What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2021-05-28 compared with 2020-05-27 · 165 added, 167 removed, 68 unchanged (83% of the section changed)

1 unchanged sentence

You should carefully consider the following risks, together with the information provided elsewhere in this Annual Report.

The items described below are not the only risks facing the Company.

Additional risks that are currently unknown to the Company or that are currently considered to be immaterial may also impair the business or adversely affect the Company's financial condition or results of operations.

The items described below are not the only risks we face.

Additional risks that are currently unknown to us or that are currently considered to be immaterial may also impair the business or adversely affect our financial condition or results of operations.

Business and Operational Risks

The impact of local or national emergencies, including the COVID-19 pandemic, can adversely affect our financial results, condition and prospects, including such impacts from state and federal regulatory action that restricts our ability to operate our business in the ordinary course and impacts on (i) customer demand and the availability of financing for our products, (ii) our supply chain and the availability of raw materials for the manufacture of our products, (iii) the availability of labor and the health and safety of our workforce and (iv) our liquidity and access to the capital markets

Severe weather conditions, natural disasters, hostilities and social unrest, terrorist activities, health epidemics or pandemics or other local or national emergencies (both ones quickly resolved and ones that endure over long periods of time) can adversely affect consumer spending and confidence levels and supply availability and costs, as well as the local operations in impacted markets, all of which can affect our financial results, condition and prospects.

The Company's sales of affordable homes are largely dependent on the ability of consumers to obtain financing for the purchase of a home.

Severe weather conditions, natural disasters, hostilities and social unrest, terrorist activities, health epidemics or pandemics or other local or national emergencies (both ones quickly resolved and ones that endure over long periods of time) can adversely affect consumer spending and confidence levels and supply availability and costs, as well as local operations in impacted markets, all of which can affect our financial results, condition and prospects.

Our sales of affordable homes are largely dependent on the ability of consumers to obtain financing for the purchase of a home.

Consumer financing is dependent on a number of economic factors, including the employment status of borrowers, which may be adversely affected by local or national emergencies.

Consumer confidence is also an important factor to support home purchases and is subject to the adverse effects of an emergency situation.

The Company's products are produced in a manner that is considered labor-intensive and requires a consistent and available workforce, which may be adversely affected by a large-scale decline in public health conditions or other emergencies.

Our products are produced in a manner that is considered labor-intensive and requires a consistent and available workforce, which may be adversely affected by a large-scale decline in public health conditions or other emergencies.

As it relates to the COVID-19 pandemic, our normal operations have been constrained by actions we have taken to maintain a safe working environment for our employees, including compliance with mandated social distancing and other governmental requirements.

Plant capacity utilization levels have fallen accordingly.

The Company has experienced increased employee absenteeism and it has also impacted our supply chain.

Factory capacity utilization levels have fallen accordingly, having also experienced increased employee absenteeism and pandemic impacts to our supply chain.

Our primary suppliers are domestic, while also depending on materials originating from overseas.

The ability of suppliers to fulfill orders on behalf of the Company on pre-existing terms is dependent upon their particular circumstances, including those related to the COVID-19 pandemic.

In addition, we have seen decreased customer traffic in our sales offices.

The magnitude of the COVID-19 pandemic, including the extent of any continuing impact on Cavco's business, financial position, results of operations or liquidity, which could be material, cannot be reasonably estimated at this time because of the rapid development and fluidity of the situation.

The ability of suppliers to fulfill orders on our behalf under pre-existing terms is dependent upon their particular circumstances, including those related to the COVID-19 pandemic.

The magnitude of the COVID-19 pandemic, including the extent of any continuing impact on our business, financial position, results of operations or liquidity, which could be material, cannot be reasonably estimated at this time because of the continuing fluidity of the situation.

It will depend on the duration of the pandemic, its geographic spread, potential business disruptions and the overall impact on the national economy and consumer behavior.

8 unchanged sentences

and risks related to stock price fluctuations.

The Company's results of operations can be adversely affected by labor shortages and the pricing and availability of raw materials

The homebuilding industry has from time to time experienced labor shortages and other labor related issues.

A number of factors may adversely affect the labor force available to us and our subcontractors in one or more of our markets.

This includes high employment levels, construction market conditions and government regulation, which include laws and regulations related to workers' health and safety, wage and hour practices and immigration patterns or restrictions.

An overall labor shortage or a lack of skilled or unskilled labor could cause significant increases in costs or delays in construction of homes, which could have a material adverse effect upon our revenue and results of operations.

Our results of operations can also be affected by the pricing and availability of raw materials.

Key building materials include wood and wood products, gypsum wallboard, steel, windows, appliances, insulation and other petroleum-based products.

There can be no assurance that sufficient supplies of these and other raw materials will continue to be available to us.

Sudden increases in price or lack of availability of raw materials can be caused by natural disaster, regulation or other market forces, as has occurred in recent years.

We have experienced production halts from shortages of primary building materials in the past, and although we attempt to increase the sales prices of our homes in response to higher materials costs, such increases may lag behind the escalation of material costs.

The Company may not be able to successfully integrate past or future acquisitions to attain the anticipated benefits and such acquisitions may adversely impact the Company's liquidity

The Company has acquired industry competitors in the past and may consider additional strategic acquisitions if such opportunities arise.

Prior acquisitions and any other acquisitions that may be considered in the future involve a number of risks, including the diversion of our management's attention from its existing business for those transactions that it completes, or possible adverse effects on our operating results and liquidity during the integration process.

In addition, the Company may not be able to successfully or profitably integrate, operate, maintain and manage the operations or employees of past or future acquisitions.

During the integration stage of an acquisition, the Company also may not be able to maintain uniform standards, controls, procedures and policies, which may lead to financial losses.

