CAVCO INDUSTRIES, INC. 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures The Company carried out an evaluation, under the supervision and with the participation of the Company's management, including its President and Chief Executive Officer and its 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 The management of Cavco Industries, Inc. (the "Company") is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the Company's assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in conformity with U.S. generally accepted accounting principles, and that the Company's receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements. 41 Table of Contents Because of its inherent limitations, the Company's controls and procedures may not prevent or detect misstatements. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the controls system are met. Because of the inherent limitations in all controls systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. 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 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 April 3, 2021, which have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. 42 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and the Board of Directors of Cavco Industries, Inc. Opinion on the Internal Control Over Financial Reporting We have audited Cavco Industries, Inc. 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 The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements. 43 Table of Contents Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ RSM US LLP Phoenix, Arizona May 27, 2021 44 Table of Contents ITEM 9B. OTHER INFORMATION None. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 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. A copy of the Company's Code of Ethics is located on the Company's website at www.cavco.com or will be mailed, at no charge, upon request submitted to Mickey R. 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 website at www.cavco.com . ITEM 11. EXECUTIVE COMPENSATION The information required to be disclosed by this item is incorporated herein by reference to our 2021 Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 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 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 Issued Upon Exercise of Outstanding Options, Warrants, and Rights (a) Weighted- Average Exercise Price of Outstanding Options, Warrants, and Rights Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) Equity compensation plans approved by stockholders 251,749 $ 146.86 295,571 Equity compensation plans not approved by stockholders — — — Total 251,749 $ 146.86 295,571 45 Table of Contents ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required to be disclosed by this item is incorporated herein by reference to our 2021 Proxy Statement. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information required to be disclosed by this item is incorporated herein by reference to our 2021 Proxy Statement. 46 Table of Contents PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES Financial Statements and Financial Statement Schedules Financial Statements are listed in the Index to Consolidated Financial Statements on page F-1 of this report. All schedules have been omitted because they are not applicable or the required information is included in the Consolidated Financial Statements or Notes thereto. Exhibits The documents listed below are being filed or have previously been filed on behalf of the Company and are incorporated herein by reference from the documents indicated and made a part hereof. Exhibits not identified as previously filed are filed herewith. Copies of any of the exhibits referred to below will be furnished at no cost to security holders who make a written request to Mickey R. Dragash, Secretary, Cavco Industries, Inc., 3636 North Central Avenue, Suite 1200, Phoenix, Arizona, 85012 or via the Company website (www.cavco.com) . Exhibit Number Exhibit Filed/Furnished Herewith or Incorporated by Reference 3.1 Restated Certificate of Incorporation of Cavco Exhibit 3.1 to the Annual Report on Form 10-K for the fiscal year ended March 31, 2004 3.2 Certificate of Amendment to Restated Certificate of Incorporation of Cavco Exhibit 3.1 to the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2006 3.3 Certificate of Amendment to Restated Certificate of Incorporation of Cavco Exhibit 3.1 to the Quarterly Report on Form 10-Q for the fiscal quarter ended September 27, 2015 3.4 Third Amended and Restated Bylaws of Cavco Exhibit 3.1 to the Periodic Report on Form 8-K filed on January 29, 2020 4.1 Description of Registrant's Securities registered under Section 12 of the Securities Exchange Act of 1934, as amended. Exhibit 4.1 to the Annual Report on Form 10-K for the fiscal year ended March 28, 2020 10.1* Stock Incentive Plan of Cavco Exhibit 10.6 to the Registration Statement on Form 10/A (File No. 000-08822) filed by Cavco on May 30, 2003 10.1.1* Amendment to the Cavco Industries, Inc. Stock Incentive Plan Exhibit 10.1 to the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2010 10.2* Cavco 2005 Stock Incentive Plan Exhibit A to the Corporation's Definitive Proxy Statement for its 2005 Annual Meeting of Stockholders filed by the Company with the Securities and Exchange Commission on May 23, 2005 10.2.1* First Amendment to Cavco Industries, Inc. 2005 Stock Incentive Plan Exhibit 10.2 to the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2010 10.2.2* Second Amendment to Cavco Industries, Inc. 2005 Stock Incentive Plan Exhibit 10.1 to the Quarterly Report on Form 10-Q for the fiscal