What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2021-05-28 compared with 2020-05-27 · 718 added, 760 removed, 675 unchanged (69% of the section changed)

1 unchanged sentence

Evaluation of Disclosure Controls and Procedures

The Company carried out an evaluation, under the supervision and with the participation of its management, including the President and Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)).

Based upon that evaluation, the Company's President and Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered in this report, the Company's disclosure controls and procedures were effective.

The Company carried out an evaluation, under the supervision and with the participation of the Company's management, including its President and Chief Executive Officer and its Chief Accounting Officer, of the effectiveness of its disclosure controls and procedures (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)).

Based upon that evaluation, the Company's President and Chief Executive Officer and its Chief Accounting Officer concluded that, as of April 3, 2021, its disclosure controls and procedures were effective.

Management's Report on Internal Controls Over Financial Reporting

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Management assessed the effectiveness of the Company's internal control over financial reporting based on the criteria in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("2013 framework").

Based on management's evaluation under the criteria in the 2013 framework, management concluded that the Company's internal control over financial reporting was effective as of March 28, 2020 .

The effectiveness of the Company's internal control over financial reporting as of March 28, 2020 has been audited by RSM US LLP, an independent registered public accounting firm, as stated in their report, which appears herein.

Based on management's evaluation under the criteria in the 2013 framework, management concluded that the Company's internal control over financial reporting was effective as of April 3, 2021.

The effectiveness of the Company's internal control over financial reporting as of April 3, 2021 has been audited by RSM US LLP, an independent registered public accounting firm, as stated in their report, which appears herein.

Changes in Internal Control over Financial Reporting

There have been no changes in the Company's internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the fiscal quarter ended March 28, 2020 , which have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

There have been no changes in the Company's internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the fiscal quarter ended April 3, 2021, which have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

2 unchanged sentences

We have audited Cavco Industries, Inc.

and subsidiaries' (the Company) internal control over financial reporting as of March 28, 2020 , based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 28, 2020 , based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of March 28, 2020 and March 30, 2019 , and the related consolidated statements of comprehensive income, stockholders' equity and cash flows for each of the three fiscal years in the period ended March 28, 2020 , and the related notes and our report dated May 26, 2020 expressed an unqualified opinion.

and subsidiaries' (the Company) internal control over financial reporting as of April 3, 2021, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of April 3, 2021, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of April 3, 2021 and March 28, 2020, and the related consolidated statements of comprehensive income, stockholders' equity and cash flows for each of the three fiscal years in the period ended April 3, 2021, and the related notes and our report dated May 27, 2021 expressed an unqualified opinion.

Basis for Opinion

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DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

For a description of the directors and executive officers of the Company and other information called for by this Item 10, see the Company's Proxy Statement for the 2020 Annual Meeting of Stockholders (the " 2020 Proxy Statement"), which is incorporated herein by reference.

The information required to be disclosed by this item is incorporated herein by reference to our definitive proxy statement for the 2021 Annual Meeting of Stockholders (the "2021 Proxy Statement"), which proxy statement we expect to file with the SEC within 120 days after the end of our fiscal year ended April 3, 2021.

The Company has a Code of Ethics that applies to all directors, officers and employees of the Company.

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Dragash, Secretary, Cavco Industries, Inc., 3636 North Central Avenue, Suite 1200, Phoenix, Arizona, 85012.

If the Company makes any amendment to, or grants any waivers of, a provision of the Code of Ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller where such amendment or waiver is required to be disclosed under applicable SEC rules, the Company intends to disclose such amendment or waiver and the reasons therefore on its Internet website at www.cavco.com .

EXECUTIVE COMPENSATION

For a description of the Company's executive compensation, see the 2020 Proxy Statement, which is incorporated herein by reference.

The information required to be disclosed by this item is incorporated herein by reference to our 2021 Proxy Statement.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

For a description of the security ownership of management and certain beneficial owners, see the 2020 Proxy Statement, which is incorporated herein by reference.

The information required to be disclosed by this item is incorporated herein by reference to our 2021 Proxy Statement.

Equity Compensation Plan Information

The following table sets forth information as of March 28, 2020 , with respect to the Company's compensation plans and individual compensation arrangements under which the Company's equity securities were authorized for issuance to directors, officers, employees, consultants and certain other persons and entities in exchange for the provision to us of goods or services.

Plan Category

The following table sets forth information as of April 3, 2021, with respect to the Company's compensation plans and individual compensation arrangements under which the Company's equity securities were authorized for issuance to directors, officers, employees, consultants and certain other persons and entities in exchange for the provision of goods or services.

Plan Category Number of

Securities to be

Warrants, and

Rights (a) Weighted-

Average Exercise

Warrants, and

Number of Securities

Rights Number of Securities

Remaining Available for

5 unchanged sentences

Equity compensation plans not approved by stockholders — — —

Total 251,749 $ 146.86 295,571

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

For a description of certain relationships and related transactions of the Company, see the 2020 Proxy Statement, which is incorporated herein by reference.

The information required to be disclosed by this item is incorporated herein by reference to our 2021 Proxy Statement.

PRINCIPAL ACCOUNTING FEES AND SERVICES

For a description of principal accounting fees and services, see "Audit Fees" and "Ratification of Appointment of Independent Auditor" in the 2020 Proxy Statement, which is incorporated herein by reference.

The information required to be disclosed by this item is incorporated herein by reference to our 2021 Proxy Statement.

EXHIBITS, FINANCIAL STATEMENT SCHEDULES

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Dragash, Secretary, Cavco Industries, Inc., 3636 North Central Avenue, Suite 1200, Phoenix, Arizona, 85012 or via the Company website (www.cavco.com) .

Filed/Furnished Herewith or

Number Exhibit Filed/Furnished Herewith or

Incorporated by Reference

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Description of Registrant's Securities registered under Section 12 of the Securities Exchange Act of 1934, as amended.

Filed herewith

Exhibit 4.1 to the Annual Report on Form 10-K for the fiscal year ended March 28, 2020

Stock Incentive Plan of Cavco

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Exhibit 10.1 to the Quarterly Report on Form 10-Q for the fiscal quarter ended September 29, 2018

Filed/Furnished Herewith or

Number Exhibit Filed/Furnished Herewith or

Incorporated by Reference

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Larry Keener Retirement Letter, dated January 28, 2020

Filed herewith

Exhibit 10.3.5 to the Annual Report on Form 10-K for the fiscal year ended March 28, 2020

Offer Letter, dated as of January 7, 2020, between the Company and Matthew Niño

Filed herewith

Exhibit 10.3.6 to the Annual Report on Form 10-K for the fiscal year ended March 28, 2020

Severance Agreement, dated April 14, 2020, by and between Simone Reynolds and Cavco Industries, Inc.

Filed herewith

Exhibit 10.3.7 to the Annual Report on Form 10-K for the fiscal year ended March 28, 2020

Severance Agreement, dated May 20, 2020, by and between Steven K.

Like and Cavco Industries, Inc.

Exhibit 10.3.8 to the Annual Report on Form 10-K for the fiscal year ended March 28, 2020

Separation Agreement, dated as of February 19, 2021, by and between Cavco Industries, Inc .

and Daniel L.

Filed herewith

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Clawback Policy

Filed herewith

Exhibit 10.6 to the Annual Report on Form 10-K for the fiscal year ended March 28, 2020

List of Subsidiaries of Cavco

5 unchanged sentences

Filed herewith

Certificate of Daniel L.

Urness, Chief Financial Officer, pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended

Certificate of Paul Bigbee, Chief Accounting Officer, pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended

Filed herewith

Certifications of President and Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C.

Certifications of President and Chief Executive Officer and Chief Accounting Officer, pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Furnished herewith

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* Management contract or compensatory plan or arrangement

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CAVCO INDUSTRIES, INC.

/s/ William C.

May 27, 2021 /s/ William C.

President and Chief Executive Officer

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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature Title Date

/s/ William C.

President and

Chief Executive Officer

Boor Director, President and May 27, 2021

Boor Chief Executive Officer

(Principal Executive Officer)

/s/ Daniel L.

Chief Financial Officer

(Principal Financial and Accounting Officer)

/s/ Paul Bigbee Chief Accounting Officer May 27, 2021

Paul Bigbee (Principal Financial and Accounting Officer)

/s/ Steven G.

Chairman of the Board of Directors

Bunger Chairman of the Board of Directors May 27, 2021

Blount Director May 27, 2021

Greenblatt Director May 27, 2021

/s/ Richard A.

Kerley Director May 27, 2021

/s/ Steven W.

Moster Director May 27, 2021

Sze Director May 27, 2021

CAVCO INDUSTRIES, INC.

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Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of March 28, 2020 and March 30, 2019

Consolidated Statements of Comprehensive Income for the Years Ended March 28, 2020, March 30, 2019 and March 31, 2018

Consolidated Statements of Stockholders' Equity for the Years Ended March 28, 2020, March 30, 2019 and March 31, 2018

Consolidated Statements of Cash Flows for the Years Ended March 28, 2020, March 30, 2019 and March 31, 2018

Consolidated Balance Sheets as of April 3, 2021 and March 28, 2020

Consolidated Statements of Comprehensive Income for the Years Ended April 3, 2021, March 28, 2020 and March 30, 2019

Consolidated Statements of Stockholders' Equity for the Years Ended April 3 , 2021, March 28, 2020 and March 30, 2019

Consolidated Statements of Cash Flows for the Years Ended April 3, 2021, March 28, 2020 and March 30, 2019

Notes to Consolidated Financial Statements

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We have audited the accompanying consolidated balance sheets of Cavco Industries, Inc.

and its subsidiaries (the Company) as of March 28, 2020 and March 30, 2019 , the related consolidated statements of comprehensive income, stockholders' equity and cash flows for each of the three fiscal years in the period ended March 28, 2020 , and the related notes to the consolidated financial statements (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of March 28, 2020 and March 30, 2019 , and the results of its operations and its cash flows for each of the three fiscal years in the period ended March 28, 2020 , in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of March 28, 2020 , based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated May 26, 2020 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.

and its subsidiaries (the Company) as of April 3, 2021 and March 28, 2020, the related consolidated statements of comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended April 3, 2021, and the related notes to the consolidated financial statements (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of April 3, 2021 and March 28, 2020, and the results of its operations and its cash flows for each of the three years in the period ended April 3, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of April 3, 2021, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated May 27, 2021 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.

Basis for Opinion

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Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the account or disclosures to which they relate.

Reserve for Property-Liability Insurance Claims

As described in Notes 1 and 14 to the consolidated financial statements, the financial services segment of the Company establishes reserves for property-liability insurance claims and related expenses on reported and unreported claims of insured losses, which totaled $5.6 million as of March 28, 2020 .

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

Reserve for Property Casualty Insurance Claims

As described in Notes 1 and 14 to the consolidated financial statements, the financial services segment of the Company establishes reserves for property casualty insurance claims and related expenses on reported and unreported claims of insured losses, which totaled $7.5 million as of April 3, 2021.

The Company's process for establishing these reserves takes into account many factors, including the Company's 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 laws and regulations, judicial decisions, and economic conditions.

The evaluation of factors and information used to estimate the reserve for property-liability insurance claims and claims expense requires a significant amount of judgment from management and involves a high degree of estimation.

We identified estimation of the reserve for property-liability insurance claims and claims expense as a critical audit matter because auditing the matter required a high degree of auditor judgment and increased audit effort to evaluate management’s conclusions regarding the reasonableness of the assumptions and factors used in the calculation and presentation of insurance loss reserves.

Our audit procedures related to the estimation and reasonableness of the recorded property-liability insurance reserves included the following, among others:

We obtained an understanding of the relevant controls over the Company’s claims process and the Company’s process for setting reserves for the property-liability insurance claims and related claims expenses on known reported and unreported claims of insured losses, including the completeness and accuracy of data used in the process, and tested such controls for design and operating effectiveness.

The evaluation of factors and information used to estimate the reserve for property casualty insurance claims and claims expense requires a significant amount of judgment from management and involves a high degree of estimation.

We identified estimation of the reserve for property casualty insurance claims and claims expense as a critical audit matter because auditing the matter required a high degree of auditor judgment and increased audit effort to evaluate management's conclusions regarding the reasonableness of the assumptions and factors used in the calculation and presentation of insurance loss reserves.

Our audit procedures related to the estimation and reasonableness of the recorded property casualty insurance reserves included the following, among others:

• We obtained an understanding of the relevant controls over the Company's claims process and the Company's process for setting reserves for the property casualty insurance claims and related claims expenses on reported and unreported claims of insured losses, including the completeness and accuracy of data used in the process, the review and approval processes management has in place over the methods and assumptions used in estimating the reserves and tested such controls for design and operating effectiveness.

• With the assistance of an actuarial specialist, we evaluated the reasonableness of the methodology, assumptions and data used in the Company's estimate by:

– Comparing reserving techniques and processes used to recognized actuarial practices for the industry;

Evaluating historical data, including changes and trends in the data and development of prior reserve estimates;

– Evaluating the results of the reserve analysis prepared by management's third-party actuary for comparison to management’s best estimate;

– Evaluating historical data, including changes and trends in the data and comparing prior year estimates of expected incurred losses to actual experience during the current year;

– Testing on a sample basis, the completeness and accuracy of the underlying data to supporting documentation and testing the mathematical accuracy of the calculations.

Acquisition of Destiny Industries, LLC - Valuation of Acquired Intangible Assets

As described in Note 22 to the consolidated financial statements, the Company completed the acquisition of certain manufactured housing assets and assumed certain liabilities of Destiny Industries, LLC for $16.5 million on August 2, 2019.

The Company accounted for this transaction under the acquisition method of accounting for business combinations.

Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values, including identified intangible assets of $5.9 million , and resulting goodwill of $2.2 million .

To value the identified intangible assets, which consist of trademarks, trade names and customer relationships, the Company used the income approach, which is a method of using discounted cash flows to value intangibles assets.

The process requires management to make significant assumptions regarding the estimates that would be used by a market participant, which include, where applicable, forecast of future cash flows and pre-tax income, forecasted revenue growth rates, royalty rates, and discount rates.

We identified the valuation of acquired intangible assets as a critical audit matter as there was a high degree of auditor judgment and increased audit effort when performing audit procedures to evaluate the reasonableness of significant estimates and assumptions utilized in management’s intangible asset valuation processes.

Our audit procedures related to the significant estimates and assumptions, including forecasts of future cash flows, pre-tax income and revenue growth rates, as well as the selection of the royalty rates and discount rates, for acquired intangible assets included the following, among others:

We obtained an understanding of the relevant controls related to the valuation of the intangible assets, including management’s controls over forecasts of future cash flows and future pre-tax income, as well as the selection of the royalty rates and discount rates, and tested such controls for design and operating effectiveness.

We evaluated the reasonableness of management’s forecasts of future cash flows and pre-tax income by comparing the projections to historical results and certain peer companies.

With the assistance of our fair value specialists, we evaluated the reasonableness of the valuation methodology, royalty rates and discount rates utilized by management by:

Testing the source information underlying the determination of the royalty rates and discount rates and testing the mathematical accuracy of the calculations.

Developing a range of independent estimates for the discount rates and comparing those to the discount rates selected by management.