We have acquired industry competitors in the past and may consider additional strategic acquisitions if such opportunities arise.

Prior acquisitions and any other acquisitions that may be considered in the future involve a number of risks, including the diversion of our management's attention from the existing business for those transactions that we complete, or possible adverse effects on our operating results and liquidity during the integration process.

In addition, we may not be able to successfully or profitably integrate, operate, maintain and manage the operations or employees of past or future acquisitions.

During the integration stage of an acquisition, we also may not be able to maintain uniform standards, controls, procedures and policies, which may lead to financial losses.

The Company's involvement in vertically integrated lines of business, including manufactured housing consumer finance, commercial finance and insurance, exposes the Company to certain risks

CountryPlace offers conforming mortgages, non-conforming mortgages and home-only loans to purchasers of factory-built homes sold by Company-owned retail sales centers and independent distributors, builders, communities and developers.

Most loans originated through CountryPlace are sold to investors.

CountryPlace also provides various loan servicing functions for non-affiliated entities under contract.

If CountryPlace's customers are unable to repay their loans, CountryPlace may be adversely affected.

CountryPlace makes loans to borrowers that it believes are creditworthy based on its underwriting guidelines.

We offer conforming mortgages, non-conforming mortgages and home-only loans to purchasers of factory-built homes sold by Company-owned retail stores and independent distributors, builders, communities and developers through our subsidiary, CountryPlace.

Most loans we originate are sold to investors.

We also provide various loan servicing functions for non-affiliated entities under contract.

If customers are unable to repay their loans, we may be adversely affected.

We make loans to borrowers that we believe are creditworthy based on underwriting guidelines.

However, the ability of these customers to repay their loans may be affected by a number of factors, including, but not limited to:

3 unchanged sentences

and employment, financial or unexpected life circumstances.

If CountryPlace's customers do not repay their loans, CountryPlace may repossess or foreclose on the secured property in order to liquidate its loan collateral and minimize losses.

If customers do not repay their loans, we may repossess or foreclose on the secured property in order to liquidate the loan collateral and minimize losses.

The homes and land securing the loans are subject to fluctuating market values, and proceeds realized from liquidating repossessed or foreclosed property are highly susceptible to adverse movements in collateral values.

Home price depreciation and elevated levels of unemployment may result in additional defaults and exacerbate actual loss severities upon collateral liquidation.

Some of the loans CountryPlace has originated or may originate in the future may not have a liquid market, or the market may contract rapidly and the loans may become illiquid.

Although CountryPlace offers loan products and prices its loans at levels that it believes are marketable at the time of credit application approval, market conditions for its loans may deteriorate rapidly and significantly.

CountryPlace's ability to respond to changing market conditions is affected by credit approval and funding commitments it makes in advance of loan completion.

Some of the loans we originate or may originate in the future may not have a liquid market, or the market may contract rapidly and the loans may become illiquid.

Although we offer loan products and price our loans at levels that we believe are marketable at the time of credit application approval, market conditions for such loans may deteriorate rapidly and significantly.

Our ability to respond to changing market conditions is affected by credit approval and funding commitments we make in advance of loan completion.

In this environment, it is difficult to predict the types of loan products and characteristics that may be susceptible to future market curtailments and tailor loan offerings accordingly.

As a result, no assurances can be given that the market value of the Company's loans will not decline in the future, or that a market will continue to exist for loan products.

CountryPlace sells loans through GSE-related programs and to whole-loan purchasers.

CountryPlace also finances certain loans with long-term credit facilities secured by the respective loans.

In connection with these activities, CountryPlace provides to the GSEs, whole-loan purchasers and lenders, as the case may be, representations and warranties related to the loans sold or financed.

These representations and warranties generally relate to the ownership of the loans, the validity of the liens securing the loans, the loans' compliance with the criteria for inclusion in the transactions, including compliance with underwriting standards or loan criteria established by buyers or lenders and CountryPlace's ability to deliver documentation in compliance with applicable laws.

As a result, no assurances can be given that the market value of our loans will not decline in the future, or that a market will continue to exist for loan products.

We sell loans through GSE-related programs and to whole-loan purchasers and also finance certain loans with long-term credit facilities secured by the respective loans.

In connection with these activities, we provide to GSEs, whole-loan purchasers and lenders, as the case may be, representations and warranties related to the loans sold or financed.

These representations and warranties generally relate to the ownership of the loans, the validity of the liens securing the loans, the loans' compliance with the criteria for inclusion in the transactions, including compliance with underwriting standards or loan criteria established by buyers or lenders and our ability to deliver documentation in compliance with applicable laws.

Generally, representations and warranties may be enforced at any time over the life of the loan.

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

Although CountryPlace maintains reserves for these contingent repurchase and indemnification obligations, these reserves may not be ultimately sufficient for incurred losses, which could have a material adverse effect on the Company's operational results or financial condition.

Standard Casualty specializes in the manufactured housing industry, primarily serving the Texas, Arizona, New Mexico and Nevada markets.

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

Although we maintain reserves for these contingent repurchase and indemnification obligations, these reserves may not be ultimately sufficient for incurred losses, which could have a material adverse effect on our operational results or financial condition.

Standard Casualty specializes in homeowner property and casualty insurance products for the manufactured housing industry, primarily serving the Texas, Arizona, New Mexico and Nevada markets.

Property and casualty insurance companies are subject to certain risk-based capital requirements as specified by the National Association of Insurance Commissioners.

Under those requirements, the amount of capital and surplus maintained by a property and casualty insurance company is determined based on its various risk factors.

Certain of Standard Casualty's premiums and benefits are assumed from and ceded to other insurance companies under various reinsurance agreements.

The ceded reinsurance agreements provide Standard Casualty with increased capacity to write larger risks.

Standard Casualty remains obligated for amounts ceded in the event that the reinsurers do not meet their obligations.

