What changed in this filing

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Item 1. Financial Statements

2021-01-29 compared with 2020-10-30 · 180 added, 201 removed, 630 unchanged (38% of the section changed)

3 unchanged sentences

(Dollars in thousands, except per share amounts)

September 26,

2020 March 28,

67 unchanged sentences

(Dollars in thousands, except per share amounts)

Three Months Ended Six Months Ended

September 26,

2020 September 28,

2019 September 26,

2020 September 28,

Three Months Ended Nine Months Ended

2020 December 28,

2019 December 26,

2020 December 28,

$ 288,772 $ 273,722 $ 801,549 $ 806,439

18 unchanged sentences

Reclassification adjustment for securities sold or matured

( 13 ) 15 20 17

Applicable income taxes

1 unchanged sentence

Net change in unrealized position of investments held

( 6 ) ( 14 ) 56 126

Applicable income taxes

12 unchanged sentences

(Dollars in thousands)

Six Months Ended

September 26,

2020 September 28,

Nine Months Ended

2020 December 28,

OPERATING ACTIVITIES

26 unchanged sentences

FINANCING ACTIVITIES

Payments for exercise of stock options ( 11 ) ( 311 )

Proceeds from exercise of stock options 469 226

Proceeds from secured financings and other 64 76

16 unchanged sentences

The accompanying unaudited Consolidated Financial Statements of Cavco Industries, Inc.

and its subsidiaries (collectively, the "Company" or "Cavco") have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") for Quarterly Reports on Form 10-Q and Article 10 of SEC Regulation S-X.

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 the Company believes are necessary to fairly state the results for the periods presented.

In the opinion of management, these financial statements include all adjustments, including normal recurring adjustments, that are necessary to fairly state the results for the periods presented.

Certain prior period amounts have been reclassified to conform to current period classification.

The Company has evaluated subsequent events after the balance sheet date through the date of the filing of this report with the SEC;

and except for the events set forth in Note 22 of the Consolidated Financial Statements Notes ("Notes") of the Company's Quarterly Report on Form 10-Q for the period ended September 26, 2020, there were no subsequent events requiring disclosure.

These Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the Notes to the Consolidated Financial Statements included in the Company's 2020 Annual Report on Form 10-K for the year ended March 28, 2020 filed with the SEC on May 27, 2020 ("Form 10-K").

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and the accompanying Notes.

The uncertainty created by the novel coronavirus COVID-19 ("COVID-19") have made such estimates more difficult and subjective.

We have evaluated subsequent events after the balance sheet date through the date of the filing of this report with the SEC, and there were no subsequent events requiring disclosure.

These Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the Notes to the Consolidated Financial Statements included in our 2020 Annual Report on Form 10-K for the year ended March 28, 2020 filed with the SEC on May 27, 2020 ("Form 10-K").

The uncertainty created by the novel coronavirus COVID-19 ("COVID-19") has made such estimates more difficult and subjective.

Due to that and other uncertainties, actual results could differ from those estimates.

2 unchanged sentences

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 31 st .

The Company's current fiscal year will end on April 3, 2021.

The Company operates principally in two segments:

The current fiscal year will end on April 3, 2021 and will include 53 weeks.

We operate principally in two segments:

(1) factory-built housing, which includes wholesale and retail systems-built housing operations, and (2) financial services, which includes manufactured housing consumer finance and insurance.

The Company designs and builds a wide variety of affordable manufactured homes, modular homes and park model RVs through 20 homebuilding production lines located throughout the United States, which are sold to a network of independent distributors, community owners and developers and through the Company's 40 Company-owned retail stores.

Our financial services segment is comprised of a finance subsidiary, CountryPlace Acceptance Corp.

We design and build a wide variety of affordable manufactured homes, modular homes and park model RVs through 20 homebuilding production lines located throughout the United States, which are sold to a network of independent distributors, community owners and developers and through our 40 Company-owned retail stores.

The financial services segment is comprised of a finance subsidiary, CountryPlace Acceptance Corp.

("CountryPlace"), and an insurance subsidiary, Standard Casualty Co.

("Standard Casualty").

CountryPlace is an approved Federal National Mortgage Association and Federal Home Loan Mortgage Corporation seller/servicer and a Government National Mortgage Association mortgage-backed securities issuer that offers conforming mortgages, non-conforming mortgages and home-only loans to purchasers of factory-built homes.

CountryPlace is an approved Federal National Mortgage Association and Federal Home Loan Mortgage Corporation seller/servicer and a Government National Mortgage Association ("GNMA") mortgage-backed securities issuer that offers conforming mortgages, non-conforming mortgages and home-only loans to purchasers of factory-built homes.

Standard Casualty provides property and casualty insurance primarily to owners of manufactured homes.

Recently Issued or Adopted Accounting Standards.

On March 29, 2020, the Company adopted the Financial Accounting Standards Board's ("FASB") Accounting Standards Update ("ASU") 2016-13, Financial Instruments - Credit Losses (Topic 326):

On March 29, 2020, we adopted the Financial Accounting Standards Board's ("FASB") Accounting Standards Update ("ASU") 2016-13, Financial Instruments - Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments ("ASU 2016-13").

ASU 2016-13 changes the impairment model for most financial assets and certain other instruments and requires a forward-looking impairment model based on expected losses rather than incurred losses.

The Company adopted the standard by recognizing the cumulative effect of initially applying the new credit loss standard as an adjustment to the opening balance of Retained earnings.

We adopted the standard by recognizing the cumulative effect of initially applying the new credit loss standard as an adjustment to the opening balance of Retained earnings.