/s/ RSM US LLP

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(Dollars in thousands, except per share amounts)

2021 March 28,

Current assets:

6 unchanged sentences

Current portion of commercial loans receivable from affiliates, net 4,664 766

Assets held for sale

Inventories 131,234 113,535

Prepaid expenses and other current assets 57,779 42,197

1 unchanged sentence

Restricted cash 335 335

Investments 35,010 31,557

Consumer loans receivable, net 37,108 49,928

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Property, plant and equipment, net 96,794 77,190

Goodwill 75,090 75,090

Other intangibles, net 14,363 15,110

Operating lease right-of-use assets 16,252 13,894

Total assets $ 951,833 $ 810,431

LIABILITIES AND STOCKHOLDERS' EQUITY

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Accrued expenses and other current liabilities 203,133 139,930

Current portion of securitized financings and other

Current portion of secured credit facilities and other 1,851 2,248

Total current liabilities 237,104 172,102

Operating lease liabilities 13,361 10,743

Securitized financings and other

Secured credit facilities and other 10,335 12,705

Deferred income taxes 7,393 7,295

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40,000,000 shares authorized;

Outstanding 9,173,242 and 9,098,320 shares, respectively

Issued 9,241,256 and 9,173,242 shares, respectively

Treasury stock, at cost;

6,600 shares as of April 3, 2021, No shares as of March 28, 2020

Additional paid-in capital 253,835 252,260

Retained earnings 431,057 355,144

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income 97 90

Total stockholders' equity 683,640 607,586

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(Dollars in thousands, except per share amounts)

2021 March 28,

2020 March 30,

$ 1,108,051 $ 1,061,774 $ 962,746

Cost of sales

869,074 831,256 757,040

238,977 230,518 205,706

Selling, general and administrative expenses

150,152 145,611 121,568

Income from operations

88,825 84,907 84,138

Interest expense

( 738 ) ( 1,495 ) ( 3,444 )

Other income, net

8,825 9,567 5,982

Income before income taxes

96,912 92,979 86,676

Income tax expense

( 20,266 ) ( 17,913 ) ( 18,054 )

$ 76,646 $ 75,066 $ 68,622

Comprehensive income:

$ 76,646 $ 75,066 $ 68,622

Reclassification adjustment for securities sold

Applicable income taxes (benefit)

Applicable income taxes ( 4 ) ( 4 ) ( 15 )

Net change in unrealized position of investments held

( 10 ) 132 122

Applicable income taxes

Comprehensive income

2 ( 28 ) ( 26 )

$ 76,653 $ 75,184 $ 68,777

Net income per share:

Basic $ 8.34 $ 8.22 $ 7.56

Diluted $ 8.25 $ 8.10 $ 7.40

Weighted average shares outstanding:

Basic 9,189,052 9,129,639 9,080,878

Diluted 9,293,134 9,268,784 9,268,737

See accompanying Notes to Consolidated Financial Statements

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Stockholders' Equity

Additional paid-in capital

Retained earnings

Accumulated other comprehensive income (loss)

Balance, April 1, 2017

Cumulative effect of implementing ASU 2016-09

Cumulative effect of implementing ASU 2018-02

Reclassification adjustment for net gains realized in income, net

Unrealized gain on available-for-sale securities, net

Stock option exercises and associated tax benefits

Stock-based compensation

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

Shares Amount

Balance, March 31, 2018 9,044,858 $ 90 $ — $ 246,197 $ 209,381 $ 1,438 $ 457,106

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Cumulative effect of implementing ASC 606 — — — — 454 — 454

Reclassification adjustment for net gains realized in income, net

Unrealized gain on available-for-sale securities, net

Stock option exercises

Net income — — — — 68,622 — 68,622

Other comprehensive income, net — — — — — 155 155

Issuance of common stock under stock incentive plans 53,462 1 — ( 115 ) — — ( 114 )

Stock-based compensation — — — 3,365 — — 3,365

Balance, March 30, 2019 9,098,320 $ 91 $ — $ 249,447 $ 280,078 $ ( 28 ) $ 529,588

Reclassification adjustment for net losses realized in income, net

Unrealized gain on available-for-sale securities, net

Stock option exercises and RSU releases

Net income — — — — 75,066 — 75,066

Other comprehensive income, net — — — — — 118 118

Issuance of common stock under stock incentive plans 74,922 1 — ( 1,068 ) — — ( 1,067 )

Stock-based compensation — — — 3,881 — — 3,881

Balance, March 28, 2020 9,173,242 $ 92 $ — $ 252,260 $ 355,144 $ 90 $ 607,586

Cumulative effect of implementing ASU 2016-13, net

— — — — ( 733 ) — ( 733 )

Net income — — — — 76,646 — 76,646

Other comprehensive income, net — — — — — 7 7

Issuance of common stock under stock incentive plans 68,014 — — ( 2,817 ) — — ( 2,817 )

Stock-based compensation — — — 4,392 — — 4,392

Common stock repurchases — — ( 1,441 ) — — — ( 1,441 )

Balance, April 3, 2021 9,241,256 $ 92 $ ( 1,441 ) $ 253,835 $ 431,057 $ 97 $ 683,640

See accompanying Notes to Consolidated Financial Statements

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(Dollars in thousands)

2021 March 28,

2020 March 30,

OPERATING ACTIVITIES

Net income $ 76,646 $ 75,066 $ 68,622

Adjustments to reconcile net income to net cash provided by operating activities:

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Non-cash interest income, net ( 3,312 ) ( 1,411 ) ( 953 )

Gain on sale of property, plant and equipment, net

Loss (gain) on sale or retirement of property, plant and equipment, net 116 ( 3,409 ) ( 53 )

Gain on investments and sale of loans, net ( 22,037 ) ( 10,977 ) ( 9,207 )

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Principal payments received on consumer loans receivable 14,126 10,632 12,945

Inventories ( 17,699 ) 8,250 ( 7,051 )

Prepaid expenses and other current assets 6,380 6,683 ( 12,942 )

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Payments on securitized financings and other ( 2,788 ) ( 19,916 ) ( 26,688 )

Net cash (used in) provided by financing activities

Payments for common stock repurchases ( 1,441 ) — —

Net cash used in financing activities ( 6,982 ) ( 20,756 ) ( 26,410 )

Net increase in cash, cash equivalents and restricted cash 83,700 55,738 611

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Cash paid during the year for interest $ 468 $ 736 $ 2,302

Supplemental disclosures of noncash financing activity:

Supplemental disclosures of noncash activity:

Change in GNMA loans eligible for repurchase $ 18,339 $ 3,634 $ ( 1,867 )

Right-of-use assets recognized $ 5,985 $ 18,498 $ —

Operating lease obligations incurred $ 5,985 $ 18,523 $ —

Assets acquired under capital lease

Capital lease obligations incurred

See accompanying Notes to Consolidated Financial Statements

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These Consolidated Financial Statements include the accounts of Cavco Industries, Inc.

and its consolidated subsidiaries (collectively, the "Company" or "Cavco").

and its consolidated subsidiaries (collectively, "we," "us," "our," the "Company" or "Cavco").

All significant intercompany transactions and balances have been eliminated in consolidation.

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

The Company has evaluated subsequent events after the balance sheet date of March 28, 2020 , through the date of the filing of this report with the Securities and Exchange Commission (the "SEC");

and except for the events set forth in Note 25 of the Notes to Consolidated Financial Statements ("Notes"), there were no disclosable subsequent events.

We have evaluated subsequent events after the balance sheet date of April 3, 2021, through the date of the filing of this report with the Securities and Exchange Commission (the "SEC") and there were no disclosable subsequent events .

In addition, references throughout to numbered "Notes" refer to these Notes to Consolidated Financial Statements, unless otherwise stated.

Nature of Operations.

Headquartered in Phoenix, Arizona, the Company designs and produces factory-built homes which are sold to a network of independent distributors located throughout the continental United States as well as through Company-owned retail sales locations which offer the Company's homes to retail customers.

The Company's financial services group is comprised of a mortgage subsidiary, CountryPlace Acceptance Corp.

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

Also included is the Company's insurance subsidiary, Standard Casualty Co.

Headquartered in Phoenix, Arizona, we design and produce factory-built housing products primarily distributed through a network of independent distributors located throughout the continental United States, as well as through Company-owned retail stores which offer our homes to retail customers.

Our financial services segment is comprised of:

a mortgage subsidiary, CountryPlace Acceptance Corp.

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

and an insurance subsidiary, Standard Casualty Co.

("Standard Casualty"), which provides property and casualty insurance primarily to owners of manufactured homes.

In March 2020, the World Health Organization declared the novel coronavirus COVID-19 ("COVID-19") a global pandemic.

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.

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.

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.

The Company received fewer home orders from its distribution channels than would be typical during the spring selling season.

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.

This includes accepting and processing new applications as well as servicing home loans and insurance policies.

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.

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.

As our business was considered essential, we continued to operate substantially all of our homebuilding and retail sales facilities while working to follow COVID-19 health guidelines.

We minimized exposure and transmission risks by implementing enhanced facility cleaning, social distancing and related protocols while continuing to serve our customers.

It is difficult to predict the future impacts on housing demand or operations at each of our locations due to the COVID-19 pandemic.

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.

The Company utilizes a 52-53 week fiscal year ending on the Saturday nearest to March 31 of each year.

Each fiscal quarter consists of 13 weeks, with an occasional fourth quarter extending to 14 weeks, if necessary, for the fiscal year to end on the Saturday nearest to March 31.

Fiscal years 2020 , 2019 and 2018 each consisted of 52 weeks.

The Company operates on a 52-53 week fiscal year ending on the Saturday nearest to March 31 st of each year.

Each fiscal quarter consists of 13 weeks, with an occasional fourth quarter extending to 14 weeks, if necessary, for the fiscal year to end on the Saturday nearest to March 31 st .

Th e current fiscal year ended on April 3, 2021 and includes 53 weeks, whereas fiscal years 2020 and 2019 each consisted of 52 weeks.

Accounting Estimates.

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Fair Value of Financial Instruments.

The Company's financial instruments consist of cash and cash equivalents, restricted cash, accounts receivable, investments, consumer loans receivable, commercial loans receivable, accounts payable, certain accrued expenses and other current liabilities and securitized and other financings.

Our financial instruments consist of cash and cash equivalents, restricted cash, accounts receivable, investments, consumer loans receivable, commercial loans receivable, accounts payable, certain accrued expenses and other current liabilities and secured credit facilities and other financings.

In accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 820, Fair Value Measurements and Disclosures ("ASC 820"), fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The standard describes three levels of inputs that may be used to measure fair value:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities;

quoted prices in markets that are not active;

or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The carrying amount of cash and cash equivalents approximates fair value because their maturity is less than three months.

The carrying amounts of restricted cash, accounts receivable, accounts payable and certain accrued expenses and other current liabilities approximate fair value due to the short-term maturity of the amounts.

The carrying amount of available for sale or marketable investments is at fair value (see Note 4 ).

The fair value of consumer loans receivable, commercial loans receivable and securitized and other financings are all estimated to be greater than carrying value (see Note 19 ).

See Note 19 for the fair values of our other financial instruments and the inputs used.

Factory-Built Housing Revenue Recognition - Wholesale .

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Manufacturing sales financed under floor plan arrangements that include repurchase agreements are reduced by a provision for estimated repurchase obligations (see Note 16).

Prior to the adoption of the Financial Accounting Standards Board's ("FASB") Accounting Standards Update ("ASU") No.

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.

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.

One consideration under the guidance requires the evaluation of the financing component of the related loan program.

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.

In these cases, interest income will be accrued and recognized over the life of the loan using the effective interest method.

The Company offers a significant amount of its loan programs at market rates.

Some of the Company's independent distributors operate multiple sales outlets.

No independent distributor accounted for 10% or more of factory-built housing revenue during any fiscal year within the three-year period ended March 28, 2020 .

Some of our independent distributors operate multiple sales outlets.

No independent distributor accounted for 10% or more of factory-built housing revenue during any fiscal year within the three-year period ended April 3, 2021.

Factory-Built Housing Revenue Recognition - Retail .

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.

Sales by Company-owned retail stores 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.

Financial Services Revenue Recognition.

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Policy acquisition costs are also amortized in Cost of sales over the life of the policy.

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.

Upon acquisition of the securitized loan portfolios (the "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.

The Company also considered expected prepayments and estimated the amount and timing of undiscounted expected principal, interest and other cash flows.

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).

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).

Interest income on consumer loans receivable is recognized in Net revenue (see Note 6 ).

For loans originated by CountryPlace and held for sale, loan origination fees and gains or losses on sales are recognized in Net revenue upon title transfer of the loans.

CountryPlace provides third-party servicing of mortgages and earns servicing fees each month based on the aggregate outstanding balances.

Insurance agency commissions received from third-party insurance companies are recognized as revenue upon execution of the insurance policy as we have no future or ongoing obligation with respect to such policies.

Interest income on consumer loans receivables is recognized in Net revenue.

Upon acquisition of the previously securitized loan portfolios (the "Acquisition Date"), we evaluated the existing consumer loans receivable held for investment to determine whether there was evidence of deterioration of credit quality and the probability that we would be able to collect all amounts due according to the loans' contractual terms.

We also considered expected prepayments and estimated the amount and timing of undiscounted principal, interest and other cash flows.

We determined the excess of the loan pool's scheduled contractual principal and interest payments over the undiscounted expected cash flows as of the Acquisition Date as an amount that is not accreted into interest income (the non-accretable difference).

The cash flow expected to be collected in excess of the carrying value of the acquired loans was accreted into interest income over the remaining life of the loans (referred to as accretable yield).

We adopted FASB Accounting Standards Update ("ASU") 2016-13, Financial Instruments - Credit Losses (Topic 326) :

Measurement of Credit Losses on Financial Instruments ("ASU 2016-13") on March 29, 2020.

Upon adoption, we determined that $ 1.7 million of the existing purchase discount for such consumer loans was related to credit factors and was reclassified to the allowance for loan losses upon adoption.

The remaining discount on the acquired consumer loans was determined to be related to non-credit factors and will continue to be accredited into interest income over the life of the loans (see Note 6).

For loans originated and held for sale, loan origination fees and gains or losses on sales are recognized in Net revenue upon title transfer of the loans.

We provide third-party servicing of mortgages and earn s ervicing fees each month based on the aggregate outstanding balances.

Servicing fees are recognized in Net revenue when earned.

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Highly liquid investments with insignificant interest rate risk and original maturities of three months or less, when purchased, are classified as cash equivalents.

The Company's cash equivalents are primarily comprised of U.S.

Treasury money market funds and other depository accounts and money market funds in excess of Federal Deposit Insurance Corporation insured limits.

Our cash equivalents are primarily comprised of U.S.

Treasury and other money market funds and other depository accounts, some of which are in excess of Federal Deposit Insurance Corporation insured limits.

Restricted Cash .

Restricted cash primarily represents cash related to CountryPlace customer payments to be remitted to third parties and deposits received from retail customers required to be held in trust accounts.

The Company cannot access restricted cash for general operating purposes (see Note 3 ).

These funds cannot be accessed for general operating purposes (see Note 3).

Accounts Receivable.

The Company extends competitive credit terms on a customer-by-customer basis in the normal course of business and its accounts receivable are subject to normal industry risk.

The Company reviews accounts receivable for estimated losses that may result from customers' inability to pay.

As of March 28, 2020 and March 30, 2019 , the Company had no allowance for doubtful accounts.

We extend competitive credit terms on a customer-by-customer basis in the normal course of business, subject to normal industry risk, with many requiring a cash deposit with a sales order or payment upon delivery of a home.

We review accounts receivable for estimated losses that may result from customers' inability to pay.

As of April 3, 2021 and March 28, 2020, there were no allowances for doubtful accounts.

Management determines the appropriate classification of its investment securities at the time of purchase.

The Company's investments include marketable debt and equity securities.

On April 1, 2018, the Company adopted FASB ASU 2016-01, Financial Instruments (Subtopic 825-10):

Recognition and Measurement of Financial Assets and Financial Liabilities ("ASU 2016-01"), which, among other things, removed the available-for-sale designation of marketable equity securities and requires the changes in unrealized net holding gains and losses on equity securities to be reported in earnings instead of recording these amounts in Accumulated other comprehensive income/loss ("AOCI") on the Consolidated Balance Sheets.

Unrealized net holding gains and losses on available-for-sale debt securities continue to be recorded in AOCI on the Consolidated Balance Sheets.

Our investments include marketable debt and equity securities and non-marketable equity investments.

Changes in unrealized net holding gains and losses on equity securities are reported in earnings.

Unrealized net holding gains and losses on available-for-sale debt securities are recorded in Accumulated other comprehensive income ("AOCI") on the Consolidated Balance Sheets.

Realized gains and losses from the sale of securities are determined using the specific identification method (see Note 4).

Management regularly makes an assessment to determine whether a decline in value of an individual security is other-than-temporary.

The Company considers the following factors when making its assessment:

(i) the Company's ability and intent to hold the investment to maturity, or a period of time sufficient to allow for a recovery in market value;

(ii) whether it is probable that the Company will be able to collect the amounts contractually due;

and (iii) whether any decision has been made to dispose of the investment prior to the balance sheet date.

Investments on which there is an unrealized loss that is deemed to be other-than-temporary are written down to fair value with the loss recorded in earnings.

As discussed above, we adopted ASU 2016-13 on March 29, 2020.

Under this standard, declines in the fair value of individual available-for-sale debt securities that are related to credit losses are recorded as a valuation allowance against the investment balance, with the loss recorded in earnings.

