5 unchanged sentences
Forward-looking statements are typically included, for example, in discussions regarding the manufactured housing and site-built housing industries;
−Removed: the Company's financial performance and operating results;
−Removed: and the expected effect of certain risks and uncertainties on the Company's business, financial condition and results of operations, economic conditions and consumer confidence, operational and legal risks, how the Company may be affected by the COVID-19 pandemic, governmental regulations and legal proceedings, the availability of favorable consumer and wholesale manufactured home financing, market interest rates and Company investments and the ultimate outcome of the Company's commitments and contingencies.
−Removed: Forward-looking statements involve risks, uncertainties and other factors that may cause the Company's actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements, many of which are beyond our control.
−Removed: To the extent that the Company's assumptions and expectations differ from actual results, the Company's ability to meet such forward-looking statements, including the ability to generate positive cash flow from operations, may be significantly hindered.
−Removed: Factors that could affect the Company's results and cause them to materially differ from those contained in the forward-looking statements include, without limitation, those discussed under Item 1A, "Risk Factors," and elsewhere in this Annual Report.
−Removed: The Company expressly disclaims any obligation to update any forward-looking statements contained in this Annual Report, whether as a result of new information, future events or otherwise.
+Added: our financial performance and operating results;
+Added: the expected effect of certain risks and uncertainties on our business, financial condition and results of operations;
+Added: economic conditions and consumer confidence;
+Added: operational and legal risks;
+Added: how we may be affected by the COVID-19 pandemic, governmental regulations and legal proceedings;
+Added: the availability of favorable consumer and wholesale manufactured home financing, market interest rates and Company investments;
+Added: and the ultimate outcome of our commitments and contingencies.
+Added: Forward-looking statements involve risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements, many of which are beyond our control.
+Added: To the extent that our assumptions and expectations differ from actual results, our ability to meet such forward-looking statements, including the ability to generate positive cash flow from operations, may be significantly hindered.
+Added: Factors that could affect our results and cause them to materially differ from those contained in the forward-looking statements include, without limitation, those discussed under Item 1A, "Risk Factors," and elsewhere in this Annual Report.
+Added: We expressly disclaim any obligation to update any forward-looking statements contained in this Annual Report, whether as a result of new information, future events or otherwise.
For all of these reasons, you should not place undue reliance on any such forward-looking statements included in this Annual Report.
The following should be read in conjunction with the Company's Consolidated Financial Statements and the related Notes that appear in Part IV of this Report.
−Removed: References to "Note" or "Notes" pertain to the Notes to the Company's Consolidated Financial Statements.
−Removed: Headquartered in Phoenix, Arizona, the Company designs and produces factory-built homes primarily distributed through a network of independent and Company-owned retailers, planned community operators and residential developers.
−Removed: The Company is one of the largest producers of manufactured homes in the United States, based on reported wholesale shipments, marketed under a variety of brand names, including Cavco, Fleetwood, Palm Harbor, Fairmont, Friendship, Chariot Eagle and Destiny.
−Removed: The Company is also one of the leading producers of park model RVs, vacation cabins and systems-built commercial structures, as well as modular homes built primarily under the Nationwide Homes brand.
−Removed: Cavco's finance subsidiary, CountryPlace, is an approved Fannie Mae and Freddie Mac seller/servicer and a Ginnie Mae mortgage-backed securities issuer that offers conforming mortgages, non-conforming mortgages and home-only loans to purchasers of factory-built homes.
−Removed: Cavco's insurance subsidiary, Standard Casualty, provides property and casualty insurance to owners of manufactured homes.
−Removed: Company Growth
−Removed: From its inception in 1965, Cavco traditionally served affordable housing markets in the southwestern United States principally through manufactured home production.
+Added: References to "Note" or "Notes" pertain to the Notes to the Consolidated Financial Statements.
+Added: Company Overview
+Added: Headquartered in Phoenix, Arizona, we design and produce factory-built housing products primarily distributed through a network of independent and Company-owned retailers, planned community operators and residential developers.
+Added: We are one of the largest producers of manufactured homes in the United States, based on reported wholesale shipments, marketed under a variety of brand names, including Cavco, Fleetwood, Palm Harbor, Fairmont, Friendship, Chariot Eagle and Destiny.
+Added: We are also one of the leading producers of park model RVs, vacation cabins and factory-built commercial structures, as well as modular homes built primarily under the Nationwide Homes brand.
+Added: Our finance subsidiary, CountryPlace, is an approved Fannie Mae and Freddie Mac seller/servicer and a Ginnie Mae mortgage-backed securities issuer that offers conforming mortgages, non-conforming mortgages and home-only loans to purchasers of factory-built homes.
+Added: Our insurance subsidiary, Standard Casualty, provides property and casualty insurance to owners of manufactured homes.
+Added: From our inception in 1965, we have traditionally served affordable housing markets in the southwestern United States principally through manufactured home production.
During the period from 1997 to 2000, Cavco was purchased by, and became a wholly-owned subsidiary of, Centex Corporation, which operated the Company until 2003, when Cavco became a stand-alone publicly-held company traded on the Nasdaq Global Select Market under the ticker symbol CVCO.
−Removed: The Company has strategically expanded its factory operations and related business activities primarily through the acquisition of other industry participants.
−Removed: This has enabled Cavco to meet the needs of the affordable housing market on a national basis.
−Removed: The purchase of the Fleetwood and Palm Harbor assets in August 2009 and April 2011, respectively, increased home production and distribution capabilities and provided for vertical integration through entry into financial services businesses specific to the Company's industry.
−Removed: These transactions expanded the Company's geographic reach at a national level by adding factories and retail locations serving the Northwest, West, South, South Central and Mid-Atlantic regions.
−Removed: The purchase of Chariot Eagle, Fairmont, Lexington and Destiny, in March 2015, May 2015, April 2017 and August 2019, respectively, provided additional operating capacity, increased home production capabilities and further strengthened the Company's market in certain areas of the United States and several provinces in Canada.
−Removed: In April 2020, the Company decided to shut down production and close its Lexington, Mississippi plant.
−Removed: Ongoing market and operating challenges were exacerbated by decreased business and the ongoing uncertainty resulting from the COVID-19 pandemic, all of which contributed to this decision.
−Removed: This location has stopped accepting new orders for homes, is working to support customers by completing production of home orders already in process (which are expected to be completed in June 2020) and has notified its workforce of this shut down decision in accordance with applicable legal requirements.
−Removed: The Company will remain available to serve wholesale customers previously served by the Lexington facility, that choose to continue to purchase the Company's products, from its other production lines in the southeast.
−Removed: The Company does not expect that closing the Lexington facility will have a significant adverse financial effect on the Company and no significant restructuring or related asset impairment charges are expected.
−Removed: Currently, no decisions have been made on the disposition of the production facility, which is currently leased, or related assets.
−Removed: The Company operates 20 homebuilding production lines located in Millersburg and Woodburn, Oregon;
+Added: We have strategically expanded our factory operations and related business activities primarily through the acquisition of other industry participants.
+Added: This has enabled us to meet the needs of the affordable housing market on a national basis.
+Added: We operate 20 homebuilding production lines located in Millersburg and Woodburn, Oregon;
Nampa, Idaho;
9 unchanged sentences
The majority of the homes produced are sold to, and distributed by, independently owned and controlled retail operations located throughout the United States and Canada.
−Removed: In addition, the Company's homes are sold through 39 Company-owned U.S.
+Added: In addition, our homes are sold through 40 Company-owned U.S.
retail locations.
−Removed: Company operations are generally managed on a decentralized basis with oversight from the home office.
−Removed: This decentralization enables the Company's operators the flexibility to adapt to local market demand, be more customer focused and have the autonomy to make swift decisions, while still being held accountable for operational and financial performance.
−Removed: The Company regularly reviews its product offerings and strives to improve designs, production methods and marketing strategies.
−Removed: The Company continues to focus on gaining operational efficiencies among its operations, all of which have organic growth potential.
−Removed: Company Outlook
−Removed: The Company maintains a conservative cost structure in an effort to build added value into its homes and has worked diligently to maintain a solid financial position.
−Removed: The balance sheet strength, including the position in cash and cash equivalents, should help avoid liquidity problems and enable the Company to act effectively as market opportunities or challenges present themselves.
