What changed in this filing

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Item 1. Financial Statements

2021-11-05 compared with 2021-08-06 · 314 added, 127 removed, 441 unchanged (50% of the section changed)

4 unchanged sentences

2021 April 3,

ASSETS (Unaudited)

Current assets

Cash and cash equivalents $ 224,291 $ 322,279

$ 329,753 $ 322,279

Restricted cash, current 19,850 16,693

16,728 16,693

Accounts receivable, net 72,038 47,396

51,054 47,396

Short-term investments 18,867 19,496

19,749 19,496

Current portion of consumer loans receivable, net 26,475 37,690

32,429 37,690

Current portion of commercial loans receivable, net 31,307 14,568

16,500 14,568

Current portion of commercial loans receivable from affiliates, net 294 4,664

150,917 131,234

Inventories 190,394 131,234

Prepaid expenses and other current assets 49,482 57,779

48,621 57,779

Total current assets 632,998 651,799

667,864 651,799

Restricted cash 335 335

38,192 35,010

Investments 35,650 35,010

Consumer loans receivable, net 32,124 37,108

35,095 37,108

Commercial loans receivable, net 36,685 20,281

21,245 20,281

Commercial loans receivable from affiliates, net 3,647 4,801

Property, plant and equipment, net 156,397 96,794

97,981 96,794

75,090 75,090

Goodwill 106,487 75,090

Other intangibles, net 35,404 14,363

14,190 14,363

Operating lease right-of-use assets 16,706 16,252

16,150 16,252

$ 970,872 $ 951,833

LIABILITIES AND STOCKHOLDERS' EQUITY

Total assets $ 1,056,433 $ 951,833

LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST, AND STOCKHOLDERS' EQUITY

Current liabilities

Accounts payable $ 42,549 $ 32,120

$ 30,175 $ 32,120

Accrued expenses and other current liabilities 237,462 203,133

210,190 203,133

Current portion of secured financings and other 2,260 1,851

Total current liabilities 282,271 237,104

242,187 237,104

Operating lease liabilities 13,240 13,361

13,085 13,361

Secured financings and other 17,305 10,335

Deferred income taxes 9,373 7,393

Redeemable noncontrolling interest 1,128 —

Stockholders' equity

9 unchanged sentences

Additional paid-in capital 259,116 253,835

255,071 253,835

Retained earnings 495,713 431,057

458,103 431,057

Accumulated other comprehensive income 71 97

Total stockholders' equity 733,116 683,640

699,067 683,640

Total liabilities and stockholders' equity

$ 970,872 $ 951,833

Total liabilities, redeemable noncontrolling interest and stockholders' equity $ 1,056,433 $ 951,833

See accompanying Notes to Consolidated Financial Statements

2 unchanged sentences

(Dollars in thousands, except per share amounts)

Three Months Ended

2021 June 27,

Three Months Ended Six Months Ended

2021 September 26,

2020 October 2,

2021 September 26,

$ 359,543 $ 257,976 $ 689,965 $ 512,777

9 unchanged sentences

Other income, net

4,668 1,702 7,129 3,578

Income before income taxes

3 unchanged sentences

37,683 15,049 64,729 31,723

net income attributable to redeemable noncontrolling interest 73 — 73 —

Net income attributable to Cavco common stockholders $ 37,610 $ 15,049 $ 64,656 $ 31,723

Comprehensive income

$ 27,046 $ 16,674

Net income $ 37,683 $ 15,049 $ 64,729 $ 31,723

Reclassification adjustment for securities sold — 7 1 33

Applicable income taxes

— ( 2 ) — ( 7 )

Net change in unrealized position of investments held

( 16 ) 3 ( 34 ) 62

Applicable income taxes

3 ( 1 ) 7 ( 13 )

Net income per share

Comprehensive income 37,670 15,056 64,703 31,798

comprehensive income attributable to redeemable noncontrolling interest 73 — 73 —

Comprehensive income attributable to Cavco common stockholders $ 37,597 $ 15,056 $ 64,630 $ 31,798

Net income per share attributable to Cavco common stockholders

$ 4.09 $ 1.64 $ 7.03 $ 3.46

7 unchanged sentences

(Dollars in thousands)

Three Months Ended

2021 June 27,

Six Months Ended

2021 September 26,

OPERATING ACTIVITIES

8 unchanged sentences

Gain on investments and sale of loans, net ( 12,555 ) ( 9,597 )

Changes in operating assets and liabilities

Changes in operating assets and liabilities, net of acquisitions

Accounts receivable ( 3,136 ) 5,948

9 unchanged sentences

Purchases of property, plant and equipment ( 4,671 ) ( 3,773 )

Payments for acquisitions, net ( 151,309 ) —

Proceeds from sale of property, plant and equipment 53 77

1 unchanged sentence

Proceeds from sale of investments 6,133 8,054

Net cash (used in) provided by investing activities ( 3,616 ) 105

Net cash used in investing activities ( 156,045 ) ( 82 )