As of April 3, 2021, we have determined that all losses on available-for-sale debt securities were from market factors, and therefore we had no valuation allowance.

Prior to the adoption of ASU 2016-13, management would evaluate whether a decline in the value of an individual security was other-than-temporary.

Investments on which there was an unrealized loss that was deemed to be other-than-temporary were written down to fair value with the loss recorded in earnings.

Consumer Loans Receivable.

Consumer loans receivable consists primarily of manufactured housing loans originated by CountryPlace (held for investment or held for sale) and construction advances on mortgages.

The fair value of consumer loans receivable held on the Acquisition Date was calculated as of that date, as determined by the present value of expected future cash flows, with no allowance for loan loss recorded.

Loans held for investment consist of loan contracts collateralized by the borrowers' homes and, in some instances, related land.

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those conforming to the requirements of Government-Sponsored Enterprises ("GSEs") and those that are non-conforming.

In most instances, the Company's mortgages are secured by a first-lien position and are provided for the consumer purchase of a home.

Consumer loans held for investment include home-only personal property loans originated under the Company's home-only lending programs.

Accordingly, the Company classifies its loans receivable as follows:

In most instances, our mortgages are secured by a first-lien position and are provided for the consumer purchase of a home.

Consumer loans held for investment include home-only personal property loans originated under our home-only lending programs.

Accordingly, we classify our loans receivable as follows:

conforming mortgages, non-conforming mortgages, home-only loans and other loans.

In measuring credit quality within each segment and class, the Company uses commercially available credit scores (such as FICO®).

At the time of each loan's origination, the Company obtains credit scores from each of the three primary credit bureaus, if available.

To evaluate credit quality of individual loans, the Company uses the mid-point of the available credit scores or, if only two scores are available, the Company uses the lower of the two.

The Company does not update credit bureau scores after the time of origination.

Securitized Financing.

Prior to being acquired by the Company, CountryPlace completed two securitizations of factory-built housing loan receivables on July 12, 2005 and March 22, 2007.

A special purpose bankruptcy remote trust ("SPE") was formed for the purpose of issuing asset backed notes.

The Company transferred assets to the SPE, which then issued to investors various asset-backed securities.

In these securitization transactions, the Company received cash and/or other interests in the SPE as proceeds for the transferred assets.

The Company retained the right to service the transferred receivables and to repurchase the transferred receivables from the SPE if the outstanding balance of the receivables falls to less than twenty percent of the original balance of the transferred receivables.

The Company evaluated its interests in the SPE for classification as a variable interest entity and the Company determined that the Company is the primary beneficiary and, therefore, the Company includes the SPE in its consolidated financial statements.

The Company repurchased these loan portfolios in January 2019 and August 2019, respectively, eliminating the related securitized financings.

Prior to the repurchase, these two securitizations were accounted for as financings, which used the portfolio method of accounting in accordance with FASB Accounting Standards Codification ("ASC") 310, Receivables – Nonrefundable Fees and Other .

The securitizations included provisions for removal of accounts, retention of certain credit loss risk by CountryPlace and other factors that preclude sale accounting of the securitizations under FASB ASC 860, Transfers and Servicing .

Both securitizations were accounted for as securitized borrowings;

therefore, the related consumer loans receivable and securitized financings were included in CountryPlace's financial statements.

Since the Acquisition Date, the acquired consumer loans receivable and securitized financings have been accounted for in a manner similar to FASB ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality ("ASC 310-30").

The Company considered expected prepayments and estimates the amount and timing of undiscounted expected principal, interest and other cash flows for securitized consumer loans receivable held for investment to determine the expected cash flows on securitized financings and the contractual payments.

The amount of contractual principal and interest payments due on the securitized financings in excess of all cash flows expected as of the Acquisition Date included interest that could not be accreted into interest expense (the non-accretable difference).

The remaining amount was accreted into interest expense over the remaining life of the obligation, referred to as accretable yield (see Notes 6 and 13 ).

In measuring credit quality within each segment and class, we use commercially available credit scores (such as FICO®).

At the time of each loan's origination, we obtain credit scores from each of the three primary credit bureaus, if available.

To evaluate credit quality of individual loans, we use the mid-point of the available credit scores or, if only two scores are available, we use the lower of the two.

We do not update credit bureau scores after the time of origination.

Commercial Loans Receivable.

The Company's commercial loans receivable balance consists of amounts loaned by the Company under commercial loan programs for the benefit of the Company's independent distributors and community operators' home purchasing needs.

Under the terms of certain programs, the Company has entered into direct commercial loan arrangements with independent distributors and community operators wherein the Company provides funds to purchase home inventory or homes for placement in communities.

Our commercial loans receivable balance consists of amounts loaned under commercial loan programs for the benefit of our independent distributors and community operators' home purchasing needs.

Under the terms of certain programs, we have entered into direct commercial loan arrangements with independent distributors and community operators wherein we provide funds to purchase home inventory or homes for placement in communities.

Interest income on commercial loans receivable is recognized in Other income, net in the Consolidated Statements of Comprehensive Income on an accrual basis.

Allowance for Loan Losses.

The primary portion of the allowance for loan losses reflects the Company's judgment of the incurred loss exposure on its consumer loans receivable originated after the Acquisition Date.

This allowance reflects a judgment of the probable loss exposure on loans originated since the Acquisition Date and included in the held for investment portfolio as of the end of the reporting period.

The Company recorded allowance for loan losses of $ 1.8 million and $ 709,000 at March 28, 2020 and March 30, 2019 , respectively (see Note 6 ).

The Company accounts for the loans that were in existence at the Acquisition Date in a manner similar to ASC 310-30.

Management evaluated such loans as of the Acquisition Date to determine whether there was evidence of deterioration of credit quality and if it was probable that the Company would be unable to collect all amounts due according to the loans' contractual terms.

Over the life of the loans, the Company continues to estimate cash flows expected to be collected.

At the balance sheet date, the Company evaluates whether the present value of its expected cash flows, determined using the effective interest rate, has decreased and, if so, recognizes an allowance for loan loss.

The present value of any subsequent increase in the loan pool's actual cash flows expected to be collected is used first to reverse any existing allowance for loan loss and then to adjust the amount of accretable yield recognized on a prospective basis over the loan pool's remaining life (see Note 6 ).

The Company has modified payment amounts and/or interest rates for borrowers that, in management's judgment, exhibited the willingness and ability to continue to pay and meet certain other conditions.

The Company considers a modified loan a troubled debt restructuring when three conditions are met:

(i) the borrower is experiencing financial difficulty, (ii) concessions are made by the Company that it would not otherwise consider for a borrower with similar risk characteristics and (iii) the loan was originated after the Acquisition Date.

The Company no longer considers modified loans to be troubled debt restructurings once the modified loan is seasoned for six months, is not delinquent under the modified terms and is at a market rate of interest at the modification date.

Another portion of the allowance for loan losses relates to commercial loans receivable as of the end of the reporting period.

The allowance for loan losses is developed at a portfolio level.

The Company has historically been able to resell repossessed homes, thereby mitigating loss experience.

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

If the Company determines that it is probable that a borrower will default, a specific reserve is determined and recorded within the estimated allowance for loan losses.

The Company recorded allowance for loan losses of $ 393,000 and $ 180,000 at March 28, 2020 and March 30, 2019 , respectively (see Note 7 ).

Raw material inventories are valued at the lower of cost (first-in, first-out method) or market.

ASU 2016-13 requires a forward-looking impairment model based on expected losses rather than incurred losses.

The primary portion of the allowance for loan losses reflects our judgment of the incurred loss exposure on our consumer loans receivable.

As of April 3, 2021, we had an allowance for loan losses of $ 3.2 million, which includes the previously discussed $ 1.7 million of existing purchase discount on acquired consumer loans that was reclassified upon adoption of ASU 2016-13.

Our allowance for loan losses as of March 28, 2020 was $ 1.8 million (see Note 6).

Another portion of the allowance for loan losses relates to our commercial loans receivables as of the end of the reporting period.

We have historically been able to resell repossessed homes, thereby mitigating loss exposure.

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

In addition to the allowance calculated under ASU 2016-13, if we determine that it is probable that a borrower will default, a specific reserve is determined and recorded within the estimated allowance for loan losses.

We recorded allowance for loan losses of $ 816,000 and $ 393,000 at April 3, 2021 and March 28, 2020, respectively, related to commercial loans receivable (see Note 7).

Raw material inventories are valued at the lower of cost or market, using the first in, first out method.

Finished goods and work-in-process inventories are valued at the lower of cost or market, using the specific identification method.

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Repairs and maintenance charges are expensed as incurred.

The Company sells miscellaneous property, plant and equipment in the normal course of business.

We sell miscellaneous property, plant and equipment in the normal course of business.

Asset Impairment .

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.

We periodically evaluate 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.

The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flow from such asset is less than its carrying value.

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Losses on long-lived assets to be disposed of are determined in a similar manner, except that the fair values are primarily based on independent appraisals and preliminary or definitive contractual arrangements less costs to dispose.

The Company recognized no impairment losses in fiscal years 2020 , 2019 or 2018 .

There were no impairment losses recognized in fiscal years 2021, 2020 or 2019 .

Goodwill and Other Intangibles.

The Company accounts for business combinations using the acquisition method of accounting, which allocates the fair value of the purchase consideration to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values.

We account for business combinations using the acquisition method of accounting, which allocates the fair value of the purchase consideration to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values.

In the fair value evaluation of intangible assets acquired, there are significant estimates and assumptions, including forecasts of future cash flows, pre-tax income and revenue growth rates, as well as the selection of the royalty rates and discount rates.

The excess of the purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill.

The Company accounts for goodwill and other intangible assets in accordance with the provisions of FASB ASC 350, Intangibles—Goodwill and Other.

As such, the Company tests goodwill annually for impairment.

The Company has identified two reporting segments:

We account for goodwill and other intangible assets in accordance with the provisions of FASB ASC 350, Intangibles—Goodwill and Other .

As such, we test goodwill annually for impairment.

The Company has two reporting segments:

factory-built housing and financial services.

As of March 28, 2020 , all of the Company's goodwill is attributable to its factory-built housing reporting segment.

As of April 3, 2021, all of our goodwill is attributable to the factory-built housing reporting segment.

Certain intangibles are considered indefinite-lived and others are finite-lived and are amortized over their useful lives.

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Indefinite-lived intangible assets are assessed annually for impairment first by making a qualitative assessment, and if necessary, performing a quantitative assessment and recording an impairment charge if the fair value of the asset is less than its carrying amount.

The Company performed its annual goodwill impairment analysis as of March 28, 2020 .

The analysis determined that the fair value of the reporting unit was greater than the carrying value.

No impairment was determined to be necessary for fiscal years 2020 , 2019 or 2018 .

The Company provides retail home buyers, builders or developers with a one year warranty for manufacturing defects from the date of sale to the retail customer.

We performed our annual goodwill impairment analysis as of April 3, 2021, and the analysis determined that the fair value of the reporting unit was greater than the carrying value.

There was no impairment recognized during fiscal years 2021, 2020 or 2019.

We provide retail home buyers, builders or developers with a one year warranty for manufacturing defects from the date of sale to the retail customer.

Nonstructural components of a cosmetic nature are warranted for 120 days, except in specific cases where state laws require longer warranty terms.

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Factors used to calculate the warranty obligation are 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.

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.

Distributor Volume Rebates .

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.

Volume Rebates .

Certain distributors, builders and developers can qualify for cash rebates generally based on the level of sales attained during a twelve-month period on specified products.

Volume rebates are accrued at the time of sale and are recorded as a reduction of Net revenue.

Substantially all freight costs are recovered from the Company's distributors and are included in Net revenue.

Substantially all freight costs are recovered from our distributors and are included in Net revenue.

Freight charges of $ 29.3 million, $ 30.9 million and $ 28.9 million were recognized in fiscal years 2021, 2020 and 2019, respectively.

Reserve for Repurchase Commitment.

The Company is contingently liable under terms of repurchase agreements with financial institutions providing inventory financing for distributors of its products.

These arrangements, which are customary in the industry, provide for the repurchase of products sold to distributors in the event of default by the distributor.

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

The risk of loss under these agreements is spread over numerous distributors.

The price the Company is obligated to pay generally declines over the period of the agreement (generally 18 to 36 months) and the risk of loss is further reduced by the resale value of repurchased homes.

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

Under the provisions of ASC 460, during the period in which a home is sold (inception of a repurchase commitment), the Company records the greater of the estimated fair value of the non-contingent obligation or a contingent liability for each repurchase arrangement under the provisions of ASC 450-20, based on historical information available, as a reduction to revenue.

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.

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.

We are contingently liable under terms of repurchase agreements with the financial institutions that provide inventory financing to certain distributors of our products.

These arrangements, which are customary in the industry, provide the lender a guarantee that we will repurchase our products in the event of default by the distributor.

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

The risk of loss under these agreements is spread over numerous distributors and the repurchase price generally declines over the period of the agreement (generally 18 to 24 months), further reduced by the resale value of repurchased homes.

We apply FASB ASC 460, Guarantees ("ASC 460") to account for our liability for repurchase commitments.

Following the inception of the commitment, the recorded reserve is reduced over the repurchase period in conjunction with applicable curtailment arrangements and is eliminated once the distributor sells the home.

Changes in the reserve are recorded as an adjustment to Net revenue.

Reserve for Property-Liability Insurance Claims and Claims Expense.

See Note 16 for further discussion.

Reserve for Property Casualty Insurance Claims and Claims Expense.

Standard Casualty establishes reserves for claims and claims expense on reported and unreported claims of insured losses.

Standard Casualty's reserving process takes into account known facts and interpretations of circumstances and factors, including Standard's 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.

In the normal course of business, Standard Casualty may also supplement its 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.

Our reserve process takes into account known facts and interpretations of circumstances and factors, including 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.

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.

The effects of inflation are implicitly considered in the reserving process.

The applicable reserve balance was $ 5.6 million and $ 6.7 million as of March 28, 2020 and March 30, 2019 , respectively, of which $ 3.5 million and $ 4.0 million related to incurred but not reported ("IBNR") losses, respectively.

The Company is self-insured for a significant portion of its general and products liability, auto liability, health, property and workers' compensation liability coverage.

The applicable reserve balance was $ 7.5 million and $ 5.6 million as of April 3, 2021 and March 28, 2020, respectively, of which $ 3.7 million and $ 3.5 million related to incurred but not reported ("IBNR") losses, respectively.

We are self-insured for a significant portion of our general and products liability, auto liability, health, property and workers' compensation liability coverage.

Insurance is maintained for catastrophic exposures and those risks required to be insured by law.

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The determination of claims and expenses and the appropriateness of the related liabilities are regularly reviewed and updated.

Advertising costs are expensed as incurred and were $ 900,000 in fiscal year 2020 , $ 837,000 in fiscal year 2019 and $ 1.1 million in fiscal year 2018 .

Advertising costs are expensed as incurred and were $ 807,000 in fiscal year 2021, $ 900,000 in fiscal year 2020 and $ 837,000 in fiscal year 2019.

Income Taxes.

The Company accounts for income taxes pursuant to FASB ASC 740, Income Taxes ("ASC 740") and provides for income taxes utilizing the asset and liability approach.

We account for income taxes pursuant to FASB ASC 740, Income Taxes ("ASC 740") and provide for income taxes utilizing the asset and liability approach.

Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid.

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The calculation of tax liabilities involves considering uncertainties in the application of complex tax regulations.

The Company recognizes liabilities for anticipated tax audit issues based on the Company's estimate of whether, and the extent to which, additional taxes will be due.

If payment of these amounts ultimately proves to be unnecessary, the reversal of the liabilities would result in tax benefits being recognized in the period when the liabilities are no longer determined to be necessary.

We recognize liabilities for anticipated tax audit issues based on our estimate of whether, and the extent to which, additional taxes will be due.

If payment of these amounts ultimately proves to be unnecessary, the reversal of the liabilities would result in tax benefits being recognized in the period of derecognition.

If the estimate of tax liabilities proves to be less than the ultimate assessment, a further charge to expense would result.

The Company uses a two-step approach to evaluate uncertain tax positions.

We use a two-step approach to evaluate uncertain tax positions.

This approach involves recognizing any tax positions that are more likely than not to occur and then measuring those positions to determine the amounts to be recognized in the Consolidated Financial Statements.

Other Income, net.

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 or impairment of property, plant and equipment assets held for sale or sold.