Substantially all of Standard Casualty's assumed reinsurance is with one entity.

Further, Standard Casualty's policies in force may be subject to numerous risks, including geographic concentration, adverse selection, home deterioration, unusual weather events, and regulation.

Although, subject to certain conditions, claim amounts are recoverable by Standard Casualty through reinsurance for catastrophic losses up to policy maximums, significant losses may be realized and the Company's results of operations and financial condition could be adversely affected.

Certain of our premiums and benefits are assumed from and ceded to other insurance companies under various reinsurance agreements.

The ceded reinsurance agreements provide us with increased capacity to write larger risks.

We remain obligated for amounts ceded in the event that the reinsurers do not meet their obligations.

Substantially all of our assumed reinsurance is with one entity.

Further, our policies in force may be subject to numerous risks, including geographic concentration, adverse selection, home deterioration, unusual weather events, and regulation.

Although claim amounts are recoverable through reinsurance for catastrophic losses up to policy maximums, subject to certain conditions, significant losses may be realized and our results of operations and financial condition could be adversely affected.

Information technology failures or cyber incidents could harm the Company's business

The Company is increasingly dependent on information technology systems and infrastructure to operate its business.

In the ordinary course of business, the Company collects, stores, processes and transmits significant amounts of sensitive information, including proprietary business information, personal information, and other confidential information, including that of the Company's, and its mortgage and insurance subsidiaries CountryPlace, Standard Casualty and Standard Insurance Agency, customers, vendors and suppliers.

We are increasingly dependent on information technology systems and infrastructure to operate our business.

In the ordinary course of business, we collect, store, process and transmit significant amounts of sensitive information, including proprietary business information, personal information, and other confidential information, including that of our customers, vendors and suppliers.

All information systems are subject to disruption, breach or failure.

Potential vulnerabilities can be exploited from inadvertent or intentional actions of the Company's employees, third-party vendors, business partners or by malicious third parties.

Potential vulnerabilities can be exploited from inadvertent or intentional actions of our employees, third-party vendors and business partners or by malicious third parties.

Attacks of this nature are increasing in their frequency, levels of persistence, sophistication and intensity, and are being conducted by a variety of threat actors, including sophisticated and organized groups and individuals with a wide range of expertise and motives, such as organized criminal groups, industrial spies, nation states and others.

In addition to the extraction of sensitive information, attacks could include the deployment of harmful malware, ransomware, denial of service attacks or other means, which could affect service reliability and threaten the confidentiality, integrity and availability of information.

The Company uses enterprise-grade information technology and computer resources to carry out important operational activities and to maintain business records.

Although secured in commercial data centers, the Company's computer systems, including its back-up systems, are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, security breaches and cyber incidents, catastrophic events such as fires, tornadoes and hurricanes and human error.

Given the unpredictability of the timing, nature and scope of information technology disruptions, if the Company's computer systems and its backup systems are damaged, breached or cease to function properly, the Company could potentially be subject to production downtimes, operational delays, distraction of management, the compromising of confidential or otherwise protected information, destruction or corruption of data, security breaches, other manipulation or improper use of its systems and networks and financial losses from remedial actions.

Significant disruptions in the Company's, or its third-party vendors', information technology systems or other data security breaches or cyber incidents could adversely affect the business operations and result in the loss or misappropriation of, and unauthorized access to, sensitive information, which may force the Company to incur significant costs and engage in litigation, harm its reputation and subject the Company to liability under laws, regulations and contractual obligations.

In addition, the costs of maintaining adequate protection against such threats are expected to increase and could be material to the Company's operations.

In March 2019, the Company suffered a cyber incident and attack to its computer networks.

The Company immediately retained outside legal counsel along with forensic experts to assist with the investigation, restoration and remediation of the incident as well as legal compliance.

The cyber incident and attack resulted in impairment of certain of the Company's business operations for up to a two-week period.

Although many of the costs and expenses the Company incurred related to this March 2019 incident were covered by insurance, we could in the future suffer a cyber incident that could result in material costs and losses that are not covered by insurance, which could have a material adverse effect on the Company's results of operations and financial condition.

We use enterprise-grade information technology and computer resources to carry out important operational activities and to maintain business records.

Although secured in commercial data centers, our computer systems, including its back-up systems, are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, security breaches and cyber incidents, catastrophic events such as fires, tornadoes and hurricanes and human error.

Given the unpredictability of the timing, nature and scope of information technology disruptions, if our computer systems and our backup systems are damaged, breached or cease to function properly, we could potentially be subject to production downtimes, operational delays, distraction of management, the compromising of confidential or otherwise protected information, destruction or corruption of data, security breaches, other manipulation or improper use of our systems and networks and financial losses from remedial actions.

Significant disruptions in our, or our third-party vendors', information technology systems or other data security breaches or cyber incidents could adversely affect the business operations and result in the loss or misappropriation of, and unauthorized access to, sensitive information, which may force us to incur significant costs and engage in litigation, harm our reputation and subject us to liability under laws, regulations and contractual obligations.

In addition, the costs of maintaining adequate protection against such threats are expected to increase and could be material to our operations.

In March 2019, we suffered a cyber incident and attack to our computer networks.

Although many of the costs and expenses we incurred related to this March 2019 incident were covered by insurance, we could in the future suffer a cyber incident that could result in material costs and losses that are not covered by insurance, which could have a material adverse effect on our results of operations and financial condition.

The Company's participation in certain financing programs for the purchase of its products by industry distributors and consumers may expose the Company to additional risk of credit loss, which could adversely impact its liquidity and results of operations

We are exposed to risks associated with the creditworthiness of certain independent distributors, builders, developers, community owners, inventory financing partners and home buyers, many of whom may be adversely affected by the volatile conditions in the economy and financial markets.