The comparative information has not been restated and continues to be reported under the accounting standard in effect for the applicable prior periods.

2 unchanged sentences

It had an insignificant impact to our allowance for credit losses for Accounts receivable, net.

The Company adopted ASU 2016-13 using the prospective transition approach for acquired consumer loans receivable assets that were previously accounted for under FASB Accounting Standards Codification ("ASC") 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality ("ASC 310-30").

The Company determined that $ 1.7 million of the existing purchase discount for acquired consumer loans was related to credit factors and was reclassified to the allowance for loan loss upon adoption.

ASU 2016-13 was adopted using the prospective transition approach for acquired consumer loans receivable assets that were previously accounted for under FASB Accounting Standards Codification ("ASC") 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality ("ASC 310-30").

We determined that $ 1.7 million of the existing purchase discount for acquired consumer loans was related to credit factors and was reclassified to the allowance for loan loss upon adoption.

The remaining discount on the acquired consumer loans was determined to be related to non-credit factors and will be accreted into interest income over the life of the loans.

For a description of other significant accounting policies used by the Company in the preparation of its Consolidated Financial Statements, please refer to Note 1 of the Notes to Consolidated Financial Statements included in the Form 10-K.

For a description of other significant accounting policies we used in the preparation of our Consolidated Financial Statements, please refer to Note 1 of the Notes to Consolidated Financial Statements included in the Form 10-K.

Revenue from Contracts with Customers

The following table summarizes customer contract revenues disaggregated by reportable segment and source (in thousands):

Three Months Ended Six Months Ended

September 26, 2020 September 28, 2019 September 26,

2020 September 28,

Three Months Ended Nine Months Ended

December 26, 2020 December 28, 2019 December 26,

2020 December 28,

Factory-built housing

5 unchanged sentences

8,296 10,219 31,045 34,831

13,734 13,971 27,873 27,992

Other 13,783 13,413 41,656 41,405

Net revenue from factory-built housing

3 unchanged sentences

840 783 2,387 2,212

16,232 15,711 32,173 29,830

Other 17,110 15,833 49,283 45,663

Net revenue from financial services

2 unchanged sentences

$ 288,772 $ 273,722 $ 801,549 $ 806,439

(1) Other factory-built housing revenue includes revenue from ancillary products and services including used homes, freight and other services.

(2) Other financial services revenue includes consumer finance and insurance revenue that is not within the scope of ASU 2014-09, Revenue from Contracts with Customers ("Topic 606") .

Restricted Cash

Restricted cash consisted of the following (in thousands):

September 26,

2020 March 28,

4 unchanged sentences

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):

September 26,

2020 March 28,

2020 September 28,

2020 December 28,

2019 March 30,

5 unchanged sentences

Investments consisted of the following (in thousands):

September 26,

2020 March 28,

6 unchanged sentences

$ 35,485 $ 31,557

The Company's investments in marketable equity securities consist of investments in the common stock of industrial and other companies.

As of September 26, 2020 and March 28, 2020, non-marketable equity investments included contributions of $ 15.0 million t o equity-method investments in community-based initiatives that buy and sell the Company's homes and provide home-only financing to residents of certain manufactured home communities.

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

As of December 26, 2020 and March 28, 2020, non-marketable equity investments included contributions of $ 15.0 million t 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 other distribution operations.

The following tables summarize the Company's available-for-sale debt securities, gross unrealized gains and losses and fair value, aggregated by investment category (in thousands):

September 26, 2020

The following tables summarize our available-for-sale debt securities, gross unrealized gains and losses and fair value, aggregated by investment category (in thousands):

December 26, 2020

Residential mortgage-backed securities

14 unchanged sentences

The following tables show gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities had been in a continuous unrealized loss position (in thousands):

September 26, 2020

December 26, 2020

Less than 12 Months 12 Months or Longer Total

21 unchanged sentences

$ 4,481 $ ( 67 ) $ 1,880 $ ( 27 ) $ 6,361 $ ( 94 )

The Company is not aware of any changes to the securities or issuers that would indicate the losses above are indicative of credit impairment as of September 26, 2020.

Further, the Company does not intend to sell the investments, and it is more likely than not that the Company will not be required to sell the investments, before recovery of their amortized cost.

The amortized cost and fair value of the Company's investments in available-for-sale debt securities, by contractual maturity, are shown in the table below (in thousands).

We are not aware of any changes to the securities or issuers that would indicate the losses above are indicative of credit impairment as of December 26, 2020.

Further, we do not intend to sell the investments, and it is more likely than not that we will not be required to sell the investments, before recovery of their amortized cost.

The amortized cost and fair value of our investments in available-for-sale debt securities, by contractual maturity, are shown in the table below (in thousands).

Expected maturities differ from contractual maturities as borrowers may have the right to call or prepay obligations, with or without penalties.

September 26, 2020

December 26, 2020

Due in less than one year $ 601 $ 603

4 unchanged sentences

$ 16,482 $ 16,673

The Company recognizes investment gains and losses on available-for-sale debt securities when it sells or otherwise disposes of securities using the specific identification method.

For the three and six months ended September 26, 2020, there were no gross gains realized on the sale of available-for-sale debt securities and g ross losses realized were $ 5,000 .

There were no gross gains or losses realized on the sale of available-for-sale debt securities during the three and six months ended September 28, 2019.

The Company recognizes unrealized gains and losses on marketable equity securities from changes in market prices during the period as a component of earnings in the Consolidated Statements of Comprehensive Income.