Other income primarily consists of realized and unrealized gains and losses on corporate investments, interest income related to commercial loan receivables and earned on cash balances, gains and losses on the sale of property, plant and equipment or assets held for sale and impairment of such assets, if necessary.

Stock-Based Compensation.

The Company applies the fair value recognition provisions of FASB ASC 718, Compensation—Stock Compensation ("ASC 718"), using the Black-Scholes-Merton option-pricing model.

We calculate the fair value of stock options under the provisions of FASB ASC 718, Compensation—Stock Compensation ("ASC 718"), using the Black-Scholes-Merton option-pricing model.

The determination of the fair value of stock options on the date of grant using this option-pricing model is affected by the Company's stock price as well as assumptions regarding a number of complex and subjective variables.

These variables include actual and projected employee stock option exercise behaviors, the Company's expected stock price volatility over the expected term of the awards, the risk-free interest rate and expected dividends.

The Company uses historical data to estimate pre-vesting option forfeitures and records stock-based compensation cost, using the straight-line attribution method, only for those awards that are expected to vest.

The Company utilizes historic option activity when estimating the expected term of options granted.

The Company estimates the expected volatility of its common stock taking into consideration its historical stock price movement and its expected future stock price trends based on known or anticipated events.

The Company bases the risk-free interest rate that it uses in the option pricing model on U.S.

Treasury zero-coupon issues with remaining terms similar to the expected term on the options.

The Company does not anticipate paying cash dividends and therefore uses an expected dividend yield of zero in the option-pricing model.

The Company estimates future forfeitures at the time of grant and revises those estimates in subsequent periods if actual forfeitures differ from those estimates (see Note 17 ).

These variables include actual and projected employee stock option exercise behaviors, the expected stock price volatility over the expected term of the awards, the risk-free interest rate and expected dividends.

The fair value of restricted stock awards is estimated as the closing price of our common stock on the date of grant.

We use historical data to estimate pre-vesting forfeitures and record stock-based compensation cost, using the straight-line attribution method, only for those awards that are expected to vest.

Compensation expense related to performance-based awards is recognized over the implicit service period of the award based on management's estimate of the probability of the performance criteria being satisfied, adjusted at each balance sheet date (see Note 17).

Accumulated Other Comprehensive Income.

AOCI is comprised of unrealized gains and losses on available-for-sale debt securities (see Note 4), and is presented net of tax.

Prior to the adoption of ASU 2016-01, as discussed above, AOCI included unrealized gains and losses on both debt and equity securities.

Accumulated unrealized gain on available-for-sale debt securities at the end of fiscal year 2021 was $ 123,000 before tax, with an associated tax amount of $ 26,000 , resulting in a net unrealized gain of $ 97,000 .

Unrealized loss on available-for-sale investments for fiscal year 2019 was $ 35,000 , offset by tax effect of $ 7,000 , for a net unrealized loss of $ 28,000 .

Unrealized gain on available-for-sale investments for fiscal year 2018 was $ 1.9 million before tax, with an associated tax amount of $ 493,000 , resulting in a net unrealized gain of $ 1.4 million .

Unrealized gain on available-for-sale debt securities for fiscal year 2020 was $ 114,000 , with an associated tax amount of $ 24,000 , for a net unrealized gain of $ 90,000 .

Treasury Stock.

We record repurchases of our common stock as treasury stock at cost.

As we do not have a formal retirement plan for the shares acquired, and the ultimate disposition has not yet been decided, we show the cost of the acquired stock separately as a deduction from equity.

Net Income Per Share.

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Recently Issued or Adopted Accounting Pronouncements.

In February 2016, the FASB issued ASU 2016-02, Leases ("Topic 842").

This guidance amends previous accounting considerations and treatments for leases to increase transparency and comparability among organizations by requiring the recognition of right-of-use ("ROU") assets and lease liabilities on the balance sheet for both finance leases and operating leases.

For finance leases, the lessee recognizes interest expense and amortization of the ROU asset and for operating leases, the lessee recognizes straight-line lease expense.

Effective March 31, 2019, the Company adopted Topic 842 using the modified retrospective transition approach.

This approach provides a method for recording existing leases at adoption, without restating comparative periods.

The Company also elected to adopt the package of practical expedients provided in the guidance, which allowed the Company to retain the historical classification for each lease, and provided relief from reviewing existing or expired contracts to determine if they contain leases under the new guidance.

In addition, an accounting policy election was made to account for non-lease and lease components as a single lease component for all asset classes.

The Company also made an accounting policy election to exclude ROU assets and lease liabilities for leases with an initial term of twelve months or less from the Consolidated Balance Sheet.

Adoption of the new standard resulted in an addition of net operating lease ROU assets and lease liabilities of $ 13.0 million and $ 13.5 million , respectively, to the Company's Consolidated Balance Sheet as of March 31, 2019.

The difference between the additional lease assets and lease liabilities reflects existing accrued rent balances that were reclassified to the operating lease ROU asset as of March 31, 2019.

The standard did not materially impact the Company's consolidated Net income and had no impact on cash flows.

See Note 9 for additional information.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326):

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

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

The guidance also requires increased disclosures.

ASU 2016-13 will be effective beginning with the first quarter of the Company's fiscal year 2021 and is to be applied using a modified retrospective transition method.

The adoption of ASU 2016-13 will not have a material impact on the Company's Consolidated Financial Statements and disclosures.

From time to time, new accounting pronouncements are issued by the FASB and other regulatory bodies that are adopted by the Company as of the specified effective dates.

On March 29, 2020, we adopted ASU 2016-13, which changed the impairment model for most financial assets and certain other instruments and requires a forward-looking impairment model based on expected losses rather than incurred losses.

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

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

The cumulative effect of the changes made to our consolidated balance sheet at March 29, 2020 for the adoption of ASU 2016-13 w as $ 733,000 , net of taxes.

The application of ASU 2016-13 increased our allowance for loan losses by $ 435,000 for commercial loans receivable and $ 528,000 for non-acquired consumer loans receivable.

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

From time to time, new accounting pronouncements are issued by the FASB and other regulatory bodies that are adopted as of the specified effective dates.

Unless otherwise discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company's Consolidated Financial Statements upon adoption.

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A good or service is transferred when, or as, the customer obtains control of that good or service.

Revenues are based on the consideration expected to be received in connection with the Company's promises to deliver goods and services to its customers.

Revenues are based on the consideration expected to be received in connection with our promises to deliver goods and services to the customers.

Site Improvements on Retail Sales.

The Company recognizes sales of subcontracted ancillary services, such as preparation of the home site or other exterior enhancements.

We recognize sales of subcontracted ancillary services, such as preparation of the home site or other exterior enhancements.

Such services are provided as a convenience to the customer.

As the Company is involved in the selection of subcontractors, under ASC 606, we recognize the sale of these ancillary services on a gross basis.

As we are involved in the selection of subcontractors, under FASB ASC 606, Revenue from Contracts with Customers , we recognize the sale of these ancillary services on a gross basis.

The revenues associated with these programs for fiscal years 2021, 2020 and 2019 were $ 41.1 million, $ 30.0 million and $ 24.9 million, respectively.

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Expected consideration, and therefore revenue, reflects reductions for returns, allowances, and other incentives, some of which may be contingent on future events.

Additionally, the Company's volume rebates are accrued at the time of sale and are recorded as a reduction of Net revenue.

Additionally, our volume rebates are accrued at the time of sale and are recorded as a reduction of Net revenue.

In customer contracts for retail sales of manufactured homes, consideration includes certain state and local excise taxes billed to customers when those taxes are levied directly upon us by the taxing authorities.

Expected consideration excludes sales and other taxes collected on behalf of taxing authorities.

The Company elects to treat consideration for freight performed as a fulfillment activity.

We elect to treat consideration for freight performed as a fulfillment activity.

Therefore, Net revenue includes consideration for freight and other fulfillment activities performed prior to the customer obtaining control of the goods.

Practical Expedients and Exemptions.

The Company generally expenses sales commissions when incurred because the amortization period would be one year or less.

We generally expense sales commissions when incurred because the amortization period would be one year or less.

These costs are recorded within Selling, general and administrative expenses.

In addition, the Company does not disclose the value of unsatisfied performance obligations for contracts with an expected length of one year or less.

In addition, we do not disclose the value of unsatisfied performance obligations for contracts with an expected length of one year or less.

Disaggregation of Revenue .

The following table summarizes customer contract revenues disaggregated by reportable segment and the source of revenue.

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

All revenue from customers is recognized at a point in time, either when the customer takes delivery or when a third-party insurance contract is executed, as more fully discussed above.

2021 March 28,

2020 March 30,

Factory-built housing

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Park model RVs 46,862 46,427 38,057

Net revenue from factory-built housing

Other 56,616 55,341 49,083

1,037,889 999,340 905,726

Financial services

Insurance agency commissions received from third-party insurance companies 3,102 3,352 3,065

Net revenue from financial services

Total Net revenue

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

Other financial services revenue includes consumer finance and insurance revenue that is not within the scope of ASC 606 .

Impacts on Consolidated Financial Statements .

The impacts to the Company's Consolidated Financial Statements as a result of ASC 606 implementation are as follows (in thousands):

Fiscal year ended March 28, 2020

Consolidated Statement of Comprehensive Income

Balance without ASC 606 Adoption

Cost of sales

Selling, general and administrative expenses

Income from operations

Income before income taxes

Income tax expense

Fiscal year ended March 30, 2019

Consolidated Statement of Comprehensive Income

Balance without ASC 606 Adoption

Cost of sales

Selling, general and administrative expenses

Income from operations

Income before income taxes

Income tax expense

Other 67,060 59,082 53,955

70,162 62,434 57,020

$ 1,108,051 $ 1,061,774 $ 962,746

Restricted Cash

Restricted cash consisted of the following (in thousands):

2021 March 28,

Cash related to CountryPlace customer payments to be remitted to third parties $ 16,049 $ 12,740

Other restricted cash

Corresponding amounts are recorded in Accounts payable and Accrued expenses and other current liabilities for customer payments and deposits, respectively.

$ 17,028 $ 13,781

Corresponding amounts for customer payments to be remitted to third parties are recorded in Accounts payable.

The following table provides a reconciliation of Cash and cash equivalents and Restricted cash reported within the Consolidated Balance Sheets to the combined amounts shown on the Consolidated Statements of Cash Flows (in thousands):

2021 March 28,

2020 March 30,

Cash and cash equivalents $ 322,279 $ 241,826 $ 187,370

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Restricted cash

Cash, cash equivalents and restricted cash per statement of cash flows

$ 339,307 $ 255,607 $ 199,869

Investments consisted of the following (in thousands):

2021 March 28,

Available-for-sale debt securities

$ 14,946 $ 14,774

Marketable equity securities

Non-marketable equity investments

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

As of March 28, 2020 and March 30, 2019 , non-marketable equity investments included contributions of $ 15.0 million to equity-method investments in community-based initiatives that buy and sell the Company's homes and provide home-only financing to residents of certain manufactured home communities.

21,960 21,536

54,506 46,139

Less current portion ( 19,496 ) ( 14,582 )

$ 35,010 $ 31,557

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

As of April 3, 2021 and March 28, 2020, non-marketable equity investments included contributions of $ 15.0 million to equity-method investments in community-based initiatives that buy and sell our homes and provide home-only financing to residents of certain manufactured home communities.

Other non-marketable equity investments included investments in other distribution operations.

The Company records investments in fixed maturity securities classified as available-for-sale at fair value and records the difference between fair value and cost in Accumulated other comprehensive income (loss).

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

March 28, 2020

We record investments in fixed maturity securities classified as available-for-sale at fair value and record the difference between fair value and cost in AOCI.

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

April 3, 2021

Residential mortgage-backed securities

$ 2,787 $ 30 $ ( 13 ) $ 2,804

State and political subdivision debt securities

7,239 125 ( 19 ) 7,345

Corporate debt securities

4,797 11 ( 11 ) 4,797

$ 14,823 $ 166 $ ( 43 ) $ 14,946

March 28, 2020

Residential mortgage-backed securities

$ 5,400 $ 69 $ ( 26 ) $ 5,443

State and political subdivision debt securities

4,239 134 ( 3 ) 4,370

Corporate debt securities

Treasury and government debt securities

5,021 5 ( 65 ) 4,961

$ 14,660 $ 208 $ ( 94 ) $ 14,774

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

March 28, 2020

Less than 12 Months

12 Months or Longer

April 3, 2021

Less than 12 Months 12 Months or Longer Total

Value Unrealized

Residential mortgage-backed securities

$ 927 $ ( 6 ) $ 450 $ ( 7 ) $ 1,377 $ ( 13 )

State and political subdivision debt securities

3,013 ( 19 ) — — 3,013 ( 19 )

Corporate debt securities 2,153 ( 10 ) 249 ( 1 ) 2,402 ( 11 )

$ 6,093 $ ( 35 ) $ 699 $ ( 8 ) $ 6,792 $ ( 43 )

March 28, 2020

Less than 12 Months

12 Months or Longer

Less than 12 Months 12 Months or Longer Total

Value Unrealized

Residential mortgage-backed securities

$ 133 $ — $ 1,779 $ ( 26 ) $ 1,912 $ ( 26 )

State and political subdivision debt securities

601 ( 2 ) 101 ( 1 ) 702 ( 3 )

Corporate debt securities 3,747 ( 65 ) — — 3,747 ( 65 )

Treasury and government debt securities

Based on the Company's ability and intent to hold the investments for a reasonable period of time sufficient for a forecasted recovery of fair value, the Company does not consider any investments to be other-than-temporarily impaired as of March 28, 2020 .

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

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

We are not aware of any changes to the securities or issuers that would indicate the losses above are indicative of credit impairment as of April 3, 2021.

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

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

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

March 28, 2020

April 3, 2021

Due in less than one year

$ 1,218 $ 1,220

Due after one year through five years

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Mortgage-backed securities

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

$ 14,823 $ 14,946

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

There were no gross gains realized on the sale of available-for-sale debt securities for fiscal years 2021, 2020 and 2019.

There were no gross losses realized on the sale of available-for-sale debt securities in fiscal year 2020 .

Gross losses realized in fiscal years 2019 and 2018 were $ 38,000 and $ 63,000 , respectively.

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

Gross losses realized on the sale of available-for-sale debt securities were $ 6,000 in fiscal year 2021, none in fiscal year 2020, and $ 38,000 in fiscal year 2019.

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

See Note 1 for further discussion.

Net investment gains and losses on marketable equity securities for fiscal years 2021, 2020 and 2019 were as follows (in thousands):

March 28, 2020

March 30, 2019

March 31, 2018

2021 March 28, 2020 March 30, 2019

Marketable equity securities:

Net losses on securities held

Net losses on securities sold

Gross realized gains

Gross realized losses

Total net (loss) gain on marketable equity securities

Net gain (loss) recognized during the period $ 8,515 $ ( 2,264 ) $ ( 355 )

Net (gains) losses recognized on securities sold during the period ( 2,191 ) 232 64

Unrealized gains (losses) recognized during the period on securities still held $ 6,324 $ ( 2,032 ) $ ( 291 )

Inventories consisted of the following (in thousands):

2021 March 28,

Raw materials

$ 54,336 $ 35,691

Work in process

19,149 13,953

Finished goods

57,749 63,891

$ 131,234 $ 113,535

Consumer Loans Receivable

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

Loans held for investment (at Acquisition Date, defined below)

2021 March 28,

Loans held for investment (at Acquisition Date) $ 31,949 $ 37,779

Loans held for investment (originated after Acquisition Date)

18,690 20,140

Loans held for sale

15,587 14,671

Construction advances

Consumer loans receivable

13,801 13,400

80,027 85,990

Deferred financing fees and other, net

( 2,041 ) ( 1,919 )

Allowance for loan losses

The allowance for loan losses is developed at the loan level and allocated to specific individual loans or to impaired loans.

A range of probable losses is calculated after giving consideration to, among other things, the loan characteristics and historical loss experience.

The Company then makes a determination of the best estimate within the range of loan losses.

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

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

("Palm Harbor") in April 2011 ("Acquisition Date").

As of the Acquisition Date, the Company determined the excess of the loan pool's scheduled contractual principal and interest payments over all cash flows expected as an amount that consists of interest that cannot be accreted into interest income (the non-accretable difference).

The cash flow expected to be collected in excess of the carrying value of the acquired loans consists of interest that is accreted into interest income over the remaining life of the loans (accretable yield).