These conditions could result in financial instability or other adverse effects, the consequences of which could include delinquencies by customers who purchase our products under special financing initiatives and the deterioration of collateral values.

In addition, losses may be incurred if the collateral cannot be recovered or is liquidated at prices insufficient to recover recorded commercial loan notes receivable balances.

The realization of any of these factors may adversely affect our cash flow, profitability and financial condition.

The Company's results of operations could be adversely affected by significant warranty and construction defect claims on factory-built housing

In the ordinary course of business, we are subject to home warranty and construction defect claims.

We record a reserve for estimated future warranty costs relating to homes sold based upon an assessment of historical claim experience.

Construction defect claims may arise significantly after product completion.

Although we maintain general liability insurance and reserves for such claims, there can be no assurance that warranty and construction defect claims will remain at current levels or that such reserves will continue to be adequate.

A large number of warranty and construction defect claims that exceed current levels could have a material adverse effect on our results of operations or financial condition.

The Company has contingent repurchase obligations related to wholesale financing provided to industry distributors

In accordance with customary business practice in the manufactured housing industry, we have entered into repurchase agreements with various financial institutions and other credit sources who provide floor plan financing to industry distributors, which provide that we will be obligated, under certain circumstances, to repurchase homes sold to distributors in the event of a default by a distributor under floor plan financing arrangements.

Under these agreements, we have agreed to repurchase homes at declining prices over the term of the agreement (which in most cases is 18 to 24 months).

Our obligation under these repurchase agreements ceases upon the purchase of the home by the retail customer.

The maximum amount of contingent obligations under such repurchase agreements was approximately $74.2 million as of April 3, 2021, before reduction for the resale value of the homes.

We may be required to honor contingent repurchase obligations in the future and may incur additional expense as a consequence of these repurchase agreements.

A write-off of all or part of the Company's goodwill could adversely affect its results of operations and financial condition

As of April 3, 2021, 8% of our total assets consisted of goodwill, all of which is attributable to factory-built housing operations.

In accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 350, Intangibles—Goodwill and Other ("ASC 350"), goodwill is tested annually for impairment.

If goodwill becomes impaired, such impairment is charged as an expense in the period in which it occurs.

Our goodwill could be impaired if developments affecting our manufacturing operations or the markets in which we produce manufactured homes lead us to conclude that the cash flows expected to be derived from our manufacturing operations will be substantially reduced.

If the Company is unable to establish or maintain relationships with its independent distributors who sell the Company's homes, revenue could decline

During fiscal year 2021, approximately 79% of our sales of factory-built homes were to independent distributors.

As is common in the industry, independent distributors may also sell homes produced by competing manufacturers.

We may not be able to establish relationships with new independent distributors or maintain good relationships with independent distributors that sell our homes.

Even if we do establish and maintain relationships with independent distributors, these distributors are not obligated to sell our homes exclusively and may choose to sell competitors' homes.

The independent distributors with whom we have relationships can cancel these relationships on short notice.

In addition, these distributors may not remain financially solvent, as they are subject to industry, economic, demographic and seasonal trends similar to those faced by us.

If we do not establish and maintain relationships with solvent independent distributors in one or more of our markets, revenue in those markets could decline.

The Company's business and operations are concentrated in certain geographic regions, which could be impacted by market declines

Our operations are concentrated in certain states, most notably Texas, California, Florida, Arizona and Oregon.

Due to the concentrated nature of the operations, there could be instances where these regions are negatively impacted by economic, natural or population changes that could, in turn, negatively impact our results of operations more than other companies that are more geographically dispersed.

We operate 20 homebuilding production lines located in the Northwest, Southwest, South, Southeast, Midwest and Mid-Atlantic regions.

We have a significant presence in Texas with factories in the cities of Austin, Ft.

Worth, Seguin and Waco.

Further, of the 40 Company-owned retail stores, 32 are located in Texas.

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

We have loan contracts secured by factory-built homes located in 26 states, including Texas, Florida, Arizona, Oklahoma and New Mexico.

Standard Casualty also specializes in writing contracts for the manufactured housing industry, primarily serving the Texas, Arizona, New Mexico and Nevada markets.

A prolonged delay by Congress and the President to approve budgets or continuing appropriation resolutions to facilitate the operations of the federal government could delay the completion of home sales and/or cause cancellations, and thereby negatively impact the Company's deliveries and revenues

Congress and the President may not timely approve budgets or appropriation legislation to facilitate the operations of the federal government.

As a result, many federal agencies have historically and may again cease or curtail some activities.

The affected activities include issuance of HUD certification labels to manufacturers, Internal Revenue Service verification of loan applicants' tax return information and approvals by the FHA and other government agencies to fund or insure mortgage loans under programs that these agencies operate.

As a number of our home buyers use these programs to obtain financing to purchase homes, and many lenders, including CountryPlace, require ongoing coordination with these and other governmental entities to originate home loans, a prolonged delay in the performance of their activities could prevent prospective qualified buyers from obtaining the loans they need to complete such purchases, which could lead to delays or cancellations of home sales.

These and other affected governmental bodies could cause interruptions in various aspects of our business and investments.

Depending on the length of disruption, such factors could have a material adverse impact on our consolidated financial statements.

Industry and Economic Risks

Tightened credit standards, curtailed lending activity by home-only lenders and increased government lending regulations continue to constrain the consumer financing market which could continue to restrict sales of the Company's homes

Consumers who buy the Company's manufactured homes have historically secured retail financing from third-party lenders.

Home-only financing is at times more difficult to obtain than financing for site-built homes.

The availability, terms and costs of retail financing depend on the lending practices of financial institutions, governmental policies and economic and other conditions, all of which are beyond the Company's control.

