proceeds from sale of investments	6,133		8,054
Net cash (used in) provided by investing activities		(3,616)		105
Net cash used in investing activities						Net cash used in investing activities	(156,045)		(82)
FINANCING ACTIVITIES	FINANCING ACTIVITIES					FINANCING ACTIVITIES
Proceeds from (payments for) exercise of stock options	Proceeds from (payments for) exercise of stock options	136		(533)		Proceeds from (payments for) exercise of stock options	2,865		(11)
Proceeds from secured financings and other	Proceeds from secured financings and other	0		64		Proceeds from secured financings and other	—		64
Payments on secured financings and other	Payments on secured financings and other	(444)		(453)		Payments on secured financings and other	(1,122)		(918)
Payments for common stock repurchases	Payments for common stock repurchases	(12,842)		0		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	(13,150)		(922)		Net cash used in financing activities	(18,873)		(865)
Net increase in cash, cash equivalents and restricted cash		7,509		34,875
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	339,307		255,607		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	$	346,816	$	290,482	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	$	4,774	$	2,536	Cash paid for income taxes	$	19,127	$	7,865
Cash paid for interest	Cash paid for interest	$	100	$	127	Cash paid for interest	$	195	$	251
Supplemental disclosures of noncash activity	Supplemental disclosures of noncash activity					Supplemental disclosures of noncash activity
Change in GNMA loans eligible for repurchase	Change in GNMA loans eligible for repurchase	$	(6,607)	$	1,242	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	$	708	$	5,559	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

Table of Contents

CAVCO INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The accompanying unaudited Consolidated Financial Statements of Cavco Industries, Inc. and its subsidiaries (collectively, "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. We have evaluated subsequent events after the balance sheet date through the date of the filing of this report with the ~~SEC;~~SEC, and ~~except for the events set forth in Note 20 of the Notes to Consolidated Financial Statements ("Notes") of the Company's Quarterly Report on Form 10-Q for the period ended July 3, 2021,~~ 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 2021 Annual Report on Form 10-K for the year ended April 3, 2021, filed with the SEC ("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. The uncertainty created by the novel coronavirus COVID-19 pandemic ~~("COVID-19")~~ 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 2, 2022 and will include 52 weeks.

We operate in 2 segments: (1) factory-built housing, which includes wholesale and retail factory-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 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.

~~For~~On September 24, 2021, we acquired the business and certain assets and liabilities of The Commodore Corporation ("Commodore"), including its six manufacturing facilities and two wholly-owned retail locations. The results of operations are included in our Consolidated Financial Statements from the date of acquisition. See Note 21.

In addition to the below, for a description of 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.

Table of Contents

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			Three Months Ended						Six Months Ended
			July 3, 2021			June 27, 2020			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		$	262,390		$	189,446	U.S. Housing and Urban Development code homes	$	285,947	$	197,723	$	548,337	$	387,169
Modular homes	Modular homes		26,617			20,783		Modular homes	31,386		20,483		58,003		41,266
Park model RVs	Park model RVs		9,671			13,722		Park model RVs	9,728		9,027		19,399		22,749
Other	Other		13,605			14,139		Other	15,033		13,734		28,638		27,873
			312,283			238,090			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		873			770		Insurance agency commissions received from third-party insurance companies	850		777		1,723		1,547
Other	Other		17,266			15,941		Other	16,599		16,232		33,865		32,173
			18,139			16,711			17,449		17,009		35,588		33,720
			$	330,422		$	254,801		$	359,543	$	257,976	$	689,965	$	512,777

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3. Restricted Cash

Restricted cash consisted of the following (in thousands):


		July 3, 2021		April 3, 2021			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	$	15,928	$	16,049	Cash related to CountryPlace customer payments to be remitted to third parties	$	18,820	$	16,049
Other restricted cash	Other restricted cash	1,135		979		Other restricted cash	1,365		979
		17,063		17,028			20,185		17,028
Less current portion	Less current portion	(16,728)		(16,693)		Less current portion	(19,850)		(16,693)
		$	335	$	335		$	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):


		July 3, 2021		April 3, 2021			October 2, 2021		September 26, 2020
Cash and cash equivalents	Cash and cash equivalents	$	329,753	$	322,279	Cash and cash equivalents	$	224,291	$	312,243
Restricted cash	Restricted cash	17,063		17,028		Restricted cash	20,185		17,026
		$	346,816	$	339,307		$	244,476	$	329,269

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4. Investments

Investments consisted of the following (in thousands):


		July 3, 2021		April 3, 2021			October 2, 2021		April 3, 2021
Available-for-sale debt securities	Available-for-sale debt securities	$	17,962	$	14,946	Available-for-sale debt securities	$	18,179	$	14,946
Marketable equity securities	Marketable equity securities	17,550		17,600		Marketable equity securities	16,566		17,600
Non-marketable equity investments	Non-marketable equity investments	22,429		21,960		Non-marketable equity investments	19,772		21,960
		57,941		54,506			54,517		54,506
Less current portion	Less current portion	(19,749)		(19,496)		Less current portion	(18,867)		(19,496)
		$	38,192	$	35,010		$	35,650	$	35,010

Investments in marketable equity securities consist of investments in the common stock of industrial and other companies.

~~As of July 3, 2021 and April 3, 2021,~~Our non-marketable equity investments ~~included contributions of $15.0 million t~~include ~~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 in~~communities and other distribution operations.

The ~~following tables summarize~~amortized cost and fair value of our investments in available-for-sale debt securities, ~~gross unrealized gains and losses and fair value, aggregated~~ by ~~investment category~~security type are shown in the table below (in thousands):.

July 3, 2021
Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair
Value
Residential mortgage-backed securities $ 2,609 $ 26 $ (11) $ 2,624
State and political subdivision debt securities 8,265 109 (19) 8,355
Corporate debt securities 6,982 12 (11) 6,983
$ 17,856 $ 147 $ (41) $ 17,962

April 3, 2021
Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair
Value
Residential mortgage-backed securities $ 2,787 $ 30 $ (13) $ 2,804
State and political subdivision debt securities 7,239 125 (19) 7,345
Corporate debt securities 4,797 11 (11) 4,797
$ 14,823 $ 166 $ (43) $ 14,946

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 July 3, 2021. 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.


	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

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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.


		July 3, 2021					October 2, 2021
		Amortized Cost		Fair Value			Amortized Cost		Fair Value
Due in less than one year	Due in less than one year	$	1,518	$	1,519	Due in less than one year	$	1,611	$	1,618
Due after one year through five years	Due after one year through five years	11,033		11,028		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	1,391		1,450		Due after five years through ten years	1,268		1,321
Due after ten years	Due after ten years	1,305		1,341		Due after ten years	1,051		1,083
Mortgage-backed securities	Mortgage-backed securities	2,609		2,624		Mortgage-backed securities	2,352		2,365
		$	17,856	$	17,962		$	18,089	$	18,179

There were 0no gross gains or losses realized on the sale of available-for-sale debt securities during thethe three and six months ended ~~July 3, 2021 or June 27, 2020.~~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.