FINANCING ACTIVITIES

3 unchanged sentences

Payments for common stock repurchases ( 20,436 ) —

Distributions to noncontrolling interest ( 180 ) —

Net cash used in financing activities ( 18,873 ) ( 865 )

Net increase in cash, cash equivalents and restricted cash 7,509 34,875

Net (decrease) increase in cash, cash equivalents and restricted cash ( 94,831 ) 73,662

Cash, cash equivalents and restricted cash at beginning of the fiscal year 339,307 255,607

6 unchanged sentences

Right-of-use assets recognized and operating lease obligations incurred $ 2,205 $ 5,617

Fair value of assets acquired under finance leases $ 7,398 $ —

Finance lease obligations incurred $ 6,043 $ —

See accompanying Notes to Consolidated Financial Statements

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

We have evaluated subsequent events after the balance sheet date through the date of the filing of this report with the SEC;

and except for the events set forth in Note 20 of the Notes to Consolidated Financial Statements ("Notes") of the Company's Quarterly Report on Form 10-Q for the period ended July 3, 2021, there were no subsequent events requiring disclosure.

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

These Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the Notes to the Consolidated Financial Statements included in our 2021 Annual Report on Form 10-K for the year ended April 3, 2021, filed with the SEC ("Form 10-K").

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

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

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

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

10 unchanged sentences

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

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

On September 24, 2021, we acquired the business and certain assets and liabilities of The Commodore Corporation ("Commodore"), including its six manufacturing facilities and two wholly-owned retail locations.

The results of operations are included in our Consolidated Financial Statements from the date of acquisition.

See Note 21 .

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

Redeemable Noncontrolling Interest.

In fiscal year 2017, we purchased a 50 % interest in Craftsman Homes, LLC and Craftsman Homes Development, LLC (collectively known as “Craftsman" or the "Entities") from a third-party ("Seller").

Craftsman is a manufactured home street retailer in Nevada with four locations selling Company and other manufacturer branded homes.

They also provide general construction to setup the home property and assist with multi-home developments and multi-family dwellings.

On July 4, 2021, we entered into an agreement (the "Craftsman Purchase Agreement") with the Seller to obtain the remaining 50 % ownership in Craftsman, owned by the Seller, to be purchased over time.

As provided in the Craftsman Purchase Agreement, 20 % of the equity of Craftsman owned by the Seller was obtained as of July 4, 2021 by us for cash and, as a result, we obtained a controlling ownership interest.

We accounted for this transaction as a business combination to be achieved in stages (see Note 21) and consolidated the entities while recognizing a noncontrolling interest for the remaining Seller ownership as discussed below.

The Craftsman Purchase Agreement calls for an additional 20 % of the equity of Craftsman owned by the Seller to be purchased on December 31, 2023 by us for cash.

As mandatory redemption of this ownership interest is required, $ 2.5 million for the fair value of this portion of the noncontrolling interest is recorded in the long-term liabilities section of the Consolidated Balance Sheet under the Secured financings and other caption.

In each reporting period hereafter, until purchased by the Company, the mandatorily redeemable noncontrolling interest is adjusted to its current redemption value, based on a predetermined formula.

Adjustments in the redemption value to the mandatorily redeemable noncontrolling interest are recorded to Interest expense.

After December 31, 2023, the Seller has the right to require Cavco to purchase all of Seller's remaining 10 % ownership (“Put Right”) for an amount specified in the Agreement that is designed to approximate fair value.

Likewise, Cavco has the right to require Seller to sell their remaining 10 % ownership (“Call Right”) based on the same timing as described above for the Put Right.

The purchase price to be payable by the Company for the purchase of Seller's remaining ownership pursuant to the exercise of the Put Right or the Call Right will be settled in cash.

As redemption of this remaining ownership is not a current obligation, $ 1.2 million for the initial fair value of this portion of the noncontrolling interest is classified as a temporary equity mezzanine item between liabilities and stockholders' equity in the Consolidated Balance Sheet under the Redeemable noncontrolling interest caption.

The amount of income attributable to this noncontrolling interest is included in the Consolidated Statements of Comprehensive Income on the face of the Consolidated Statements of Comprehensive Income.