Interest income on consumer loans receivable is recognized as Net revenue (see further discussion in Note 1).

(in thousands)

Loans held for investment (at Acquisition Date) – contractual amount

Purchase discount:

Non-accretable

Less loans reclassified as other assets

Total loans held for investment (at Acquisition Date), net

Over the life of the consumer loans held for investment (at Acquisition Date), the Company estimates cash flows expected to be collected to determine if an allowance for loan loss subsequent to the Acquisition Date is required (see further discussion in Note 1).

The weighted averages of assumptions used in the calculation of expected cash flows to be collected are as follows:

Prepayment rate

Assuming there was a 1 % (100 basis point) unfavorable variation from the expected level, for each key assumption, the expected cash flows over the life of the portfolio, as of March 28, 2020 , would decrease by approximately $ 699,000 and $ 2.3 million for the expected prepayment rate and expected default rate, respectively.

The changes in accretable yield on consumer loans receivable held for investment (at Acquisition Date) were as follows (in thousands):

Balance at the beginning of the period

Reclassifications from non-accretable discount

Balance at the end of the period

The consumer loans held for investment have the following characteristics:

( 3,188 ) ( 1,767 )

74,798 82,304

Less current portion ( 37,690 ) ( 32,376 )

$ 37,108 $ 49,928

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

The following table represents changes in the estimated allowance for loan losses, including related additions and deductions to the allowance for loan losses (in thousands):

2021 March 28,

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

Impact of adoption of ASU 2016-13 2,276 —

Change in estimated loan losses, net ( 655 ) 1,352

Charge-offs ( 201 ) —

Recoveries 1 —

Allowance for loan losses at end of period $ 3,188 $ 1,767

The consumer loans held for investment had the following characteristics:

2021 March 28,

Weighted average contractual interest rate

8.26 % 8.42 %

Weighted average effective interest rate

9.34 % 9.27 %

Weighted average months to maturity

The following table disaggregates CountryPlace's gross consumer loans receivable for each class by portfolio segment and credit quality indicator as of the time of origination (in thousands):

March 28, 2020

Consumer Loans Held for Investment

At Acquisition Date

Originated after Acquisition Date

Consumer Loans Held

Credit Quality Indicator (FICO® score)

Home-only loans

Conforming mortgages

Non-conforming mortgages

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

2021 March 28,

Consumer Loans Held for Investment

At Acquisition Date

Originated after Acquisition Date

Consumer Loans Held

Credit Quality Indicator (FICO® score)

Home-only loans

Conforming mortgages

Non-conforming mortgages

Current $ 76,378 $ 83,861

31 to 60 days 508 547

61 to 90 days 21 307

91+ days 3,120 1,275

$ 80,027 $ 85,990

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

April 3, 2021

2021 2020 2019 2018 2017 Prior Total March 28,

Prime- FICO score 680 and greater

$ 18,250 $ 3,575 $ 1,718 $ 971 $ 1,959 $ 23,375 $ 49,848 $ 55,513

Near Prime- FICO score 620-679

10,227 2,744 1,794 1,364 500 10,401 27,030 27,767

Sub-Prime- FICO score less than 620

348 53 — — 84 1,579 2,064 2,142

No FICO score

576 — 28 — — 481 1,085 568

$ 29,401 $ 6,372 $ 3,540 $ 2,335 $ 2,543 $ 35,836 $ 80,027 $ 85,990

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

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

As of April 3, 2021, 35 % of the outstanding principal balance of the consumer loans receivable portfolio was concentrated in Texas and 20 % was concentrated in Florida.

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

Other than Texas and Florida, no state had concentrations in excess of 10 % of the principal balance of the consumer loans receivable as of March 28, 2020 or March 30, 2019 .

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

Other than Texas and Florida, no state had concentrations in excess of 10 % of the principal balance of consumer loans receivable as of April 3, 2021 or March 28, 2020.

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

At repossession, the fair value of the collateral is determined based on the historical recovery rates of previously charged-off loans;

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On a monthly basis, the fair value of the collateral is adjusted to the lower of the amount recorded at repossession or the estimated sales price less estimated costs to sell, based on current information.

Repossessed homes totaled approximately $ 1.5 million as of March 28, 2020 and March 30, 2019 , and are included in Prepaid expenses and other current assets in the Consolidated Balance Sheets.

Foreclosure or similar proceedings in progress totaled approximately $ 560,000 and $ 1.5 million as of March 28, 2020 and March 30, 2019 , respectively.

Repossessed homes totaled approximately $ 518,000 as of April 3, 2021 and $ 1.5 million as of March 28, 2020, and are included in Pre paid expenses and other current assets in the Consolidated Balance Sheets.

Foreclosure or similar proceedings in progress totaled approximately $ 1.1 million and $ 560,000 as of April 3, 2021 and March 28, 2020, respectively.

Commercial Loans Receivable and Allowance for Loan Losses

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

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

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

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

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

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

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

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

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

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

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

We also provide loans to independent floor plan lenders that then lend to distributors to finance their inventory purchases.

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

Direct loans receivable

Participation loans receivable

2021 March 28,

Loans receivable $ 45,377 $ 47,202

Allowance for loan losses

( 816 ) ( 393 )

Deferred financing fees, net ( 247 ) ( 244 )

44,314 46,565

Less current portion of commercial loans receivable (including from affiliates), net ( 19,232 ) ( 15,423 )

$ 25,082 $ 31,142

The commercial loans receivable balance had the following characteristics:

2021 March 28,

Weighted average contractual interest rate

Weighted average months to maturity

The Company evaluates the potential for loss from its participation loan programs based on the independent lender's overall financial stability, as well as historical experience, and has determined that an applicable allowance for loan losses was not needed at March 28, 2020 or March 30, 2019 .

With respect to direct programs with communities and developers, borrower activity is monitored on a regular basis and contractual arrangements are in place to provide adequate loss mitigation in the event of a default.

For direct programs with independent distributors, the risk of loss is spread over numerous borrowers.

Borrower activity is monitored in conjunction with third-party service providers, where applicable, to estimate the potential for loss on the related loans receivable, considering potential exposures, including repossession costs, remarketing expenses, impairment of value and the risk of collateral loss.

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

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

If the Company determines that it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement, a specific reserve is determined and recorded within the estimated allowance for loan losses.

The Company has included considerations related to the COVID-19 pandemic when assessing its risk of loan loss and setting reserve amounts for its commercial finance portfolio as of March 28, 2020 .

The Company recorded an allowance for loan losses of $ 393,000 and $ 180,000 at March 28, 2020 and March 30, 2019 , respectively.

The following table represents changes in the estimated allowance for loan losses, including related additions and deductions to the allowance for loan losses applicable to the direct programs (in thousands):

The risk of loss is spread over numerous borrowers.

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

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

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

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

We have included considerations related to the COVID-19 pandemic when assessing our risk of loan loss and setting reserve amounts for the commercial finance portfolio as of April 3, 2021.

The following table represents changes in the e stimated allowance for loan losses, including related additions and deductions to the allowance for loan losses (in thousands):

2021 March 28,

Balance at beginning of period

Impact of adoption of ASU 2016-13 435 —

Change in estimated loan losses, net ( 12 ) 213

1 unchanged sentence

Balance at end of period $ 816 $ 393

The following table disaggregates commercial loans receivable and the estimated allowance for loan losses for direct commercial loans by evaluation methodology (in thousands):

Direct Commercial Loans

Commercial loans receivable:

Collectively evaluated for impairment

Individually evaluated for impairment

Allowance for loan losses:

Collectively evaluated for impairment

Individually evaluated for impairment

Loans are subject to regular review and are given management's attention whenever a problem situation appears to be developing.

1 unchanged sentence

Nonperforming status includes loans accounted for on a non-accrual basis and accruing loans with principal payments 90 days or more past due.

The Company's policy is to place loans on nonaccrual status when interest is past due and remains unpaid 90 days or more or when there is a clear indication that the borrower is unable or unwilling to make payments as they become due.

The Company will resume accrual of interest once these factors have been remedied.

At March 28, 2020 , there were no commercial loans 90 days or more past due that were still accruing interest.

Payments received on non-accrual loans are recorded on a cash basis, first to interest and then to principal.

At March 28, 2020 , the Company was not aware of any potential problem loans that would have a material effect on the commercial receivables balance.

Charge-offs occur when it becomes probable that outstanding amounts will not be recovered.

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

Direct Commercial Loans

Participation Commercial Loans

Our policy is to place loans on nonaccrual status when interest is past due and remains unpaid 90 days or more or when there is a clear indication that the borrower is unable or unwilling to make payments as they become due.

We will resume accrual of interest once these factors have been remedied.

Payments received on non-accrual loans are recorded on a cash basis, first to interest and then to principal, and charge-offs occur when it becomes probable that outstanding amounts will not be recovered.

At April 3, 2021, there were no commercial loans 90 days or more past due that were still accruing interest, and we were not aware of any potential problem loans that would have a material effect on the commercial loans receivable balance.

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

April 3, 2021

2021 2020 2019 2018 2017 Total March 28,

Risk profile based on payment activity:

$ 30,627 $ 8,677 $ 3,206 $ 1,864 $ 1,003 $ 45,377 $ 47,016

— — — — — — 186

Nonperforming

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

As of March 30, 2019 , 21.1 % was concentrated in California, 16.3 % was in Arizona and 10.4 % was in Oregon.

— — — — — — —

$ 30,627 $ 8,677 $ 3,206 $ 1,864 $ 1,003 $ 45,377 $ 47,202

As of April 3, 2021, 13 % of our outstanding commercial loans receivable principal balance was concentrated in Arizona.

As of March 28, 2020, 11 % of the outstanding commercial loans receivable principal balance was concentrated in California.

No other state had concentrations in excess of 10 % of the principal balance of the consumer loans receivable as of April 3, 2021 or March 28, 2020.

We had concentrations with one independent third-party and its affiliates that equaled 18 % and 21 % of the net commercial loans receivables principal balance outstanding, all of which was secured, as of April 3, 2021 and March 28, 2020, respectively.

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

The Company had concentrations with one independent third-party and its affiliates that equaled 21.0 % and 22.0 % of the commercial loans receivables principal balance outstanding, all of which was secured, as of March 28, 2020 and March 30, 2019 , respectively.

Property, Plant and Equipment, net

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

2021 March 28,

Property, plant and equipment, at cost:

$ 28,314 $ 26,827

Buildings and improvements

71,827 52,011

Machinery and equipment

34,146 30,984

134,287 109,822

Accumulated depreciation

( 37,493 ) ( 32,632 )

$ 96,794 $ 77,190

Depreciation expense was $ 5.6 million in fiscal year 2021, $ 5.2 million in fiscal year 2020 and $ 4.4 million in fiscal year 2019.

1 unchanged sentence

See Note 9 for additional information.

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

The Company determines if a contract or arrangement is, or contains, a lease at inception.

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

We determine if a contract or arrangement is, or contains, a lease at inception.

Lease agreements with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheet.

Certain lease agreements include one or more options to renew, with renewal terms that can extend the lease term by one to three years or more.

Generally, the exercise of lease renewal options is at the Company's discretion.

Generally, the exercise of lease renewal options is at our discretion.

Some agreements also include options to purchase the leased property.

The estimated life of assets and leasehold improvements is limited by the expected lease term, unless there is a transfer of title or purchase option that the Company is reasonably certain to exercise.

Certain of the Company's lease agreements include rental payments adjusted periodically for inflation.

The estimated life of assets and leasehold improvements is limited by the expected lease term, unless there is a transfer of title or purchase option that we are reasonably certain to exercise.

Certain of our lease agreements include rental payments adjusted periodically for inflation.

These lease agreements do not contain any material residual value guarantees or material restrictive covenants.

ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the Company's obligation to make lease payments in accordance with the lease.

Right Of Use ("ROU") assets represent the right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments in accordance with the lease.

Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term.

Since the Company's leases do not provide a readily determinable implicit interest rate, the Company estimates an incremental borrowing rate.

In determining the estimated incremental borrowing rate, the Company considers the lease period and comparable market interest rates, as well as any other information available at the lease commencement date.

The lease term includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options.

The following table provides information about the financial statement classification of the Company's lease balances reported within the Consolidated Balance Sheet as of March 28, 2020 (in thousands):

Classification

Operating lease assets

Operating lease right-of-use assets

Finance lease assets

Property, plant and equipment, net (1)

Since our leases do not provide a readily determinable implicit interest rate, we estimate an incremental borrowing rate.

In determining the estimated incremental borrowing rate, we consider the lease period and comparable market interest rates, as well as any other information available at the lease commencement date.

The lease term includes options to extend or terminate the lease when it is reasonably certain that we will exercise such options.

The following table provides information about the financial statement classification of our lease balances reported within the Consolidated Balance Sheet as of April 3, 2021 and March 28, 2020 (in thousands):

Classification April 3,

2021 March 28,

Operating lease assets Operating lease right-of-use assets $ 16,252 $ 13,894

Finance lease assets Property, plant and equipment, net (1)

Total lease assets $ 17,238 $ 14,919

Lease Liabilities

Operating lease liabilities

Accrued expenses and other current liabilities

Finance lease liabilities

Current portion of securitized financings and other

Operating lease liabilities

Finance lease liabilities

Securitized financings and other

Operating lease liabilities Accrued expenses and other current liabilities $ 4,184 $ 4,170

Finance lease liabilities Current portion of secured credit facilities and other 71 77

Operating lease liabilities Operating lease liabilities 13,361 10,743

Finance lease liabilities Secured credit facilities and other 233 289

Total lease liabilities $ 17,849 $ 15,279

(1) Recorded net of accumulated amortization of $ 103,000 as of March 28, 2020 .

The following table provides information about the financial statement classification of the Company's lease expenses reported within the Consolidated Statement of Comprehensive Income for the year ended March 28, 2020 (in thousands):

Lease Expense Category

Classification

(1) Recorded net of accumulated amortization of $ 143,000 and $ 103,000 as of April 3, 2021 and March 28, 2020, respectively.

The following table provides information about the financial statement classification of our lease expenses reported within the Consolidated Statement of Comprehensive Income for the years ended April 3, 2021 and March 28, 2020 (in thousands):

Lease Expense Category Classification April 3,

2021 March 28, 2020

3 unchanged sentences

Finance lease expense:

Amortization of leased assets

Cost of sales

Interest on lease liabilities

Interest expense

Amortization of leased assets Cost of sales 39 39

Interest on lease liabilities Interest expense 17 52

Total lease expense $ 4,488 $ 4,044

(2) Excludes short-term and variable lease expenses, which are immaterial.

Cash payments for operating and finance leases for the year ended March 28, 2020 were $ 3.4 million and $ 142,000 , respectively.

The present value of the minimum payments for future fiscal years under non-cancelable leases as of March 28, 2020 were as follows (in thousands):

Operating Leases

Finance Leases

Total lease payments

Cash payments for operating and finance leases for the year ended April 3, 2021 were $ 4.2 million and $ 79,000 , respectively.

Cash payments for operating and finance leases for year ended March 28, 2020 were $ 3.4 million and $ 142,000 , respectively.

Rent expense for third-party operating leases was $ 5.2 million for the fiscal year ended March 30, 2019 and is included in Cost of sales and Selling, general and administrative expenses in the accompanying Consolidated Statements of Comprehensive Income.

The present value minimum payments for future fiscal years under non-cancelable leases as of April 3, 2021 was as follows (in thousands):

Operating Leases Finance Leases Total

2022 $ 4,292 $ 73 $ 4,365

2023 3,973 73 4,046

2024 3,591 73 3,664

2025 2,799 73 2,872

2026 2,855 49 2,904

Thereafter 2,266 — 2,266

19,776 341 20,117

Amount representing interest ( 2,231 ) ( 37 ) ( 2,268 )

Present value of lease liabilities

The following table provides information about the weighted average remaining lease terms and weighted average discount rates as of March 28, 2020 :

Remaining Lease Term (Years)

Discount Rate

$ 17,545 $ 304 $ 17,849

The following table provides information about the weighted average remaining lease terms and weighted average discount rates as of April 3, 2021:

Remaining Lease Term (Years) Discount Rate

Operating leases 5.2 4.5 %

Finance leases 4.6 5.0 %

Operating Leases pre-Topic 842 adoption :

The Company has non-cancelable operating leases with third parties, primarily for administrative and distribution center space and computer equipment.

The Company's facility leases generally provide for periodic rent increases and many contain escalation clauses and renewal options.