−Removed: The Company's manufacturing facilities are strategically positioned across the United States, and utilize local market research to design homes to meet the demands of its customers.
−Removed: The Company has the ability to customize floor plans and designs to fulfill specific needs and interests.
−Removed: By offering a full range of homes from entry-level models to large custom homes and with the ability to engineer designs in-house, the Company can accommodate virtually any customer request.
−Removed: In addition to homes built to the federal HUD code, the Company also constructs modular homes that conform to state and local codes, park model RVs and cabins and light commercial buildings at many of the Company's manufacturing facilities.
−Removed: The Company seeks out niche market opportunities where its diverse product lines and custom building capabilities provide a competitive advantage.
−Removed: The green building initiatives involve the creation of an energy efficient envelope and higher utilization of renewable materials.
+Added: Our manufacturing facilities are strategically positioned across the United States and utilize local market research to design homes to meet the demands of our customers.
+Added: We have the ability to customize floor plans and designs to fulfill specific needs and interests.
+Added: By offering a full range of homes from entry-level models to large custom homes and with the ability to engineer designs in-house, we can accommodate virtually any customer request.
+Added: In addition to homes built to the federal HUD code, we also construct modular homes that conform to state and local codes, park model RVs, cabins and light commercial buildings at many of our manufacturing facilities.
+Added: We seek out niche market opportunities where our diverse product lines and custom building capabilities provide a competitive advantage.
+Added: Our green building initiatives involve the creation of an energy efficient envelope and higher utilization of renewable materials.
These homes provide environmentally-friendly maintenance requirements, typically lower utility costs and sustainability.
−Removed: The Company also builds homes designed to use alternative energy sources, such as solar and wind.
−Removed: From bamboo flooring and tankless water heaters to solar-powered homes, the Company's products are diverse and tailored to a wide range of consumer interests.
−Removed: Innovation in housing design is a forte of the Company and it continues to introduce new models at competitive price points with expressive interiors and exteriors that complement home styles in the areas in which they are located.
−Removed: Based on the relatively low cost associated with manufactured home ownership, the Company's products have traditionally competed with rental housing's monthly payment affordability.
−Removed: Rental housing activity is reported to have continued to increase in recent years, which has contributed to a decline in tenant housing vacancy rates and a corresponding rise in rental rates.
−Removed: These factors, should they continue, among other market and economic factors, may cause some renters to become buyers of affordable-housing alternatives, including manufactured homes.
−Removed: Further, with respect to the general rise in demand for rental housing during fiscal year 2020, the Company realized a larger proportion of orders and interest from developers and community owners for new manufactured homes intended for use as rental homes, alternative dwelling units and seasonal living.
−Removed: The Company is responsive to the unique product requirements of these buyers and values the opportunity to provide units that are well suited for these purposes.
−Removed: As a result of the COVID-19 pandemic, home orders from developers and community owners have declined substantially.
−Removed: At this time, it is uncertain as to how long this trend could continue.
−Removed: Cavco maintains a backlog of orders from its network of licensed distributors, communities and developers.
+Added: We also build homes designed to use alternative energy sources, such as solar and wind.
+Added: From bamboo flooring and tankless water heaters to solar-powered homes, our products are diverse and tailored to a wide range of consumer interests.
+Added: Innovation in housing design is a forte of the Company and we continue to introduce new models at competitive price points with expressive interiors and exteriors that complement home styles in the areas in which they are located.
+Added: Company Outlook
+Added: We maintain a backlog of orders from our network of licensed distributors, communities and developers.
Distributors may cancel orders prior to production without penalty.
−Removed: Accordingly, until the production of a particular unit has commenced, the Company does not consider its backlog to be firm orders.
−Removed: The Company strives to manage its production levels, capacity and workforce size based upon current market demand.
−Removed: The backlog of home sales orders at March 28, 2020 was $124 million in total, down from $129 million one year earlier as of March 30, 2019 .
−Removed: While the circumstances surrounding the COVID-19 pandemic have caused home sales orders to decline, production rates have also declined, causing elevated levels of order backlogs with a value of $123 million in mid-May 2020.
−Removed: This backlog of home orders excludes home orders that have been paused or canceled at the request of the customer.
−Removed: During the onset of COVID-19, the Company continued to operate substantially all of its homebuilding and retail sales facilities while working to follow COVID-19 health guidelines.
−Removed: The Company adjusted its operations to manage exposure and transmission risks by implementing enhanced facility cleaning, social distancing and other related protocols while continuing to serve its customers.
+Added: Accordingly, until the production of a particular unit has commenced, we do not consider our backlog to be firm orders.
+Added: We strive to manage our production levels, capacity and workforce size based upon current market demand.
+Added: The backlog of home sales orders at April 3, 2021 was $603 million in total, up $479 million from $124 million as of March 28, 2020.
+Added: Backlog excludes home orders that have been paused or canceled at the request of the customer.
+Added: During the onset of COVID-19, we continued to operate substantially all of our homebuilding and retail sales facilities while working to follow COVID-19 health guidelines.
+Added: We adjusted our operations to manage exposure and transmission risks by implementing enhanced facility cleaning, social distancing and other related protocols while continuing to serve our customers.
Operational efficiencies declined from adjusting home production processes to comply with health guidelines and managing higher factory employee absenteeism and building material supply shortages.
−Removed: The Company's average plant capacity utilization rate fell accordingly, fluctuating between approximately 45% and 75% since the onset of the pandemic, compared to pre-pandemic levels of more than 80%.
−Removed: While Company-owned retail stores and most independently owned retail sales locations remained open for business since the onset of the pandemic, customer traffic has declined.
−Removed: The Company received fewer home orders from its distribution channels than would be typical during the spring selling season.
−Removed: Home sales order volumes dropped approximately 40% in mid-April 2020, but improved somewhat to approximately 20% lower than pre-pandemic levels by mid-May 2020.
−Removed: Financial services operations have also continued to operate since the onset of the COVID-19 pandemic, largely through the implementation of work-from-home solutions.
−Removed: This includes accepting and processing new applications as well as servicing home loans and insurance policies.
−Removed: The financial services operations are complying with all state and federal regulations regarding loan forbearance, home foreclosures and policy cancellations and are assisting customers in need.
−Removed: Because of changed economic conditions at the end of the fiscal year, loan loss reserves have been increased.
−Removed: Certain loans serviced by CountryPlace for investors expose the Company to cash flow deficits if customers do not make contractual monthly payments of principal and interest in a timely manner.
−Removed: Our primary investor, Ginnie Mae, permits cash obligations on loans in forbearance from COVID-19 to be offset by other incoming cash flows from loans, such as loan pre-payments.
−Removed: While monthly collections of principal and interest from borrowers has normally exceeded scheduled principal and interest payments owed to investors, given various state and local emergency order changes in light of COVID-19, this could change.
−Removed: In April 2020, the Company decided to shut down production and close its Lexington, Mississippi plant.
−Removed: Ongoing market and operating challenges were exacerbated by decreased business and the ongoing uncertainty resulting from the COVID-19 pandemic, all of which contributed to this decision.
−Removed: See further discussion above.
−Removed: Currently, no decisions have been made on the disposition of the production facility, which is currently leased, or related assets.
−Removed: It is difficult to predict the future impacts on housing demand or the nature of operations at each of our locations due to the COVID-19 pandemic.
−Removed: We could experience further reduction of customer demand, plant utilization or production levels, increased costs resulting from our efforts to mitigate the impact of the virus, impairment or write down of assets or other consequences.
−Removed: However, our wholesale customers have been positive about continuing the process of delivering homes and appreciative of our efforts to continue production to meet housing needs.
−Removed: The Company continues to focus on developing order volume growth opportunities by working to improve its production capabilities and adjusting product offerings as appropriate.
−Removed: The Company strives to manage its production levels and workforce size in order to match the demand for its product offerings while ensuring efficient use of its production capabilities.
−Removed: The Company continually reviews wage rates of its production employees and has established other monetary incentive programs to ensure competitive compensation.
−Removed: The Company is working to more extensively use on-line recruiting tools, update recruitment brochures and improve the appearance and appeal of its production facilities in order to improve the recruitment and retention of qualified production employees and reduce annualized turnover rates.
−Removed: The Company believes its ability to help meet the overall need for affordable housing continues to improve.