Home-only lenders have tightened the credit underwriting standards for loans to purchase manufactured homes, which has reduced lending volumes and negatively impacted the Company's revenue.

Consumers who buy our manufactured homes have historically secured retail financing from third-party lenders.

Home-only financing is usually more difficult to obtain than financing for site-built homes.

Over time, home-only lenders have tightened the credit underwriting standards for loans to purchase manufactured homes, which has reduced lending volumes and negatively impacted our revenue.

Most of the national lenders who have historically provided home-only loans have exited the manufactured housing sector of the home loan industry.

Retail sales of manufactured housing could be adversely affected if remaining retail lenders curtail industry lending activities or exit the industry altogether.

Changes in laws or other events that adversely affect liquidity in the secondary mortgage market could hurt the Company's business.

The GSEs and the FHA play significant roles in insuring or purchasing home mortgages and creating or insuring investment securities secured by home mortgages that are either sold to investors or held in their portfolios.

Changes in laws or other events that adversely affect liquidity in the secondary mortgage market could hurt the business.

GSEs and the FHA play significant roles in insuring or purchasing home mortgages and creating or insuring investment securities secured by home mortgages that are either sold to investors or held in their portfolios.

These organizations provide significant liquidity to the secondary market.

Any new federal laws or regulations that restrict or curtail their activities, or any other events or conditions that alter the roles of these organizations in the housing finance market could affect the ability of the Company's customers to obtain mortgage loans or could increase mortgage interest rates, fees, and credit standards, which could reduce demand for the Company's homes and/or the loans that the Company originates and adversely affect its results of operations.

Any new federal laws or regulations that restrict or curtail their activities, or any other events or conditions that alter the roles of these organizations in the housing finance market, could affect the ability of our customers to obtain mortgage loans or could increase mortgage interest rates, fees, and credit standards, which could reduce demand for our homes and/or the loans that we originate and adversely affect our results of operations.

Some investors are reluctant to own or participate in owning such loans because of the uncertainty of potential litigation and other costs.

2 unchanged sentences

Compliance may constrain lenders' ability to profitably price certain loans.

Failure to comply with such regulations, changes in these or other regulations, or the imposition of additional regulations, could affect the Company's earnings, limit the Company's access to capital and have a material adverse effect on the Company's business and results of operations.

Failure to comply with such regulations, changes in these or other regulations, or the imposition of additional regulations, could affect our earnings, limit our access to capital and have a material adverse effect on the business and results of operations.

Availability of wholesale financing for industry distributors continues to be limited to a few floor plan lenders and lending limits may be reduced from time to time which can negatively affect distributor demand

1 unchanged sentence

The availability of wholesale financing is significantly affected by the number of floor plan lenders and their lending limits.

The Company's independent distributors rely primarily on 21 st Mortgage Corporation and smaller national and regional lending institutions that specialize in providing wholesale floor plan financing to manufactured housing distributors.

Our independent distributors rely primarily on 21 st Mortgage Corporation and smaller national and regional lending institutions that specialize in providing wholesale floor plan financing to manufactured housing distributors.

Floor plan financing providers could further reduce their levels of floor plan lending.

Reduced availability of floor plan lending negatively affects the inventory levels of the Company's independent distributors, the number of retail sales center locations and related wholesale demand, and the availability of and access to capital on an ongoing basis.

The Company is exposed to risks associated with the creditworthiness of certain independent distributors, builders, developers, community owners, inventory financing partners and home buyers, many of whom may be adversely affected by the volatile conditions in the economy and financial markets.

These conditions could result in financial instability or other adverse effects, the consequences of which could include delinquencies by customers who purchase the Company's products under special financing initiatives and the deterioration of collateral values.

In addition, losses may be incurred if the collateral cannot be recovered or is liquidated at prices insufficient to recover recorded commercial loan notes receivable balances.

The realization of any of these factors may adversely affect the Company's cash flow, profitability and financial condition.

The Company's results of operations could be adversely affected by significant warranty and construction defect claims on factory-built housing

In the ordinary course of business, the Company is subject to home warranty and construction defect claims.

The Company records a reserve for estimated future warranty costs relating to homes sold based upon an assessment of historical claim experience.

Construction defect claims may arise a significant period of time after product completion.

Although the Company maintains general liability insurance and reserves for such claims, there can be no assurance that warranty and construction defect claims will remain at current levels or that such reserves will continue to be adequate.

A large number of warranty and construction defect claims that exceed current levels could have a material adverse effect on the Company's results of operations or financial condition.

The Company has contingent repurchase obligations related to wholesale financing provided to industry distributors

In accordance with customary business practice in the manufactured housing industry, the Company has entered into repurchase agreements with various financial institutions and other credit sources who provide floor plan financing to industry distributors, which provide that the Company will be obligated, under certain circumstances, to repurchase homes sold to distributors in the event of a default by a distributor under its floor plan financing.

Under these agreements, the Company has agreed to repurchase homes at declining prices over the term of the agreement (which in most cases is 18 to 36 months).

The Company's obligation under these repurchase agreements ceases upon the purchase of the home by the retail customer.

The maximum amount of contingent obligations under such repurchase agreements was approximately $ 79.3 million as of March 28, 2020 , before reduction for the resale value of the homes.

The Company may be required to honor contingent repurchase obligations in the future and may incur additional expense as a consequence of these repurchase agreements.

Reduced availability of floor plan lending negatively affects the inventory levels of our independent distributors, the number of retail sales center locations and related wholesale demand, and the availability of, and access to, capital on an ongoing basis.

The Company's operating results could be affected by market forces and declining housing demand

As a participant in the homebuilding industry, the Company is subject to market forces beyond the Company's control.

As a participant in the homebuilding industry, we are subject to market forces beyond our control.