Rent expense for these third-party operating leases was $ 5.2 million for the fiscal year ended March 30, 2019 and $ 5.3 million for the fiscal year ended March 31, 2018, and is included in Cost of sales and Selling, general and administrative expenses in the accompanying Consolidated Statements of Comprehensive Income.

Goodwill and Other Intangibles

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

March 28, 2020

March 30, 2019

April 3, 2021 March 28, 2020

Amount Accumulated

Amortization Net

Amount Accumulated

Amortization Net

Indefinite-lived:

$ 75,090 $ — $ 75,090 $ 75,090 $ — $ 75,090

Trademarks and trade names

8,900 — 8,900 8,900 — 8,900

State insurance licenses

Total indefinite-lived intangible assets

1,100 — 1,100 1,100 — 1,100

85,090 — 85,090 85,090 — 85,090

Finite lived:

Customer relationships

11,300 ( 7,097 ) 4,203 11,300 ( 6,463 ) 4,837

1,424 ( 1,264 ) 160 1,424 ( 1,151 ) 273

$ 97,814 $ ( 8,361 ) $ 89,453 $ 97,814 $ ( 7,614 ) $ 90,200

Amortization expense recognized on intangible assets was $ 747,000 during fiscal year 2021, $ 606,000 during fiscal year 2020 and $ 324,000 during fiscal year 2019.

Expected amortization for future fiscal years is as follows (in thousands):

Thereafter 1,465

Accrued Expenses and Other Current Liabilities

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

Salaries, wages and benefits

2021 March 28,

Customer deposits $ 41,835 $ 22,055

Salaries, wages and benefits 37,737 25,885

Company repurchase options on certain loans sold 25,938 7,444

Unearned insurance premiums 22,643 20,614

1 unchanged sentence

Accrued volume rebates 12,132 9,801

Company repurchase options on certain loans sold

Insurance loss reserves

Accrued self-insurance

Operating lease liabilities

Reserve for repurchase commitments

Accrued taxes

Capital lease obligation

Other 44,816 35,453

$ 203,133 $ 139,930

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

2021 March 28,

2020 March 30,

Balance at beginning of period

$ 18,678 $ 17,069 $ 16,638

Purchase accounting additions

Charged to costs and expenses

28,352 29,885 29,591

Payments and deductions

( 28,998 ) ( 29,468 ) ( 29,160 )

Balance at end of period

$ 18,032 $ 18,678 $ 17,069

Debt and Finance Lease Obligations

Debt and finance lease obligations primarily consisted of amounts related to loans sold that did not qualify for loan sale accounting treatment and lease obligations in which it is expected that the Company will obtain ownership of a leased asset at the end of the lease term.

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

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

2007-1 securitized financings (acquired as part of the Palm Harbor transaction)

2021 March 28,

Secured credit facilities

$ 8,210 $ 10,474

Other secured financings

Finance lease liabilities

Prior to the Company's acquisition of Palm Harbor and CountryPlace, CountryPlace completed an initial securitization (2005-1) and a second securitized borrowing (2007-1).

The Company repurchased these loan portfolios in January 2019 and August 2019, respectively, eliminating the related securitized financings.

Acquired securitized financings were recorded at fair value at the time of acquisition, which resulted in a discount, and subsequently are accounted for in a manner similar to ASC 310-30 to accrete the discount.

The following table summarizes acquired securitized financings (in thousands):

Securitized financings – contractual amount

Purchase Discount

Non-accretable (1)

Total acquired securitized financings, net

(1) There is no non-accretable difference, as the contractual payments on acquired securitized financings were determined by the cash collections from the underlying loans.

Over the life of the loans, the Company estimated the cash flows expected to be paid on securitized financings.

The Company evaluated at each balance sheet date whether the present value of its securitized financings, determined using the effective interest rate, had increased or decreased.

The present value of any subsequent change in cash flows expected to be paid adjusted the amount of accretable yield recognized on a prospective basis over the securitized financings remaining life.

The changes in accretable yield on securitized financings were as follows (in thousands):

Balance at the beginning of the period

Adjustment to cash flows

Balance at the end of the period

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.

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.

Finance lease obligations 304 366

12,186 14,953

Less current portion ( 1,851 ) ( 2,248 )

$ 10,335 $ 12,705

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

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

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

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

As of March 28, 2020 , the outstanding balance of the converted loans was $ 10.5 million at a weighted average interest rate of 4.9 % .

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

The outstanding balance of the converted loans was $ 8.2 million as of April 3, 2021 and $ 10.5 million as of March 28, 2020 with a weighted average interest rate of 4.9 %.

Scheduled maturities for future fiscal years of the Company's debt obligations consist of the following (in thousands):

Thereafter 4,987

Actual payments may vary from those above, resulting from prepayments or other factors.

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

Reinsurance and Insurance Loss Reserves

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

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

The ceded reinsurance agreements provide Standard Casualty with increased capacity to write larger risks and maintain its exposure to loss within its capital resources.

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.

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

The ceded reinsurance agreements provide increased capacity to write larger risks while maintaining exposure to loss within our capital resources.

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

Substantially all of the assumed reinsurance is with one entity.

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

April 3, 2021 March 28, 2020

Written Earned Written Earned

Direct premiums

$ 23,226 $ 21,424 $ 20,060 $ 18,912

Assumed premiums—nonaffiliated 29,167 28,160 27,359 26,370

Ceded premiums—nonaffiliated ( 12,604 ) ( 12,604 ) ( 12,598 ) ( 12,598 )

$ 39,789 $ 36,980 $ 34,821 $ 32,684

Typical insurance policies written or assumed have a maximum coverage of $ 300,000 per claim, of which we cede $ 150,000 of the risk of loss per reinsurance.

Therefore, our risk of loss is limited to $ 150,000 per claim on typical policies, subject to the reinsurers meeting their obligations.

After this limit, amounts are recoverable through reinsurance for catastrophic losses in excess of $ 2.0 million per occurrence, up to a maximum of $ 55.0 million in the aggregate for that occurrence.

Purchasing reinsurance contracts mitigates the frequency and/or severity of losses incurred on insurance policies issued, such as in the case of a catastrophe that generates a large number of serious claims on multiple policies at the same time.

Under these agreements, we may be required to repurchase and reestablish the reinsurance contracts for the remainder of the year to the extent that they have been utilized.

We have reinsurance reinstatement premium protection coverage, which will assist in reducing premium repurchase expense in the event of a catastrophic weather claim.

Standard Casualty establishes reserves for claims and claims expense on reported and unreported claims of non-reinsured losses.

The following details the activity in the reserve for fiscal years 2021, 2020 and 2019 (in thousands):

2021 March 28,

2020 March 30,

Direct premiums

Assumed premiums—nonaffiliate

Ceded premiums—nonaffiliate

Typical insurance policies written or assumed by Standard Casualty have a maximum coverage of $ 300,000 per claim, of which Standard Casualty cedes $ 175,000 of the risk of loss per reinsurance.

Therefore, Standard Casualty's risk of loss is limited to $ 125,000 per claim on typical policies, subject to the reinsurers meeting their obligations.

After this limit, amounts are recoverable by Standard Casualty through reinsurance for catastrophic losses in excess of $ 1.5 million per occurrence, up to a maximum of $ 43.5 million in the aggregate.

Purchasing reinsurance contracts protects Standard Casualty from frequency and/or severity of losses incurred on insurance policies issued, such as in the case of a catastrophe that generates a large number of serious claims on multiple policies at the same time.

Under these agreements, the Company may be required to repurchase and reestablish its reinsurance contracts for the remainder of the year to the extent that they have been utilized.

The Company has reinsurance reinstatement premium protection coverage, which will assist in reducing premium repurchase expense in the event of a catastrophic weather claim.

On December 22, 2017, the U.S.

government enacted comprehensive tax legislation commonly referred to as the Tax Act.

The Tax Act makes broad and complex changes to the U.S.

tax code that affect the Company and include, but are not limited to:

(1) reducing the U.S.

federal corporate tax rate, (2) allowing bonus depreciation for full expensing of qualified property and (3) eliminating the manufacturing deduction.

The Tax Act reduces the federal corporate tax rate to 21 % .

As a result of these changes, the Company's statutory 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.

Balance at beginning of period $ 5,582 $ 6,686 $ 6,157

Net incurred losses during the year 23,041 16,961 16,179

Net claim payments during the year ( 21,172 ) ( 18,065 ) ( 15,650 )

Balance at end of period $ 7,451 $ 5,582 $ 6,686

The provision for income taxes generally represents income taxes paid or payable for the current year plus the change in deferred taxes during the year.

The provision for income taxes for fiscal years 2020 , 2019 and 2018 were as follows (in thousands):

Total current

Total deferred

Total income tax provision

A reconciliation of income taxes computed by applying the expected federal statutory income tax rates of 21 % for fiscal years 2020 and 2019 and 31.54 % for fiscal year 2018 , respectively, to income before income taxes reported in the Consolidated Statements of Comprehensive Income is as follows (in thousands):

The following details the provision for income taxes for fiscal years 2021, 2020 and 2019 (in thousands):

2021 2020 2019

$ 16,823 $ 14,625 $ 16,086

3,128 3,084 2,209

19,951 17,709 18,295

302 246 ( 347 )

13 ( 42 ) 106

315 204 ( 241 )

$ 20,266 $ 17,913 $ 18,054

A reconciliation of income taxes computed by applying the expected federal statutory income tax rate of 21 % for fiscal years 2021, 2020 and 2019 to income before income taxes reported in the Consolidated Statements of Comprehensive Income is as follows (in thousands):

2021 2020 2019

Federal income tax at statutory rate

$ 20,351 $ 19,525 $ 18,202

State income taxes, net of federal benefit

3,422 3,297 3,111

Stock-based compensation ( 2,710 ) ( 2,994 ) ( 2,507 )

Impact of Tax Act

Domestic production activities deduction

Total income tax provision

Net long-term deferred tax assets and liabilities were as follows (in thousands):

Net long-term deferred tax (liabilities) assets

( 1,356 ) ( 2,401 ) ( 1,506 )

$ 20,266 $ 17,913 $ 18,054

Net deferred tax assets and liabilities were as follows (in thousands):

2021 March 28,

Net deferred tax (liabilities) assets

$ ( 16,327 ) $ ( 16,120 )

Property, plant, equipment and depreciation

( 5,121 ) ( 5,084 )

Warranty reserves

1 unchanged sentence

Lease - Right of use asset

( 3,820 ) ( 3,295 )

Salaries and wages

Stock-based compensation

Unrealized gains on marketable equity investments ( 1,695 ) ( 43 )

Loan discount

Salaries and wages

Other intangibles

( 1,538 ) ( 1,534 )

Accrued volume rebates

Prepaid expenses

The effective income tax rate for the current year was positively impacted by the recognition of certain tax credits under the 2020 Appropriations Bill that was signed into law on December 20, 2019, stock option exercises, research and development tax credits and work opportunity tax credits.

The Company recorded an insignificant amount of unrecognized tax benefits during fiscal years 2020 , 2019 and 2018 , and there would be an insignificant effect on the effective tax rate if all unrecognized tax benefits were recognized.

The Company classifies interest and penalties related to unrecognized tax benefits in income tax expense.

$ ( 7,393 ) $ ( 7,295 )

The effective income tax rate for the current year was positively impacted by stock option exercises and the recognition of certain tax credits, including Energy Star, Research and Development and Work Opportunity Tax Credits.

We recorded an insignificant amount of unrecognized tax benefits during fiscal years 2021, 2020 and 2019, and there would be an insignificant effect on the effective tax rate if all unrecognized tax benefits were recognized.

We classify interest and penalties related to unrecognized tax benefits in income tax expense.

The total amount of unrecognized tax benefit related to any particular tax position is not anticipated to change significantly within the next 12 months.

At March 28, 2020 , the Company has state net operating loss carryforwards that total $ 8.0 million , which begin to expire in 2025.

The Company recorded a $ 270,000 valuation allowance against the related deferred tax asset.

The Company periodically evaluates the deferred tax assets based on the requirements established in ASC 740, 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.

We believe that our income tax filing positions and deductions will be sustained on audit and we do not anticipate any adjustments that will result in a material change to our financial position.

We periodically evaluate the deferred tax assets based on the requirements established in ASC 740, 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.

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 management projections of anticipated taxable income.

At March 28, 2020 , the Company evaluated its historical profits earned and forecasted taxable income and determined that, except as described above, all of the deferred tax assets would be utilized in future periods.

Ultimate realization of the deferred tax assets depends on the Company's ability to continue to earn profits as we have historically and to meet these forecasts in future periods.

At April 3, 2021, we had state net operating loss carryforwards that total $ 12.6 million, which begin to expire in 2025.

We recorded a $ 445,000 valuation allowance against the related deferred tax asset.

At April 3, 2021, we evaluated our historical profits earned and forecasted taxable income and determined that, except as described above, all of the deferred tax assets would be utilized in future periods.

Ultimate realization of the deferred tax assets depends on our ability to continue to earn profits, as we have historically, and to meet these forecasts in future periods.

Income tax returns are filed in the U.S.

federal jurisdiction and in several state jurisdictions.

In August 2017, the Company received a notice of examination from the Internal Revenue Service ("IRS") for the Company's federal income tax return for the fiscal year ended April 2, 2016.

In July 2018, the Company received notice from the IRS that its examination was complete and resulted in no changes.

In general, the Company is no longer subject to examination by the IRS for years before fiscal year 2017 or state and local income tax examinations by tax authorities for years before fiscal year 2016.

The Company believes that its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material change to the Company's financial position.

In general, we are no longer subject to examination by the IRS for years before fiscal year 2018 or state and local income tax examinations by tax authorities for years before fiscal year 2017.

Commitments and Contingencies

Repurchase Contingencies .

The Company is contingently liable under terms of repurchase agreements with financial institutions providing inventory financing for independent distributors of its products.

We are contingently liable under terms of repurchase agreements with financial institutions providing inventory financing to independent distributors of our products.

These arrangements, which are customary in the industry, provide for the repurchase of products sold to distributors in the event of default by the distributor.

The risk of loss under these agreements is spread over numerous distributors.

The price the Company is obligated to pay generally declines over the period of the agreement (generally 18 to 36 months , calculated from the date of sale to the distributor) and the risk of loss is further reduced by the resale value of the repurchased homes.

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

Under the provisions of ASC 460, issuance of a guarantee results in two different types of obligations:

(1) a non-contingent obligation to stand ready to perform under the repurchase commitment (accounted for pursuant to ASC 460) and (2) a contingent obligation to make future payments under the conditions of the repurchase arrangement (accounted for pursuant to ASC 450-20).

Management reviews the distributors' inventories to estimate the amount of inventory subject to repurchase obligation, which is used to calculate:

(1) the fair value of the non-contingent obligation for repurchase commitments and (2) the contingent liability based on historical information available at the time.

During the period in which a home is sold (inception of a repurchase commitment), the Company records the greater of these two calculations as a liability for repurchase commitments and as a reduction to revenue.

The Company estimates the fair value of the non-contingent portion of its manufacturer's inventory repurchase commitment under the provisions of ASC 460 when a home is shipped to a distributor whose floor plan financing includes a repurchase commitment.

The fair value of the inventory repurchase agreement is determined by calculating the net present value of the difference in (a) the Company's interest cost to carry the inventory over the maximum repurchase liability period at the prevailing floor plan note interest rate and (b) the distributor's interest cost to carry the inventory over the maximum repurchase liability period at the interest rate of a similar type loan without a manufacturer's repurchase agreement in force.

The Company estimates the contingent obligation to make future payments under its manufacturer's inventory repurchase commitment for the same pool of commitments as used in the fair value calculation above and records the greater of the two calculations.

This contingent obligation is estimated using historical loss factors, including the frequency of repurchases and the losses experienced by the Company for repurchased inventory.

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.

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.

Based on identified changes in distributors' financial conditions, the Company evaluates the probability of default for distributors who are identified at an elevated risk of default and applies a probability of default, based on historical default rates.

Commensurate with this default probability evaluation, the Company reviews repurchase notifications received from floor plan sources and reviews distributor inventory for expected repurchase notifications based on various communications from the lenders and distributors.

The Company's repurchase commitments for the distributors in the category of elevated risk of default are excluded from the pool of commitments used in both of the calculations at (1) and (2) above.

Changes in the reserve are recorded as an adjustment to revenue.