−Removed: The Company participates in certain commercial loan programs with members of the Company's independent wholesale distribution chain.
−Removed: Under these programs, the Company provides a significant amount of the funds that independent financiers then lend to distributors to finance retail inventories of its products.
−Removed: In addition, the Company has entered into direct commercial loan arrangements with distributors, communities and developers under which the Company provides funds for financing homes (see Note 7 to the Consolidated Financial Statements).
−Removed: The Company's involvement in commercial loans helps to increase the availability of manufactured home financing to distributors, communities and developers.
−Removed: Participation in wholesale financing is helpful to these customers and provides additional opportunity for product exposure to potential home buyers.
−Removed: These initiatives support the Company's ongoing efforts to expand product distribution.
−Removed: However, these initiatives do expose the Company to risks associated with the creditworthiness of this customer base and the Company's inventory financing partners.
−Removed: 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.
−Removed: The lack of an efficient secondary market for manufactured home-only loans and the limited number of institutions providing such loans result in higher borrowing costs for home-only loans, which continues to constrain industry growth.
−Removed: The Company is working directly with other industry participants to develop secondary market opportunities for manufactured home-only loan portfolios and expand lending availability in the industry.
−Removed: Additionally, the Company continues to invest in community-based lending initiatives that provide home-only financing to new residents of certain manufactured home communities.
−Removed: The Company's mortgage subsidiary also develops and invests in home-only lending programs to grow sales of homes through traditional distribution points.
−Removed: The Company believes that growing its investment and participation in home-only lending may provide additional sales growth opportunities for the financial services segment, as well as provide a means that could lead to increased home sales for its factory-built housing operations.
−Removed: The Company is also working through industry trade associations to encourage favorable legislative and GSE action to address the mortgage financing needs of buyers of affordable homes.
−Removed: Federal law requires the GSEs to implement the "Duty to Serve" requirements specified in the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended by the Housing and Economic Recovery Act of 2008.
−Removed: In December 2017, Fannie Mae and Freddie Mac each released their final Underserved Markets Plan that describes, with specificity, the actions they will take over a three-year period to fulfill the "Duty to Serve" obligation.
+Added: Accordingly, our factory capacity utilization rate fluctuated during the fiscal year and was at approximately 75% during the fourth fiscal quarter of 2021, compared to pre-pandemic levels of more than 80%.
+Added: While it is difficult to predict the future impacts of the COVID-19 pandemic on housing demand, employee availability, supply chain and Company performance and ope rations, maintaining an appropriately sized and well-trained workforce is key to increasing production to meet increased demand, and we face challenges in overcoming labor-related difficulties in the COVID-19 environment to increase home production.
+Added: We continually review the wage rates of our production employees, and have established other monetary incentive and benefit programs, with a goal of providing competitive compensation.
+Added: We are also working to more extensively use on-line recruiting tools, update our recruitment brochures and improve the appearance and appeal of our manufacturing facilities to improve the recruitment and retention of qualified production employees and reduce annualized turnover rates.
+Added: Regardless, we believe our ability to recruit the workforce we need to help meet the overall need for affordable housing continues to improve.
+Added: We continue to make certain commercial loan programs available to members of our wholesale distribution chain.
+Added: Under direct commercial loan arrangements, we provide funds for financed home purchases by distributors, community owners and developers.
+Added: In addition, we provide loans to independent floor plan lenders that then lend to distributors to finance their inventory purchases (see Note 7 to the Consolidated Financial Statements).
+Added: Our involvement in commercial loans helps to increase the availability of manufactured home financing to distributors, community owners and developers and provides additional opportunity for product exposure to potential home buyers.
+Added: While these initiatives support our ongoing efforts to expand product distribution, they do expose us to risks associated with the creditworthiness of this customer base and our inventory financing partners.
+Added: Although Company-owned, and most independently owned, retail stores remained open for business at the onset of the pandemic, customer traffic initially declined, resulting in fewer home orders from our distribution channels than would be typical during the spring selling season.
+Added: However, sales order activity was exceptionally strong during the rest of fiscal year 2021.
+Added: Home sales order rates during the second and third fiscal quarters were nearly 65% higher than the comparable prior year quarters, and nearly 50% higher for the fourth quarter.
+Added: The financial services segment also maintained operations since the onset of the COVID-19 pandemic, largely through the implementation of work-from-home solutions.
+Added: During these uncertain economic times, we continue to assist customers in need by servicing existing loans and insurance policies and complying with state and federal regulations regarding loan forbearance, home foreclosures and policy cancellations.
+Added: Certain loans serviced for investors expose us to cash flow deficits if customers do not make contractual monthly payments of principal and interest in a timely manner.
+Added: For certain loans serviced for Ginnie Mae and Freddie Mac, and home-only loans serviced for certain other investors, we must remit scheduled monthly principal and/or interest payments and principal curtailments regardless of whether monthly mortgage payments are collected from borrowers.
+Added: Ginnie Mae permits cash obligations on loans in forbearance from COVID-19 to be offset by other incoming cash flows from loans such as loan pre-payments.
+Added: Through fiscal year 2021, monthly collections of principal and interest from borro wers have exceeded scheduled principal and interest payments owed to investors.
+Added: However, mandatory extended forbearance under the CARES Act and certain other regulations related to COVID-19 could negatively impact cash obligations in the future.
+Added: The lack of an efficient secondary market for manufactured home-only loans and the limited number of institutions providing such loans results in higher borrowing costs for home-only loans and continues to constrain industry growth.
+Added: We work directly with other industry participants to develop secondary market opportunities for manufactured home-only loan portfolios and expand lending availability in the industry.
+Added: Additionally, we continue to invest in community-based lending initiatives that provide home-only financing to new residents of certain manufactured home communities.
+Added: We also develop and invest in home-only lending programs to grow sales of homes through traditional distribution points.
+Added: We believe that growing our investment and participation in home-only lending may provide additional sales growth opportunities for our financial services segment, as well as provide a means that could lead to increased home sales for our factory-built housing operations.
+Added: We also work with industry trade associations to encourage favorable legislative and GSE action to address the mortgage financing needs of buyers of affordable homes.
+Added: Federal law requires GSEs to implement the "Duty to Serve" requirements specified in the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended by the Housing and Economic Recovery Act of 2008.
+Added: In December 2017, Fannie Mae and Freddie Mac released their final Underserved Markets Plans that describe, with specificity, the actions they would take over a three-year period to fulfill the "Duty to Serve" obligation.
These plans became effective on January 1, 2018.
−Removed: Each of the three-year plans offers an enhanced mortgage loan product through their "MH Advantage" and "ChoiceHome" programs, respectively, that began in the latter part of calendar year 2018.
−Removed: Small-scale pilot programs for the purchase of home-only loans that were expected to commence towards the end of calendar year 2019 have not occurred.
−Removed: Expansion of the secondary market for lending through the GSEs could support further demand for housing as lending options would likely become more available to home buyers.
−Removed: Although some progress has been made in this area, meaningful positive impact in the form of increased home orders has yet to be realized.
−Removed: On January 25, 2018, HUD announced a top-to-bottom review of its manufactured housing rules as part of a broader effort to identify regulations that may be ineffective, overly burdensome, or excessively costly given the critical need for affordable housing.
−Removed: In addition, on June 25, 2019, President Trump signed an Executive Order directing federal agencies to work together to alleviate barriers that impede the production of affordable housing.
−Removed: The Executive Order created a White House Council on Eliminating Regulatory Barriers to Affordable Housing, consisting of members from eight federal agencies and chaired by the HUD Secretary.
−Removed: While there has been no timeline established, if certain changes are made, the Company may be able to serve a broader range of home buyers.
+Added: On January 5, 2021, the Federal Housing Finance Agency, the GSE regulator, announced that it had issued "Non-Objections" to modified plans which are extended through 2021.
+Added: The plans offered enhanced mortgage loan products for manufactured homes titled as real property through Fannie Mae's "MH Advantage" and Freddie Mac's "ChoiceHome" programs that began in the latter part of calendar year 2018.
+Added: Although some progress has been made with these programs, meaningful positive impact in the form of increased home orders has yet to be realized.
+Added: Small-scale pilot programs included in the plans for the purchase of home-only loans have not occurred.