Net investment gains and losses on marketable equity securities were as follows (in thousands):


		Three Months Ended			Three Months Ended						Six Months Ended
			July 3, 2021			June 27, 2020			October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020
Marketable equity securities	Marketable equity securities							Marketable equity securities
Net gain recognized during the period	Net gain recognized during the period		$	1,696		$	2,030	Net gain recognized during the period	$	243	$	1,251	$	1,939	$	3,281
Less: Net gains recognized on securities sold during the period			(136)			(33)
Less: Net (gains) losses recognized on securities sold during the period								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	Unrealized gains recognized during the period on securities still held		$	1,560		$	1,997	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):


		July 3, 2021		April 3, 2021			October 2, 2021		April 3, 2021
Raw materials	Raw materials	$	69,123	$	54,336	Raw materials	$	78,810	$	54,336
Work in process	Work in process	20,426		19,149		Work in process	27,983		19,149
Finished goods	Finished goods	61,368		57,749		Finished goods	83,601		57,749
		$	150,917	$	131,234		$	190,394	$	131,234

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6. Consumer Loans Receivable

The following table summarizes consumer loans receivable (in thousands):


		July 3, 2021		April 3, 2021			October 2, 2021		April 3, 2021
Loans held for investment, previously securitized	Loans held for investment, previously securitized	$	30,384	$	31,949	Loans held for investment, previously securitized	$	28,631	$	31,949
Loans held for investment	Loans held for investment	17,565		18,690		Loans held for investment	16,207		18,690
Loans held for sale	Loans held for sale	13,542		15,587		Loans held for sale	10,253		15,587
Construction advances	Construction advances	10,479		13,801		Construction advances	7,485		13,801
		71,970		80,027			62,576		80,027
Deferred financing fees and other, net	Deferred financing fees and other, net	(1,528)		(2,041)		Deferred financing fees and other, net	(1,178)		(2,041)
Allowance for loan losses	Allowance for loan losses	(2,918)		(3,188)		Allowance for loan losses	(2,799)		(3,188)
		67,524		74,798			58,599		74,798
Less current portion	Less current portion	(32,429)		(37,690)		Less current portion	(26,475)		(37,690)
		$	35,095	$	37,108		$	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			Three Months Ended						Six Months Ended
			July 3, 2021			June 27, 2020			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		$	3,188		$	1,767	Allowance for loan losses at beginning of period	$	2,918	$	4,012	$	3,188	$	1,767
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")		0			2,276		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		(267)			161		Change in estimated loan losses, net	210		(94)		(57)		67
Charge-offs	Charge-offs		(3)			(192)		Charge-offs	(329)		(8)		(332)		(200)
Allowance for loan losses at end of period	Allowance for loan losses at end of period		$	2,918		$	4,012	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:


		July 3, 2021		April 3, 2021			October 2, 2021		April 3, 2021
Weighted average contractual interest rate	Weighted average contractual interest rate	8.2	%	8.3	%	Weighted average contractual interest rate	8.2	%	8.3	%
Weighted average effective interest rate	Weighted average effective interest rate	8.8	%	9.3	%	Weighted average effective interest rate	8.8	%	9.3	%
Weighted average months to maturity	Weighted average months to maturity	160		162		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):

July 3,
2021 April 3,
2021
Current $ 68,258 $ 76,378
31 to 60 days 192 508
61 to 90 days 3,112 21
91+ days 408 3,120
$ 71,970 $ 80,027

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	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 tables disaggregate gross consumer loans receivable by credit quality indicator and fiscal year of origination (in thousands):


		July 3, 2021															October 2, 2021
		2022		2021		2020		2019		2018		Prior		Total			2022		2021		2020		2019		2018		Prior		Total
Prime- FICO score 680 and greater	Prime- FICO score 680 and greater	$	5,068	$	10,500	$	2,970	$	1,578	$	770	$	24,028	$	44,914	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	2,312		6,528		2,159		1,676		1,360		10,353		24,388		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	0		260		53		0		0		1,605		1,918		Sub-Prime- FICO score less than 620	—		21		53		—		—		1,547		1,621
No FICO score	No FICO score	150		149		0		27		0		424		750		No FICO score	—		149		19		27		—		346		541
		$	7,530	$	17,437	$	5,182	$	3,281	$	2,130	$	36,410	$	71,970		$	8,911	$	8,692	$	5,023	$	3,291	$	2,119	$	34,540	$	62,576


		April 3, 2021															April 3, 2021
		2021		2020		2019		2018		2017		Prior		Total			2021		2020		2019		2018		2017		Prior		Total
Prime- FICO score 680 and greater	Prime- FICO score 680 and greater	$	18,250	$	3,575	$	1,718	$	971	$	1,959	$	23,375	$	49,848	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	Near Prime- FICO score 620-679	10,227		2,744		1,794		1,364		500		10,401		27,030		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	Sub-Prime- FICO score less than 620	348		53		0		0		84		1,579		2,064		Sub-Prime- FICO score less than 620	348		53		—		—		84		1,579		2,064
No FICO score	No FICO score	576		0		28		0		0		481		1,085		No FICO score	576		—		28		—		—		481		1,085
		$	29,401	$	6,372	$	3,540	$	2,335	$	2,543	$	35,836	$	80,027		$	29,401	$	6,372	$	3,540	$	2,335	$	2,543	$	35,836	$	80,027

As of ~~July~~October 2, 2021, 36% of the outstanding principal balance of the consumer loans receivable portfolio was concentrated in Texas and 18% was concentrated in Florida. As of April 3, 2021, ~~and 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 state had concentrations in excess of 10% of the principal balance of the consumer loans receivable as of ~~July 3,~~October 2, 2021 or April 3, 2021.

Repossessed homes totaled approximately ~~$493,000~~$893,000 and $518,000 as of ~~July 3,~~October 2, 2021 and 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 ~~$1.0 million~~$927,000 and $1.1 million as of ~~July 3,~~October 2, 2021 and April 3, 2021, respectively.

7. Commercial Loans Receivable

The commercial loans receivable balance consists of direct financing arrangements for the home product needs of our independent distributors, community owners and developers and amounts loaned by us under participation financing programs.