The maximum amount for which the Company was liable under such agreements approximated $ 79.3 million and $ 77.1 million at March 28, 2020 and March 30, 2019 , respectively, without reduction for the resale value of the homes.

The Company had a reserve for repurchase commitments of $ 2.7 million and $ 2.4 million at March 28, 2020 and March 30, 2019 , respectively.

The price we may be obligated to pay generally declines over the period of the agreement (generally 18 to 24 months, calculated from the date of sale to the distributor) and the risk of loss is further reduced by the resale value of the repurchased homes.

The maximum amount for which the Company was liable under such agreements approximated $ 74.2 million and $ 79.3 million at April 3, 2021 and March 28, 2020, respectively, without reduction for the resale value of the homes.

We had a reserve for repurchase commitments of $ 2.3 million and $ 2.7 million at April 3, 2021 and March 28, 2020, respectively.

Letter of Credit.

To secure certain reinsurance contracts, Standard Casualty maintains an irrevocable letter of credit of $ 11.0 million to provide assurance that Standard Casualty will fulfill its reinsurance obligations.

This letter of credit is secured by certain of Standard Casualty's investments.

There were no amounts outstanding against the letter of credit at either March 28, 2020 or March 30, 2019 .

Construction-Period Mortgages.

CountryPlace funds construction-period mortgages through periodic advances during home construction.

At the time of initial funding, CountryPlace commits to fully fund the loan contract in accordance with a predetermined schedule.

To secure certain reinsurance contracts, Standard Casualty maintained an irrevocable letter of credit of $ 11.0 million to provide assurance that we would fulfill our reinsurance obligations.

The letter of credit was released on July 11, 2020 and there were no amounts outstanding against it as of March 28, 2020.

Constru ction-Period Mortgages.

We fund construction-period mortgages through periodic advances during home construction.

At the time of initial funding, we commit to fully fund the loan contract in accordance with a predetermined schedule.

Subsequent advances are contingent upon the performance of contractual obligations by the seller of the home and the borrower.

Cumulative advances on construction-period mortgages are carried on the Consolidated Balance Sheets at the amount advanced less a valuation allowance, and are included in Consumer loans receivable, net.

The total loan contract amount, less cumulative advances, represents an off-balance sheet contingent commitment of CountryPlace to fund future advances.

Cumulative advances on construction-period mortgages are carried at the amount advanced less a valuation allowance, and are included in Consumer loans receivable, net.

The total loan contract amount, less cumulative advances, represents an off-balance sheet contingent commitment to fund future advances.

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

2021 March 28,

Construction loan contract amount

$ 37,628 $ 31,136

Cumulative advances

Remaining construction contingent commitment

( 13,801 ) ( 13,400 )

$ 23,827 $ 17,736

Representations and Warranties of Mortgages Sold .

CountryPlace sells loans to GSEs and whole-loan purchasers and 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, representations and warranties related to the loans sold or financed.

These representations and warranties generally relate to the ownership of the loan, the validity of the lien securing the loan, the loan's compliance with the criteria for inclusion in the sale transaction, including compliance with underwriting standards or loan criteria established by the buyer, and CountryPlace's ability to deliver documentation in compliance with applicable laws.

We sell loans to GSEs and whole-loan purchasers and finance certain loans with long-term credit facilities secured by the respective loans.

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

These representations and warranties generally relate to the ownership of the loan, the validity of the lien securing the loan, the loan's compliance with the criteria for inclusion in the sale transaction, including compliance with underwriting standards or loan criteria established by the buyer, 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.

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

Repurchase demands and claims for indemnification payments are reviewed on a loan-by-loan basis to validate if there has been a breach requiring repurchase.

CountryPlace manages the risk of repurchase through underwriting and quality assurance practices and by servicing the mortgage loans to investor standards.

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

This reserve of $ 1.0 million as of March 28, 2020 and March 30, 2019 , included in Accrued expenses and other current liabilities, reflects management's estimate of probable loss.

CountryPlace considers a variety of assumptions, including borrower performance (both actual and estimated future defaults), historical repurchase demands and loan default rates to estimate the liability for loan repurchases and indemnifications.

During the year ended March 28, 2020 , no claim request resulted in the execution of an indemnification agreement or in the repurchase of a loan .

We manage the risk of repurchase through underwriting and quality assurance practices and by servicing the mortgage loans to investor standards.

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

This reserve of $ 1.2 million as of April 3, 2021 and $ 1.0 million as of March 28, 2020, included in Accrued expenses and other current liabilities, reflects management's estimate of probable loss.

We consider a variety of assumptions, including borrower performance (both actual and estimated future defaults), historical repurchase demands and loan default rates to estimate the liability for loan repurchases and indemnifications.

During the fiscal year ended April 3, 2021, we executed indemnification agreements to cover 20 % of the losses experienced over the next 2 years related to five loans that were impacted by COVID-19.

There were no claim requests that resulted in the repurchase of a loan during the year ended April 3, 2021.

Interest Rate Lock Commitments .

In originating loans for sale, CountryPlace issues interest rate lock commitments ("IRLCs") to prospective borrowers.

In originating loans for sale, we issue interest rate lock commitments ("IRLCs") to prospective borrowers.

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

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

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

As such, outstanding IRLCs are subject to interest rate risk and related loan sale price risk during the period from the date of the IRLC through the earlier of the loan sale date or IRLC expiration date.

The loan commitments generally range between 30 and 180 days;

The lock commitments generally range between 30 and 180 days;

however, borrowers are not obligated to close the related loans.

As a result, the Company is subject to fallout risk related to IRLCs, which is realized if approved borrowers choose not to close on the loans within the terms of the IRLCs unless the commitment is successfully paired with another loan that may mitigate losses from fallout.

As of March 28, 2020 , CountryPlace had outstanding IRLCs with a notional amount of $ 29.4 million , which are recorded at fair value in accordance with FASB ASC 815, Derivatives and Hedging ("ASC 815").

As a result, we are subject to fallout risk related to IRLCs, which is realized if approved borrowers choose not to close on the loans within the terms of the IRLCs unless the commitment is successfully paired with another loan that may mitigate losses from fallout.

As of April 3, 2021, we had outstanding IRLCs with a notional amount of $ 37.7 million, which are recorded at fair value in accordance with FASB ASC 815, Derivatives and Hedging ("ASC 815").

ASC 815 clarifies that the expected net future cash flows related to the associated servicing of a loan should be included in the measurement of all written loan commitments that are accounted for at fair value through earnings.

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The initial and subsequent changes in the value of IRLCs are a component of gain (loss) on loans held for sale.

During fiscal years 2020 and 2019 , the Company recognized non-cash gain s of $ 153,000 and $ 23,000 , respectively, on outstanding IRLCs.

During fiscal year 2018 , the Company recognized a non-cash loss of $ 47,000 on outstanding IRLCs.

During fiscal years 2021, 2020 and 2019, we recognized a non-cash loss of $ 208,000 , and non-cash gains of $ 153,000 and $ 23,000 , resp ectively, on outstanding IRLCs.

Forward Sales Commitments .

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

As of March 28, 2020 , CountryPlace had $ 59.9 million in outstanding notional forward sales of MBSs and forward sales commitments.

We manage the risk profiles of a portion of the outstanding IRLCs and mortgage loans held for sale by entering into forward sales of mortgage-backed securities and whole loan sale commitments (collectively "Commitments").

As of April 3, 2021, we had $ 55.2 million in outstanding Commitments.

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

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

During the years ended March 28, 2020 and March 30, 2019 , the Company recognized non-cash loss es of $ 951,000 and $ 86,000 , respectively, on forward sales and whole loan sale commitments.

For the year ended March 31, 2018 , the Company recognized a non-cash gain of $ 113,000 on forward sales and whole loan sale commitments .

The estimated fair values of Commitments are based on quoted market values and are recorded within Prepaid expenses and other current assets in the Consolidated Balance Sheets.

During the years ended April 3, 2021, March 28, 2020 and March 30, 2019, we recognized a non-cash gain of $ 1.4 million , and non-cash losses of $ 951,000 and $ 86,000 , r espectively, on Commitments.

Legal Matters .

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 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.

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

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

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

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

As previously disclosed in September 2020, the SEC staff issued a Wells Notice to Daniel L.

Urness, our former Chief Financial Officer, Principal Financial Officer and Principal Accounting Officer, in connection with its investigation, noting that it intends to recommend an enforcement action against him.

Rather than have this be a distraction to Cavco, Mr.

Urness went on leave to focus on his response to the Wells Notice.

As previously disclosed, on February 19, 2021, the employment of Mr.

Urness was mutually concluded.

In November 2020, the SEC staff issued a Wells Notice to Cavco stating that the staff intends to recommend an enforcement action against us in connection with the investigation.

We continue to explore the possibility of a settlement with the SEC staff.

In the fourth quarter of fiscal year 2021, while we cannot predict with certainty the resolution of this matter, we recorded an accrual for this loss contingency in Selling, general and administrative expenses and it does not, and is not expected to have, a material adverse effect on our Consolidated Financial Statements.

Cavco Industries, Inc.

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

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

Fleetwood Homes, Inc.

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

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

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

(ii) alleged failure to compensate employees for all straight-time and overtime hours worked;

(ii) alleged failure to compensate employees for straight-time and overtime hours worked;

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

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

Based on management's present knowledge of the facts and (in certain cases) advice of outside counsel, management does not believe that loss contingencies arising from pending matters are likely to have a material adverse effect on the Company's consolidated financial position, liquidity or results of operations after taking into account any existing reserves, which reserves are included in Accrued expenses and other current liabilities in the Consolidated Balance Sheets included in this Annual Report on Form 10-K.

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

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

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

Later in the fourth quarter of fiscal year 2021, the Parties continued post-mediation settlement discussions and ultimately reached a settlement to settle Plaintiffs' claims on a class-wide basis, recorded in Selling, general and administrative expense, which did not have a material adverse effect on our Consolidated Financial Statements.

We are party to certain other lawsuits in the ordinary course of business.

Based on management's present knowledge of the facts and (in certain cases) advice of outside counsel, management does not believe that loss contingencies arising from pending matters are likely to have a material adverse effect on our consolidated financial position, liquidity or results of operations after taking into account any existing reserves, which reserves are included in Accrued expenses and other current liabilities in the Consolidated Balance Sheets included in this Annual Report on Form 10-K.

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

Stock-Based Compensation

The Company maintains stock incentive plans whereby stock option grants or awards of restricted stock may be made to certain officers, directors and key employees.

The plans, which are shareholder approved, permit the award of up to 1,650,000 shares of the Company's common stock, of which 256,879 shares were still available for grant as of March 28, 2020 .

The plans, which are shareholder approved, permit the award of up to 1,650,000 shares of the Company's common stock, of which 295,571 shares were still available for grant as of April 3, 2021.

Upon option exercise, new shares of the Company's common stock are issued and when restricted stock vests, restricted stock shares issued become unrestricted.

Awards may not be granted below 100 % of the fair market value of the Company's common stock at the date of grant and generally expire seven years from the date of grant.

Stock options and awards of restricted stock vest over a defined period or based on certain performance criteria, as determined by the plan administrator (the Compensation Committee of the Board of Directors, which consists of independent directors), but typically is no more than 5 years .

The stock incentive plans provide for accelerated vesting of stock options and removal of restrictions on restricted stock awards upon a change in control (as defined in the plans).

The Company applies the fair value recognition provisions of ASC 718.

Stock option compensation expense, decreased income before income taxes by approximately $ 3.9 million , $ 3.4 million and $ 2.3 million for fiscal years 2020 , 2019 and 2018 , respectively.

As of March 28, 2020 , total unrecognized compensation cost related to stock options was approximately $ 5.4 million and the related weighted-average period over which it is expected to be recognized is approximately 2.63 years.

Stock option awards may not be granted below 100 % of the fair market value of the Company's common stock at the date of grant and generally expire seven years from the date of grant.

The stock incentive plans provide for accelerated vesting of stock option awards and removal of restrictions on restricted stock awards upon a change in control (as defined in the plans).

We apply the fair value recognition provisions of ASC 718.

Stock compensation expense decreased income before income taxes by approximately $ 4.4 million, $ 3.9 million and $ 3.4 million for fiscal years 2021, 2020 and 2019, respectively.

As of April 3, 2021, total unrecognized compensation cost was approximately $ 6.3 million and the related weighted-average period over which it is expected to be recognized is approximately 2.12 years.

Stock Options.

The fair value of each stock option award is estimated on the date of the grant using the Black Scholes-Merton option pricing model, which requires the input of assumptions.

The Company estimates the risk-free interest rate based on the U.S.

Treasury security rate in effect at the time of the grant.

The expected life of the options, volatility and dividend rates are estimated based on historical data.

The following table summarizes stock option activity for the fiscal years 2020 , 2019 and 2018 :

The following table summarizes stock option activity for fiscal years 2021, 2020 and 2019:

of Shares Weighted

Price Weighted

Term (years) Aggregate

(in thousands)

Options outstanding at April 1, 2017

Outstanding at March 31, 2018 418,205 $ 79.73

Granted 73,750 194.08

Exercised ( 74,144 ) 53.78

Canceled or expired ( 6,700 ) 150.34

Options outstanding at March 31, 2018

Outstanding at March 30, 2019 411,111 $ 102.71 3.74 $ 61,025

Granted 74,750 145.24

Exercised ( 120,687 ) 63.66

Canceled or expired ( 1,000 ) 99.65

Options outstanding at March 30, 2019

Outstanding at March 28, 2020 364,174 $ 123.93 4.02 $ 49,000

Granted 39,800 177.61

Exercised ( 131,567 ) 90.49

Canceled or expired ( 20,658 ) 148.95

Options outstanding at March 28, 2020

Exercisable at March 31, 2018

Outstanding at April 3, 2021 251,749 $ 146.86 4.04 $ 34,266

Exercisable at March 30, 2019 197,663 $ 71.28 2.35 $ 31,296

Exercisable at March 28, 2020 179,133 $ 100.82 2.83 $ 25,423

The weighted-average estimated fair value of employee stock options granted during fiscal years 2020 , 2019 and 2018 was $ 46.84 , $ 64.55 and $ 42.30 , respectively.

Exercisable at April 3, 2021 108,588 $ 132.48 3.22 $ 15,549

The weighted-average estimated fair value of employee stock options granted during fiscal years 2021, 2020 and 2019 was $ 69.65 , $ 46.84 and $ 64.55 per share, respectively.

The total intrinsic value of options exercised during fiscal years 2021, 2020 and 2019 was $ 16.7 million, $ 15.7 million and $ 12.3 million, respectively.

The fair values of options granted were estimated at the date of grant using the following weighted average assumptions:

2021 2020 2019

47.5 % 36.0 % 31.5 %

Risk-free interest rate

0.3 % 2.0 % 2.7 %

Dividend yield

Expected option life in years

4.56 4.33 5.18

Estimated forfeiture rate

7.0 % 7.0 % 7.0 %

Restricted Stock Awards.

The fair value of restricted stock awards is estimated as the closing price of the Company's common stock on the date of grant.

A summary of restricted stock award activity is as follows:

A summary of restricted stock award activity for fiscal years 2021 and 2020 is as follows:

Number of Shares

Performance-Based Awards

Service-Based Awards

Performance-Based Awards Service-Based Awards Total

Outstanding at March 30, 2019 — — —

Awarded 7,305 4,900 12,205

Released — ( 400 ) ( 400 )

Canceled or expired — — —

Outstanding at March 28, 2020 7,305 4,500 11,805

Awarded 7,450 3,550 11,000

Released — ( 3,465 ) ( 3,465 )

Canceled or expired ( 1,816 ) — ( 1,816 )

Outstanding at April 3, 2021 12,939 4,585 17,524

Unvested target stock awards that may vest based upon performance conditions through fiscal year 2022 6,438

Unvested target stock awards that may vest based upon performance conditions through fiscal year 2023 6,501

Earnings Per Share

Basic earnings per common share is computed based on the weighted-average number of common shares outstanding during the reporting period.

Diluted earnings per common share is computed based on the combination of dilutive common share equivalents, comprised of shares issuable under the Company's stock-based compensation plans and the weighted-average number of common shares outstanding during the reporting period.

Dilutive common share equivalents include the dilutive effect of in-the-money options to purchase shares, which is calculated based on the average share price for each period using the treasury stock method.