These market forces include employment levels, employment growth, interest rates, consumer confidence, land availability and development costs, apartment and rental housing vacancy levels, inflation, deflation and the health of the general economy.

Unfavorable changes in any of the above factors or other issues could have an adverse effect on the Company's revenue, earnings or financial position.

The Company has incurred net losses in certain prior periods and there can be no assurance that it will generate income in the future

Since becoming a stand-alone public company, the Company has generated net income each complete fiscal year, except for fiscal year 2010, in which the Company incurred net losses attributable in substantial part to the downturn affecting the manufactured housing industry.

The likelihood that the Company will generate net income in the future must be considered in light of the difficulties facing the manufactured housing industry as a whole, economic conditions, the competitive environment in which it operates and the other risks and uncertainties discussed in this section of the Annual Report.

A write-off of all or part of the Company's goodwill could adversely affect its results of operations and financial condition

As of March 28, 2020 , 9% of the Company's total assets consisted of goodwill, all of which is attributable to factory-built housing operations.

If goodwill becomes impaired, such impairment is charged as an expense in the period in which it occurs.

The Company's goodwill could be impaired if developments affecting our manufacturing operations or the markets in which the Company produces manufactured homes lead us to conclude that the cash flows expected to be derived from the Company's manufacturing operations will be substantially reduced.

Unfavorable changes in any of the above factors or other issues could have an adverse effect on our revenues, earnings or financial position.

The cyclical and seasonal nature of the manufactured housing industry causes the Company's revenues and operating results to fluctuate, and we expect this cyclicality and seasonality to continue in the future

The manufactured housing industry is highly cyclical and seasonal and is influenced by many national and regional economic and demographic factors, including the availability of consumer financing for home buyers, the availability of wholesale financing for distributors, seasonality of demand, consumer confidence, interest rates, demographic and employment trends, income levels, housing demand, general economic conditions, including inflation and recessions, and the availability of suitable home sites.

As a result of the foregoing economic, demographic and other factors, the Company's revenues and operating results fluctuate, and the Company expects them to continue to fluctuate in the future.

The Company's liquidity and ability to raise capital may be limited

The Company may need to obtain debt or additional equity financing in the future.

The type, timing and terms of the financing selected by us will depend on, among other things, the Company's cash needs, the availability of other financing sources and prevailing conditions in the financial markets.

There can be no assurance that any of these sources will be available to us at any time or that they will be available on satisfactory terms.

As a result of the foregoing economic, demographic and other factors, our revenues and operating results fluctuate, and we expect them to continue to fluctuate in the future.

The manufactured housing industry is highly competitive, and increased competition may result in lower revenue

The manufactured housing industry is highly competitive.

Competition at both the manufacturing and retail levels is based upon several factors, including price, product features, reputation for service and quality, merchandising, terms of distributor promotional programs and the terms of retail customer financing.

Numerous companies produce manufactured homes in the Company's markets.

Certain of the Company's manufacturing competitors also have their own retail distribution systems and consumer finance and insurance operations.

In addition, there are many independent manufactured housing retail locations in most areas where the Company has retail operations.

We believe that where wholesale floor plan financing is available, it is relatively easy for new distributors to enter into the Company's markets as competitors.

In addition, the Company's products compete with other forms of low- to moderate-cost housing, including new and existing site-built homes, apartments, townhouses and condominiums.

If the Company is unable to compete effectively in this environment, factory-built housing revenue could be reduced.

If the Company is unable to establish or maintain relationships with its independent distributors who sell the Company's homes, revenue could decline

During fiscal year 2020 , approximately 81% of the Company's wholesale sales of manufactured homes were to independent distributors.

As is common in the industry, independent distributors may also sell homes produced by competing manufacturers.

The Company may not be able to establish relationships with new independent distributors or maintain good relationships with independent distributors that sell its homes.

Even if we do establish and maintain relationships with independent distributors, these distributors are not obligated to sell the Company's homes exclusively and may choose to sell competitors' homes.

The independent distributors with whom we have relationships can cancel these relationships on short notice.

In addition, these distributors may not remain financially solvent, as they are subject to industry, economic, demographic and seasonal trends similar to those faced by us.

If we do not establish and maintain relationships with solvent independent distributors in one or more of the Company's markets, revenue in those markets could decline.

The Company's business and operations are concentrated in certain geographic regions, which could be impacted by market declines

The Company's operations are concentrated in certain states, most notably Texas, California, Florida, Arizona and Oregon.

Due to the concentrated nature of the Company's operations, there could be instances where these regions are negatively impacted by economic, natural or population changes that could, in turn, negatively impact the Company's results of operations more than other companies that are more geographically dispersed.

The Company operates 20 homebuilding production lines located in the Northwest, Southwest, South, Southeast, Midwest and Mid-Atlantic regions.

The Company has a significant presence in Texas with factories in the cities of Austin, Ft.

Worth, Seguin and Waco.

Further, of the 39 Company-owned sales centers, 31 are located in Texas.

CountryPlace has loan contracts secured by factory-built homes located in 27 states, including Texas, Florida, New Mexico and Oklahoma .

Standard Casualty specializes in writing contracts for the manufactured housing industry, primarily serving the Texas, Arizona, New Mexico and Nevada markets.

A decline in the economic conditions in the United States and especially the economies of Texas, California, Florida, Arizona and/or Oregon could have a material adverse effect on the Company's results of operations.

The Company's results of operations can be adversely affected by labor shortages and the pricing and availability of raw materials

The homebuilding industry has from time to time experienced labor shortages and other labor related issues.

A number of factors may adversely affect the labor force available to the Company and its subcontractors in one or more of the Company's markets, including high employment levels, construction market conditions and government regulation, which include laws and regulations related to workers' health and safety, wage and hour practices and immigration patterns or restrictions.

The Company's results of operations can be affected by the pricing and availability of raw materials.