Revenue from Contracts with Customers

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

Three Months Ended

2021 June 27,

Three Months Ended Six Months Ended

October 2, 2021 September 26, 2020 October 2,

2021 September 26,

Factory-built housing

4 unchanged sentences

Park model RVs

9,728 9,027 19,399 22,749

Other 15,033 13,734 28,638 27,873

2 unchanged sentences

Insurance agency commissions received from third-party insurance companies

850 777 1,723 1,547

Other 16,599 16,232 33,865 32,173

10 unchanged sentences

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

2021 April 3,

2021 September 26,

Cash and cash equivalents $ 224,291 $ 312,243

12 unchanged sentences

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

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

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

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

Residential mortgage-backed securities

$ 2,609 $ 26 $ ( 11 ) $ 2,624

State and political subdivision debt securities

8,265 109 ( 19 ) 8,355

Corporate debt securities

6,982 12 ( 11 ) 6,983

$ 17,856 $ 147 $ ( 41 ) $ 17,962

April 3, 2021

Our non-marketable equity investments include investments in community-based initiatives that buy and sell our homes and provide home-only financing to residents of certain manufactured home communities and other distribution operations.

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

October 2, 2021 April 3, 2021

Value Amortized Cost Fair

Residential mortgage-backed securities

5 unchanged sentences

$ 18,089 $ 18,179 $ 14,823 $ 14,946

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 July 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.

October 2, 2021

Due in less than one year $ 1,611 $ 1,618

4 unchanged sentences

$ 18,089 $ 18,179

There were no gross gains or losses realized on the sale of available-for-sale debt securities during t he three months ended July 3, 2021 or June 27, 2020.

There were no gross gains or losses realized on the sale of available-for-sale debt securities during the three and six months ended October 2, 2021.

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

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

Three Months Ended

2021 June 27,

Three Months Ended Six Months Ended

2021 September 26,

2020 October 2,

2021 September 26,

Marketable equity securities

Net gain recognized during the period $ 243 $ 1,251 $ 1,939 $ 3,281

Net gains recognized on securities sold during the period ( 136 ) ( 33 )

Net (gains) losses recognized on securities sold during the period ( 143 ) 27 ( 279 ) ( 6 )

Unrealized gains recognized during the period on securities still held $ 100 $ 1,278 $ 1,660 $ 3,275

19 unchanged sentences

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

Three Months Ended

2021 June 27,

Three Months Ended Six Months Ended

2021 September 26,

2020 October 2,

2021 September 26,

Allowance for loan losses at beginning of period $ 2,918 $ 4,012 $ 3,188 $ 1,767

17 unchanged sentences

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

October 2, 2021

2022 2021 2020 2019 2018 Prior Total

19 unchanged sentences

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

As of July 3, 2021 and 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.

Other than Texas and Florida, no sta te had concentrations in excess of 10 % of the principal balance of the consumer loans receivable as of July 3, 2021 or April 3, 2021.

Repossessed homes totaled approximately $ 493,000 and $ 518,000 as of July 3, 2021 and April 3, 2021, respectively, and are included in Prepaid expenses and other current assets in the Consolidated Balance Sheets.

Foreclosure or similar proceedings in progress totaled approximately $ 1.0 million and $ 1.1 million as of July 3, 2021 and April 3, 2021, respectively.

As of October 2, 2021, 36 % of the outstanding principal balance of the consumer loans receivable portfolio was concentrated in Texas and 18 % was concentrated in Florida.

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

Other than Texas and Florida, no sta te had concentrations in excess of 10 % of the principal balance of the consumer loans receivable as of October 2, 2021 or April 3, 2021.

Repossessed homes totaled approximately $ 893,000 and $ 518,000 as of October 2, 2021 and April 3, 2021, respectively, and are included in Prepaid expenses and other current assets in the Consolidated Balance Sheets.

Foreclosure or similar proceedings in progress totaled approximately $ 927,000 and $ 1.1 million as of October 2, 2021 and April 3, 2021, respectively.

Commercial Loans Receivable

11 unchanged sentences

Weighted average contractual interest rate 6.3 % 6.4 %

Weighted average months to maturity 10 11

Weighted average months outstanding 10 11

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

Three Months Ended

2021 June 27,

Three Months Ended Six Months Ended

2021 September 26,

2020 October 2,

2021 September 26,

Balance at beginning of period

$ 785 $ 828 $ 816 $ 393

Impact of adoption of ASU 2016-13 — — — 435

Change in estimated loan losses, net

41 ( 39 ) 10 ( 39 )

Balance at end of period

As of July 3, 2021 and April 3, 2021, there were no commercial loans considered watch list or nonperforming.

$ 826 $ 789 $ 826 $ 789

As of October 2, 2021 and April 3, 2021, there were no commercial loans considered watch list or nonperforming.

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

October 2, 2021

2022 2021 2020 2019 2018 Prior Total

3 unchanged sentences

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

At July 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.

As of July 3, 2021, 14 % of our outstanding commercial loans receivable principal balance was concentrated in Arizona and 13 % was concentrated in California.

At October 2, 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.

As of October 2, 2021, 34 % of our outstanding commercial loans receivable principal balance was concentrated in Pennsylvania.

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

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

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

No other state had concentrations in excess of 10 % of the principal balance of the consumer loans receivable as of October 2, 2021 or April 3, 2021.