We recognize investment gains and losses on available-for-sale debt securities when we sell or otherwise dispose of securities using the specific identification method.

For the three and nine months ended December 26, 2020, there were no gross gains realized on the sale of available-for-sale debt securities and g ross losses realized were $ 1,000 and $ 6,000 , respectively.

There were no gross gains or losses realized on the sale of available-for-sale debt securities during the three and nine months ended December 28, 2019.

We recognize unrealized gains and losses on marketable equity securities from changes in market prices during the period as a component of earnings in the Consolidated Statements of Comprehensive Income.

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

Three Months Ended Six Months Ended

September 26,

2020 September 28,

2019 September 26,

2020 September 28,

Three Months Ended Nine Months Ended

2020 December 28,

2019 December 26,

2020 December 28,

Marketable equity securities:

Net gains on securities held $ 1,857 $ 764 $ 5,132 $ 2,066

Net (losses) gains on securities sold ( 27 ) ( 1 ) 6 ( 2 )

Net gains on securities sold 151 13 157 11

$ 2,008 $ 777 $ 5,289 $ 2,077

Inventories consisted of the following (in thousands):

September 26,

2020 March 28,

5 unchanged sentences

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

September 26,

2020 March 28,

9 unchanged sentences

$ 39,501 $ 49,928

The Company acquired consumer loans receivable as part of its acquisition of Palm Harbor Homes, Inc.

The Company acquired consumer loans receivable as part of the acquisition of Palm Harbor Homes, Inc.

in April 2011 ("Acquisition Date").

The allowance for loan losses reflects the Company's judgment of the probable loss exposure on its loans held for investment portfolio.

On March 29, 2020 the Company adopted ASU 2016-13 using the prospective transition approach for acquired consumer loans receivable assets that were previously accounted for under ASC 310-30.

The Company determined th at $ 1.7 million o f the existing purchase discount for such consumer loans was related to credit factors and was reclassified to the allowance for loan loss upon adoption.

The allowance for loan losses reflects our judgment of the probable loss exposure on loans held for investment.

On March 29, 2020 we adopted ASU 2016-13 using the prospective transition approach for acquired consumer loans receivable assets that were previously accounted for under ASC 310-30.

We determined th at $ 1.7 million o f the existing purchase discount for such consumer loans was related to credit factors and was reclassified to the allowance for loan losses upon adoption.

The remaining discount on the acquired consumer loans was determined to be related to non-credit factors and will be accreted into interest income over the life of the loans.

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 Six Months Ended

September 26,

2020 September 28,

2019 September 26,

2020 September 28,

Three Months Ended Nine Months Ended

2020 December 28,

2019 December 26,

2020 December 28,

Allowance for loan losses at beginning of period $ 3,910 $ 415 $ 1,767 $ 415

5 unchanged sentences

The consumer loans held for investment had the following characteristics:

September 26,

2020 March 28,

3 unchanged sentences

The following table is a consolidated summary of the delinquency status of the outstanding amortized cost of consumer loans receivable (in thousands):

September 26,

2020 March 28,

4 unchanged sentences

$ 87,536 $ 85,990

The following tables disaggregates CountryPlace's gross consumer loans receivable by credit quality indicator and fiscal year of origination (in thousands):

September 26, 2020

The following table disaggregates CountryPlace's gross consumer loans receivable by credit quality indicator and fiscal year of origination (in thousands):

December 26, 2020

2021 2020 2019 2018 2017 Prior Total March 28,

9 unchanged sentences

Loan contracts secured by geographically concentrated collateral could experience higher rates of delinquencies, default and foreclosure losses than loan contracts secured by collateral that is more geographically dispersed.

As of September 26, 2020 , 35 % of the outstanding principal balance of consumer loans receivable portfolio was concentrated in Texas and 19 % was concentrated in Florida.

As of December 26, 2020 , 37 % of the outstanding principal balance of consumer loans receivable portfolio was concentrated in Texas and 20 % was concentrated in Florida.

As of March 28, 2020, 36 % of the outstanding principal balance of the consumer loans receivable portfolio was concentrated in Texas and 16 % was concentrated in Florida.

Other than Texas and Florida, no state had concentrations in excess of 10 % of the principal balance of the consumer loans receivable as of September 26, 2020 or March 28, 2020.

Other than Texas and Florida, no state had concentrations in excess of 10 % of the principal balance of the consumer loans receivable as of December 26, 2020 or March 28, 2020.

Collateral for repossessed loans is acquired through foreclosure or similar proceedings and is recorded at the estimated fair value of the home less the costs to sell.

1 unchanged sentence

the loan is charged off and the loss is recorded to the allowance for loan losses.

Repossessed homes totaled approximately $ 931,000 and $ 1.5 million as of September 26, 2020 and March 28, 2020, respectively, and are included in Prepaid expenses and other current assets in the Consolidated Balance Sheets.

Foreclosure or similar proceedings in progress totaled approximately $ 240,000 and $ 560,000 as of September 26, 2020 and March 28, 2020, respectively.

Repossessed homes totaled approximately $ 162,000 and $ 1.5 million as of December 26, 2020 and March 28, 2020, respectively, and are included in Prepaid expenses and other current assets in the Consolidated Balance Sheets.

Foreclosure or similar proceedings in progress totaled approximately $ 606,000 and $ 560,000 as of December 26, 2020 and March 28, 2020, respectively.

Commercial Loans Receivable

The Company's commercial loans receivable balance consists of two classes:

(i) direct financing arrangements for the home product needs of the Company's independent distributors, communities and developers;

and (ii) amounts loaned by the Company under participation financing programs.