Although the Company attempts to increase the sales prices of its homes in response to higher materials costs, such increases may lag behind the escalation of materials costs.

Sudden increases in price or lack of availability of raw materials can be caused by natural disaster, regulation or other market forces, as has occurred in recent years.

The Company has experienced production halts from shortages of primary building materials.

Key building materials include wood and wood products, gypsum wallboard, steel, windows, appliances, insulation and other petroleum-based products.

There can be no assurance that sufficient supplies of these and other raw materials will continue to be available to the Company.

Competition at both the manufacturing and retail levels is based upon many factors, including price, product features, reputation for service and quality, merchandising, terms of distributor promotional programs and the terms of retail customer financing.

Numerous companies produce manufactured homes in our markets.

Certain competitors also have their own retail distribution systems and consumer finance and insurance operations.

In addition, there are many independent manufactured housing retail locations in most areas where we have retail operations.

We believe that where wholesale floor plan financing is available, it is relatively easy for new distributors to enter into our markets as competitors.

In addition, our products compete with other forms of low- to moderate-cost housing, including new and existing site-built homes, apartments, townhouses and condominiums.

If we are unable to compete effectively in this environment, revenues could be reduced.

Deterioration in economic conditions and turmoil in financial markets could reduce the Company's earnings and financial condition

Deterioration in global, national, regional or local economic conditions and turmoil in financial markets could have a negative impact on our business.

Among other things, unfavorable changes in employment levels, job growth, consumer confidence and income, inflation, deflation, trade tariffs, foreign currency exchange rates and interest rates may further reduce demand for our products, which could negatively affect our business, results of operations and financial condition.

These factors could have an adverse effect on the availability of financing to our customers, causing revenues to decline.

Legal and Regulatory Risks

If the manufactured housing industry is not able to secure favorable local zoning ordinances, the Company's revenue could decline and its business could be adversely affected

2 unchanged sentences

Manufactured homes may not achieve widespread acceptance and localities may not adopt zoning ordinances permitting the development of manufactured home communities.

If the manufactured housing industry is unable to secure favorable local zoning ordinances, the Company's revenue could decline and its business, results of operations and financial condition could be adversely affected.

If the manufactured housing industry is unable to secure favorable local zoning ordinances, our revenue could decline and the business, results of operations and financial condition could be adversely affected.

The Company is subject to extensive regulation affecting the production and sale of manufactured housing, which could adversely affect its profitability

A variety of federal, state and local laws and regulations affect the production and sale of manufactured housing.

Please refer to the section above under the heading "Business - Government Regulation" for a description of many of these laws and regulations.

Our failure to comply with such laws and regulations could expose us to a wide variety of sanctions, including closing one or more manufacturing facilities.

Regulatory matters affecting our operations are under regular review by governmental bodies and we cannot predict what effect, if any, new laws and regulations would have on us or the manufactured housing industry.

Failure to comply with applicable laws or regulations or the passage in the future of new and more stringent laws, may adversely affect our financial condition or results of operations.

The Company may face risks related to the potential outcomes of the SEC subpoenas, including potential penalties, expense, the use of significant management time and attention, potential litigation or regulatory action and potential reputational damage that the Company may suffer as a result of the matters under investigation

As disclosed in Part I, Item 3, Legal Proceedings, since 2018, we have been cooperating with an investigation by the enforcement staff of the SEC regarding 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 results of the Audit Committee's work were shared with the Company's auditors, listing exchange and the SEC staff.

We continue to make documents and personnel available to the SEC staff and intend to continue cooperating with its investigation.

We are unable to predict what consequences any investigation by any regulatory agency may have on us, including significant legal and accounting expenses.

These matters may also divert management's attention from other business concerns, which could harm the business and could result in reputational damage.

Any proceedings commenced against us by a regulatory agency could result in administrative orders against us, the imposition of penalties and/or fines against us and/or the imposition of sanctions against certain of our current or former officers, directors and/or employees.

The investigations, results of the investigations or remedial actions we have taken or may take as a result of such investigations may adversely affect our business.

If we are subject to adverse findings resulting from the SEC investigation, or from our own independent investigation, we could be required to pay damages and/or penalties or have other remedies imposed on us.

Losses not covered by our Director and Officer ("D&O") insurance may be large, which could adversely impact the Company's financial performance

We maintain D&O liability insurance for losses or advancement of defense costs in the event legal actions are brought against the Company's directors, officers or employees for alleged wrongful acts in their capacity as directors, officers or employees.

Such D&O insurance contains certain customary exclusions that may make it unavailable to the Company or its directors and officers in the event it is needed;

and, in any case, the D&O insurance may not be adequate to fully protect the Company against liability for the conduct of its directors, officers or employees or the Company's indemnification obligations to its directors and officers.

General Risk Factors

The loss of any of the Company's executive officers could reduce its ability to execute its business strategy and could have a material adverse effect on its business and results of operations

The Company is dependent to a significant extent upon the efforts of its executive officers.

The loss of the services of one or more of the Company's executive officers could impair its ability to execute its business strategy and have a material adverse effect upon its business, financial condition and results of operations.

The Company currently has no key person life or other insurance for its executive officers.

We are dependent to a significant extent upon the efforts of our executive officers.

The loss of the services of one or more executive officer could impair our ability to execute our business strategy and have a material adverse effect upon our business, financial condition and results of operations.

We currently have no key person life or other insurance for our executive officers.

The Company has incurred net losses in certain prior periods and there can be no assurance that it will generate income in the future

Since becoming a stand-alone public company, we have generated net income each complete fiscal year, except for fiscal year 2010, in which we incurred net losses attributable in substantial part to the downturn affecting the manufactured housing industry.