quarter ended September 26, 2015 10.2.3* Form of Stock Option Agreement for Stock Incentive Plan Exhibit 10.1 to the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2012 10.2.4* Form of Stock Option Agreement for Stock Incentive Plan Exhibit 10.1 to the Quarterly Report on Form 10-Q for the fiscal quarter ended July 2, 2016 10.2.5* Form of Stock Option Agreement for Stock Incentive Plan Exhibit 10.1 to the Current Report on Form 8-K filed on January 8, 2019 10.2.6* Amendment to the 2017 Stock Option Award Agreement effective as of April 15, 2019, by and between the Company and Dan Urness Exhibit 10.2 to the Current Report on Form 8-K filed on April 2, 2019 10.2.7* Amendment to the 2018 Stock Option Award Agreement effective as of April 15, 2019, by and between the Company and Dan Urness Exhibit 10.3 to the Current Report on Form 8-K filed on April 2, 2019 10.2.8* Form of Cavco Industries, Inc. 2005 Stock Incentive Plan Restricted Stock Unit Agreement Exhibit 10.2.10 to the Annual Report on Form 10-K for the fiscal year ended March 30, 2019 10.3* Transition Agreement, dated as of November 8, 2018, by and between Cavco Industries, Inc. and Joseph Stegmayer Exhibit 10.1 to the Quarterly Report on Form 10-Q for the fiscal quarter ended September 29, 2018 47 Table of Contents Exhibit Number Exhibit Filed/Furnished Herewith or Incorporated by Reference 10.3.1* Indemnification Agreement, dated as of November 8, 2018, by and between Daniel L. Urness and Cavco Industries, Inc. Exhibit 10.3 to the Quarterly Report on Form 10-Q for the fiscal quarter ended September 29, 2018 10.3.2* Employment Agreement, dated as of April 1, 2019, by and between William C. Boor and Cavco Industries, Inc. Exhibit 10.1 to the Current Report on Form 8-K filed on April 2, 2019 10.3.3* Employment Agreement, dated as of April 1, 2019, by and between Daniel L. Urness and Cavco Industries, Inc. Exhibit 10.4 to the Current Report on Form 8-K filed on April 2, 2019 10.3.4* Employment Agreement, dated as of April 1, 2019, by and between Mickey R. Dragash and Cavco Industries, Inc. Exhibit 10.6 to the Current Report on Form 8-K filed on April 2, 2019 10.3.5* Larry Keener Retirement Letter, dated January 28, 2020 Exhibit 10.3.5 to the Annual Report on Form 10-K for the fiscal year ended March 28, 2020 10.3.6* Offer Letter, dated as of January 7, 2020, between the Company and Matthew Niño Exhibit 10.3.6 to the Annual Report on Form 10-K for the fiscal year ended March 28, 2020 10.3.7* Severance Agreement, dated April 14, 2020, by and between Simone Reynolds and Cavco Industries, Inc. Exhibit 10.3.7 to the Annual Report on Form 10-K for the fiscal year ended March 28, 2020 10.3.8* 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 10.3. 9 * Separation Agreement, dated as of February 19, 2021, by and between Cavco Industries, Inc . and Daniel L. Urness Filed herewith 10.4* Executive Officer Incentive Plans for Fiscal Year 2019 Current Report on Form 8-K filed on July 12, 2018 10.4.1* Executive Officer Incentive Plans for Fiscal Year 2020 Current Report on Form 8-K filed on June 21, 2019 10.5 Form of Indemnification Agreement Exhibit 10.5 to Current Report on Form 8-K filed on April 2, 2019 10.6 Cavco Industries, Inc. Clawback Policy Exhibit 10.6 to the Annual Report on Form 10-K for the fiscal year ended March 28, 2020 21 List of Subsidiaries of Cavco Filed herewith 23 Consent of RSM US LLP, Independent Registered Public Accounting Firm Filed herewith 31.1 Certificate of William C. Boor, President and Chief Executive Officer, pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended Filed herewith 31.2 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 32.1** 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 101.INS Inline XBRL Instance Document- the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. 101.SCH Inline XBRL Taxonomy Extension Schema 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase 101.LAB Inline XBRL Taxonomy Extension Label Linkbase 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase 104 Cover Page Interactive Data File- the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document * Management contract or compensatory plan or arrangement ** These certifications are not "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. These certifications are not to be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, unless Cavco specifically incorporates them by reference. ITEM 16. FORM 10-K SUMMARY None. 48 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CAVCO INDUSTRIES, INC. Date: May 27, 2021 /s/ William C. Boor William C. Boor President and Chief Executive Officer (Principal Executive Officer) 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. Boor Director, President and May 27, 2021 William C. Boor Chief Executive Officer (Principal Executive Officer) /s/ Paul Bigbee Chief Accounting Officer May 27, 2021 Paul Bigbee (Principal Financial and Accounting Officer) /s/ Steven G. Bunger Chairman of the Board of Directors May 27, 2021 Steven G. Bunger /s/ Susan L. Blount Director May 27, 2021 Susan L. Blount /s/ David A. Greenblatt Director May 27, 2021 David A. Greenblatt /s/ Richard A. Kerley Director May 27, 2021 Richard A. Kerley /s/ Steven W. Moster Director May 27, 2021 Steven W. Moster /s/ Julia W. Sze Director May 27, 2021 Julia W. Sze 49 Table of Contents CAVCO INDUSTRIES, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm F- 2 Consolidated Balance Sheets as of April 3, 2021 and March 28, 2020 F- 4 Consolidated Statements of Comprehensive Income for the Years Ended April 3, 2021, March 28, 2020 and March 30, 2019 F- 5 Consolidated Statements of Stockholders' Equity for the Years Ended April 3 , 2021, March 28, 2020 and March 30, 2019 F- 6 Consolidated Statements of Cash Flows for the Years Ended April 3, 2021, March 28, 2020 and March 30, 2019 F- 7 Notes to Consolidated Financial Statements F- 8 F-1 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and the Board of Directors of Cavco Industries, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Cavco Industries, Inc. 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 These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters 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. 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 accounts or disclosures to which they relate. F-2 Table of Contents 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 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 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; and – Testing on a sample basis, the completeness and accuracy of the underlying data to supporting documentation and testing the mathematical accuracy of the calculations. /s/ RSM US LLP We have served as the Company's auditor since 2015. Phoenix, Arizona May 27, 2021 F-3 Table of Contents CAVCO INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share amounts) April 3, 2021 March 28, 2020 ASSETS Current assets: Cash and cash equivalents $ 322,279 $ 241,826 Restricted cash, current 16,693 13,446 Accounts receivable, net 47,396 42,800 Short-term investments 19,496 14,582 Current portion of consumer loans receivable, net 37,690 32,376 Current portion of commercial loans receivable, net 14,568 14,657 Current portion of commercial loans receivable from affiliates, net 4,664 766 Inventories 131,234 113,535 Prepaid expenses and other current assets 57,779 42,197 Total current assets 651,799 516,185 Restricted cash 335 335 Investments 35,010 31,557 Consumer loans receivable, net 37,108 49,928 Commercial loans receivable, net 20,281 23,685 Commercial loans receivable from affiliate, net 4,801 7,457 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 Current liabilities: Accounts payable $ 32,120 $ 29,924 Accrued expenses and other current liabilities 203,133 139,930 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 Secured credit facilities and other 10,335 12,705 Deferred income taxes 7,393 7,295 Stockholders' equity: Preferred stock, $ 0.01 par value; 1,000,000 shares authorized; No shares issued or outstanding — — Common stock, $ 0.01 par value; 40,000,000 shares authorized; Issued 9,241,256 and 9,173,242 shares, respectively 92 92 Treasury stock, at cost; 6,600 shares as of April 3, 2021, No shares as of March 28, 2020 ( 1,441 ) — Additional paid-in capital 253,835 252,260 Retained earnings 431,057 355,144 Accumulated other comprehensive income 97 90 Total stockholders' equity 683,640 607,586 Total liabilities and stockholders' equity $ 951,833 $ 810,431 See accompanying Notes to Consolidated Financial Statements F-4 Table of Contents CAVCO INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Dollars in thousands, except per share amounts) Year Ended April 3, 2021 March 28, 2020 March 30, 2019 Net revenue $ 1,108,051 $ 1,061,774 $ 962,746 Cost of sales 869,074 831,256 757,040 Gross profit 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 ) Net income $ 76,646 $ 75,066 $ 68,622 Comprehensive income: Net income $ 76,646 $ 75,066 $ 68,622 Reclassification adjustment for securities sold 19 18 74 Applicable income taxes ( 4 ) ( 4 ) ( 15 ) Net change in unrealized position of investments held ( 10 ) 132 122 Applicable income taxes 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 F-5 Table of Contents CAVCO INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Dollars in thousands) Stockholders' Equity Treasury Stock Additional paid-in capital Retained earnings Accumulated other comprehensive income (loss) Total Common Stock Shares Amount Balance, March 31, 2018 9,044,858 $ 90 $ — $ 246,197 $ 209,381 $ 1,438 $ 457,106 Cumulative effect of implementing ASU 2016-01 — — — — 1,621 ( 1,621 ) — Cumulative effect of implementing ASC 606 — — — — 454 — 454 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 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 F-6 Table of Contents CAVCO INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) Year Ended April 3, 2021 March 28, 2020 March 30, 2019 OPERATING ACTIVITIES Net income $ 76,646 $ 75,066 $ 68,622 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 6,324 5,783 4,698 Provision for credit losses ( 1,193 ) 1,348 562 Deferred income taxes 326 261 ( 762 ) Stock-based compensation expense 4,392 3,881 3,365 Non-cash interest income, net ( 3,312 ) ( 1,411 ) ( 953 ) 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 ) Changes in operating assets and liabilities: Accounts receivable ( 4,597 ) ( 1,442 ) ( 5,684 ) Consumer loans receivable originated ( 161,562 ) ( 157,090 ) ( 129,990 ) Proceeds from sales of consumer loans 167,067 159,632 131,117 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 ) Commercial loans receivable 1,825 ( 1,914 ) ( 26,543 ) Accounts payable and accrued expenses and other current liabilities 47,229 6,444 4,712 Net cash provided by operating activities 114,031 101,737 32,836 INVESTING ACTIVITIES Purchases of property, plant and equipment ( 25,537 ) ( 14,340 ) ( 7,636 ) Payments for acquisition, net — ( 15,937 ) — Proceeds from sale of property, plant and equipment and assets held for sale 240 6,541 125 Purchases of investments ( 17,518 ) ( 11,699 ) ( 7,337 ) Proceeds from sale of investments 19,466 10,192 9,033 Net cash used in investing activities ( 23,349 ) ( 25,243 ) ( 5,815 ) FINANCING ACTIVITIES Payments for exercise of stock options ( 2,817 ) ( 1,067 ) ( 114 ) Proceeds from secured financings and other 64 227 392 Payments on securitized financings and other ( 2,788 ) ( 19,916 ) ( 26,688 ) 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 Cash, cash equivalents and restricted cash at beginning of the fiscal year 255,607 199,869 199,258 Cash, cash equivalents and restricted cash at end of the fiscal year $ 339,307 $ 255,607 $ 199,869 Supplemental disclosures of cash flow information: Cash paid during the year for income taxes $ 19,469 $ 18,839 $ 19,912 Cash paid during the year for interest $ 468 $ 736 $ 2,302 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 $ — See accompanying Notes to Consolidated Financial Statements F-7 Table of Contents CAVCO INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies Principles of Consolidation. These Consolidated Financial Statements include the accounts of Cavco Industries, Inc. 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. 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, 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. 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. Fiscal Year. 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. Preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from the estimates and assumptions used in preparation of the consolidated financial statements. Fair Value of Financial Instruments. 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. F-8 Table of Contents 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. See Note 19 for the fair values of our other financial instruments and the inputs used. Factory-Built Housing Revenue Recognition - Wholesale . Revenue from homes sold to independent distributors, builders, communities and developers is generally recognized when the home is shipped, at which time title passes and it is probable that substantially all of the consideration will be received. Homes sold to independent distributors are generally either paid upon shipment or floor plan financed by the independent distributor through standard industry financing arrangements, which can include repurchase agreements. Manufacturing sales financed under floor plan arrangements that include repurchase agreements are reduced by a provision for estimated repurchase obligations (see Note 16). 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 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. Premium amounts collected on policies issued and assumed by Standard Casualty are amortized on a straight-line basis into Net revenue over the life of the policy. Premiums earned are net of reinsurance ceded. 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 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. F-9 Table of Contents Cash and Cash Equivalents . Highly liquid investments with insignificant interest rate risk and original maturities of three months or less, when purchased, are classified as cash equivalents. 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. These funds cannot be accessed for general operating purposes (see Note 3). Accounts Receivable. 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. Investments. Management determines the appropriate classification of its investment securities at the time of purchase. 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). 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. Loans held for investment consist of loan contracts collateralized by the borrowers' homes and, in some instances, related land. Construction loans in progress are stated at the aggregate amount of cumulative funded advances. Loans held for sale are loans that, at the time of origination, are originated with the intent to resell to investors with which the Company has pre-existing purchase agreements, such as Fannie Mae and Freddie Mac, or to sell as part of a Ginnie Mae insured pool of loans and consist of loan contracts collateralized by single-family residential mortgages. Loans held for sale are stated at the lower of cost or market on an aggregate basis. Combined land and home mortgages are further disaggregated by the type of loan documentation: those conforming to the requirements of Government-Sponsored Enterprises ("GSEs") and those that are non-conforming. 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, 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. F-10 Table of Contents Commercial Loans Receivable. 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. 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). Inventories. 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. Property, Plant and Equipment. Property, plant and equipment are carried at cost. Depreciation is calculated using the straight-line method over the estimated useful life of each asset. Estimated useful lives for significant classes of assets are as follows: buildings and improvements, 10 to 39 years; and machinery and equipment, 3 to 25 years. Repairs and maintenance charges are expensed as incurred. We sell miscellaneous property, plant and equipment in the normal course of business. Asset Impairment . 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. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. Fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. 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. There were no impairment losses recognized in fiscal years 2021, 2020 or 2019 . F-11 Table of Contents Goodwill and Other Intangibles. 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. 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 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. Finite-lived intangibles are amortized over 3 to 15 years on a straight-line basis and are reviewed for possible impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. 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. 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. Warranties. 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. Estimated warranty costs are accrued in Cost of sales at the time of sale. The warranty provision and reserves are based on estimates of the amounts necessary to settle existing and future claims on homes sold as of the balance sheet date. 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. 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. Freight. 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. 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. See Note 16 for further discussion. F-12 Table of Contents 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. 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 $ 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. Insurance. 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. Estimated self-insurance costs are accrued for incurred claims and estimated IBNR claims. A reserve for products liability is actuarially determined and reflected in Accrued expenses and other current liabilities in the accompanying Consolidated Balance Sheets. The determination of claims and expenses and the appropriateness of the related liabilities are regularly reviewed and updated. Advertising. 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. 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. 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. Deferred taxes result from differences between the financial and tax bases of the Company's assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted. The calculation of tax liabilities involves considering uncertainties in the application of complex tax regulations. 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. 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 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. 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 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. F-13 Table of Contents 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. 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 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. 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 (see Note 18). Recently Issued or Adopted Accounting Pronouncements. 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. 2. Revenue from Contracts with Customers Revenues are recognized when a good or service is transferred to a customer. 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 our promises to deliver goods and services to the customers. Site Improvements on Retail Sales. 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 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. Additional Items . Expected consideration, and therefore revenue, reflects reductions for returns, allowances, and other incentives, some of which may be contingent on future events. Additionally, our volume rebates are accrued at the time of sale and are recorded as a reduction of Net revenue. F-14 Table of Contents 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. 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. 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, 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 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. April 3, 2021 March 28, 2020 March 30, 2019 Factory-built housing U.S. Housing and Urban Development code homes $ 842,515 $ 813,074 $ 727,950 Modular homes 91,896 84,498 90,636 Park model RVs 46,862 46,427 38,057 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 Other 67,060 59,082 53,955 70,162 62,434 57,020 $ 1,108,051 $ 1,061,774 $ 962,746 3. Restricted Cash Restricted cash consisted of the following (in thousands): April 3, 2021 March 28, 2020 Cash related to CountryPlace customer payments to be remitted to third parties $ 16,049 $ 12,740 Other restricted cash 979 1,041 $ 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): April 3, 2021 March 28, 2020 March 30, 2019 Cash and cash equivalents $ 322,279 $ 241,826 $ 187,370 Restricted cash, current 16,693 13,446 12,148 Restricted cash 335 335 351 $ 339,307 $ 255,607 $ 199,869 F-15 Table of Contents 4. Investments Investments consisted of the following (in thousands): April 3, 2021 March 28, 2020 Available-for-sale debt securities $ 14,946 $ 14,774 Marketable equity securities 17,600 9,829 Non-marketable equity investments 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. 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 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Residential mortgage-backed securities $ 2,787 $ 30 $ ( 13 ) $ 2,804 State and political subdivision debt securities 7,239 125 ( 19 ) 7,345 Corporate debt securities 4,797 11 ( 11 ) 4,797 $ 14,823 $ 166 $ ( 43 ) $ 14,946 March 28, 2020 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value 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 5,021 5 ( 65 ) 4,961 $ 14,660 $ 208 $ ( 94 ) $ 14,774 F-16 Table of Contents 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): April 3, 2021 Less than 12 Months 12 Months or Longer Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses 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 Total Fair Value Unrealized Losses Fair Value Unrealized Losses Fair Value Unrealized Losses 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 ) $ 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. April 3, 2021 Amortized Cost Fair Value Due in less than one year $ 1,218 $ 1,220 Due after one year through five years 8,487 8,484 Due after five years through ten years 1,022 1,087 Due after ten years 1,309 1,351 Mortgage-backed securities 2,787 2,804 $ 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. 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. F-17 Table of Contents 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): Year Ended April 3, 2021 March 28, 2020 March 30, 2019 Marketable equity securities: Net gain (loss) recognized during the period $ 8,515 $ ( 2,264 ) $ ( 355 ) Less: 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 ) 5. Inventories Inventories consisted of the following (in thousands): April 3, 2021 March 28, 2020 Raw materials $ 54,336 $ 35,691 Work in process 19,149 13,953 Finished goods 57,749 63,891 $ 131,234 $ 113,535 6. Consumer Loans Receivable The following table summarizes consumer loans receivable (in thousands): April 3, 2021 March 28, 2020 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 13,801 13,400 80,027 85,990 Deferred financing fees and other, net ( 2,041 ) ( 1,919 ) Allowance for loan losses ( 3,188 ) ( 1,767 ) 74,798 82,304 Less current portion ( 37,690 ) ( 32,376 ) $ 37,108 $ 49,928 F-18 Table of Contents 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): April 3, 2021 March 28, 2020 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: April 3, 2021 March 28, 2020 Weighted average contractual interest rate 8.26 % 8.42 % Weighted average effective interest rate 9.34 % 9.27 % Weighted average months to maturity 162 164 The following table is a consolidated summary of the delinquency status of the outstanding amortized cost of consumer loans receivable (in thousands): April 3, 2021 March 28, 2020 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, 2020 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 F-19 Table of Contents 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 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 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; the loan is charged off and the loss is recorded to the allowance for loan losses. 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 $ 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. 7. Commercial Loans Receivable and Allowance for Loan Losses 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. 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): April 3, 2021 March 28, 2020 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: April 3, 2021 March 28, 2020 Weighted average contractual interest rate 6.4 % 5.7 % Weighted average months to maturity 11 10 F-20 Table of Contents 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): April 3, 2021 March 28, 2020 Balance at beginning of period $ 393 $ 180 Impact of adoption of ASU 2016-13 435 — Change in estimated loan losses, net ( 12 ) 213 Loans charged off, net of recoveries — — Balance at end of period $ 816 $ 393 Loans are subject to regular review and are given management's attention whenever a problem situation appears to be developing. Loans with indicators of potential performance problems are placed on watch list status and are subject to additional monitoring and scrutiny. Nonperforming status includes loans accounted for on a non-accrual basis and accruing loans with principal payments 90 days or more past due. 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, 2020 Risk profile based on payment activity: Performing $ 30,627 $ 8,677 $ 3,206 $ 1,864 $ 1,003 $ 45,377 $ 47,016 Watch list — — — — — — 186 Nonperforming — — — — — — — $ 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. F-21 Table of Contents 8. Property, Plant and Equipment, net Property, plant and equipment, net, consisted of the following (in thousands): April 3, 2021 March 28, 2020 Property, plant and equipment, at cost: Land $ 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. Included in the amounts above are certain assets under finance leases. See Note 9 for additional information. 9. Leases 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 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 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. 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 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. F-22 Table of Contents 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, 2020 ROU assets Operating lease assets Operating lease right-of-use assets $ 16,252 $ 13,894 Finance lease assets Property, plant and equipment, net (1) 986 1,025 Total lease assets $ 17,238 $ 14,919 Lease Liabilities Current: 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 Non-current: 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 $ 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): Year Ended Lease Expense Category Classification April 3, 2021 March 28, 2020 Operating lease expense (2) Cost of sales $ 1,105 $ 834 Selling, general and administrative expenses 3,327 3,119 Finance lease 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 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. F-23 Table of Contents 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 Less: Amount representing interest ( 2,231 ) ( 37 ) ( 2,268 ) $ 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 % 10. Goodwill and Other Intangibles Goodwill and other intangibles, net, consisted of the following (in thousands): April 3, 2021 March 28, 2020 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Indefinite-lived: Goodwill $ 75,090 $ — $ 75,090 $ 75,090 $ — $ 75,090 Trademarks and trade names 8,900 — 8,900 8,900 — 8,900 State insurance licenses 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 Other 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. F-24 Table of Contents Expected amortization for future fiscal years is as follows (in thousands): 2022 $ 673 2023 591 2024 585 2025 546 2026 503 Thereafter 1,465 11. Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consisted of the following (in thousands): April 3, 2021 March 28, 2020 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 Estimated warranties 18,032 18,678 Accrued volume rebates 12,132 9,801 Other 44,816 35,453 $ 203,133 $ 139,930 12. Warranties Activity in the liability for estimated warranties was as follows (in thousands): April 3, 2021 March 28, 2020 March 30, 2019 Balance at beginning of period $ 18,678 $ 17,069 $ 16,638 Purchase accounting additions — 1,192 — 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 13. Debt and Finance Lease Obligations 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): April 3, 2021 March 28, 2020 Secured credit facilities $ 8,210 $ 10,474 Other secured financings 3,672 4,113 Finance lease obligations 304 366 12,186 14,953 Less current portion ( 1,851 ) ( 2,248 ) $ 10,335 $ 12,705 F-25 Table of Contents 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 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): 2022 $ 1,840 2023 1,497 2024 1,323 2025 1,281 2026 1,258 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. 14. Reinsurance and Insurance Loss Reserves Standard Casualty is primarily a specialty writer of manufactured home physical damage insurance. 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): Year Ended 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. F-26 Table of Contents 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): April 3, 2021 March 28, 2020 March 30, 2019 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 15. Income Taxes 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 following details the provision for income taxes for fiscal years 2021, 2020 and 2019 (in thousands): Fiscal Year 2021 2020 2019 Current Federal $ 16,823 $ 14,625 $ 16,086 State 3,128 3,084 2,209 19,951 17,709 18,295 Deferred Federal 302 246 ( 347 ) State 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): Fiscal Year 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 ) Tax credits ( 1,356 ) ( 2,401 ) ( 1,506 ) Other 559 486 754 $ 20,266 $ 17,913 $ 18,054 F-27 Table of Contents Net deferred tax assets and liabilities were as follows (in thousands): April 3, 2021 March 28, 2020 Net deferred tax (liabilities) assets Goodwill $ ( 16,327 ) $ ( 16,120 ) Property, plant, equipment and depreciation ( 5,121 ) ( 5,084 ) Warranty reserves 4,277 4,444 Lease - Operating lease liability 4,123 3,535 Lease - Right of use asset ( 3,820 ) ( 3,295 ) Salaries and wages 3,065 1,679 Stock-based compensation 2,177 2,595 Unrealized gains on marketable equity investments ( 1,695 ) ( 43 ) Loan discount 1,631 2,436 Other intangibles ( 1,538 ) ( 1,534 ) Accrued volume rebates 1,494 1,189 Inventory 1,271 1,012 Other 3,070 1,891 $ ( 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. 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 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 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. F-28 Table of Contents 16. Commitments and Contingencies Repurchase Contingencies . We are contingently liable under terms of repurchase agreements with financial institutions providing inventory financing to independent distributors of our products. These arrangements, which are customary in the industry, provide for the repurchase of products sold to distributors in the event of default by the distributor. The risk of loss under these agreements is spread over numerous distributors. 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 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 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): April 3, 2021 March 28, 2020 Construction loan contract amount $ 37,628 $ 31,136 Cumulative advances ( 13,801 ) ( 13,400 ) $ 23,827 $ 17,736 Representations and Warranties of Mortgages Sold . 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, 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. 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. F-29 Table of Contents Interest Rate Lock Commitments . 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 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 lock commitments generally range between 30 and 180 days; however, borrowers are not obligated to close the related loans. 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. The estimated fair value of IRLCs is recorded in Prepaid expenses and other current assets in the Consolidated Balance Sheets. The fair value of IRLCs is based on the value of the underlying loan adjusted for: (1) estimated cost to complete and originate the loan and (2) the estimated percentage of IRLCs that will result in closed loans. The initial and subsequent changes in the value of IRLCs are a component of gain (loss) on loans held for sale. 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 . 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 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, 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. F-30 Table of Contents Joseph D. Robles v. Cavco Industries, Inc. ( "Robles"), was filed in the Superior Court for the State of California, Riverside on June 25, 2019 and Malik Griffin v. Fleetwood Homes, Inc. ("Griffin"), was filed in the Superior Court for the State of California, San Bernardino on September 19, 2019 each seeking recovery on behalf of a putative class of current and former hourly employees for certain alleged wage-and-hour violations including, among other things: (i) alleged failure to comply with certain wage statement formatting requirements; (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. 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. 17. 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 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. 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. 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 five years . 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. F-31 Table of Contents Stock Options. The following table summarizes stock option activity for fiscal years 2021, 2020 and 2019: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (years) Aggregate Intrinsic Value (in thousands) 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 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 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 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 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: Fiscal Year 2021 2020 2019 Volatility 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 % F-32 Table of Contents Restricted Stock Awards. 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 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 18. Earnings Per Share 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): Fiscal Year 2021 2020 2019 Net income $ 76,646 $ 75,066 $ 68,622 Weighted average shares outstanding: Basic 9,189,052 9,129,639 9,080,878 Effect of dilutive securities 104,082 139,145 187,859 Diluted 9,293,134 9,268,784 9,268,737 Net income per share: Basic $ 8.34 $ 8.22 $ 7.56 Diluted $ 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. F-33 Table of Contents 19. Fair Value Measurements The book value and estimated fair value of our financial instruments were as follows (in thousands): April 3, 2021 March 28, 2020 Book Value Estimated Fair Value Book Value Estimated Fair Value 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) 74,798 86,209 82,304 97,395 Commercial loans receivable (5) 44,314 42,379 46,565 46,819 Secured credit facilities and other (6) ( 12,186 ) ( 12,340 ) ( 14,953 ) ( 15,592 ) (1) Level 2: 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. (2) Level 1: The fair value is based on quoted market prices. (3) Level 3: The fair value approximates book value based on the non-marketable nature of the investments. (4) Level 3: Includes consumer loans receivable held for investment, held for sale and construction advances. See discussion of fair value inputs below. (5) Level 3: The fair value is estimated using market interest rates of comparable loans. (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. 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 based on the present value of the expected future cash flows related to servicing these loans. April 3, 2021 March 28, 2020 Number of loans serviced with MSRs 4,647 4,688 Weighted average servicing fee (basis points) 33.57 31.12 Capitalized servicing multiple 45.93 % 67.19 % Capitalized servicing rate (basis points) 15.42 20.91 Serviced portfolio with MSRs (in thousands) $ 593,939 $ 585,777 MSRs (in thousands) $ 916 $ 1,225 F-34 20. Employee Benefit Plans 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 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. 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. The Company match is discretionary, and may be up to 50 % of the first 5 % of eligible compensation contributed by employees up to a maximum of $ 1,000 . For calendar year 2020, the Company match was 20 % of the first 5 % of eligible compensation contributed by employees. 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 each in fiscal years 2021 and 2020 and $ 1.0 million in fiscal year 2019. 21. Related Party Transactions We have non-marketable equity investments in other distribution operations outside of Company-owned retail stores. In the ordinary course of business, we sell homes and lend to certain of these operations through our commercial lending programs. For the 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. F-35 Table of Contents 22. Business Segment Information 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 April 3, 2021 March 28, 2020 March 30, 2019 Net revenue: 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 Insurance 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 127 57 56 $ 5,577 $ 5,177 $ 4,374 Amortization: Factory-built housing $ 560 $ 419 $ 136 Financial services 187 187 188 $ 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 72 1,129 114 $ 25,537 $ 14,340 $ 7,636 April 3, 2021 March 28, 2020 Total assets: Factory-built housing $ 711,579 $ 607,808 Financial services 240,254 202,623 $ 951,833 $ 810,431 F-36 23. 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): First Quarter Second Quarter Third Quarter Fourth Quarter Total Fiscal year ended April 3, 2021 Net revenue $ 254,801 $ 257,976 $ 288,772 $ 306,502 $ 1,108,051 Gross profit 55,323 53,541 59,238 70,875 238,977 Net income 16,674 15,049 19,701 25,222 76,646 Net income per share: Basic $ 1.82 $ 1.64 $ 2.14 $ 2.74 $ 8.34 Diluted $ 1.80 $ 1.62 $ 2.12 $ 2.71 $ 8.25 Fiscal year ended March 28, 2020 Net revenue $ 264,042 $ 268,675 $ 273,722 $ 255,335 $ 1,061,774 Gross profit 60,298 58,467 59,855 51,898 230,518 Net income 21,282 20,885 20,898 12,001 75,066 Net income per share: Basic $ 2.34 $ 2.29 $ 2.29 $ 1.31 $ 8.22 Diluted $ 2.31 $ 2.25 $ 2.25 $ 1.29 $ 8.10 F-37