Under the terms of the direct programs, the Company provides funds for financed home purchases by independent distributors, communities and developers.

The commercial loans receivable balance consists of two classes:

(i) direct financing arrangements for the home product needs of our independent distributors, community owners and developers;

and (ii) amounts loaned by us under participation financing programs.

Under the terms of the direct programs, we provide funds for financed home purchases by distributors, community owners and developers.

The notes are secured by the homes as collateral and, in some instances, other security.

Other terms of direct arrangements vary, depending on the needs of the borrower and the opportunity for the Company.

Under the terms of the participation programs, the Company provides loans to independent floor plan lenders, representing a significant portion of the funds that such financiers then lend to distributors to finance their inventory purchases.

Under the terms of the participation programs, we provide loans to independent floor plan lenders that then lend to distributors to finance their inventory purchases.

The participation commercial loans receivables are unsecured general obligations of the independent floor plan lenders.

Commercial loans receivable, net consisted of the following, by class of financing notes receivable (in thousands):

September 26,

2020 March 28,

7 unchanged sentences

The commercial loans receivable balance had the following characteristics:

September 26,

2020 March 28,

3 unchanged sentences

Borrower activity is monitored on a regular basis and contractual arrangements are in place to provide adequate loss mitigation in the event of a default.

The Company has historically been able to sell repossessed homes, thereby mitigating loss exposure.

If a default occurs and collateral is lost, the Company is exposed to loss of the full value of the home loan.

The Company evaluates the potential for loss from its commercial loan programs based on the borrower's risk rating, overall financial stability, historical experience and estimates of other economic factors.

The Company has included considerations related to the COVID-19 pandemic when assessing its risk of loan loss and setting reserve amounts for its commercial finance portfolio as of September 26, 2020.

Historically, we have been able to sell repossessed homes, thereby mitigating loss exposure.

If a default occurs and collateral is lost, we are exposed to loss of the full value of the home loan.

We evaluate the potential for loss from the commercial loan programs based on the borrower's risk rating, overall financial stability, historical experience and estimates of other economic factors.

We have included considerations related to the COVID-19 pandemic when assessing our risk of loan loss and setting reserve amounts for the commercial finance portfolio as of December 26, 2020.

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 Six Months Ended

September 26,

2020 September 28,

2019 September 26,

2020 September 28,

Three Months Ended Nine Months Ended

2020 December 28,

2019 December 26,

2020 December 28,

Balance at beginning of period

6 unchanged sentences

$ 765 $ 162 $ 765 $ 162

The following table disaggregates the Company's commercial loans receivable by credit quality indicator and fiscal year of origination (in thousands):

September 26, 2020

The following table disaggregates our commercial loans receivable by credit quality indicator and fiscal year of origination (in thousands):

December 26, 2020

2021 2020 2019 2018 2017 Total March 28,

5 unchanged sentences

$ 22,708 $ 10,394 $ 3,954 $ 2,180 $ 1,522 $ 40,758 $ 47,202

At September 26, 2020, there were no commercial loans 90 days or more past due that were still accruing interest and the Company was not aware of any potential problem loans that would have a material effect on the commercial loans receivable balance.

As of September 26, 2020, 10.5 % of the Company's outstanding commercial loans receivable principal balance was concentrated in Arizona and 10.0 % was concentrated in California.

As of March 28, 2020, 11.0 % of the Company's outstanding commercial loans receivable principal balance was concentrated in California.

No other state had concentrations in excess of 10 % of the principal balance of the consumer loans receivable as of September 26, 2020 or March 28, 2020.

The Company had concentrations with one independent third-party and its affiliates that equaled 17.9 % and 21.0 % of the net commercial loans receivables principal balance outstanding, all of which was secured, as of September 26, 2020 and March 28, 2020 respectively.

T he risks created by these concentrations have been considered in the determination of the adequacy of the allowance for loan loss.

At December 26, 2020, there were no commercial loans 90 days or more past due that were still accruing interest and we were not aware of any potential problem loans that would have a material effect on the commercial loans receivable balance.

As of December 26, 2020, 10.0 % of our outstanding commercial loans receivable principal balance was concentrated in Arizona.

As of March 28, 2020, 11.0 % of the outstanding commercial loans receivable principal balance was concentrated in California.

No other state had concentrations in excess of 10 % of the principal balance of the consumer loans receivable as of December 26, 2020 or March 28, 2020.

We had concentrations with one independent third-party and its affiliates that equaled 16.8 % and 21.0 % of the net commercial loans receivable principal balance outstanding, all of which was secured, as of December 26, 2020 and March 28, 2020, respectively.

T he risks created by these concentrations have been considered in the determination of the adequacy of the allowance for loan losses.

Property, Plant and Equipment, net

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

September 26,

2020 March 28,

6 unchanged sentences

$ 78,493 $ 77,190

Depreciation expense was $ 1.4 million and $ 1.3 million for the three months ended September 26, 2020 and September 28, 2019, respectively.

Depreciation expense for the six months ended September 26, 2020 and September 28, 2019 was $ 2.8 million and $ 2.4 million, respectively.

Depreciation expense was $ 1.4 million for each of the three month periods ended December 26, 2020 and December 28, 2019.

Depreciation expense for the nine months ended December 26, 2020 and December 28, 2019 was $ 4.2 million and $ 3.8 million, respectively.

Included in the amounts above are certain assets under finance leases.

See Note 9 for additional information.