The likelihood that we will generate net income in the future must be considered in light of the difficulties facing the manufactured housing industry as a whole, economic conditions, the competitive environment in which we operate and the other risks and uncertainties discussed in this section of the Annual Report.

The Company's liquidity and ability to raise capital may be limited

We may need to obtain debt or additional equity financing in the future.

The type, timing and terms of the financing selected will depend on, among other things, our cash needs, the availability of other financing sources and prevailing conditions in the financial markets.

There can be no assurance that any of these sources will be available to us at any time or that they will be available on satisfactory terms.

Certain provisions of the Company's organizational documents could delay or make more difficult a change in control of the Company

Certain provisions of the Company's restated certificate of incorporation and restated bylaws could delay or make more difficult transactions involving a change of control of the Company, and may have the effect of entrenching the Company's current management or possibly depressing the market price of the Company's common stock.

Certain provisions of the Company's restated certificate of incorporation and restated bylaws could delay or make more difficult transactions involving a change of control, and may have the effect of entrenching the current management or possibly depressing the market price of the Company's common stock.

For example, the Company's restated certificate of incorporation and restated bylaws authorize blank series preferred stock, establish a staggered board of directors and impose certain procedural and other requirements for stockholder proposals.

Volatility of stock price

The price of the Company's common stock may fluctuate widely, depending upon a number of factors, many of which are beyond the Company's control.

The price of the Company's common stock may fluctuate widely, depending upon a number of factors, many of which are beyond our control.

These factors include:

the perceived prospects of the Company's business and the manufactured housing industry as a whole;

differences between the Company's actual financial and operating results and those expected by investors and analysts;

the perceived prospects of the business and the manufactured housing industry as a whole;

differences between our actual financial and operating results and those expected by investors and analysts;

changes in analysts' recommendations or projections;

1 unchanged sentence

actions or announcements by competitors;

changes in the regulatory environment in which the Company operates;

changes in the regulatory environment in which we operate;

significant sales of shares by a principal stockholder;

1 unchanged sentence

and changes in general economic or market conditions.

In addition, stock markets generally experience significant price and volume volatility from time to time, which may adversely affect the market price of the Company's common stock for reasons unrelated to its performance.

Deterioration in economic conditions and turmoil in financial markets could reduce the Company's earnings and financial condition

Deterioration in global, national, regional or local economic conditions and turmoil in financial markets could have a negative impact on the Company's business.

Among other things, unfavorable changes in employment levels, job growth, consumer confidence and income, inflation, deflation, trade tariffs, foreign currency exchange rates and interest rates may further reduce demand for the Company's products, which could negatively affect its business, results of operations and financial condition.

These factors could have an adverse effect on the availability of financing to the Company's customers, causing its revenues to decline.

Congress and the President may not timely approve budgets or appropriation legislation to facilitate the operations of the federal government.

As a result, many federal agencies have historically and may again cease or curtail some activities.

As a number of the Company's home buyers use these programs to obtain financing to purchase homes, and many lenders, including CountryPlace, require ongoing coordination with these and other governmental entities to originate home loans, a prolonged delay in the performance of their activities could prevent prospective qualified buyers of the Company's homes from obtaining the loans they need to complete such purchases, which could lead to delays or cancellations of home sales.

These and other affected governmental bodies could cause interruptions in various aspects of the Company's business and investments.

Depending on the length of disruption, such factors could have a material adverse impact on the Company's consolidated financial statements.

The Company is subject to extensive regulation affecting the production and sale of manufactured housing, which could adversely affect its profitability

A variety of federal, state and local laws and regulations affect the production and sale of manufactured housing.

Please refer to the section above under the heading "Business - Government Regulation" for a description of many of these laws and regulations.

The Company's failure to comply with such laws and regulations could expose it to a wide variety of sanctions, including closing one or more manufacturing facilities.

Regulatory matters affecting Company operations are under regular review by governmental bodies and the Company cannot predict what effect, if any, new laws and regulations would have on it or the manufactured housing industry.

Failure to comply with applicable laws or regulations or the passage in the future of new and more stringent laws, may adversely affect the Company's financial condition or results of operations.

As disclosed in Part I, Item 3, Legal Proceedings, since 2018, the Company has been cooperating with an investigation by the enforcement staff of the Securities and Exchange Commission regarding trading in personal and Company accounts directed by the Company's former Chief Executive Officer ("CEO"), Joseph Stegmayer.

The Company continues to make documents and personnel available to the SEC staff and intends to continue cooperating with its investigation.

The Company is unable to predict what consequences any investigation by any regulatory agency may have on us, including significant legal and accounting expenses.

These matters may also divert management's attention from other business concerns, which could harm the Company's business and could result in reputational damage.

Any proceedings commenced against us by a regulatory agency could result in administrative orders against us, the imposition of penalties and/or fines against us and/or the imposition of sanctions against certain of the Company's current or former officers, directors and/or employees.

The investigations, results of the investigations or remedial actions the Company has taken or may take as a result of such investigations may adversely affect its business.

If the Company is subject to adverse findings resulting from the SEC investigation, or from its own independent investigation, the Company could be required to pay damages and/or penalties or have other remedies imposed on us.

Losses not covered by our Director and Officer ("D&O") insurance may be large, which could adversely impact the Company's financial performance

The Company maintains D&O liability insurance for losses or advancement of defense costs in the event legal actions are brought against the Company's directors, officers or employees for alleged wrongful acts in their capacity as directors, officers or employees.

The Company's D&O insurance contains certain customary exclusions that may make it unavailable to the Company or its directors and officers in the event it is needed;

and, in any case, its D&O insurance may not be adequate to fully protect the Company against liability for the conduct of its directors, officers or employees or the Company's indemnification obligations to its directors and officers.

UNRESOLVED STAFF COMMENTS

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-K

Item 1A. Risk Factors