We had concentrations with one independent third-party and its affiliates that equaled 12 % and 18 % of the net commercial loans receivable principal balance outstanding, all of which was secured, as of October 2, 2021 and April 3, 2021 .

Property, Plant and Equipment, net

8 unchanged sentences

$ 156,397 $ 96,794

Depreciation expense was $ 1.4 million for each of the three month periods ended July 3, 2021 and June 27, 2020.

Depreciation expense was $ 1.4 million for each of the three month periods ending October 2, 2021 and September 26, 2020.

Depreciation expense for the six months ended October 2, 2021 and September 26, 2020 was $ 2.9 million and $ 2.8 million, respectively.

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

See Note 9 for further information.

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

During the period ended October 2, 2021, we executed various lease renewals and acquired certain assets under finance leases.

The following table provides information about the financial statement classification of our lease balances reported within the Consolidated Balance Sheets as of October 2, 2021 and April 3, 2021 (in thousands):

Classification October 2,

2021 April 3,

Operating lease assets Operating lease right-of-use assets

$ 16,706 $ 16,252

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

Total lease assets $ 25,058 $ 17,238

Lease Liabilities

Operating lease liabilities Accrued expenses and other current liabilities $ 4,783 $ 4,184

Finance lease liabilities Current portion of secured credit facilities and other

Operating lease liabilities Operating lease liabilities 13,240 13,361

Finance lease liabilities Secured credit facilities and other 5,923 233

Total lease liabilities $ 24,347 $ 17,849

(1) Recorded net of accumulated amortization of $ 149,000 and $ 143,000 as of October 2, 2021 and April 3, 2021, respectively.

The present value of minimum payments for future fiscal years under non-cancelable leases as of October 2, 2021 was as follows (in thousands):

Operating Leases Finance Leases Total

Remainder of 2022 $ 2,449 $ 206 $ 2,655

2023 4,667 411 5,078

2024 4,121 411 4,532

2025 3,103 411 3,514

2026 3,127 387 3,514

2027 1,087 338 1,425

Thereafter 1,439 10,415 11,854

19,993 12,579 32,572

Less amount representing interest ( 1,970 ) ( 6,255 ) ( 8,225 )

18,023 6,324 24,347

Less current portion ( 4,783 ) ( 401 ) ( 5,184 )

$ 13,240 $ 5,923 $ 19,163

The following table provides information about the weighted average remaining lease terms and weighted average discount rates as of October 2, 2021 :

Remaining Lease Term (Years) Discount Rate

Operating leases 4.9 4.5 %

Finance leases 34.9 4.5 %

Goodwill and Other Intangibles

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

July 3, 2021 April 3, 2021

October 2, 2021 April 3, 2021

Amount Accumulated

12 unchanged sentences

$ 150,591 $ ( 8,700 ) $ 141,891 $ 97,814 $ ( 8,361 ) $ 89,453

Amortization expense recognized on intangible assets was $ 173,000 and $ 187,000 for the three months ended July 3, 2021 and June 27, 2020, respectively.

Changes in the carrying amount of Goodwill were as follows for the six months ended October 2, 2021 (in thousands).

See Note 21 for further information.

Balance at beginning of period

Goodwill recognized on Craftsman acquisition 3,933

Goodwill recognized on Commodore acquisition 27,464

Balance at end of period

Amortization expense recognized on intangible assets was $ 166,000 and $ 187,000 for the three months ended October 2, 2021 and September 26, 2020, respectively.

Amortization expense recognized on intangible assets was $ 339,000 and $ 374,000 for the six months ended October 2, 2021 and September 26, 2020, respectively.

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

Remainder of fiscal year $ 1,985

Thereafter 6,670

Accrued Expenses and Other Current Liabilities

3 unchanged sentences

Salaries, wages and benefits 44,161 37,737

Unearned insurance premiums 24,125 22,643

Company repurchase options on certain loans sold 19,432 25,938

Estimated warranties 25,745 18,032

Unearned insurance premiums 24,498 22,643

Accrued volume rebates 22,008 12,132

Company repurchase options on certain loans sold 17,151 25,938

Other 54,680 44,816

1 unchanged sentence

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

Three Months Ended

2021 June 27,

Three Months Ended Six Months Ended

2021 September 26,

2020 October 2,

2021 September 26,

Balance at beginning of period $ 19,344 $ 18,538 $ 18,032 $ 18,678

Purchase accounting additions 6,928 — 6,928 —

Charged to costs and expenses 7,994 6,232 17,119 12,579

1 unchanged sentence

Balance at end of period $ 25,745 $ 17,805 $ 25,745 $ 17,805

Debt and Finance Lease Obligations

Debt and finance lease obligations primarily consist of secured financings 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 the lease term.