The Company leases certain production and retail locations, office space and equipment.

During the period ended September 26, 2020, the Company executed various lease renewals, including a five-year extension at one of our active manufacturing facilities, which increased the right of use asset and lease liability.

The present value of minimum payments for future fiscal years under non-cancelable leases as of September 26, 2020 was as follows (in thousands):

See Note 9 of the Notes to the Consolidated Financial Statements included in the Form 10-K for additional information.

We lease certain production and retail locations, office space and equipment.

During the period ended December 26, 2020, we executed various lease renewals, including a five-year extension at one of our active manufacturing facilities, which increased the right of use asset and lease liability.

The present value of minimum payments for future fiscal years under non-cancelable leases as of December 26, 2020 was as follows (in thousands):

Operating Leases Finance Leases Total

13 unchanged sentences

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

September 26, 2020 March 28, 2020

December 26, 2020 March 28, 2020

Amount Accumulated

13 unchanged sentences

$ 97,814 $ ( 8,174 ) $ 89,640 $ 97,814 $ ( 7,614 ) $ 90,200

Amortization expense recognized on intangible assets was $ 187,000 and $ 151,000 for the three months ended September 26, 2020 and September 28, 2019, respectively.

Amortization expense recognized on intangible assets was $ 374,000 and $ 231,000 for the six months ended September 26, 2020 and September 28, 2019, respectively.

Amortization expense recognized on intangible assets was $ 186,000 and $ 188,000 for the three months ended December 26, 2020 and December 28, 2019, respectively.

Amortization expense recognized on intangible assets was $ 560,000 and $ 419,000 for the nine months ended December 26, 2020 and December 28, 2019, respectively.

Accrued Expenses and Other Current Liabilities

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

September 26,

2020 March 28,

5 unchanged sentences

Accrued volume rebates 12,063 9,801

Insurance loss reserves 6,887 5,582

Accrued self-insurance 5,661 5,112

Insurance loss reserves 5,351 5,582

Operating lease liabilities 4,082 4,170

Accrued taxes 3,247 1,908

Reserve for repurchase commitments 2,281 2,679

Accrued taxes 2,212 1,908

Other 19,342 16,002

1 unchanged sentence

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

Three Months Ended Six Months Ended

September 26,

2020 September 28,

2019 September 26,

2020 September 28,

Three Months Ended Nine Months Ended

2020 December 28,

2019 December 26,

2020 December 28,

Balance at beginning of period $ 17,805 $ 18,563 $ 18,678 $ 17,069

4 unchanged sentences

Debt and Finance Lease Obligations

Debt and finance lease obligations primarily consist of secured credit facilities at the Company's finance subsidiary and lease obligations in which it is expected that the Company will obtain ownership of a leased asset at the end of the lease term.

Debt and finance lease obligations primarily consist of secured credit facilities at our finance subsidiary and lease obligations for which it is expected that we will obtain ownership of the leased assets at the end of their lease term.

The following table summarizes debt and finance lease obligations (in thousands):

September 26,

2020 March 28,

2 unchanged sentences

Other secured financings

Finance lease liabilities

Finance lease obligations 319 366

12,987 14,953

1 unchanged sentence

$ 10,847 $ 12,705

The Company's finance subsidiary entered into secured credit facilities with independent third-party banks with draw periods from one to fifteen months and maturity dates of ten years after the expiration of the draw periods, which have now expired.

The proceeds were used by the Company to originate and hold consumer home-only loans secured by manufactured homes, which are pledged as collateral to the facilities.

CountryPlace entered into secured credit facilities with independent third-party banks with draw periods from one to fifteen months and maturity dates of ten years after the expiration of the draw periods, which have now expired.

The proceeds were used to originate and hold consumer home-only loans secured by manufactured homes, which are pledged as collateral to the facilities.

Upon completion of the draw down periods, the facilities were converted into an amortizing loan based on a 20-year amortization period with a balloon payment due upon maturity .

The maximum advance for loans under this program was 80 % of the outstanding collateral principal balance, with the Company providing the remaining funds.

As of September 26, 2020, the outstanding balance of the converted loans was $ 9.8 million at a weighted average interest rate of 4.91 %.

See Note 9 for further discussion of the finance lease obligations.

The outstanding balance of the converted loans was $ 8.8 million as of December 26, 2020 and $ 10.5 million as of March 28, 2020, with a weighted average interest rate of 4.91 %.

See Note 9 of the Notes to the Consolidated Financial Statements included in the Form 10-K for further discussion of the finance lease obligations.

Standard Casualty is primarily a specialty writer of manufactured home physical damage insurance.

4 unchanged sentences

Three Months Ended

September 26, 2020 September 28, 2019

December 26, 2020 December 28, 2019

Written Earned Written Earned

6 unchanged sentences

$ 8,815 $ 9,478 $ 7,501 $ 8,361

Six Months Ended

September 26, 2020 September 28, 2019

Nine Months Ended

December 26, 2020 December 28, 2019

Written Earned Written Earned

13 unchanged sentences

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 the Company was liable under such agreements approximated $ 77.6 million and $ 79.3 million at September 26, 2020 and March 28, 2020, respectively, without reduction for the resale value of the homes.

The Company applies ASC 460, Guarantees , and ASC 450-20, Loss Contingencies , to account for its liability for repurchase commitments.

The Company had a reserve for repurchase commitments of $ 2.5 million and $ 2.7 million at September 26, 2020 and March 28, 2020, respectively.