Table of Contents

Commercial loans receivable, net consisted of the following (in thousands):

July 3,
2021 April 3,
2021
Loans receivable $ 45,620 $ 45,377
Allowance for loan losses (785) (816)
Deferred financing fees, net (247) (247)
44,588 44,314
Less current portion of commercial loans receivable (including from affiliates), net (18,613) (19,232)
$ 25,975 $ 25,082

~~Table of Contents~~


	October 2, 2021		April 3, 2021
Loans receivable	$	73,006	$	45,377
Allowance for loan losses	(826)		(816)
Deferred financing fees, net	(247)		(247)
	71,933		44,314
Less current portion of commercial loans receivable (including from affiliates), net	(31,601)		(19,232)
	$	40,332	$	25,082

The commercial loans receivable balance had the following characteristics:


		July 3, 2021		April 3, 2021			October 2, 2021		April 3, 2021
Weighted average contractual interest rate	Weighted average contractual interest rate	6.0	%	6.4	%	Weighted average contractual interest rate	6.3	%	6.4	%
Weighted average months to maturity		10		11
Weighted average months outstanding						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			Three Months Ended						Six Months Ended
			July 3, 2021			June 27, 2020			October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020
Balance at beginning of period	Balance at beginning of period		$	816		$	393	Balance at beginning of period	$	785	$	828	$	816	$	393
Impact of adoption of ASU 2016-13	Impact of adoption of ASU 2016-13		0			435		Impact of adoption of ASU 2016-13	—		—		—		435
Change in estimated loan losses, net	Change in estimated loan losses, net		(31)			0		Change in estimated loan losses, net	41		(39)		10		(39)
Balance at end of period	Balance at end of period		$	785		$	828	Balance at end of period	$	826	$	789	$	826	$	789

As of ~~July 3,~~October 2, 2021 and April 3, 2021, there were 0no commercial loans considered watch list or nonperforming. The following table disaggregates our commercial loans receivable by fiscal year of origination (in thousands):

July 3, 2021
2022 2021 2020 2019 2018 Prior Total
Performing $ 15,150 $ 19,119 $ 5,973 $ 2,689 $ 1,743 $ 946 $ 45,620


	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 $ 0 $ 45,377


	April 3, 2021
	2021		2020		2019		2018		2017		Prior		Total
Performing	$	30,627	$	8,677	$	3,206	$	1,864	$	1,003	$	—	$	45,377

At ~~July 3,~~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 ~~July 3,~~October 2, 2021, ~~14%~~34% of our outstanding commercial loans receivable principal balance was concentrated in ~~Arizona and 13% was concentrated in California.~~Pennsylvania. As of April 3, 2021, 13% of our outstanding commercial loans receivable principal balance was concentrated in Arizona. No other state had concentrations in excess of 10% of the principal balance of the consumer loans receivable as of ~~July 3,~~October 2, 2021 or April 3, 2021.

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We had concentrations with one independent third-party and its affiliates that equaled 12% and 18% of the net commercial loans receivable principal balance outstanding, all of which was secured, as of ~~July 3,~~October 2, 2021 and April 3, 2021.

~~Table of Contents~~

8. Property, Plant and Equipment, net

Property, plant and equipment, net, consisted of the following (in thousands):


		July 3, 2021		April 3, 2021			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	$	28,314	$	28,314	Land	$	42,407	$	28,314
Buildings and improvements	Buildings and improvements	73,415		71,827		Buildings and improvements	108,577		71,827
Machinery and equipment	Machinery and equipment	35,075		34,146		Machinery and equipment	45,628		34,146
		136,804		134,287			196,612		134,287
Accumulated depreciation	Accumulated depreciation	(38,823)		(37,493)		Accumulated depreciation	(40,215)		(37,493)
		$	97,981	$	96,794		$	156,397	$	96,794

Depreciation expense was $1.4 million for each of the three month periods ending October 2, 2021 and September 26, 2020. Depreciation expense for the six months ended ~~July~~October 2, 2021 and September 26, 2020 was $2.9 million and $2.8 million, respectively. Included in the balances above are certain assets under finance leases. See Note 9 for further information.

9. Leases

We lease certain production and retail locations, office space and equipment. During the period ended October 2, 2021, we executed various lease renewals and acquired certain assets under finance leases.

The following table provides information about the financial statement classification of our lease balances reported within the Consolidated Balance Sheets as of October 2, 2021 and 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 ~~June 27, 2020.~~$143,000 as of October 2, 2021 and April 3, 2021, respectively.

Table of Contents

The present value of minimum payments for future fiscal years under non-cancelable leases as of October 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

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	%

9.10. Goodwill and Other Intangibles

Goodwill and other intangibles, net, consisted of the following (in thousands):


		July 3, 2021						April 3, 2021							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		(7,255)		4,045		11,300		(7,097)		4,203		Customer relationships	25,400		(7,413)		17,987		11,300		(7,097)		4,203
Other	Other	1,424		(1,279)		145		1,424		(1,264)		160		Other	1,924		(1,287)		637		1,424		(1,264)		160
		$	97,814	$	(8,534)	$	89,280	$	97,814	$	(8,361)	$	89,453		$	150,591	$	(8,700)	$	141,891	$	97,814	$	(8,361)	$	89,453

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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 ~~$173,000~~$166,000 and $187,000 for the three months ended ~~July 3,~~October 2, 2021 and ~~June 27,~~September 26, 2020, respectively. Amortization expense recognized on intangible assets was $339,000 and $374,000 for the six months ended October 2, 2021 and September 26, 2020, 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

~~Table of Contents~~

~~10.~~11. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):


		July 3, 2021		April 3, 2021			October 2, 2021		April 3, 2021
Customer deposits	Customer deposits	$	48,989	$	41,835	Customer deposits	$	49,219	$	41,835
Salaries, wages and benefits	Salaries, wages and benefits	37,176		37,737		Salaries, wages and benefits	44,161		37,737
Estimated warranties						Estimated warranties	25,745		18,032
Unearned insurance premiums	Unearned insurance premiums	24,125		22,643		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	19,432		25,938		Company repurchase options on certain loans sold	17,151		25,938
Estimated warranties		19,344		18,032
Accrued volume rebates		14,097		12,132

Other	Other	47,027		44,816		Other	54,680		44,816
		$	210,190	$	203,133		$	237,462	$	203,133

~~11.~~12. Warranties

Activity in the liability for estimated warranties was as follows (in thousands):


		Three Months Ended			Three Months Ended						Six Months Ended
			July 3, 2021			June 27, 2020			October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020
Balance at beginning of period	Balance at beginning of period		$	18,032		$	18,678	Balance at beginning of period	$	19,344	$	18,538	$	18,032	$	18,678
Purchase accounting additions								Purchase accounting additions	6,928		—		6,928		—
Charged to costs and expenses	Charged to costs and expenses		9,125			6,347		Charged to costs and expenses	7,994		6,232		17,119		12,579
Payments and deductions	Payments and deductions		(7,813)			(6,487)		Payments and deductions	(8,521)		(6,965)		(16,334)		(13,452)
Balance at end of period	Balance at end of period		$	19,344		$	18,538	Balance at end of period	$	25,745	$	17,805	$	25,745	$	17,805

~~12.~~

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13. Debt, ~~and~~ Finance Lease and Mandatorily Redeemable Noncontrolling Interest Obligations

Debt and finance lease obligations primarily consist of secured financings 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 the lease term. The following table summarizes debt, ~~and~~ finance lease and mandatorily redeemable noncontrolling interest obligations (in thousands):


		July 3, 2021		April 3, 2021			October 2, 2021		April 3, 2021
Secured term loan	Secured term loan	$	7,980	$	8,210	Secured term loan	$	7,718	$	8,210
Finance lease obligations						Finance lease obligations	6,324		304
Other secured financings	Other secured financings	3,473		3,672		Other secured financings	3,052		3,672
Finance lease obligations		296		304
Mandatorily redeemable noncontrolling interest						Mandatorily redeemable noncontrolling interest	2,471		—
		11,749		12,186			19,565		12,186
Less current portion	Less current portion	(1,822)		(1,851)		Less current portion	(2,260)		(1,851)
		$	9,927	$	10,335		$	17,305	$	10,335

We entered into secured credit facilities with independent third-party banks to originate and hold consumer home-only loans secured by manufactured homes, which were pledged as collateral to the facilities. Those facilities have since been converted into an amortizing loan with maturity dates starting in 2028 and payments based on a 20 or 25-year amortization period, resulting in a balloon payment due upon maturity. The outstanding balance of the converted loans was ~~$8.0~~$7.7 million as of ~~July 3,~~October 2, 2021 and $8.2 million as of April 3, 2021 with a weighted average interest rate of ~~4.9%~~4.91%.

~~Table of Contents~~

~~13.~~14. Reinsurance and Insurance Loss Reserves

Certain of Standard Casualty's premiums and benefits are assumed from and ceded to other insurance companies under various reinsurance agreements. We remain obligated for amounts ceded in the event that the reinsurers do not meet their obligations.

Table of Contents

The effects of reinsurance on premiums written and earned were as follows (in thousands):


		Three Months Ended									Three Months Ended
		July 3, 2021				June 27, 2020					October 2, 2021				September 26, 2020
		Written		Earned		Written		Earned			Written		Earned		Written		Earned
Direct premiums	Direct premiums	$	6,839	$	5,996	$	5,765	$	5,185	Direct premiums	$	6,310	$	6,323	$	4,915	$	5,145
Assumed premiums—nonaffiliated	Assumed premiums—nonaffiliated	8,574		7,378		7,653		6,790		Assumed premiums—nonaffiliated	8,240		7,630		7,593		7,043
Ceded premiums—nonaffiliated	Ceded premiums—nonaffiliated	(3,647)		(3,647)		(3,202)		(3,202)		Ceded premiums—nonaffiliated	(3,714)		(3,714)		(2,853)		(2,853)
		$	11,766	$	9,727	$	10,216	$	8,773		$	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 have a maximum coverage of $300,000 per claim, of which we cede $150,000 of the risk of loss per reinsurance. Therefore, our 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 through reinsurance for catastrophic losses in excess of $2 million per occurrence, up to a maximum of $55 million in the 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 ~~three~~six months ended ~~July 3,~~October 2, 2021 and ~~June 27,~~September 26, 2020 (in thousands):


		Three Months Ended					Three Months Ended				Six Months Ended
		July 3, 2021		June 27, 2020			October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020
Balance at beginning of period	Balance at beginning of period	$	7,451	$	5,582	Balance at beginning of period	$	8,348	$	6,730	$	7,451	$	5,582
Net incurred losses during the year	Net incurred losses during the year	7,975		5,982		Net incurred losses during the year	7,282		7,477		15,257		13,460
Net claim payments during the year	Net claim payments during the year	(7,078)		(4,834)		Net claim payments during the year	(8,280)		(7,320)		(15,358)		(12,155)
Balance at end of period	Balance at end of period	$	8,348	$	6,730	Balance at end of period	$	7,350	$	6,887	$	7,350	$	6,887

~~14.~~15. Commitments and Contingencies

Repurchase Contingencies. We are contingently liable under terms of repurchase agreements with financial institutions providing inventory financing to independent distributors of our 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 ~~$80.9~~$95.7 million and $74.2 million at ~~July 3,~~October 2, 2021 and April 3, 2021, respectively, without reduction for the resale value of the homes that are repurchased. We had a reserve for repurchase commitments of $2.7 million at October 2, 2021 and $2.3 million at ~~July 3, 2021 and~~ April 3, 2021.

Construction-Period Mortgages. We fund construction-period mortgages through periodic advances during home construction. At the time of initial funding, we commit to fully fund the loan contract in accordance with a predetermined schedule. The total loan contract amount, less cumulative advances, represents an off-balance sheet contingent commitment to fund future advances.

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Loan contracts with off-balance sheet commitments are summarized below (in thousands):


		July 3, 2021		April 3, 2021			October 2, 2021		April 3, 2021
Construction loan contract amount	Construction loan contract amount	$	28,204	$	37,628	Construction loan contract amount	$	22,466	$	37,628
Cumulative advances	Cumulative advances	(10,479)		(13,801)		Cumulative advances	(7,485)		(13,801)
		$	17,725	$	23,827		$	14,981	$	23,827

Representations and Warranties of Mortgages Sold. We sell loans to Government-Sponsored Enterprises ("GSEs") and whole-loan purchasers and finance certain loans with long-term credit facilities secured by the respective loans. In connection with these activities, we provide to GSEs and whole-loan purchasers and lenders representations and warranties related to the loans sold or financed. Upon a breach of a representation, we may be required to repurchase the loan or to indemnify a party for incurred losses. We maintain a reserve for these contingent repurchase and indemnification obligations. This reserve of ~~$1.3~~$1.2 million as of ~~July 3,~~October 2, 2021 and ~~$1.2 million as of~~ 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 ~~three~~six months ended ~~July 3,~~October 2, 2021.

Interest Rate Lock Commitments. In originating loans for sale, we issue interest rate lock commitments ("IRLCs") to prospective borrowers. These IRLCs bind us 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 ~~July 3,~~October 2, 2021, we had outstanding IRLCs with a notional amount of ~~$32.1 million~~$29.5 million. During the three months ended October 2, 2021 and September 26, 2020, we recognized ~~a gain~~losses of $5,000 and $19,000, respectively, on outstanding IRLCs. For the six months ended October 2, 2021 and September 26, 2020, we recognized gains of $~~47,000~~42,000 and ~~in the~~ ~~2022first quarter~~ ~~and a~~ ~~loss~~losses of ~~$125,000 in the 2021first quarter~~.$144,000, respectively.

Forward Sales Commitments. We manage the risk profiles of a portion of the outstanding IRLCs and mortgage loans held for sale by entering into forward sales of mortgage-backed securities ("MBS") and whole loan sale commitments (collectively "Commitments"). As of ~~July 3,~~October 2, 2021, we had ~~$42.9~~$33.5 million in outstanding ~~Commitments~~Commitments. We recognized non-cash gains of $79,000 and ~~recognized a non-cash~~ ~~loss~~$118,000 in the second quarter of 2022 and 2021, respectively. ~~$347,000 in~~During the six months ended October 2, 2021 and September 26, 2020, we recognized losses of ~~2022~~$268,000 and gains of $1.1 million~~first quarter~~ ~~and gain of $1.0 million in the 2021first quarter~~., respectively.

Legal Matters. ~~Since 2018, we have been cooperating~~On September 2, 2021, the SEC filed a civil complaint in the United States District Court, District of Arizona, naming the Company along with ~~an investigation by~~ the ~~enforcement staff~~Company’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 securities~~antifraud and internal accounting control provisions of the Securities Exchange Act of 1934 based on trading in ~~personal and Company accounts~~the shares of another company directed by the ~~Company~~'s former ~~Chief Executive Officer, Joseph Stegmayer. As previously disclosed,~~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 SEC action follows an investigation that began in 2018. The Company filed a summary judgment to dismiss on November ~~2020,~~2, 2021. While the ~~SEC staff issued a Wells Notice to Cavco stating that the staff intends to recommend an enforcement action against us in connection with the investigation. While we~~Company cannot predict with certainty the resolution of this matter, we do not ~~expect it to~~believe that this proceeding will have a material adverse effect on ~~our~~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, 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 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.

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~~15.~~

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 ~~three~~six months ended ~~July 3,~~October 2, 2021 (dollars in thousands):


																							Equity Attributable to Cavco Stockholders
					Treasury Stock				Additional paid-in capital		Retained earnings			Accumulated other comprehensive income					Total												Treasury Stock				Additional paid-in capital				Retained earnings				Accumulated other comprehensive income				Total						Redeemable Noncontrolling Interest
		Common Stock											Common Stock
		Shares	Amount										Shares									Amount
Balance, April 3, 2021	Balance, April 3, 2021	9,241,256	$	92			$	(1,441)			$	253,835					$	431,057					$	97		$	683,640		Balance, April 3, 2021	9,241,256						$	92			$	(1,441)			$	253,835			$	431,057		$	97				$	683,640		$	—
Net income	Net income	—	0				0				0					27,046					0				27,046	Net income		—						—				—				—				27,046				—				27,046				—
Other comprehensive income, net	Other comprehensive income, net	—	0		0				0		0			(13)					(13)			Other comprehensive income, net	—			—							—				—				—				(13)				(13)						—
Issuance of common stock under stock incentive plans	Issuance of common stock under stock incentive plans	4,465	0		—				136		0			0					136			Issuance of common stock under stock incentive plans	4,465			—						—				136				—				—				136						—
Stock-based compensation	Stock-based compensation	—	0		0				1,100		0			0					1,100			Stock-based compensation	—			—					—					1,100				—				—				1,100						—
Common stock repurchases	Common stock repurchases	—	—		(12,842)				—		—			—					(12,842)			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		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	—			—					—				—				—				(13)				(13)						—
Issuance of common stock under stock incentive plans																						Issuance of common stock under stock incentive plans	29,295			1					—				2,728				—				—				2,729						—
Stock-based compensation																						Stock-based compensation	—			—					—				1,317				—				—				1,317						—
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

Table of Contents

Treasury Stock Additional paid-in capital Retained earnings Accumulated other comprehensive income Total
Common Stock
Shares Amount
Balance, March 28, 2020 9,173,242 $ 92 $ 0 $ 252,260 $ 355,144 $ 90 $ 607,586
Cumulative effect of implementing ASU 2016-13, net — 0 0 0 (733) 0 (733)
Net income — 0 0 0 16,674 0 16,674
Other comprehensive income, net — 0 0 0 0 68 68
Issuance of common stock under stock incentive plans 3,822 0 0 (533) 0 0 (533)
Stock-based compensation — 0 0 945 0 0 945
Balance, June 27, 2020 9,177,064 $ 92 $ 0 $ 252,672 $ 371,085 $ 158 $ 624,007


	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	9,173,242	$	92	$	—	$	252,260	$	355,144	$	90	$	607,586	$	—
Cumulative effect of implementing ASU 2016-13, net	—	—		—		—		(733)		—		(733)		—
Net income	—	—		—		—		16,674		—		16,674		—
Other comprehensive income, net	—	—		—		—		—		68		68		—
Issuance of common stock under stock incentive plans	3,822	—		—		(533)		—		—		(533)		—
Stock-based compensation	—	—		—		945		—		—		945		—
Balance, June 27, 2020	9,177,064	$	92	$	—	$	252,672	$	371,085	$	158	$	624,007	$	—
Net income	—	—		—		—		15,049		—		15,049		—
Other comprehensive income, net	—	—		—		—		—		7		7		—
Issuance of common stock under stock incentive plans	11,098	—		—		522		—		—		522		—
Stock-based compensation	—	—		—		1,103		—		—		1,103		—
Balance, September 26, 2020	9,188,162	$	92	$	—	$	254,297	$	386,134	$	165	$	640,688	$	—

~~Table of Contents~~

~~16.~~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			Three Months Ended						Six Months Ended
			July 3, 2021			June 27, 2020			October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020
Net income			$	27,046		$	16,674
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							Weighted average shares outstanding
Basic	Basic		9,198,229			9,174,182		Basic	9,190,866		9,182,945		9,194,577		9,178,609
Effect of dilutive securities	Effect of dilutive securities		78,300			90,479		Effect of dilutive securities	82,270		112,464		79,863		101,471
Diluted	Diluted		9,276,529			9,264,661		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		$	2.94		$	1.82	Basic	$	4.09	$	1.64	$	7.03	$	3.46
Diluted	Diluted		$	2.92		$	1.80	Diluted	$	4.06	$	1.62	$	6.97	$	3.42

~~There were 8,366 anti-dilutive~~Anti-dilutive common stock equivalents excluded from the computation of diluted earnings per share for the three months ended ~~July 3,~~October 2, 2021 and ~~39,996~~September 26, 2020 were 2,808 and 20,582, respectively. Anti-dilutive common stock equivalents excluded from the computation of diluted earnings per share for the ~~three~~six months ended ~~June 27, 2020.~~October 2, 2021 and September 26, 2020 were 5,417 and 30,182, respectively.

~~17.~~

Table of Contents

18. Fair Value Measurements

The book value and estimated fair value of our financial instruments were as follows (in thousands):


		July 3, 2021				April 3, 2021					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	$	17,962	$	17,962	$	14,946	$	14,946	Available-for-sale debt securities	$	18,179	$	18,179	$	14,946	$	14,946
Marketable equity securities	Marketable equity securities	17,550		17,550		17,600		17,600		Marketable equity securities	16,566		16,566		17,600		17,600
Non-marketable equity investments	Non-marketable equity investments	22,429		22,429		21,960		21,960		Non-marketable equity investments	19,772		19,772		21,960		21,960
Consumer loans receivable	Consumer loans receivable	67,524		76,466		74,798		86,209		Consumer loans receivable	58,599		65,641		74,798		86,209

Commercial loans receivable	Commercial loans receivable	44,588		42,586		44,314		42,379		Commercial loans receivable	71,933		70,363		44,314		42,379
Secured financings other		(11,749)		(11,810)		(12,186)		(12,340)
Secured financings and other										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.

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. MSRs are initially recorded at fair value.


		July 3, 2021			April 3, 2021				October 2, 2021			April 3, 2021
Number of loans serviced with MSRs	Number of loans serviced with MSRs	4,614			4,647			Number of loans serviced with MSRs	4,533			4,647
Weighted average servicing fee (basis points)	Weighted average servicing fee (basis points)	33.86			33.57			Weighted average servicing fee (basis points)	34.39			33.57
Capitalized servicing multiple	Capitalized servicing multiple	67.3		%	45.9		%	Capitalized servicing multiple	73.7		%	45.9		%
Capitalized servicing rate (basis points)	Capitalized servicing rate (basis points)	22.78			15.42			Capitalized servicing rate (basis points)	25.36			15.42
Serviced portfolio with MSRs (in thousands)	Serviced portfolio with MSRs (in thousands)	$	594,373		$	593,939		Serviced portfolio with MSRs (in thousands)	$	586,547		$	593,939
MSRs (in thousands)	MSRs (in thousands)	$	1,354		$	916		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 TSA 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 members 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 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.

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~~18.~~

20. Related Party Transactions

We have non-marketable equity investments in other distribution operations outside of Company-owned retail 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 ~~July 3,~~October 2, 2021, the total amount of sales to non-consolidated related parties was $14.0 million and ~~June 27,~~$28.8 million, respectively. For the three and six months ended September 26, 2020, the total amount of sales to non-consolidated related parties was ~~$14.8 millionand~~ $~~12.7~~10.3 million and $23.0 million, respectively. As of ~~July 3,~~October 2, 2021, receivables from non-consolidated related parties included ~~$4.3~~$3.9 million of accounts receivable and ~~$6.8~~$3.9 million of commercial loans outstanding. As of April 3, 2021, receivables from non-consolidated related parties included $4.7 million of accounts receivable and $9.5 million of commercial loans outstanding.

~~19.~~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 the 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.

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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 September 24, 2021, we purchased certain manufactured housing assets and assumed certain liabilities of 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.

The acquisition of Commodore brings beneficial geographic addition to our 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 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 Commodore'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.


	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

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(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 Acquisitions. The following table presents supplemental pro forma information as if the above acquisitions occurred on March 29, 2020 (in thousands, except per share data):


	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

22. Business Segment Information

We operate principally in 2 segments: (1) factory-built housing, which includes wholesale and retail factory-built housing operations and (2) financial services, which includes manufactured housing consumer finance and insurance. The following table provides selected financial data by segment (in thousands):


		Three Months Ended			Three Months Ended						Six Months Ended
			July 3, 2021			June 27, 2020			October 2, 2021		September 26, 2020		October 2, 2021		September 26, 2020
Net revenue	Net revenue							Net revenue
Factory-built housing	Factory-built housing		$	312,283		$	238,090	Factory-built housing	$	342,094	$	240,967	$	654,377	$	479,057
Financial services	Financial services		18,139			16,711		Financial services	17,449		17,009		35,588		33,720
			$	330,422		$	254,801		$	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		$	33,559		$	18,450	Factory-built housing	$	46,893	$	17,452	$	80,452	$	35,902
Financial services	Financial services		1,919			3,230		Financial services	2,128		2,144		4,047		5,374
			$	35,478		$	21,680		$	49,021	$	19,596	$	84,499	$	41,276

~~20. Subsequent Event~~

On July 23, 2021, we entered into an agreement to acquire the business and certain assets and liabilities of The Commodore Corporation ("Commodore"), including its 6 manufacturing and 2 retail locations. Commodore is the largest private independent builder of manufactured and modular housing in the United States, operating under a variety of strong brand names. Commodore operates across the Northeast, Midwest and Mid-Atlantic regions, with wholly owned retail stores. In addition to manufacturing, Commodore also has a commercial lending portfolio with its dealers that we will acquire and continue. For the last 12 months ended March 31, 2021, Commodore generated net sales of approximately $258 million and sold over ~~6,600~~ ~~modules, equating to over 3,700 homes.~~

The purchase price totals $153 million, before certain adjustments that will be determined upon close of the transaction. The estimated cash outlay is $140 million after adjustments and including transaction fees. We expect to fund the acquisition entirely with cash on hand. The transaction is expected to close in our third quarter of fiscal year 2022, subject to applicable regulatory approvals and satisfaction of certain customary conditions.


	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

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Statements in this Report on Form 10-Q include "forward-looking statements," within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Private Securities Litigation Reform Act of 1995. Forward-looking statements are often characterized by the use of words such as "believes," "estimates," "expects," "projects," "may," "will," "intends," "plans," or "anticipates," or by discussions of strategy, plans or intentions. Forward-looking statements are typically included, for example, in discussions regarding the manufactured housing and site-built housing industries; 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") 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 2021 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 factory-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 Company ("Standard Casualty"), provides property and casualty insurance to owners of manufactured homes.

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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.

Included in the 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 transaction was accounted for as a business combination achieved in stages and the results of operations have been included in the accompanying Consolidated Financial Statements since the date of the acquisition of the additional 20% interest, with a reduction for 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 increased ~~14.9%~~14.3% for the first 58 months of calendar year 2021 compared to the same period in the prior year, which was impacted by shutdowns related to COVID-19. However, we did not experience any significant factory shutdowns in the prior year period, ~~like some~~in contrast to certain other industry ~~participants did.~~participants.

The industry offers solutions to the affordable housing crisis and these industry shipment numbers do not represent 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-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 are particularly affected by periods of low employment rates and underemployment. Consumer confidence 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.

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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 (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 expose us to risks associated with the creditworthiness of this customer base and our inventory financing partners.

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. We also develop and invest 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.

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Operational efficiencies have declined from hiring challenges, higher and largely unpredictable factory employee absenteeism and other inefficiencies from building material supply shortages. Accordingly, our total average plant capacity utilization rate was approximately 75% during the ~~first~~second fiscal quarter of 2022, which remains consistent with that of our ~~fourth~~first quarter of fiscal ~~2021.~~2022.

~~Sales order activity remained exceptionally~~Housing demand remains strong ~~during~~as well-qualified individuals continue pursuing home-ownership, bolstered by the ~~first fiscal quarter~~ of 2022 and was nearly 50% 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 outpaced~~Home order rates are starting to gradually decline from the ~~challenging production environment during~~extreme highs we saw in the ~~quarter, raising order~~past few quarters, but still remain above pre-COVID rates, which were considered to be strong.

Our backlogs at October 2, 2021 were $1.1 billion, up $315 million or 39.8% compared to ~~$792~~$792 million at July 3, 2021, and up ~~31.3%~~ $787 million or 245.4%compared to ~~$603~~$321 million at ~~April 3, 2021 and up 404.5% compared~~September 26, 2020. These increases include $279 million attributable to ~~$157 million at June 27, 2020.~~ the Commodore acquisition. Backlog excludes home orders that have been paused or canceled at the request of the customer.

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 lag 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 change processes in response to the delay in materials.

While 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.

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In the financial services segment, we continue to assist customers in need by servicing existing loans and insurance policies and complying with state and federal regulations regarding loan forbearance, home foreclosures and policy cancellations. Certain loans serviced for investors expose us to cash flow deficits if customers do not make contractual monthly payments of principal and interest in a timely manner. 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. Although monthly collections of principal and interest from borrowers have exceeded scheduled principal and interest payments owed to investors, mandatory extended forbearance under the Coronavirus Aid, Relief and Economic Security Act and certain other regulations related to COVID-19 could negatively impact cash obligations in the future.

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Results of Operations

Net Revenue.


											Three Months Ended
($ in thousands, except revenue per home sold)										($ in thousands, except revenue per home sold)	October 2, 2021		September 26, 2020		Change
Factory-built housing										Factory-built housing	$	342,094	$	240,967	$	101,127	42.0	%
Financial services										Financial services	17,449		17,009		440		2.6	%
											$	359,543	$	257,976	$	101,567	39.4	%
Factory-built homes sold										Factory-built homes sold
by Company-owned retail sales centers										by Company-owned retail sales centers	710		763		(53)		(6.9)	%
to independent retailers, builders, communities & developers										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										Net factory-built housing revenue per home sold	$	95,105	$	70,314	$	24,791	35.3	%

		Three Months Ended									Six Months Ended
($ in thousands, except revenue per home sold)	($ in thousands, except revenue per home sold)	July 3, 2021		June 27, 2020		Change				($ in thousands, except revenue per home sold)	October 2, 2021		September 26, 2020		Change
Factory-built housing	Factory-built housing	$	312,283	$	238,090	$	74,193	31.2	%	Factory-built housing	$	654,377	$	479,057	$	175,320	36.6	%
Financial services	Financial services	18,139		16,711		1,428		8.5	%	Financial services	35,588		33,720		1,868		5.5	%
		$	330,422	$	254,801	$	75,621	29.7	%		$	689,965	$	512,777	$	177,188	34.6	%

Factory-built homes sold	Factory-built homes sold									Factory-built homes sold
by Company-owned retail sales centers	by Company-owned retail sales centers	723		752		(29)		(3.9)	%	by Company-owned retail sales centers	1,433		1,515		(82)		(5.4)	%
to independent retailers, builders, communities & developers	to independent retailers, builders, communities & developers	2,977		2,597		380		14.6	%	to independent retailers, builders, communities & developers	5,864		5,261		603		11.5	%
		3,700		3,349		351		10.5	%		7,297		6,776		521		7.7	%
Net factory-built housing revenue per home sold	Net factory-built housing revenue per home sold	$	84,401	$	71,093	$	13,308	18.7	%	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 ~~a 10.5% increase in units sold and 18.7%~~an increase in the average sales ~~price.~~price and the number of 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. ~~On a sequential basis, adjusting for the extra week~~

Table of ~~production in the fourth quarter of fiscal year 2021, home sales volume would have also increased from slightly higher factory capacity utilization.~~Contents

Net factory-built housing revenue per home sold is a volatile metric dependent upon several factors. A primary factor is the price disparity between sales of homes to independent distributors, builders, communities and developers and sales of homes to consumers by Company-owned retail stores. Wholesale sales prices are primarily comprised of the home and the cost to ship the home from a homebuilding facility to the home-site. Retail home prices include these items and 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. Our 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 mix of modules and homes ~~shipped~~sold for the three and six months ended ~~July 3,~~October 2, 2021 and ~~June 27,~~September 26, 2020:


		Three Months Ended									Three Months Ended
		July 3, 2021		June 27, 2020		Change					October 2, 2021		September 26, 2020		Change
		Modules	Homes	Modules	Homes	Modules		Homes			Modules	Homes	Modules	Homes	Modules		Homes
U.S. Housing and Urban Development code homes	U.S. Housing and Urban Development code homes	5,652	3,276	4,881	2,865	15.8	%	14.3	%	U.S. Housing and Urban Development code homes	5,548	3,154	5,030	2,979	10.3	%	5.9	%
Modular homes	Modular homes	468	226	466	215	0.4	%	5.1	%	Modular homes	519	254	484	223	7.2	%	13.9	%
Park model RVs	Park model RVs	198	198	269	269	(26.4)	%	(26.4)	%	Park model RVs	189	189	225	225	(16.0)	%	(16.0)	%
		6,318	3,700	5,616	3,349	12.5	%	10.5	%		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										U.S. Housing and Urban Development code homes	11,200	6,430	9,911	5,844	13.0	%	10.0	%
Modular homes										Modular homes	987	480	950	438	3.9	%	9.6	%
Park model RVs										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 higher volume in home loan sales and more insurance policies in force in the current year compared to the prior ~~year. These gains were~~year, partially offset by lower unrealized gains on marketable equity securities in the insurance subsidiary's portfolio, which were $0.4 million and $1.0 million for the three months ended July 3, 2021 and June 27, 2020, respectively, and 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.

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Gross Profit.


		Three Months Ended											Three Months Ended
($ in thousands)	($ in thousands)	July 3, 2021			June 27, 2020			Change				($ in thousands)	October 2, 2021			September 26, 2020			Change
Factory-built housing	Factory-built housing	$	66,273		$	46,992		$	19,281	41.0	%	Factory-built housing	$	82,299		$	46,155		$	36,144	78.3	%
Financial services	Financial services	7,740			8,331			(591)		(7.1)	%	Financial services	7,629			7,386			243		3.3	%
		$	74,013		$	55,323		$	18,690	33.8	%		$	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	22.4		%	21.7		%	N/A		0.7	%	Consolidated	25.0		%	20.8		%	N/A		4.2	%
Factory-built housing	Factory-built housing	21.2		%	19.7		%	N/A		1.5	%	Factory-built housing	24.1		%	19.2		%	N/A		4.9	%
Financial services	Financial services	42.7		%	49.9		%	N/A		(7.2)	%	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)	%

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 also increased ~~this period~~ from a shift toward more multi-section homes.

For the three months ended October 2, 2021, Financial services gross profit ~~decreased~~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 weather-related claims volume in the first quarter and ~~lower~~ unrealized ~~gains~~losses on marketable equity securities.

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Selling, General and Administrative Expenses.


		Three Months Ended											Three Months Ended
($ in thousands)	($ in thousands)	July 3, 2021			June 27, 2020			Change				($ in thousands)	October 2, 2021			September 26, 2020			Change
Factory-built housing	Factory-built housing	$	35,497		$	30,737		$	4,760	15.5	%	Factory-built housing	$	40,347		$	30,725		$	9,622	31.3	%
Financial services	Financial services	5,335			4,586			749		16.3	%	Financial services	5,025			4,728			297		6.3	%
		$	40,832		$	35,323		$	5,509	15.6	%		$	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	12.4		%	13.9		%	N/A		(1.5)	%	Selling, general and administrative expenses as % of Net revenue	12.6		%	13.7		%	N/A		(1.1)	%

													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 increased between periods primarily from higher salary and incentive-based compensation ~~expense.~~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 the amortization of the additional Director and Officer insurance premium, added in the third quarter of fiscal year 2019, which was $2.1 million and $4.2 million for the three and six months ended ~~June 27,~~September 26, 2020, respectively, with no expense in the current ~~period~~year.

In Financial services, Selling, general and administrative expenses increased primarily from greater ~~expensing~~recognition of deferred origination costs on higher loan sales and higher compensation expense.

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Other Components of Net Income.


		Three Months Ended											Three Months Ended
($ in thousands)	($ in thousands)	July 3, 2021			June 27, 2020			Change				($ in thousands)	October 2, 2021			September 26, 2020			Change
Interest expense	Interest expense	$	164		$	196		$	(32)	(16.3)	%	Interest expense	$	203		$	194		$	9	4.6	%
Other income, net	Other income, net	2,461			1,876			585		31.2	%	Other income, net	4,668			1,702			2,966		174.3	%
Income tax expense	Income tax expense	8,432			5,006			3,426		68.4	%	Income tax expense	11,338			4,547			6,791		149.4	%
Effective tax rate	Effective tax rate	23.8		%	23.1		%	N/A		0.7	%	Effective tax rate	23.1		%	23.2		%	N/A		(0.1)	%

													Six Months Ended
($ in thousands)												($ in thousands)	October 2, 2021			September 26, 2020			Change
Interest expense												Interest expense	$	367		$	390		$	(23)	(5.9)	%
Other income, net												Other income, net	7,129			3,578			3,551		99.2	%
Income tax expense												Income tax expense	19,770			9,553			10,217		107.0	%
Effective tax rate												Effective tax rate	23.4		%	23.1		%	N/A		0.3	%

Interest expense consists primarily of debt service on the financings of manufactured home-only loans and interest related to finance leases.

Other income, net primarily consists of realized and unrealized gains and losses on corporate investments, interest income related to commercial loan receivable balances, interest income earned on cash balances and gains and losses from the sale of property, plant and equipment. ~~The increase is driven by more interest income earned~~During the year, we also recognized a non-cash gain of $3.3 million on ~~larger cash~~the remeasurement of the assets and ~~commercial loan receivables than~~liabilities of Craftsman. See Note 21 to the ~~prior year period.~~Consolidated Financial Statements for further information.

Liquidity and Capital Resources

We believe that cash and cash equivalents at ~~July 3,~~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. Regardless, depending on our operating results and strategic opportunities, we may need to seek additional or alternative sources of 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 at such time. The exact nature of any changes to our 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 the insurance subsidiary remains sufficient and do not believe that the ability to pay ordinary dividends to Cavco will be restricted per state regulations.

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The following is a summary of the Company's cash flows for the ~~three~~six months ended ~~July 3,~~October 2, 2021 and ~~June 27,~~September 26, 2020, respectively:


		Three Months Ended							Six Months Ended
(in thousands)	(in thousands)	July 3, 2021		June 27, 2020		$ 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	$	339,307	$	255,607	$	83,700	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	24,275		35,692		(11,417)		Net cash provided by operating activities	80,087		74,609		5,478
Net cash (used in) provided by investing activities		(3,616)		105		(3,721)
Net cash used in investing activities								Net cash used in investing activities	(156,045)		(82)		(155,963)
Net cash used in financing activities	Net cash used in financing activities	(13,150)		(922)		(12,228)		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	$	346,816	$	290,482	$	56,334	Cash, cash equivalents and restricted cash at end of the period	$	244,476	$	329,269	$	(84,793)

~~Table of Contents~~

Net cash provided by operating activities ~~decreased~~increased primarily ~~due~~from higher net income and proceeds from consumer loan sales, which were $101.6 million this year compared to $80.6 million in the previous year. This increase was partially offset by rising ~~material~~ costs of our raw materials and higher purchases of such ~~materials. This was partially offset by higher proceeds from consumer loan sales~~materials, the timing of ~~$49.6 million compared to $39.3 million in the previous year.~~collections on accounts receivable and commercial loans receivable and payments on Accounts payable and Accrued expenses and other current liabilities.

Consumer loan originations ~~decreased $4.7~~increased $3.0 million to ~~$42.7~~$85.4 million for the ~~three~~six months ended ~~July 3,~~October 2, 2021 from ~~$47.4~~$82.4 million for the ~~three~~six months ended ~~June 27, 2020 due to origination personnel shortages.~~September 26, 2020.

We enter into commercial loan arrangements with distributors, communities and developers under which ~~the Company provides~~we provide funds for financing homes. In addition, we enter into commercial loan arrangements with certain distributors of our products under which ~~the Company provides~~we provide funds for wholesale purchases. 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 invest in and develop 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. ~~Increased~~Decreased lending activity ~~resulted in a net use~~provided cash of $~~0.2~~3.3 million while the prior period net activity provided $~~2.6 million.~~4.7 million in cash.

Net cash used in ~~or provided by~~ investing activities ~~consist~~consists 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 ~~debt securities.~~Craftsman and Commodore.

Net cash used in financing activities for the current period was primarily for the repurchase of common stock.

We entered into secured credit facilities with independent third-party banks 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 or 25-year amortization period with a balloon payment due upon maturity. As of ~~July 3,~~October 2, 2021, the outstanding balance of the converted loans was ~~$8.0~~$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

~~There~~Except as described in Note 1 to the Consolidated Financial Statements, there have been no other significant changes to our critical accounting policies during the ~~three~~six months ended ~~July 3,~~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.

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Other Matters

Related Party Transactions. See Note 1820 to the Consolidated Financial Statements for a discussion of our related party transactions.

Off Balance Sheet Arrangements

See Note 1415 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.

~~Table of Contents~~

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 ~~July 3,~~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 ~~July 3,~~October 2, 2021 which have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

See the information under the "Legal Matters" caption in Note 1415 to the Consolidated Financial Statements, which is incorporated herein by reference.

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

Issuer 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 ~~first~~second quarter of fiscal year 2022:

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)
April 4, 2021 to
      May 8, 2021
32,984 $ 212.87 32,984 $ 91,538
May 9, 2021 to
      June 5, 2021
28,317 205.56 28,317 85,717
June 6, 2021 to
      July 3, 2021
— — — 85,717
61,301 61,301


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 no~~Item 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 required~~benefits to be ~~disclosed under this item which~~provided 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 ~~not previously disclosed.~~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.

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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 report 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 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.

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Item 6. Exhibits

Exhibit No.

Exhibit

Exhibit No.

Exhibit

10.1

(1)

Severance Agreement, dated November 2, 2021, by and between Allison K. Aden and Cavco Industries, Inc.

10.2

(1)

Form of Change in Control Agreement

10.3

(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

31.1

(1)

Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Rule 13a-14(a)/15d-14(a)

31.1

(1)

Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Rule 13a-14(a)/15d-14(a)

31.2

(1)

Certification of Principal Financial and Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Rule 13a-14(a)/15d-14(a)

31.2

(1)

Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Rule 13a-14(a)/15d-14(a)

(2)

Certification Pursuant to 18 U.S.C. 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(3)

Certification Pursuant to 18 U.S.C. 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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

Inline XBRL Taxonomy Extension Schema Document

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

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.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Cavco Industries, Inc.
Registrant

Signature	Title	Date

/s/ William C. Boor	Director, President and Chief Executive Officer	~~August 6,~~November 5, 2021
William C. Boor	(Principal Executive Officer)

/s/ ~~Paul Bigbee~~Allison K. Aden	Executive Vice President, Chief ~~Accounting~~Financial Officer & Treasurer	~~August 6,~~November 5, 2021
~~Paul Bigbee~~Allison K. Aden	(Principal Financial ~~and Accounting~~ Officer)

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	July 3, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Residential mortgage-backed securities	$	2,609	$	26	$	(11)	$	2,624
State and political subdivision debt securities	8,265		109		(19)		8,355
Corporate debt securities	6,982		12		(11)		6,983
	$	17,856	$	147	$	(41)	$	17,962