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

Debt, Finance Lease and Mandatorily Redeemable Noncontrolling Interest Obligations

The following table summarizes debt, finance lease and mandatorily redeemable noncontrolling interest obligations (in thousands):

2021 April 3,

Secured term loan $ 7,718 $ 8,210

Other secured financings

Finance lease obligations 6,324 304

Other secured financings

Mandatorily redeemable noncontrolling interest 2,471 —

19,565 12,186

3 unchanged sentences

Those facilities have since been converted into an amortizing loan with maturity dates starting in 2028 and payments based on a 20 or 25-year amortization period, resulting in a balloon payment due upon maturity .

The outstanding balance of the converted loans was $ 8.0 million as of July 3, 2021 and $ 8.2 million as of April 3, 2021 with a weighted average interest rate of 4.9 %.

The outstanding balance of the converted loans was $ 7.7 million as of October 2, 2021 and $ 8.2 million as of April 3, 2021 with a weighted average interest rate of 4.91 %.

Reinsurance and Insurance Loss Reserves

3 unchanged sentences

Three Months Ended

July 3, 2021 June 27, 2020

October 2, 2021 September 26, 2020

Written Earned Written Earned

6 unchanged sentences

$ 10,836 $ 10,239 $ 9,655 $ 9,335

Six Months Ended

October 2, 2021 September 26, 2020

Written Earned Written Earned

Direct premiums

$ 13,149 $ 12,319 $ 10,680 $ 10,330

Assumed premiums—nonaffiliated

16,814 15,008 15,246 13,833

Ceded premiums—nonaffiliated

( 7,361 ) ( 7,361 ) ( 6,055 ) ( 6,055 )

$ 22,602 $ 19,966 $ 19,871 $ 18,108

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.

2 unchanged sentences

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 the three months ended July 3, 2021 and June 27, 2020 (in thousands):

Three Months Ended

2021 June 27,

The following details the activity in the reserve for the six months ended October 2, 2021 and September 26, 2020 (in thousands):

Three Months Ended Six Months Ended

2021 September 26,

2020 October 2,

2021 September 26,

Balance at beginning of period $ 8,348 $ 6,730 $ 7,451 $ 5,582

6 unchanged sentences

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

The maximum amount for which we were liable under such agreements approximated $ 80.9 million and $ 74.2 million at July 3, 2021 and April 3, 2021, respectively, without reduction for the resale value of the homes that are repurchased.

We had a reserve for repurchase commitments of $ 2.3 million at July 3, 2021 and April 3, 2021.

The maximum amount for which we were liable under such agreements approximated $ 95.7 million and $ 74.2 million at October 2, 2021 and April 3, 2021, respectively, without reduction for the resale value of the homes that are repurchased.

We had a reserve for repurchase commitments of $ 2.7 million at October 2, 2021 and $ 2.3 million at April 3, 2021.

Construction-Period Mortgages.

12 unchanged sentences

We maintain a reserve for these contingent repurchase and indemnification obliga tions.

This reserve of $ 1.3 million as of July 3, 2021 and $ 1.2 million as of April 3, 2021, included in Accrued expenses and other current liabilities, reflects management's estimate of probable loss.

There were no claim requests that resulted in the execution of an indemnification agreement or in the repurchase of a loan during the three months ended July 3, 2021.

This reserve of $ 1.2 million as of October 2, 2021 and April 3, 2021, included in Accrued expenses and other current liabilities, reflects management's estimate of probable loss.

There were no claim requests that resulted in the execution of an indemnification agreement or in the repurchase of a loan during the six months ended October 2, 2021.

Interest Rate Lock Commitments .

1 unchanged sentence

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 of July 3, 2021, we had outstanding IRLCs with a notional amount of $ 32.1 million and recognized a gain of $ 47,000 in the 2022 first quarter and a loss of $ 125,000 in the 2021 first quarter .

As of October 2, 2021, we had outstanding IRLCs with a notional amount of $ 29.5 million.

During the three months ended October 2, 2021 and September 26, 2020, we recognized losses of $ 5,000 and $ 19,000 , respectively, on outstanding IRLCs.

For the six months ended October 2, 2021 and September 26, 2020, w e recognized gains of $ 42,000 and losses of $ 144,000 , respectively.

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 ("MBS") and whole loan sale commitments (collectively "Commitments").

As of July 3, 2021, we had $ 42.9 million in outstanding Commitments and recognized a non-cash loss of $ 347,000 in the 2022 first quarter and gain of $ 1.0 million in the 2021 first quarter .

As of October 2, 2021, we had $ 33.5 million in outstanding Commitments.

We recognized non-cash gains of $ 79,000 and $ 118,000 in the second quarter of 2022 and 2021, respectively.

During the six months ended October 2, 2021 and September 26, 2020, we recognized losses of $ 268,000 and gains of $ 1.1 million , respectively.