The maximum amount for which we were liable under such agreements approximated $ 70.8 million and $ 79.3 million at December 26, 2020 and March 28, 2020, respectively, without a reduction for the resale value of the homes.

We apply ASC 460, Guarantees , and ASC 450-20, Loss Contingencies , to account for the repurchase commitment liability.

We had a reserve for repurchase commitments of $ 2.3 million and $ 2.7 million at December 26, 2020 and March 28, 2020, respectively.

Letter of Credit.

8 unchanged sentences

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

September 26,

2020 March 28,

6 unchanged sentences

Upon a breach of a representation, CountryPlace may be required to repurchase the loan or to indemnify a party for incurred losses.

The Company maintains a reserve for these contingent repurchase and indemnification obligations.

This reserve of $ 1.3 million as of September 26, 2020 and $ 1.0 million as of March 28, 2020, included in Accrued expenses and other current liabilities, reflects management's estimate of probable loss.

During the six months ended September 26, 2020, no claim request resulted in the execution of an indemnification agreement or in the repurchase of a loan .

During the nine months ended December 26, 2020, the Company executed indemnification agreements to cover 20 % of the losses experienced over the next two years related to five loans that were impacted by COVID-19.

We maintain a reserve for these contingent repurchase and indemnification obligations.

This reserve of $ 1.3 million as of December 26, 2020 and $ 1.0 million as of March 28, 2020, included in Accrued expenses and other current liabilities, reflects management's estimate of probable loss.

There were no claim requests that resulted in the repurchase of a loan during the nine months ended December 26, 2020.

Interest Rate Lock Commitments .

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These IRLCs represent an agreement to extend credit to a loan applicant, whereby the interest rate on the loan is set prior to loan closing or sale.

These IRLCs bind the Company to fund the approved loan at the specified rate regardless of whether interest rates or market prices for similar loans have changed between the commitment date and the closing date.

As of September 26, 2020, CountryPlace had outstanding IRLCs with a notional amount of $ 23.2 million, which are recorded at fair value in accordance with ASC 815, Derivatives and Hedging .

During the three months ended September 26, 2020 and September 28, 2019, the Company recogn ized losses of $ 19,000 and $ 2,000 , respectively, on outstanding IRLCs.

During the six months ended September 26, 2020 and September 28, 2019, the Company recognized losses of $ 144,000 and $ 3,000 , respectively, on outstanding IRLCs.

These IRLCs bind CountryPlace to fund the approved loan at the specified rate regardless of whether interest rates or market prices for similar loans have changed between the commitment date and the closing date.

As of December 26, 2020, CountryPlace had outstanding IRLCs with a notional amount of $ 24.5 million, which are recorded at fair value in accordance with ASC 815, Derivatives and Hedging .

During the three months ended December 26, 2020 and December 28, 2019, we recogn ized gains of $ 57,000 and losses of $ 5,000 , respectively, on outstanding IRLCs.

During the nine months ended December 26, 2020 and December 28, 2019, we recognized losses of $ 87,000 and $ 8,000 , respectively, on outstanding IRLCs.

Forward Sales Commitments .

CountryPlace manages the risk profiles of a portion of its outstanding IRLCs and mortgage loans held for sale by entering into forward sales of mortgage-backed securities ("MBS") and whole loan sale commitments.

As of September 26, 2020, CountryPlace had $ 58.8 million in outstanding notional forward sales of MBSs and forward sales commitments.

As of December 26, 2020, CountryPlace had $ 68.9 million in outstanding notional forward sales of MBSs and forward sales commitments.

Commitments for forward sales of whole loans are typically in an amount proportionate with the amount of IRLCs expected to close in particular time frames, assuming no change in mortgage interest rates, for the respective loan products intended for whole loan sale.

The estimated fair values of forward sales of MBS and whole loan sale commitments are based on quoted market values and are recorded within Prepaid expenses and other current assets in the Consolidated Balance Sheets.

During the three months ended September 26, 2020 and September 28, 2019 , the Com pany recognized gains of $ 118,000 and $ 49,000 on forward sales of MBS and whole loan sale commitments, respectively.

During the six months ended September 26, 2020 and September 28, 2019, the Company recognized gains of $ 1.1 million and $ 84,000 on forward sales of MBS and whole loan sale commitments, respectively.

During the three months ended December 26, 2020 and December 28, 2019 , we recognized losses of $ 318,000 and gains of $ 79,000 , respectively, on forward sales of MBS and whole loan sale commitments.

During the nine months ended December 26, 2020 and December 28, 2019, we recognized gains of $ 816,000 and $ 163,000 ,respectively, on forward sales of MBS and whole loan sale commitments.

Legal Matters.

Since 2018, the Company has been cooperating with an investigation by the enforcement staff of the SEC's Los Angeles Regional Office regarding securities trading in personal and Company accounts directed by the Company's former Chief Executive Officer, Joseph Stegmayer.

The Audit Committee of the Board conducted an internal investigation led by independent legal counsel and other advisers and, following the completion of its work in early 2019, the Audit Committee shared the results of its work with the Company's auditors, listing exchange and the SEC staff.

The Company has also made documents and personnel available to the SEC staff and intends to continue cooperating with its investigation.

The Company has been exploring the possibility of a settlement with the SEC staff, but at this time, the Company is unable to estimate the amount of a potential loss, if any.

Cavco Industries, Inc., was filed in the Superior Court for the State of California, Riverside on June 25, 2019 and Malik Griffin v.