The following table sets forth the computation of basic and diluted earnings per share for fiscal years 2021, 2020 and 2019 (dollars in thousands, except per share amounts):

2021 2020 2019

$ 76,646 $ 75,066 $ 68,622

Weighted average shares outstanding:

9,189,052 9,129,639 9,080,878

Effect of dilutive securities

104,082 139,145 187,859

9,293,134 9,268,784 9,268,737

Net income per share:

There were 23,336 anti-dilutive common stock equivalents excluded from the computation of diluted earnings per share for the year ended March 28, 2020 , 13,862 for the year ended March 30, 2019 and 4,116 for the year ended March 31, 2018 .

In addition, 7,305 outstanding restricted share awards were excluded from the calculation of diluted earnings per share for the year ended March 28, 2020 , as the underlying performance criteria had not yet been met.

$ 8.34 $ 8.22 $ 7.56

$ 8.25 $ 8.10 $ 7.40

There were 19,440 anti-dilutive common stock equivalents excluded from the computation of diluted earnings per share for the year ended April 3, 2021, 23,336 for the year ended March 28, 2020 and 13,862 for the year ended March 30, 2019.

In addition, 12,939 and 7,305 outstanding restricted share awards were excluded from the calculation of diluted earnings per share for the year ended April 3, 2021 and March 28, 2020, respectively, as the underlying performance criteria had not yet been met.

Fair Value Measurements

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

March 28, 2020

March 30, 2019

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

April 3, 2021 March 28, 2020

Value Estimated

Fair Value Book

Value Estimated

Available-for-sale debt securities (1)

$ 14,946 $ 14,946 $ 14,774 $ 14,774

Marketable equity securities (2)

17,600 17,600 9,829 9,829

Non-marketable equity investments (3)

21,960 21,960 21,536 21,536

Consumer loans receivable (4)

Interest rate lock commitment derivatives (4)

Forward loan sale commitment derivatives (4)

74,798 86,209 82,304 97,395

Commercial loans receivable (5)

Securitized financings and other (6)

For Level 1 classified securities, the fair value is based on quoted market prices.

The fair value of Level 2 securities is based on other inputs, as further described below.

44,314 42,379 46,565 46,819

Secured credit facilities and other (6)

( 12,186 ) ( 12,340 ) ( 14,953 ) ( 15,592 )

The fair value is based on observable market prices for identical securities.

When observable market prices for identical securities are not available, we price our marketable debt instruments using non-binding market consensus prices that are corroborated with observable market data;

quoted market prices for similar instruments;

or pricing models, such as a discounted cash flow model, with all significant inputs derived from or corroborated with observable market data.

The fair value is based on quoted market prices.

The fair value approximates book value based on the non-marketable nature of the investments.

Includes consumer loans receivable held for investment, held for sale and construction advances.

The fair value of the loans held for investment is based on the discounted value of the remaining principal and interest cash flows.

The fair value of the loans held for sale is estimated based on recent GSE mortgage-backed bond prices.

The fair value of the construction advances approximates book value and the sales price of these loans.

The fair values are based on changes in GSE mortgage-backed bond prices and, additionally for IRLCs, pull through rates.

See discussion of fair value inputs below.

The fair value is estimated using market interest rates of comparable loans.

The fair value is estimated using recent public transactions of similar asset-backed securities.

In accordance with FASB ASC 820, Fair Value Measurements and Disclosures ("ASC 820"), fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The standard describes three levels of inputs that may be used to measure fair value:

Quoted prices in active markets for identical assets or liabilities.

Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities;

quoted prices in markets that are not active;

or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company utilizes the market approach to measure fair value for its financial assets and liabilities.

The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

When the Company uses observable market prices for identical securities that are traded in less active markets, it classifies such securities as Level 2.

When observable market prices for identical securities are not available, the Company prices its marketable debt instruments using non-binding market consensus prices that are corroborated with observable market data;

quoted market prices for similar instruments;

or pricing models, such as a discounted cash flow model, with all significant inputs derived from or corroborated with observable market data.

Non-binding market consensus prices are based on the proprietary valuation models of pricing providers or brokers.

These valuation models incorporate a number of inputs, including non-binding and binding broker quotes;

observable market prices for identical or similar securities;

and the internal assumptions of pricing providers or brokers that use observable market inputs and, to a lesser degree, unobservable market inputs.

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

March 28, 2020

Residential mortgage-backed securities (1)

State and political subdivision debt securities (1)

Corporate debt securities (1)

Marketable equity securities (2)

Interest rate lock commitment derivatives (3)

Forward loan sale commitment derivatives (3)

Mortgage servicing rights (4)

March 30, 2019

U.S Treasury and government debt securities (1)

Residential mortgage-backed securities (1)

State and political subdivision debt securities (1)

Corporate debt securities (1)

Marketable equity securities (2)

Interest rate lock commitment derivatives (3)

Forward loan sale commitment derivatives (3)

Mortgage servicing rights (4)

Unrealized gains or losses on investments are recorded in Accumulated other comprehensive income (loss) at each measurement date.

Unrealized gains or losses on investments are recorded in earnings at each measurement date.

Gains or losses on derivatives are recognized in current period earnings through Cost of sales.

Changes in the fair value of mortgage servicing rights are recognized in the current period earnings through Net revenue.

No transfers between Level 1, Level 2 or Level 3 occurred during the year ended March 28, 2020 .

The Company's policy regarding the recording of transfers between levels is to record any such transfers at the end of the reporting period.

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

March 28, 2020

Loans held for investment

Loans held for sale

Loans held—construction advances

Commercial loans receivable

Securitized financings and other

Non-marketable equity investments

March 30, 2019

Loans held for investment

Loans held for sale

Loans held—construction advances

Commercial loans receivable

Securitized financings and other

Non-marketable equity investments

No recent sales have been executed in an orderly market of manufactured home loan portfolios with comparable product features, credit characteristics or performance.

Therefore, loans held for investment are measured using Level 3 inputs that are calculated using estimated discounted future cash flows from the evaluation of loan credit quality and performance history to determine expected prepayments and defaults on the portfolio, discounted with rates considered to reflect current market conditions.

(6) L evel 2:

The fair value is based on the discounted value of the expected remaining principal and interest cash flows.

Consumer loans held for investment are measured using Level 3 inputs that are calculated using estimated discounted future cash flows from the evaluation of loan credit quality and performance history to determine expected prepayments and defaults on the portfolio, discounted with rates considered to reflect current market conditions.

Loans held for sale are measured at the lower of cost or fair value using inputs that consist of quoted market prices for mortgage-backed securities or investor purchase commitments for similar types of loan commitments on hand from investors.

These loans are held for relatively short periods, typically no more than 45 days .

As a result, changes in loan-specific credit risk are not a significant component of the change in fair value and changes are largely driven by changes in interest rates or investor yield requirements.

The cost of loans held for sale was lower than the fair value as of March 28, 2020 .

As noted above, activity in the manufactured housing asset-backed securities market is infrequent, with no reliable market price information.

As such, to determine the fair value of securitized financings, management evaluates the credit quality and performance history of the underlying loan assets to estimate the expected prepayment of the debt and credit spreads, based on market activity for similar rated bonds from other asset classes with similar durations.

FASB ASC 825, Financial Instruments ("ASC 825"), requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate fair value.

Fair value estimates are made as of a specific point in time based on the characteristics of the financial instruments and the relevant market information.

Where available, quoted market prices are used.

In other cases, fair values are based on estimates using other valuation techniques.

These techniques involve uncertainties and are significantly affected by the assumptions used and the judgments made regarding risk characteristics of various financial instruments, discount rates, estimates of future cash flows, future expected loss experience and other factors.

Changes in assumptions could significantly affect these estimates and the resulting fair values.

Derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in an immediate sale of the instrument.

Also, because of differences in methodologies and assumptions used to estimate fair values, the Company's fair values should not be compared to those of other companies.

Under ASC 825, fair value estimates are based on existing financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments.

Accordingly, the aggregate fair value amounts presented do not represent the underlying market value of the Company.

The cost of loans held for sale was lower than the fair value as of April 3, 2021.

Mortgage Servicing .

Mortgage Servicing Rights ("MSRs") are the rights to receive a portion of the interest coupon and fees collected from the mortgagors for performing specified mortgage servicing activities, which consist of collecting loan payments, remitting principal and interest payments to investors, managing escrow accounts, performing loss mitigation activities on behalf of investors and otherwise administering the loan servicing portfolio.

MSRs are initially recorded at fair value.

Changes in fair value subsequent to the initial capitalization are recorded in the Company's results of operations.

The Company recognizes MSRs on all loans sold to investors that meet the requirements for sale accounting and for which servicing rights are retained.

The Company applies fair value accounting to MSRs, with all changes in fair value recorded to Net revenue in accordance with FASB ASC 860-50, Servicing Assets and Liabilities .

The fair value of MSRs is based on the present value of the expected future cash flows related to servicing these loans.

The revenue components of the cash flows are servicing fees, interest earned on custodial accounts and other ancillary income.

The expense components include operating costs related to servicing the loans (including delinquency and foreclosure costs) and interest expenses on servicer advances that are consistent with the assumptions major market participants use in valuing MSRs.

The expected cash flows are primarily impacted by prepayment estimates, delinquencies and market discounts.

Generally, the value of MSRs is expected to increase when interest rates rise and decrease when interest rates decline, due to the effect those changes in interest rates have on prepayment estimates.

Other factors noted above as well as the overall market demand for MSRs may also affect the valuation.

MSRs are initially recorded at fair value based on the present value of the expected future cash flows related to servicing these loans.

2021 March 28,

Number of loans serviced with MSRs

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Capitalized servicing multiple

45.93 % 67.19 %

Capitalized servicing rate (basis points)

Serviced portfolio with MSRs (in thousands)

Mortgage servicing rights (in thousands)

$ 593,939 $ 585,777

MSRs (in thousands) $ 916 $ 1,225

Employee Benefit Plans

The Company has self-funded group medical plans which are administered by third-party administrators.

We have self-funded group medical plans which are administered by third-party administrators.

The medical plans have reinsurance coverage limiting liability for general individual employee loss to a maximum of $ 400,000 .

Incurred claims identified under the third-party administrator's incident reporting system and incurred but not reported claims are accrued based on estimates that incorporate the Company's experience, as well as other considerations such as the nature of each claim or incident, relevant trend factors and advice from consulting actuaries when necessary.

Incurred claims identified under the third-party administrator's incident reporting system and incurred but not reported claims are accrued based on estimates that incorporate claim experience, as well as other considerations such as the nature of each claim or incident, relevant trend factors and advice from consulting actuaries when necessary.

Medical claims expense was $ 15.8 million, $ 15.7 million and $ 16.5 million for fiscal years 2021, 2020 and 2019, respectively.

The Company sponsors an employee savings plan (the "401k Plan") that is intended to provide participating employees with additional income upon retirement.

We sponsor an employee savings plan (the "401k Plan") that is intended to provide participating employees with additional income upon retirement.

Employees may contribute their eligible compensation up to federal limits to the 401k Plan.

2 unchanged sentences

Employees are eligible to participate on the first of the month following 90 days of service and employer matching contributions are vested progressively over 4 years.

Employer matching contribution expense was $ 1.1 million , $ 1.0 million and $ 839,000 for fiscal years 2020 , 2019 and 2018 , respectively.

Employer matching contribution expense was $ 1.1 million each in fiscal years 2021 and 2020 and $ 1.0 million in fiscal year 2019.

Related Party Transactions

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

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

For the years 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.

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

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

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

For the years ended April 3, 2021 , March 28, 2020 and March 30, 2019, the total amount of sales to related parties was $ 46.7 million , $ 51.0 million and $ 42.2 million, respectively.

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.

In fiscal year 2018, the Company recorded a gain of $ 1.9 million on the sale of marketable equity securities to a related party in which the Company owns a 10% minority ownership interest.

The arm's length transaction occurred at market rates.

Acquisition of Destiny Homes

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

The transaction was accounted for as business combination and the results of operations have been included in the accompanying consolidated financial statements since the date of acquisition.

The acquisition-date fair value of the total consideration was $ 16.5 million , which is subject to future adjustments.

The Company did not incur debt in connection with the purchase or subsequent operations.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands).

Certain estimated values are not yet finalized and are subject to change, which could be significant.

The allocation of the purchase price is still preliminary and will be finalized upon completion of the analysis of the fair values of Destiny Home's assets and specified liabilities.

The Company will finalize the amounts recognized as we obtain the information necessary to complete the analysis.

We expect to finalize these amounts as soon as possible but no later than one year from the acquisition date.

Accounts receivable

Property, plant and equipment, net

Other current assets

Intangible assets (1)

Total identifiable assets acquired

Accounts payable and accrued expenses and other liabilities

Net identifiable assets acquired

Net assets acquired

(1) Includes $ 1.7 million assigned to trademarks and trade names, which are considered indefinite lived intangible assets and are not subject to amortization and $ 4.2 million assigned to a customer-related intangible subject to a useful life of 10 years amortized on a straight-line basis.

Since the acquisition date, Destiny Homes contributed net revenue of $ 30.1 million and increased consolidated Net income on the Company's Consolidated Statements of Comprehensive Income for the fiscal year ended March 28, 2020 by $ 843,000 .

Net income from the Destiny Homes acquisition included required purchase accounting adjustments whereby home product inventory is recorded at fair value upon acquisition.

This had the effect of eliminating profits from the related home sales after the acquisition date.

Pro Forma Impact of Acquisition .

The following table presents supplemental pro forma information as if the acquisition of Destiny Homes had occurred on April 2, 2017 (in thousands, except per share data):

Diluted net income per share

Business Segment Information

The Company operates principally in two segments:

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

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

We operate principally in two segments:

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

The following table provides selected financial data by segment (in thousands):

Fiscal Year Ended

2021 March 28,

2020 March 30,

Factory-built housing

$ 1,037,889 $ 999,340 $ 905,726

Financial services

70,162 62,434 57,020

$ 1,108,051 $ 1,061,774 $ 962,746

Net revenue for financial services consists of:

Finance $ 24,195 $ 24,894 $ 21,425

45,967 37,540 35,595

$ 70,162 $ 62,434 $ 57,020

Income before income taxes:

Factory-built housing

$ 78,937 $ 78,531 $ 72,959

Financial services

17,975 14,448 13,717

$ 96,912 $ 92,979 $ 86,676

Depreciation:

Factory-built housing

$ 5,450 $ 5,120 $ 4,318

Financial services

$ 5,577 $ 5,177 $ 4,374

Amortization:

Factory-built housing

$ 560 $ 419 $ 136

Financial services

$ 747 $ 606 $ 324

Income tax expense:

Factory-built housing

$ 16,204 $ 14,574 $ 14,891

Financial services

4,062 3,339 3,163

$ 20,266 $ 17,913 $ 18,054

Capital expenditures:

Factory-built housing

$ 25,465 $ 13,211 $ 7,522

Financial services

$ 25,537 $ 14,340 $ 7,636

2021 March 28,

Total assets:

Factory-built housing

$ 711,579 $ 607,808

Financial services

240,254 202,623

$ 951,833 $ 810,431

Quarterly Financial Data (Unaudited)

The following tables set forth certain unaudited quarterly financial information for fiscal years 2021 and 2020 (dollars in thousands, except per share amounts):

Fiscal year ended March 28, 2020

Quarter Second

Quarter Third

Quarter Fourth

Quarter Total

Fiscal year ended April 3, 2021

$ 254,801 $ 257,976 $ 288,772 $ 306,502 $ 1,108,051

55,323 53,541 59,238 70,875 238,977

16,674 15,049 19,701 25,222 76,646

Net income per share:

$ 1.82 $ 1.64 $ 2.14 $ 2.74 $ 8.34

$ 1.80 $ 1.62 $ 2.12 $ 2.71 $ 8.25

Fiscal year ended March 28, 2020

$ 264,042 $ 268,675 $ 273,722 $ 255,335 $ 1,061,774

60,298 58,467 59,855 51,898 230,518

21,282 20,885 20,898 12,001 75,066

Net income per share:

Subsequent Events

In April 2020, the Company decided to shut down production and close its Lexington, Mississippi plant.

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.

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.

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.

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.

Currently, no decisions have been made on the disposition of the production facility, which is currently leased, or related assets.

$ 2.34 $ 2.29 $ 2.29 $ 1.31 $ 8.22

$ 2.31 $ 2.25 $ 2.25 $ 1.29 $ 8.10

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 9A. Controls and Procedures