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.

As previously disclosed, 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.

While we cannot predict with certainty the resolution of this matter, we do not expect it to have a material adverse effect on our Consolidated Financial Statements.

On September 2, 2021, the SEC filed a civil complaint in the United States District Court, District of Arizona, naming the Company along with the Company’s former Chairman, President & Chief Executive Officer and the Company’s former Chief Financial Officer, alleging violations of the antifraud and internal accounting control provisions of the Securities Exchange Act of 1934 based on trading in the shares of another company directed by the former CEO that resulted in an unrealized gain of approximately $ 260,000 .

In the prior year, the Company recorded an accrual relating to this loss contingency.

The SEC action follows an investigation that began in 2018.

The Company filed a summary judgment to dismiss on November 2, 2021.

While the Company cannot predict with certainty the resolution of this matter, we do not believe that this proceeding will have a material adverse effect on the Company’s 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.

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

Stockholders' Equity

The following table represents changes in stockholders' equity during the three months ended July 3, 2021 (dollars in thousands):

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

However, future events or circumstances will determine whether the resolution of pending or threatened litigation or claims will ultimately have a material effect on our consolidated financial position, liquidity or results of operations in any future reporting periods.

Stockholders' Equity and Redeemable Noncontrolling Interest

The following table represents changes in stockholders' equity attributable to Cavco's stockholders and redeemable noncontrolling interest for each quarterly period during the six months ended October 2, 2021 (dollars in thousands):

Equity Attributable to Cavco Stockholders

Treasury Stock Additional paid-in capital Retained earnings Accumulated other comprehensive income Total Redeemable Noncontrolling Interest

Shares Amount

6 unchanged sentences

Balance, July 3, 2021 9,245,721 $ 92 $ ( 14,283 ) $ 255,071 $ 458,103 $ 84 $ 699,067 $ —

The following table represents changes in stockholders' equity during the three months ended June 27, 2020 (dollars in thousands):

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

Initial value of noncontrolling interest upon transaction — — — — — — — 1,235

Net income — — — — 37,610 — 37,610 73

Other comprehensive income, net — — — — — ( 13 ) ( 13 ) —

Issuance of common stock under stock incentive plans 29,295 1 — 2,728 — — 2,729 —

Stock-based compensation — — — 1,317 — — 1,317 —

Common stock repurchases — — ( 7,594 ) — — — ( 7,594 ) —

Distributions — — — — — — — ( 180 )

Balance, October 2, 2021 9,275,016 $ 93 $ ( 21,877 ) $ 259,116 $ 495,713 $ 71 $ 733,116 $ 1,128

Equity Attributable to Cavco Stockholders

Treasury Stock Additional paid-in capital Retained earnings Accumulated other comprehensive income Total Redeemable Noncontrolling Interest

Shares Amount

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Balance, June 27, 2020 9,177,064 $ 92 $ — $ 252,672 $ 371,085 $ 158 $ 624,007 $ —

Net income — — — — 15,049 — 15,049 —

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

Issuance of common stock under stock incentive plans 11,098 — — 522 — — 522 —

Stock-based compensation — — — 1,103 — — 1,103 —

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

Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share (dollars in thousands, except per share amounts):

Three Months Ended

2021 June 27,

$ 27,046 $ 16,674

Three Months Ended Six Months Ended

2021 September 26,

2020 October 2,

2021 September 26,

Net income attributable to Cavco common stockholders $ 37,610 $ 15,049 $ 64,656 $ 31,723

Weighted average shares outstanding

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9,273,136 9,295,409 9,274,440 9,280,080

Net income per share

Net income per share attributable to Cavco common stockholders

$ 4.09 $ 1.64 $ 7.03 $ 3.46

$ 4.06 $ 1.62 $ 6.97 $ 3.42

There were 8,366 anti-dilutive common stock equivalents excluded from the computation of diluted earnings per share for the three months ended July 3, 2021 and 39,996 for the three months ended June 27, 2020.

Anti-dilutive common stock equivalents excluded from the computation of diluted earnings per share for the three months ended October 2, 2021 and September 26, 2020 were 2,808 and 20,582 , respectively.

Anti-dilutive common stock equivalents excluded from the computation of diluted earnings per share for the six months ended October 2, 2021 and September 26, 2020 were 5,417 and 30,182 , respectively.

Fair Value Measurements

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

July 3, 2021 April 3, 2021

October 2, 2021 April 3, 2021

Value Estimated

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71,933 70,363 44,314 42,379

Secured financings other ( 11,749 ) ( 11,810 ) ( 12,186 ) ( 12,340 )

Secured financings and other ( 19,565 ) ( 19,454 ) ( 12,186 ) ( 12,340 )

See Note 19, Fair Value Measurements, and the Fair Value of Financial Instruments caption in Note 1, Summary of Significant Accounting Policies, in the Form 10-K for more information on the methodologies we use in determining fair value.

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MSRs (in thousands) $ 1,488 $ 916

Employee Benefit Plans

As part of the Commodore acquisition, we entered into a Transition Services Agreement ("TSA") with the seller whereby we lease Commodore employees from the seller while we transition them to our payroll systems.

Expenses related to the TSA totaled $ 1.4 million for the three and six months ended October 2, 2021.

Commodore participates in the IAM National Pension Fund, a multiemployer defined benefit plan.

Participation in this plan is available to all hourly employees who are members of the participating collective bargaining unit.

Once the TSA ends, we will contribute to the plan a specified amount per hour worked for each eligible employee.

Benefits under this plan are based on a fixed monthly benefit rate per year of credited service.

The risks of participating in this multiemployer plan differ from single-employer plans.

The potential risks include, but are not limited to, the use of the Company's contributions to provide benefits to employees of other participating employers, the Company becoming obligated for other participating employers' unfunded obligations and, upon the Company's withdrawal from the plan, the Company being required to pay the plan an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

Related Party Transactions

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

For the three months ended July 3, 2021 and June 27, 2020, the total amount of sales to related parties was $ 14.8 million and $ 12.7 million, respectively.

As of July 3, 2021, receivables from related parties included $ 4.3 million of accounts receivable and $ 6.8 million of commercial loans outstanding .

As of April 3, 2021, receivables from related parties included $ 4.7 million of accounts receivable and $ 9.5 million of commercial loans outstanding.

For the three and six months ended October 2, 2021, the total amount of sales to non-consolidated related parties was $ 14.0 million and $ 28.8 million, respectively.

For the three and six months ended September 26, 2020, the total amount of sales to non-consolidated related parties was $ 10.3 million and $ 23.0 million, respectively.

As of October 2, 2021, receivables from non-consolidated related parties included $ 3.9 million of accounts receivable and $ 3.9 million of commercial loans outstanding.

As of April 3, 2021, receivables from non-consolidated related parties included $ 4.7 million of accounts receivable and $ 9.5 million of commercial loans outstanding.

Craftsman Homes, LLC and Craftsman Development, LLC Acquisition

In fiscal year 2017, we purchased a 50 % ownership interest in Craftsman for $ 1.3 million to expand our retail presence in Nevada.

At the time of the acquisition of that ownership, we concluded that we were not considered to be the primary beneficiary and therefore did not consolidate the Entities.

Since the date of acquisition, we have recorded a non-marketable equity investment for the ownership, with changes to that investment for earnings and distributions from the Entities.

On July 4, 2021, we obtained an additional 20 % ownership interest in the Entities utilizing the same pre-tax income multiple as the 2017 purchase.

As we now have a controlling interest, we have consolidated the Entities and remeasured the Entities' assets and liabilities to fair value, including our previous equity investment of $ 2.9 million in the Entities.

As a result of the remeasurement, we recorded a gain of $ 3.3 million in Other income, net in the Consolidated Statements of Comprehensive Income.

The purchase price on July 4, 2021 for 20 % ownership was $ 2.5 million, valuing the Entities at $ 12.4 million.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands).

Certain estimated values are not yet finalized and are subject to change, which could be significant.

The allocation of the purchase price is still preliminary due to the short duration since the acquisition date and will be finalized upon completion of the analysis of the fair values of Craftsman's assets and specified liabilities.

We expect to finalize these amounts as soon as possible but no later than one year from the acquisition date.

Accounts receivable 577

Inventories 7,393

Property, plant and equipment 189

Other current assets 846

Intangible assets (1)

Total identifiable assets acquired 18,451

Accounts payable and accrued liabilities 10,028

Net identifiable assets acquired 8,423

Net assets acquired $ 12,356

(1) Includes $ 3.0 million assigned to trademarks and trade names, which are considered indefinite lived intangible assets and are not subject to amortization.

(2) Attributable to the Factory-built housing segment, all of which will be deductible for income tax purposes.

We recorded a Redeemable noncontrolling interest for the remaining 30 % ownership.

As 20 % of this is considered mandatorily redeemable per the Agreement, $ 2.5 million for the fair value of this portion of the noncontrolling interest is recorded in the long-term liabilities section of the Consolidated Balance Sheet under the Secured financings and other caption.

As we are not currently obligated for the redemption of the remaining 10 % ownership, $ 1.2 million for the initial fair value of this portion of the noncontrolling interest is classified as a temporary equity mezzanine item between liabilities and stockholders’ equity in the Consolidated Balance Sheet under the Redeemable noncontrolling interest caption.

Since the acquisition date, Craftsman contributed Net revenue of $ 4.5 million for the three and six months ended October 2, 2021.

Craftsman increased consolidated Net income on the Consolidated Statements of Comprehensive Income for the three and six months ended October 2, 2021 by $ 243,000 .

Net income from the Craftsman acquisition included required purchase accounting adjustments whereby home product inventory is recorded at fair value upon acquisition.

Commodore Homes Acquisition

On September 24, 2021, we purchased certain manufactured housing assets and assumed certain liabilities of Commodore, including its six manufacturing facilities and two wholly-owned retail locations.

In addition to manufacturing, Commodore also participates in commercial lending operations with its dealers.

The transaction was accounted for as a business combination and the results of operations have been included in the accompanying Consolidated Financial Statements since the date of acquisition.

The acquisition of Commodore brings beneficial geographic addition to our footprint with strong operations in the Northeast/Midwest/Mid-Atlantic markets and provides a platform for future growth, with the potential for cost and revenue synergies.

The acquisition-date fair value of the total consideration was $ 156.1 million, which was paid in cash and is subject to future adjustments upon the finalization of closing financial statements.

We have expensed $ 2.7 million in acquisition related deal costs in Selling, general and administrative expense in the Consolidated Statements of Comprehensive Income , and have not incurred debt in connection with the purchase or subsequent operations.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the

acquisition date (in thousands).

Certain estimated values are not yet finalized and are subject to change, which could be significant.

We expect to finalize these amounts as soon as possible but no later than one year from the acquisition date.

September 24,

Accounts receivable 20,930

Commercial loans 30,960

Inventories 31,787

Property, plant and equipment (1)

Other current assets 534

Intangible assets (2)

Total identifiable assets acquired 160,836

Accounts payable and accrued liabilities 32,249

Net identifiable assets acquired 128,587

Net assets acquired $ 156,051

(1) Includes assets acquired under finance leases.

See Note 9 for additional information.

(2) Includes $ 11.8 million assigned to customer-related intangibles, subject to a useful life of 11 years amortized on a straight-line basis;

$ 3.8 million assigned to trademarks and trade names, which are considered indefinite lived intangible assets and are not subject to amortization;

$ 2.3 million for acquired sales order backlogs that will be amortized over the period to produce the associated backlog;

and $ 0.5 million for a covenant not to compete from the sellers, amortized on a straight-line basis over the term of 5 years.

(3) Attributable to the Factory-built housing segment, all of which will be deductible for income tax purposes.

Since the acquisition date, Commodore contributed Net revenue of $ 4.4 million for the three and six months ended October 2, 2021.

Commodore decreased consolidated Net income on the Consolidated Statements of Comprehensive Income for the three and six months ended October 2, 2021 by $ 645,000 .

The Net loss from the Commodore acquisition included required purchase accounting adjustments whereby home product inventory is recorded at fair value upon acquisition.

Pro Forma Impact of Acquisitions .

The following table presents supplemental pro forma information as if the above acquisitions occurred on March 29, 2020 (in thousands, except per share data):

Three Months Ended Six Months Ended

2021 September 26,

2020 October 2,

2021 September 26,

Net revenue $ 444,303 $ 327,491 $ 856,054 $ 635,061

Net income attributable to Cavco common stockholders 38,331 20,665 66,161 37,494

Diluted net income per share 4.13 2.22 7.13 4.04

Business Segment Information

2 unchanged sentences

The following table provides selected financial data by segment (in thousands):

Three Months Ended

2021 June 27,

Three Months Ended Six Months Ended

2021 September 26,

2020 October 2,

2021 September 26,

Factory-built housing $ 342,094 $ 240,967 $ 654,377 $ 479,057

5 unchanged sentences

$ 49,021 $ 19,596 $ 84,499 $ 41,276

Subsequent Event

On July 23, 2021 , we entered into an agreement to acquire the business and certain assets and liabilities of The Commodore Corporation ("Commodore"), including its six manufacturing and two retail locations.

Commodore is the largest private independent builder of manufactured and modular housing in the United States, operating under a variety of strong brand names.

Commodore operates across the Northeast, Midwest and Mid-Atlantic regions, with wholly owned retail stores.

In addition to manufacturing, Commodore also has a commercial lending portfolio with its dealers that we will acquire and continue.

For the last 12 months ended March 31, 2021, Commodore generated net sales of approximately $ 258 million and sold over 6,600 modules, equating to over 3,700 homes.

The purchase price totals $ 153 million, before certain adjustments that will be determined upon close of the transaction.

The estimated cash outlay is $ 140 million after adjustments and including transaction fees.

We expect to fund the acquisition entirely with cash on hand.

The transaction is expected to close in our third quarter of fiscal year 2022, subject to applicable regulatory approvals and satisfaction of certain customary conditions.

2021 April 3,

Total assets:

Factory-built housing

$ 819,879 $ 711,579

Financial services

236,554 240,254

$ 1,056,433 $ 951,833

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

What changed 10-Q

Item 1. Financial Statements