Fleetwood Homes, Inc ., was filed in the Superior Court for the State of California, San Bernardino on September 19, 2019, seeking recovery on behalf of a putative class of current and former hourly employees for certain alleged wage-and-hour violations including, among other things:

The Audit Committee of the Board of Directors conducted an internal investigation led by independent legal counsel and other advisers and, following the completion of its work in early 2019, the Audit Committee shared the results of its work with the Company's auditors, listing exchange and the SEC staff.

We have also made documents and personnel available to the SEC staff and we intend to continue cooperating with its investigation.

We have been exploring the possibility of a settlement with the SEC staff but, at this time, we are unable to assess the probability of that outcome or reasonably estimate the amount of a potential loss, if any.

Cavco Industries, Inc.

("Robles"), was filed in the Superior Court for the State of California, Riverside on June 25, 2019 and Malik Griffin v.

Fleetwood Homes, Inc .

("Griffin"), was filed in the Superior Court for the State of California, San Bernardino on September 19, 2019, each seeking recovery on behalf of a putative class of current and former hourly employees for certain alleged wage-and-hour violations including, among other things:

(i) alleged failure to comply with certain wage statement formatting requirements;

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and (iii) alleged failure to provide employees with all requisite work breaks.

All parties have agreed to jointly mediate both cases.

The mediation is currently scheduled for January 27, 2021.

On November 24, 2020, Robles dismissed his separate action in the Riverside County Superior Court and Griffin filed an amended complaint adding Robles as a named plaintiff to the action in the San Bernardino County Superior Court.

A joint mediation occurred on January 27, 2021 where the Parties failed to reach a settlement or resolution to the matter

The Company is party to certain other lawsuits in the ordinary course of business.

Based on management's present knowledge of the facts and (in certain cases) advice of outside counsel, management does not believe that loss contingencies arising from pending matters are likely to have a material adverse effect on the Company's consolidated financial position, liquidity or results of operations after taking into account any existing reserves included in Accrued expenses and other current liabilities in the Consolidated Balance Sheets.

However, future events or circumstances that may currently be unknown to management will determine whether the resolution of pending or threatened litigation or claims will ultimately have a material effect on the Company's consolidated financial position, liquidity or results of operations in any future reporting periods .

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 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 .

Stockholders' Equity

The following table represents changes in stockholders' equity for each quarterly period during the six months ended September 26, 2020 (dollars in thousands):

The following table represents changes in stockholders' equity for each quarterly period during the nine months ended December 26, 2020 (dollars in thousands):

Additional paid-in capital Retained earnings Accumulated other comprehensive income Total

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Balance, September 26, 2020 9,188,162 $ 92 $ 254,297 $ 386,134 $ 165 $ 640,688

The following table represents changes in stockholders' equity for each quarterly period during the six months ended September 28, 2019 (dollars in thousands):

Net income — — — 19,701 — 19,701

Issuance of common stock under stock incentive plans 4,075 — 480 — — 480

Stock-based compensation — — 887 — — 887

Other comprehensive loss, net — — — — ( 15 ) ( 15 )

Balance, December 26, 2020 9,192,237 $ 92 $ 255,664 $ 405,835 $ 150 $ 661,741

The following table represents changes in stockholders' equity for each quarterly period during the nine months ended December 28, 2019 (dollars in thousands):

Additional paid-in capital Retained earnings Accumulated other comprehensive income (loss) Total

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Balance, September 28, 2019 9,127,466 $ 91 $ 250,584 $ 322,245 $ 84 $ 573,004

Net income — — — 20,898 — 20,898

Issuance of common stock under stock incentive plans 13,725 — 537 — — 537

Stock-based compensation — — 820 — — 820

Other comprehensive income, net — — — — 1 1

Balance, December 28, 2019 9,141,191 $ 91 $ 251,941 $ 343,143 $ 85 $ 595,260

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 Six Months Ended

September 26,

2020 September 28,

2019 September 26,

2020 September 28,

Three Months Ended Nine Months Ended

2020 December 28,

2019 December 26,

2020 December 28,

$ 19,701 $ 20,898 $ 51,424 $ 63,065

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$ 2.12 $ 2.25 $ 5.54 $ 6.81

Anti-dilutive common stock equivalents excluded from the computation of diluted earnings per share for the three months ended September 26, 2020 and September 28, 2019 were 20,582 and 22,536 , respectively.

Anti-dilutive common stock equivalents excluded from the computation of diluted earnings per share for the six months ended September 26, 2020 and September 28, 2019 were 30,182 and 42,401 , respectively.

In addition, 14,405 and 11,450 outstanding restricted share awards were excluded from the calculation of diluted earnings per share for the three and six months ended September 26, 2020 and September 28, 2019, respectively, because the underlying performance criteria had not yet been met.

Anti-dilutive common stock equivalents excluded from the computation of diluted earnings per share for the three months ended December 26, 2020 and December 28, 2019 were 26,601 and 14,482 , respectively.

Anti-dilutive common stock equivalents excluded from the computation of diluted earnings per share for the nine months ended December 26, 2020 and December 28, 2019 were 26,357 and 29,971 , respectively.

In addition, outstanding restricted share awards excluded from the calculation of diluted earnings per share because the underlying performance criteria had not been met were 14,405 for the three and nine months ended December 26, 2020, and 7,305 for the three and nine months ended December 28, 2019.

Fair Value Measurements

The book value and estimated fair value of the Company's financial instruments were as follows (in thousands):

September 26, 2020 March 28, 2020

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

December 26, 2020 March 28, 2020

Value Estimated

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39,746 38,300 46,565 46,819

Securitized financings and other

( 14,051 ) ( 13,638 ) ( 14,953 ) ( 15,592 )

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 the Company uses in determining fair value.