+Added: Public input into the GSE's proposed 2022-2024 Underserved Markets Plans is scheduled for summer 2021.
+Added: Expansion of the secondary market for home-only loans through GSEs could support further demand for housing as lending options would likely become more available to home buyers.
The insurance subsidiary is subject to adverse effects from excessive policy claims that may occur during periods of inclement weather, including seasonal spring storms or fall hurricane activity in Texas where most of its policies are underwritten.
−Removed: Where applicable, losses from catastrophic events are mitigated by reinsurance contracts in place as part of the Company's loss mitigation structure.
−Removed: 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 CEO, Joseph Stegmayer.
−Removed: 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.
−Removed: The Company continues to make documents and personnel available to the SEC staff and intends to continue cooperating with its investigation.
−Removed: As a result of the ongoing independent investigation, the Company recorded $2.9 million of expenses related to legal and other expenses during the fiscal year ended March 28, 2020 and expects to continue to incur related costs pertaining to this matter.
−Removed: During the third quarter of fiscal year 2019, the Company also reviewed the sufficiency of its insurance coverage and as a result, Cavco's Board of Directors made a decision to purchase additional D&O liability insurance coverage with 22 month terms for a total premium of $15.3 million.
−Removed: As a result, the Company recorded $8.4 million of additional D&O policy premium expense during the fiscal year ended March 28, 2020 , and expects to incur approximately $2.1 million per quarter in Selling, general and administrative expenses from the amortization of these policy premiums through the second quarter of fiscal year 2021, at which point D&O policy needs and related premium costs will be assessed further.
+Added: Where applicable, losses from catastrophic events are mitigated by reinsurance contracts in place as part of our loss mitigation structure.
Results of Operations
Fiscal Year 2021 Compared to Fiscal Year 2020
−Removed: Net revenue consisted of the following for fiscal years 2020 and 2019 , respectively (dollars in thousands):
+Added: Net revenue consisted of the following for fiscal years 2021, which included an extra week in the fiscal period, and 2020, respectively:
+Added: ($ in thousands, except revenue per home sold) April 3,
+Added: 2021 March 28,
Factory-built housing $ 1,037,889 $ 999,340 $ 38,549 3.9 %
Financial services 70,162 62,434 7,728 12.4 %
+Added: $ 1,108,051 $ 1,061,774 $ 46,277 4.4 %
Total homes sold 14,214 15,100 (886) (5.9) %
Net factory-built housing revenue per home sold $ 73,019 $ 66,181 $ 6,838 10.3 %
−Removed: In the factory-built housing segment, the increase was from improved home sales volume, including homes sold from the new Destiny Homes acquisition, which contributed $30.1 million in revenue, changes in product mix and higher home selling prices compared to the prior year.
+Added: In the factory-built housing segment, revenues increased $62.3 million from higher home selling prices, driven by product price increases and a shift toward more multi-section homes.
+Added: This was offset by a $23.8 million reduction from lower home sales volume.
Net factory-built housing revenue per home sold is a volatile metric dependent upon several factors.
−Removed: A primary factor is the price disparity between sales of homes to independent distributors, builders, communities and developers ("Wholesale") and sales of homes to consumers by Company-owned retail centers ("Retail").
+Added: A primary factor is the price disparity between sales of homes to independent distributors, builders, communities and developers ("Wholesale") and sales of homes to consumers by Company-owned retail stores ("Retail").
Wholesale sales prices are primarily comprised of the home and the cost to ship the home from a homebuilding facility to the home-site.
Retail home prices include these items and retail markup, as well as items that are largely subject to home buyer discretion, including, but not limited to, installation, utility connections, site improvements, landscaping and additional services.
−Removed: Changes to the proportion of home sales among these distribution channels between reporting periods impacts the overall net revenue per home sold.
−Removed: For the twelve months ended March 28, 2020 , the Company sold 12,247 homes Wholesale and 2,853 Retail versus 11,806 homes Wholesale and 2,583 homes Retail in the comparable prior year period.
−Removed: Further, fluctuations in net factory-built housing revenue per home sold are the result of changes in product mix, which results from home buyer tastes and preferences as they select home types/models, as well as optional home upgrades when purchasing the home.
+Added: Changes to the proportion of home sales among our distribution channels between reporting periods impacts the overall net revenue per home sold.
+Added: For the twelve months ended April 3, 2021, we sold 11,225 homes Wholesale and 2,989 Retail versus 12,247 homes Wholesale and 2,853 homes Retail in the comparable prior year period.
+Added: Fluctuations in net factory-built housing revenue per home sold are partially the result of changes in product mix, which results from home buyer tastes and preferences as they select home types/models, as well as optional home upgrades when purchasing the home.
These selections vary regularly based on consumer interests, local housing preferences and economic circumstances.
Product prices are also periodically adjusted for the cost and availability of raw materials included in, and labor used to produce, each home.
−Removed: For these reasons, the Company has experienced, and expects to continue to experience, volatility in overall net factory-built housing revenue per home sold.
−Removed: Financial services segment revenue increased primarily from higher premium revenue from a greater number of insurance policies in force, more sales of consumer loans and higher interest income on loans held for investment, partially offset by unrealized losses on equity investments and lower interest income earned on securitized loan portfolios that continue to amortize.
+Added: For these reasons, we have experienced, and expect to continue to experience, volatility in overall net factory-built housing revenue per home sold.
+Added: Financial services segment revenue increased primarily from $4.0 million market gains on equity investments, compared to $1.6 million of losses in the prior year, $3.3 million from more insurance policies in force and $0.5 million from higher volume of home loan sales.
+Added: These were partially offset by $1.2 million lower interest income earned on the acquired loan portfolios that continue to amortize as expected.
Gross Profit.
−Removed: Gross profit consisted of the following for fiscal years 2020 and 2019 , respectively (in thousands):
+Added: Gross profit consisted of the following for fiscal years 2021 and 2020, respectively:
+Added: ($ in thousands) April 3,
+Added: 2021 March 28,
Gross profit:
1 unchanged sentence
Financial services 39,373 35,274 4,099 11.6 %
+Added: $ 238,977 $ 230,518 $ 8,459 3.7 %
Gross profit as % of Net revenue:
−Removed: Factory-built housing
−Removed: Financial services
−Removed: The increase in factory-built housing gross profit was the result of higher home sales volume and prices better suited to input cost fluctuations during the year, as well as changes in product mix.
−Removed: Financial services gross profit increased from higher premium revenue from a greater number of insurance policies in force, more sales of consumer loans and higher interest income on loans held for investment, partially offset by unrealized losses on equity investments, higher claims expense and lower interest income earned on securitized loan portfolios that continue to amortize.
+Added: Consolidated 21.6 % 21.7 % N/A (0.1) %
+Added: Factory-built housing 19.2 % 19.5 % N/A (0.3) %
+Added: Financial services 56.1 % 56.5 % N/A (0.4) %
+Added: Factory-built housing gross profit increased $19.6 million from higher home sales prices and a shift toward more multi-section homes during the period, partially offset by $15.2 million of lower home sales volumes .
+Added: Financial services gross profit increased from the $8.2 million revenue gains discussed above, and $3.0 million of favorable non-cash valuation adjustments, including improved loan loss reserves.
+Added: These gains were partially offset by $6.8 million higher claims and commission expense.
Selling, General and Administrative Expenses.
−Removed: Selling, general and administrative expenses consisted of the following for fiscal years 2020 and 2019 , respectively (in thousands):
+Added: Selling, general and administrative expenses consisted of the following for fiscal years 2021 and 2020, respectively:
+Added: ($ in thousands) April 3,
+Added: 2021 March 28,
Selling, general and administrative expenses:
1 unchanged sentence
Financial services 19,654 18,437 1,217 6.6 %
+Added: $ 150,152 $ 145,611 $ 4,541 3.1 %
Selling, general and administrative expenses as % of Net revenue:
−Removed: Selling, general and administrative expenses related to factory-built housing increased from higher wages and incentive compensation expense on improved earnings, higher premium amortization related to the additional D&O insurance purchased during the third quarter of fiscal year 2019 ( $8.4 million amortized in the current year compared to $2.8 million amortized in the prior year) and greater legal and other expenses related to the Company's internal investigation and response to the SEC inquiry ( $2.9 million in the current year compared to $2.1 million in the prior year).
+Added: 13.6 % 13.7 % N/A (0.1) %
+Added: Selling, general and administrative expenses related to factory-built housing increased from higher wages and incentive compensation expense on improved earnings, charges related to a new, employee-friendly paid time off policy and severance expense related to the Company's former Chief Financial Officer.
+Added: These were partially offset by reduced expenses related to the SEC inquiry and lower amortization of the additional D&O insurance premiums.
Selling, general and administrative expenses related to financial services increased primarily from higher salary expenses from continued growth and increased incentive compensation costs from improved earnings.
−Removed: As a percentage of Net revenue, Selling, general and administrative expenses increased from the SEC and D&O costs discussed previously.
+Added: As a percentage of Net revenue, Selling, general and administrative expenses slightly decreased from better utilization of fixed costs on higher sales.
Interest Expense.
−Removed: Interest expense was $1.5 million in fiscal year 2020 and $3.4 million in fiscal year 2019 .
−Removed: Interest expense consists primarily of debt service on the CountryPlace securitized financings of manufactured home loans and interest related to finance leases.
−Removed: The decrease is related to a reduction in securitized bond interest expense, as the Company exercised its right to repurchase the 2005-1 and 2007-1 securitized loan portfolios in January 2019 and August 2019, respectively, thereby eliminating the related interest expense.
−Removed: These decreases are partially offset by increases in interest expense from secured credit facilities at CountryPlace.
+Added: Interest expense was $0.7 million in fiscal year 2021 and $1.5 million in fiscal year 2020, and consists primarily of debt service on the financings of manufactured home-only loans and interest related to finance leases.
+Added: The decrease is related to a reduction in securitized bond interest expense, as we e xercised our right to repurchase the 2007-1 securitized loan portfolio in August 2019 , thereby eliminating the related interest expense.
+Added: This decrease is partially offset by increases in interest expense from the secured credit facilities.
Other Income, net .
−Removed: For fiscal years 2020 and 2019 , Other income, net was $9.6 million and $6.0 million , respectively, an increase of $3.6 million or 60.0% .
−Removed: Other income primarily consists of realized and unrealized gains and losses on corporate investments, interest income related to commercial loan receivable balances, interest income earned on cash balances and gains and losses (including impairments) from the sale of property, plant and equipment and assets held for sale.
−Removed: The increase was primarily from a $3.4 million net gain on the sale of idle land and an increase in interest income on larger Cash and cash equivalents balances compared to the same period last year, partially offset by unrealized losses on corporate investments.
+Added: Other income primaril y consists of realized and unrealized gains and losses on corporate investments, interest income related to commercial loan receivable balances, interest income earned on cash balances and gains and losses from the sale of property, plant and equip ment and assets held for sale.
+Added: For fisca l years 2021 and 2020, Other income, net was $8.8 million and $9.6 million, respectively, a decrease of $0.8 million or 8.3%.
+Added: This decrease was primarily from a $3.4 million net gain recognized last year on the sale of idle land and lower interest income earned on cash balances, partially offset by greater unrealized gains on corporate equity investments in the current year.
Income Before Income Taxes.
−Removed: Income before income taxes consisted of the following for fiscal years 2020 and 2019 , respectively (in thousands):
+Added: Income before income taxes consisted of the following for fiscal years 2021 and 2020, respectively:
+Added: ($ in thousands) April 3,
+Added: 2021 March 28,
Income before income taxes:
1 unchanged sentence
Financial services 17,975 14,448 3,527 24.4 %
+Added: $ 96,912 $ 92,979 $ 3,933 4.2 %
Income Tax Expense.
−Removed: Income tax expense was $17.9 million , resulting in an effective tax rate of 19.3% for the fiscal year ended March 28, 2020 , compared to income tax expense of $18.1 million and an effective rate of 20.8% for the fiscal year ended March 30, 2019 .
−Removed: The lower effective tax rate in the current period is mainly from a benefit of $1.8 million for the recognition of certain tax credits under the Consolidated Appropriations Act, 2020, which was signed into law on December 20, 2019.
+Added: Income tax expense was $20.3 million, resulting in an effective tax rate of 20.9% for the fiscal year ended April 3, 2021, compared to income tax expense of $17.9 million and an effective rate of 19.3% for the fiscal year ended March 28, 2020.
+Added: The higher effective tax rate in the current year period primarily relates to higher income and lower tax benefits from stock option exercises.
Fiscal Year 2020 Compared to Fiscal Year 2019
1 unchanged sentence
Liquidity and Capital Resources
−Removed: The Company believes that cash and cash equivalents at March 28, 2020 , together with cash flow from operations, will be sufficient to fund its operations and provide for growth for the next 12 months and into the foreseeable future.
−Removed: The Company maintains cash in U.S.
+Added: We believe that cash and cash equivalents at April 3, 2021, together with cash flow from operations, will be sufficient to fund our operations and provide for growth for the next 12 months and into the foreseeable future.
+Added: We maintain cash in U.S.
Treasury and other money market funds, some of which are in excess of federally insured limits.
−Removed: The Company expects to continue to evaluate potential acquisitions of, or strategic investments in, businesses that are complementary to the Company, as well as other expansion opportunities.
−Removed: Such transactions may require the use of cash and have other impacts on the Company's liquidity and capital resources.
−Removed: The recent acquisition of Destiny Homes did not have a significant impact on the Company's liquidity or capital resources.
−Removed: Because of the Company's sufficient cash position, the Company has not historically sought external sources of liquidity, with the exception of certain credit facilities for its home-only lending programs.
−Removed: Regardless, depending on the Company's operating results and strategic opportunities, it may need to seek additional or alternative sources of financing.
+Added: We expect to continue to evaluate potential acquisitions of, or strategic investments in, businesses that are complementary to the Company, as well as other expansion opportunities.
+Added: Such transactions may require the use of cash and have other impacts on our liquidity and capital resources.
+Added: Because of our sufficient cash position, we have not historically sought external sources of liquidity, with the exception of certain credit facilities for the home-only lending programs.
+Added: Regardless, depending on our operating results and strategic opportunities, we may need to seek additional or alternative sources of financing.
There can be no assurance that such financing would be available on satisfactory terms, if at all.
−Removed: If this financing were not available, it could be necessary for the Company to reevaluate its long-term operating plans to make more efficient use of its existing capital resources.
−Removed: The exact nature of any changes to the Company's plans that would be considered depends on various factors, such as conditions in the factory-built housing industry and general economic conditions outside of the Company's control.
+Added: If this financing were not available, it could be necessary for us to reevaluate our long-term operating plans to make more efficient use of our existing capital resources.
+Added: The exact nature of any changes to our plans that would be considered depends on various factors, such as conditions in the factory-built housing industry and general economic conditions outside of our control.
State insurance regulations restrict the amount of dividends that can be paid to stockholders of insurance companies.
−Removed: As a result, the assets owned by the Company's insurance subsidiary are generally not available to satisfy the claims of Cavco or its legal subsidiaries.
−Removed: The Company believes that stockholders' equity at its insurance subsidiary remains sufficient and does not believe that its ability to pay ordinary dividends to Cavco will be restricted per state regulations.
−Removed: The following is a summary of the Company's cash flows for fiscal years 2020 and 2019 , respectively (in thousands):
+Added: As a result, the assets owned by our insurance subsidiary are generally not available to satisfy the claims of Cavco or its legal subsidiaries.
+Added: We believe that stockholders' equity at the insurance subsidiary remains sufficient and do not believe that the ability to pay ordinary dividends to Cavco will be restricted per state regulations.
+Added: The following is a summary of the Company's cash flows for fiscal years 2021 and 2020, respectively:
+Added: ($ in thousands) April 3,
+Added: 2021 March 28,
+Added: 2020 $ Change
Cash, cash equivalents and restricted cash at beginning of the fiscal year $ 255,607 $ 199,869 $ 55,738
3 unchanged sentences
Cash, cash equivalents and restricted cash at end of the fiscal year $ 339,307 $ 255,607 $ 83,700
−Removed: Net cash provided by operating activities increased during the year ended March 28, 2020 , compared to the year ended March 30, 2019 , from increased profitability and operating account activity including lower prepaid expenses from the continuing amortization of the D&O premiums and higher accounts payable and accrued expenses and other current liabilities, including factory warranties, wages and unearned insurance premiums.
−Removed: Consumer loan originations increased $27.1 million to $157.1 million during the year ended March 28, 2020 , from $130.0 million during the year ended March 30, 2019 , primarily from increased home lending activity at CountryPlace.
+Added: Net cash pro vided by operating activities increased due to the increased profitability and operating account activity including higher accounts payable and accrued expenses and other current liabilities such as salary and wage accruals, greater customer deposits, Company repurchase options on certain loans sold and unearned insurance premiums and lower prepaid expenses from the continuing amortization of the D&O premiums.
+Added: These increases are partially offset by higher inventory levels.
+Added: Consumer loan originations increased $4.5 million to $161.6 million during the year ended April 3, 2021, from $157.1 million during the year ended March 28, 2020.
Proceeds from the sale of consumer loans provided $167.1 million in cash, compared to $159.6 million in the previous year, a net increase of $7.5 million.
1 unchanged sentence
As a result, financing for the purchase of manufactured homes is characterized by shorter loan maturities and higher interest rates.
−Removed: Unfavorable changes in these factors may have material negative effects on the Company's results of operations and financial condition.
+Added: Unfavorable changes in these factors may have material negative effects on our results of operations and financial condition.
See Part I, Item IA, "Risk Factors."
−Removed: Cavco has entered into commercial loan agreements with certain distributors of its products under which the Company provides funds for wholesale purchases.
−Removed: In addition, the Company has entered into direct commercial loan arrangements with distributors, communities and developers under which the Company provides funds for financing homes.
−Removed: The Company has also invested in community-based lending initiatives that provide home-only financing to new residents of certain manufactured home communities.
+Added: We enter into commercial loan agreements with distributors, communities and developers under which the Company provides funds for financing homes.
+Added: In addition, we enter into commercial loan arrangements with certain distributors of our products under which the Company provides funds for wholesale purchases.
+Added: We have also invested in community-based lending initiatives that provide home-only financing to new residents of certain manufactured home communities.
For additional information regarding our commercial loans receivable, see Note 7 to the Consolidated Financial Statements.
−Removed: Further, the Company has invested in and developed home-only loan pools and lending programs to attract third-party financier interest in order to grow sales of new homes through traditional distribution points.
−Removed: Cash used in investing activities for the year ended March 28, 2020 included purchases of property, plant and equipment and payments for Destiny Homes.
−Removed: Cash used in investing activities in fiscal year 2019 was primarily used for purchases of property, plant and equipment.
−Removed: Net cash used in financing activities for the year ended March 28, 2020 was mainly for the repurchase of the 2007-1 securitization and other payments on securitized financings.
−Removed: Net cash used in financing activities for fiscal year 2019 was mainly for the repurchase of the 2005-1 securitization and other payments on securitized financings.
+Added: Further, we invest in and develop home-only loan pools and lending programs to attract third-party financier interest in order to grow sales of new homes through traditional distribution points.
+Added: Net cash used in investing activities for the year ended April 3, 2021 included purchases of property, plant and equipment, primarily used for the new park model RV facility in Arizona, which is expected to be operational in December 2021.
+Added: This was partially offset by cash provided from net sales of investments and proceeds from sales of property, plant and equipment.
+Added: Net cash used in investing activities in fiscal year 2020 was primarily used for purchases of property, plant and equipment, payments for the acquisition of Destiny Homes and net purchases of investments.
+Added: This was partially offset by proceeds from the sale of property, plant and equipment.
+Added: Net cash used in financing activities for the year ended April 3, 2021 was mainly used for payments of payroll taxes on the net exercises of stock options, payments on secured financings and common stock repurchases.
+Added: Net cas h used in financing activities for fiscal year 2020 was mainly for the repurchase of the 2007-1 securitization and other payments on secured financings.
See Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources" in the Company's 2020 Annual Report on Form 10-K for a discussion of changes in liquidity between fiscal years 2020 and 2019.
−Removed: In August 2019, the Company repurchased the 2007-1 securitized loan portfolio, leaving no further securitized financing balance outstanding.
−Removed: The Company's finance subsidiary has 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.
−Removed: The proceeds are used by the Company to originate and hold consumer home-only loans secured by manufactured homes, which are pledged as collateral to the facilities.
−Removed: 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.
−Removed: The maximum advance for loans under this program was 80% of the outstanding collateral principal balance, with the Company providing the remaining funds.
−Removed: As of March 28, 2020 , the outstanding balance of the converted loans was $10.5 million at a weighted average interest rate of 4.91%.
+Added: During fiscal year 2020, the Company repurchased the 2007-1 securitized loan portfolio, leaving no further securitized financing balance outstanding as of April 3, 2021 or March 28, 2020.
+Added: We have entered into secured credit facilities with independent third-party banks.
+Added: The proceeds were used to facilitate the origination of consumer home-only loans to be held for investment, secured by the manufactured homes which were subsequently pledged as collateral to the facilities.
+Added: Upon completion of the draw down periods, these facilities were converted into an amortizing loan based on a 20-year amortization period with a balloon payment due upon maturity.
+Added: As of April 3, 2021, the outstanding balance of the converted loans was $8.2 million with a weighted average interest rate of 4.91%.
+Added: In October 2020, we announced a $100 million stock repurchase program that may be used to purchase our outstanding common stock.
+Added: 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.
+Added: The plan does not obligate us to acquire any particular amount of common stock and may be suspended or discontinued at any time.
+Added: During fiscal year 2021 , we purchased 6,600 shares for an aggregate amount of $1.4 million under the new $100 million repurchase authorization that occurred on October 27, 2020.
Contractual Obligations and Commitments
−Removed: The following table summarizes the Company's contractual obligations at March 28, 2020 , to make future payments under its debt obligations and lease agreements.
+Added: The following table summarizes our contractual obligations to make future payments under the debt obligations and lease agreements as of April 3, 2021.
This table excludes long-term obligations for which there is no definite commitment period.
Payments Due by Period
−Removed: (in thousands)
+Added: ($ in thousands) Total Less than
+Added: Years After 5
Debt obligations:
−Removed: Securitized financings and other borrowings, including interest (1)
+Added: Secured financings and other borrowings, including interest (1)
+Added: $ 14,580 $ 2,313 $ 3,655 $ 3,112 $ 5,500
Operating lease obligations 19,776 4,292 7,564 5,654 2,266
3 unchanged sentences
The timing of these estimated payments fluctuates based upon various factors, including estimated loan portfolio prepayment and default rates.
−Removed: Additionally, the Company has contingent commitments at March 28, 2020 , consisting of contingent repurchase obligations, a letter of credit and remaining construction contingent commitments.
+Added: Additionally, we have contingent commitments at April 3, 2021 consisting of contingent repurchase obligations and remaining construction contingent commitments.
For additional information related to these contingent obligations, see Note 16 to the Consolidated Financial Statements.
−Removed: The Company is contingently liable under terms of repurchase agreements with financial institutions providing inventory financing for independent distributors of its products.
−Removed: The maximum amount for which the Company was liable under such agreements approximated $79.3 million at March 28, 2020 , without reduction for the resale value of the homes.
−Removed: Although the repurchase obligations outstanding have a finite life, these commitments are continually replaced as the Company continues to sell manufactured homes to distributors under repurchase and other recourse agreements with lending institutions which have provided wholesale floor plan financing to distributors.
−Removed: The Company's insurance subsidiary maintains an irrevocable letter of credit of $11.0 million to provide assurance that the Company will fulfill its reinsurance obligations.
−Removed: This letter of credit is secured by certain of the insurance subsidiary's investments.
−Removed: While the current letter of credit has a finite life, it is subject to renewal based on the underlying requirements.
−Removed: The Company's finance subsidiary has a commitment to fund construction-period mortgages up to $17.7 million at March 28, 2020 .
−Removed: The total loan contract amount, less cumulative advances, represents an off-balance sheet contingent commitment of CountryPlace to fund future advances.
+Added: • We are contingently liable under terms of repurchase agreements with financial institutions providing inventory financing for independent distributors of our products.
+Added: The maximum amount for which we were liable under such agreements approximated $74.2 million at April 3, 2021, without reduction for the resale value of the homes.
+Added: Although the repurchase obligations outstanding have a finite life, these commitments are continually replaced as we continue to sell manufactured homes to distributors under repurchase and other recourse agreements with lending institutions which have provided wholesale floor plan financing to distributors.
+Added: • CountryPlace has a commitment to fund construction-period mortgages up to $23.8 million at April 3, 2021.
+Added: The total loan contract amount, less cumulative advances, represents an off-balance sheet contingent commitment to fund future advances.
Off Balance Sheet Arrangements
See Note 16 to the Consolidated Financial Statements for a discussion of the Company's off-balance sheet commitments, which is incorporated herein by reference.
−Removed: Critical Accounting Policies
−Removed: The Company's discussion and analysis of its financial condition and results of operations are based upon its Consolidated Financial Statements, which have been prepared in accordance with U.S.
+Added: Critical Accounting Estimates
+Added: Our discussion and analysis of the Company's financial condition and results of operations is based upon its Consolidated Financial Statements, which have been prepared in accordance with U.S.
generally accepted accounting principles.
−Removed: The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.
−Removed: Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
+Added: The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.
+Added: We base these estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or conditions.
See "Forward-Looking Statements" above.
−Removed: Management believes the following accounting policies are critical to Company operating results or may affect significant judgments and estimates used in the preparation of the Company's Consolidated Financial Statements and should be read in conjunction with the Notes to the Company's Consolidated Financial Statements.
−Removed: Factory-Built Housing Revenue Recognition - Wholesale .
−Removed: Revenue from homes sold to independent distributors, builders, communities and developers is generally recognized when the home is shipped, at which time title passes and it is probable that substantially all of the consideration will be received.
−Removed: Homes sold to independent distributors are generally either paid for upon shipment or floor plan financed by the independent distributor through standard industry financing arrangements, which can include repurchase agreements.
−Removed: Manufacturing sales financed under floor plan arrangements that include repurchase agreements are reduced by a provision for estimated repurchase obligations (see Note 16 to the Consolidated Financial Statements).
−Removed: Prior to the adoption of FASB Accounting Standards Update ("ASU") No.
−Removed: 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASC 606"), revenue from homes sold under commercial loan programs involving funds provided by the Company were either deferred until such time that payment for the related commercial loan was received by the Company or recognized when the home was shipped and title transferred, depending on the nature of the program and borrower.
−Removed: Upon adoption of ASC 606, the Company generally recognizes home sales revenue upon shipment and transfer of title, as it is probable that substantially all of the consideration in exchange for the goods or services transferred to the customer will be collected.
−Removed: One consideration under the guidance requires the evaluation of the financing component of the related loan program.
−Removed: If it is determined that the interest rate charged under the loan program is less than the market rate, the Company will reduce the transaction price by an amount for deferred interest.
−Removed: In these cases, interest income will be accrued and recognized over the life of the loan using the effective interest method.
−Removed: The Company offers a significant amount of its loan programs at market rates.
−Removed: Factory-Built Housing Revenue Recognition - Retail .
−Removed: Sales by Company-owned retail locations are generally recognized when the customer has entered into a legally binding sales contract, the home is delivered and permanently located at the customer's site, the home is accepted by the customer, title has transferred and funding is probable.
−Removed: Financial Services Revenue Recognition.
−Removed: Premium amounts collected on policies issued and assumed by Standard Casualty are amortized on a straight-line basis into Net revenue over the life of the policy.
−Removed: Premiums earned are net of reinsurance ceded.
−Removed: Policy acquisition costs are also amortized in Cost of sales over the life of the policy.
−Removed: Insurance agency commissions received from third-party insurance companies are recognized as revenue upon execution of the insurance policy as the Company has no future or ongoing obligation with respect to such policies.
−Removed: Upon acquisition of the securitized loan portfolios ("Acquisition Date"), management evaluated consumer loans receivable held for investment by CountryPlace to determine whether there was evidence of deterioration of credit quality and if it was probable that CountryPlace would be unable to collect all amounts due according to the loans' contractual terms.
−Removed: The Company also considered expected prepayments and estimated the amount and timing of undiscounted expected principal, interest and other cash flows.
−Removed: The Company determined the excess of the loan pool's scheduled contractual principal and contractual interest payments over the undiscounted cash flows expected as of the Acquisition Date as an amount that is not accreted into interest income (the non-accretable difference).
−Removed: The cash flow expected to be collected in excess of the carrying value of the acquired loans is accreted into interest income over the remaining life of the loans (referred to as accretable yield).
−Removed: Interest income on consumer loans receivable is recognized in Net revenue (see Note 6 to the Consolidated Financial Statements).
−Removed: For loans originated by CountryPlace and held for sale, loan origination fees and gains or losses on sales are recognized in Net revenue upon transfer of the loans.
−Removed: CountryPlace provides third-party servicing of mortgages and earns servicing fees each month based on the aggregate outstanding balances.
−Removed: Servicing fees are recognized in Net revenue when earned.
−Removed: The Company provides the retail home buyer a one-year limited warranty covering defects in material or workmanship in home structure, plumbing and electrical systems.
+Added: We believe the following accounting policies are critical to Company operating results or may affect significant judgments and estimates used in the preparation of the Consolidated Financial Statements and should be read in conjunction with the Notes to the Consolidated Financial Statements.
+Added: We provide retail home buyers a one-year limited warranty covering defects in material or workmanship in home structure, plumbing and electrical systems.
Nonstructural components of a cosmetic nature are warranted for 120 days, except in specific cases where state laws require longer warranty terms.
−Removed: The Company records a liability for estimated future warranty costs relating to homes sold based upon an assessment of historical experience factors.
+Added: We record a liability for estimated future warranty costs relating to homes sold based upon an assessment of historical experience factors.
Factors used in the estimation of the warranty liability include the estimated amount of homes still under warranty including homes in distributor inventories, homes purchased by consumers still within the one-year warranty period, the timing in which work orders are completed and the historical average costs incurred to service a home.
−Removed: As a result of the COVID-19 pandemic, the Company has adjusted its warranty timing requirements, allowing customers an extension of time for repairs to be made if they were nearing the end of their warranty period and COVID-19 related circumstances prevented the work from being completed.
+Added: Reserve for Property Casualty Insurance Claims and Claims Expense.
+Added: Standard Casualty establishes reserves for claims and claims expense on reported and unreported claims of insured losses.
+Added: Our reserve process takes into account known facts and interpretations of circumstances and factors, including our experience with similar cases, actual claims paid, historical trends involving claim payment patterns and pending levels of unpaid claims, loss management programs, product mix, contractual terms, changes in law and regulation, judicial decisions and economic conditions.
+Added: In the normal course of business, we may also supplement our claims processes by utilizing third party adjusters, appraisers, engineers, inspectors and other professionals and information sources to assess and settle catastrophe and non-catastrophe related claims.
+Added: The effects of inflation are implicitly considered in the reserving process.
+Added: We are self-insured for a significant portion of our general and products liability, auto liability, health, property and workers' compensation liability coverage.
+Added: Insurance is maintained for catastrophic exposures and those risks required to be insured by law.
+Added: Estimated self-insurance costs are accrued for incurred claims and estimated incurred but not reported claims.
+Added: A reserve for products liability is actuarially determined.
+Added: The determination of claims and expenses and the appropriateness of the related liabilities are regularly reviewed and updated.
Reserve for Repurchase Commitments.
Manufactured housing companies customarily enter into repurchase and other recourse agreements with lending institutions that have provided wholesale floor plan financing to distributors.
−Removed: Significant portions of the Company's sales are made to distributors pursuant to repurchase agreements with lending institutions.
−Removed: These agreements generally provide that the Company will repurchase its new products from the lending institutions in the event such product is repossessed upon a distributor's default.
−Removed: The Company's obligation under these repurchase agreements ceases upon the purchase of the home by the retail customer.
−Removed: The Company applies FASB ASC 460, Guarantees and FASB ASC 450-20, Loss Contingencies ("ASC 450-20"), to account for its liability for repurchase commitments.
−Removed: Additionally, subsequent to the inception of the repurchase commitment, the Company evaluates the likelihood that it will be called on to perform under the inventory repurchase commitments.
−Removed: If it becomes probable that a distributor will default and an ASC 450-20 loss reserve should be recorded, then such contingent liability is recorded equal to the estimated loss on repurchase.
−Removed: Distributor Volume Rebates .
−Removed: The Company's manufacturing operations sponsor volume rebate programs under which certain sales to distributors, builders and developers can qualify for cash rebates generally based on the level of sales attained during a twelve-month period.
−Removed: Volume rebates are accrued at the time of sale and are recorded as a reduction of Net revenue.
+Added: Significant portions of our sales are made to distributors pursuant to repurchase agreements with lending institutions.
+Added: These agreements generally provide that we will repurchase a product from the lending institutions in the event such product is repossessed upon a distributor's default.
+Added: Our obligation under these repurchase agreements ceases upon the purchase of the home by the retail customer.
Impairment of Long-Lived Assets.
−Removed: The Company periodically evaluates the carrying value of long-lived assets to be held and used and held for sale for impairment when events and circumstances warrant such a review.
−Removed: The carrying value of long-lived assets is considered impaired when the anticipated undiscounted cash flow from such assets is less than its carrying value.
+Added: We periodically evaluate the carrying value of long-lived assets, both to be held and used and held for sale, for impairment when events and circumstances warrant such a review.
+Added: The carrying value of long-lived assets is considered impaired when the anticipated undiscounted cash flow from such assets is less than the carrying value.
In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived assets.
1 unchanged sentence
Losses on long-lived assets to be disposed of are determined in a similar manner, except that the fair values are based primarily on independent appraisals and preliminary or definitive contractual arrangements less costs to dispose.
−Removed: The Company recorded no impairment charges on long-lived assets during fiscal years 2020 , 2019 or 2018 .
+Added: We did not record an impairment charge on long-lived assets during fiscal years 2021, 2020 or 2019.
Income Taxes and Deferred Tax Assets and Liabilities.
Deferred tax assets and liabilities are determined based on temporary differences between the financial statement amounts and the tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse.
−Removed: The Company periodically evaluates the deferred tax assets based on the requirements established in FASB ASC 740, Income Taxes , which requires the recording of a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized.
−Removed: The determination of the need for or amount of any valuation allowance involves significant management judgment and is based upon the evaluation of both positive and negative evidence, including estimates of anticipated taxable profits in various jurisdictions with which the deferred tax assets are associated.
−Removed: At March 28, 2020 , the Company evaluated its historical profits earned and forecasted taxable profits and determined that, except for certain state net operating loss deferred tax assets, all other deferred tax assets would be utilized in future periods.
+Added: We periodically evaluate the deferred tax assets based on the requirements established in FASB ASC 740, Income Taxes , which requires a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized.
+Added: The determination of the need for, or amount of, any valuation allowance involves significant judgment and is based upon the evaluation of both positive and negative evidence, including estimates of anticipated taxable profits in various jurisdictions with which the deferred tax assets are associated.
+Added: At April 3, 2021, based on historical profits earned and forecasted taxable profits, we determined that all deferred tax assets, except for certain state net operating loss deferred tax assets, would be utilized in future periods.
Goodwill and Other Intangibles.
Goodwill and indefinite-lived intangibles are tested annually for impairment.
−Removed: The Company's analysis depends upon a number of judgments, estimates and assumptions.
+Added: The analysis depends upon a number of judgments, estimates and assumptions.
Accordingly, such testing is subject to uncertainties, which could cause the fair value to fluctuate from period to period.
−Removed: As of March 28, 2020 , all of the Company's goodwill is attributable to the factory-built housing segment.
−Removed: The Company performed the annual goodwill impairment analysis as of March 28, 2020 , in accordance with ASU No.
+Added: As of April 3, 2021, all of our goodwill is attributable to the factory-built housing segment.
+Added: We performed the annual goodwill impairment analysis as of April 3, 2021, in accordance with FASB Accounting Standards Update No.
2011-08, Intangibles-Goodwill and Other (Topic 350):
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The analysis determined that the fair value of the reporting unit was greater than the carrying value and thus no further procedures were considered necessary.
−Removed: In the event that the Company is not able to achieve expected cash flow levels, or other factors indicate that goodwill is impaired, the Company may need to write off all or part of its goodwill, which would adversely affect its operating results and net worth.
+Added: In the event that we are not able to achieve expected cash flow levels, or other factors indicate that goodwill is impaired, we may need to write off all or part of the goodwill, which would adversely affect our operating results and net worth.
See Part I, Item 1A, "Risk Factors."
−Removed: Accretable Yield on Consumer Loans Receivable and Securitized Financings.
−Removed: The Company acquired consumer loans receivable and securitized financings during the first quarter of fiscal 2012 as a part of the Palm Harbor transaction.
−Removed: Acquired consumer loans receivable held for investment and securitized financings were acquired at fair value, which resulted in a discount, and subsequently are accounted for in a manner similar to FASB ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality to accrete the discount.
−Removed: The Company considers expected prepayments and default rates and estimates the amount and timing of undiscounted expected principal, interest and other cash flows for consumer loans receivable held for investment to determine the expected cash flows on securitized financings and the contractual payments.
−Removed: The amount of contractual principal and contractual interest payments due on the securitized financings in excess of all cash flows expected as of the Acquisition Date cannot be accreted into interest income (the non-accretable difference).
−Removed: The remaining amount is accreted into interest income over the remaining life of the obligation (referred to as accretable yield).
−Removed: For additional information, see Note 6 to the Consolidated Financial Statements.
Other Matters
Related Party Transactions.
−Removed: The Company has non-marketable equity investments in other distribution operations outside of Company-owned retail locations.
−Removed: In the ordinary course of business, the Company sells homes and lends to certain of these operations through its commercial lending programs.
−Removed: For the year ended March 28, 2020 , March 30, 2019 and March 31, 2018 , the total amount of sales to related parties was $51.0 million , $42.2 million and $38.8 million , respectively.
−Removed: As of March 28, 2020 , receivables from related parties included $1.7 million of accounts receivable and $8.2 million of commercial loans outstanding.
+Added: We have non-marketable equity investments in other distribution operations outside of Company-owned retail stores.
+Added: In the ordinary course of business, we sell homes and lend to certain of these operations through the commercial lending programs.
+Added: For the years ended April 3, 2021, March 28, 2020 and March 30, 2019, the total amount of sales to related parties were $46.7 million, $51.0 million and $42.2 million, respectively.
+Added: As of April 3, 2021, receivables from related parties included $4.7 million of accounts receivable and $9.5 million of commercial loans outstanding.
As of March 28, 2020, receivables from related parties included $1.7 million of accounts receivable and $8.2 million of commercial loans outstanding.
−Removed: In fiscal year 2018, the Company recorded a gain of $1.9 million on the sale of equity securities to a related party in which the Company owns a 10% minority ownership interest.
−Removed: The arm's length transaction occurred at market rates.
Impact of Inflation.
−Removed: Sudden increases in specific costs, such as the increases in material and labor, as well as price competition, can affect the Company's ability to efficiently increase its selling prices and may adversely impact its results of operations.
−Removed: The Company can give no assurance that inflation will not affect its profitability in the future.
−Removed: Income Taxes.
−Removed: On December 22, 2017, the U.S.
−Removed: government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act").
−Removed: The Tax Act makes broad and complex changes to the U.S.
−Removed: tax code that affect the Company and include, but are not limited to:
−Removed: (1) reducing the U.S.
−Removed: federal corporate tax rate, (2) allowing bonus depreciation for full expensing of qualified property and (3) eliminating the manufacturing deduction.
−Removed: The Tax Act reduced the federal corporate tax rate to 21%.
−Removed: The Company's federal corporate tax rate for the fiscal year ended March 31, 2018 was 31.54%, reflecting a 35% tax rate that was applicable prior to the passage of the Tax Act and the new 21% rate that was effective after passage of the Tax Act.
−Removed: On March 27, 2020, the CARES Act was signed into law.
−Removed: Among other items, the CARES Act contains corporate income tax provisions that will be advantageous to the Company, including providing temporary suspension of certain payment requirements for the employer portion of social security taxes and the creation of certain refundable employee retention credits.
−Removed: The Company will continue to evaluate the CARES Act for opportunities as additional information is released.
+Added: Sudden increases in specific costs, such as the increases in material and labor, as well as price competition, can affect our ability to efficiently increase selling prices and may adversely impact our results of operations.
+Added: We can give no assurance that inflation will not affect future profitability.
Recent Accounting Pronouncements
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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.