Secured financings and other ( 12,987 ) ( 12,493 ) ( 14,953 ) ( 15,592 )

Assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):

September 26, 2020

December 26, 2020

Total Level 1 Level 2 Level 3

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Forward loan sale commitment derivatives (3)

Mortgage servicing rights (4)

( 195 ) — — ( 195 )

Mortgage servicing rights (4)

March 28, 2020

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(4) Changes in the fair value of mortgage servicing rights are recorded in earnings through Net revenue.

No transfers between Level 1, Level 2 or Level 3 occurred during the six months ended September 26, 2020.

No transfers between Level 1, Level 2 or Level 3 occurred during the nine months ended December 26, 2020.

Financial instruments for which fair value is disclosed but not required to be recognized in the balance sheet on a recurring basis are summarized below (in thousands):

September 26, 2020

December 26, 2020

Total Level 1 Level 2 Level 3

6 unchanged sentences

38,300 — — 38,300

Securitized financings and other

( 13,638 ) — ( 13,638 ) —

Secured financings and other ( 12,493 ) — ( 12,493 ) —

Non-marketable equity investments

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46,819 — — 46,819

Securitized financings and other

( 15,592 ) — ( 15,592 ) —

Secured financings and other ( 15,592 ) — ( 15,592 ) —

Non-marketable equity investments

21,536 — — 21,536

No impairment charges were recorded during the six months ended September 26, 2020.

No impairment charges were recorded during the nine months ended December 26, 2020.

Mortgage Servicing .

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Changes in fair value subsequent to the initial capitalization are recorded in earnings.

September 26,

2020 March 28,

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Serviced portfolio with MSRs (in thousands) $ 590,433 $ 585,777

Mortgage servicing rights (in thousands) $ 1,058 $ 1,225

MSRs (in thousands) $ 831 $ 1,225

Related Party Transactions

The Company has non-marketable equity investments in other distribution operations outside of Company-owned retail locations.

In the ordinary course of business, the Company sells homes and lends to certain of these operations through its commercial lending programs.

For the three months ended September 26, 2020 and September 28, 2019, the total amount of sales to related parties was $ 10.3 million and $ 10.4 million, respectively.

For the six months ended September 26, 2020 and September 28, 2019, the total amount of sales to related parties was $ 23.0 million and $ 23.8 million, respectively.

As of September 26, 2020, receivables from related parties included $ 2.9 million of accounts receivable and $ 7.3 million of commercial loans outstanding.

We have non-marketable equity investments in other distribution operations outside of Company-owned retail locations.

In the ordinary course of business, we sell homes and lend to certain of these operations through our commercial lending programs.

For the three months ended December 26, 2020 and December 28, 2019, the total amount of sales to related parties was $ 11.2 million and $ 13.3 million, respectively.

For the nine months ended December 26, 2020 and December 28, 2019, the total amount of sales to related parties was $ 34.2 million and $ 37.1 million, respectively.

As of December 26, 2020, receivables from related parties included $ 3.9 million of accounts receivable and $ 7.5 million of commercial loans outstanding.

As of March 28, 2020, receivables from related parties incl uded $ 1.7 million of accounts receivable and $ 8.2 million of commercial loans outstanding.

Acquisition of Destiny Homes

On August 2, 2019, the Company purchased certain manufactured housing assets and assumed certain liabilities of Destiny Homes, which operates one manufacturing facility located in Moultrie, Georgia and produces and distributes manufactured and modular homes through a network of independent retailers in the Southeastern United States, further expanding the Company's reach.

The Company finalized the purchase price allocation and has not made any purchase accounting adjustments during fiscal year 2021.

We finalized the purchase price allocation and have not made any purchase accounting adjustments during fiscal year 2021.

Pro Forma Impact of Acquisition .

The following table presents supplemental pro forma information as if the acquisition of Destiny Homes had occurred on March 31, 2019 (in thousands, except per share data):

Three Months Ended Six Months Ended

September 26,

2020 September 28,

2019 September 26,

2020 September 28,

Three Months Ended Nine Months Ended

2020 December 28,

2019 December 26,

2020 December 28,

$ 288,772 $ 273,722 $ 801,549 $ 817,674

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Business Segment Information

The Company operates principally in two segments:

We operate principally in two segments:

(1) factory-built housing, which includes wholesale and retail systems-built housing operations and (2) financial services, which includes manufactured housing consumer finance and insurance.

The following table details Net revenue and Income before income taxes by segment (in thousands):

Three Months Ended Six Months Ended

September 26,

2020 September 28,

2019 September 26,

2020 September 28,

Three Months Ended Nine Months Ended

2020 December 28,

2019 December 26,

2020 December 28,

Factory-built housing $ 270,822 $ 257,106 $ 749,879 $ 758,564

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$ 25,890 $ 24,732 $ 67,166 $ 79,349

Subsequent Events

On October 27, 2020 , the Company’s Board of Directors approved a $ 100 million stock repurchase program that may be used to purchase its outstanding common stock.

This program replaces a previously standing $ 10 million authorization, which is now canceled.

The purchases may be made in the open market or one or more privately negotiated transactions in compliance with applicable securities laws and other legal requirements.

The actual timing, number and value of shares repurchased under the program will be determined by the Company in its discretion and will depend on a number of factors, including market conditions, applicable legal requirements and other strategic capital needs and opportunities.

The plan does not obligate Cavco to acquire any particular amount of common stock and may be suspended or discontinued at any time.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements