What changed in this filing

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Item 9A. Controls and Procedures

2022-05-31 compared with 2021-05-28 · 421 added, 354 removed, 1039 unchanged (43% of the section changed)

1 unchanged sentence

Evaluation of Disclosure Controls and Procedures

The Company carried out an evaluation, under the supervision and with the participation of 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)).

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 Financial 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 2, 2022, its disclosure controls and procedures were effective.

12 unchanged sentences

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 2, 2022.

The scope of management's assessment of the effectiveness of internal control over financial reporting did not include the internal controls of Craftsman or Commodore, which are included in the 2022 consolidated financial statements of Cavco Industries, Inc.

since the acquisition dates of July 4, 2021 and September 24, 2021, respectively, and which comprised approximately 17% of total assets and 11% of net revenues as of and for the year ended April 2, 2022, respectively.

The effectiveness of the Company's internal control over financial reporting as of April 2, 2022 has been audited by RSM US LLP, an independent registered public accounting firm, as stated in their report, which appears herein.

7 unchanged sentences

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of April 2, 2022, 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.

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 2, 2022 and April 3, 2021, and the related consolidated statements of comprehensive income, stockholders' equity and redeemable noncontrolling interest, and cash flows for each of the three fiscal years in the period ended April 2, 2022, and the related notes of the Company and our report dated May 31, 2022 expressed an unqualified opinion.

As described in Management's Report on Internal Controls Over Financial Reporting, management has excluded Craftsman and Commodore from its assessment of internal control over financial reporting as of April 2, 2022, because they were acquired by the Company in purchase business combinations in the second fiscal quarter of 2022.

We have also excluded Craftsman and Commodore from our audit of internal control over financial reporting.

Craftsman and Commodore are subsidiaries whose total assets and net income represent approximately 17% and 11%, respectively, of the related consolidated financial statement amounts as of and for the year ended April 2, 2022.

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.

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OTHER INFORMATION

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

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 2022 Annual Meeting of Stockholders (the "2022 Proxy Statement"), which proxy statement we expect to file with the SEC within 120 days after the end of our fiscal year ended April 2, 2022.

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.

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

A copy of the Company's Code of Conduct 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 .

If the Company makes any amendment to, or grants any waivers of, a provision of the Code of Conduct that applies to its principal executive officer, principal financial officer or principal accounting officer 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 .

EXECUTIVE COMPENSATION

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Securities to be

Warrants, and

Rights (a) Weighted-

Average Exercise

Warrants, and

Rights Number of Securities

45 unchanged sentences

Exhibit 10.1 to the Quarterly Report on Form 10-Q for the fiscal quarter ended September 26, 2015

Form of Stock Option Agreement for Stock Incentive Plan

Form of Restricted Stock Award Agreement for Stock Incentive Plan

Exhibit 10.1 to the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2012

3 unchanged sentences

Exhibit 10.1 to the Current Report on Form 8-K filed on January 8, 2019

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

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

Form of Cavco Industries, Inc.

1 unchanged sentence

Exhibit 10.2.10 to the Annual Report on Form 10-K for the fiscal year ended March 30, 2019

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

Number Exhibit Filed/Furnished Herewith or

Incorporated by Reference

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

Form of Cavco Industries, Inc.

2005 Stock Incentive Plan Performance - based Restricted Stock Unit Award Agreement

Filed herewith

Employment Agreement, dated as of April 1, 2019, by and between William C.

1 unchanged sentence

Exhibit 10.1 to the Current Report on Form 8-K filed on April 2, 2019

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

Employment Agreement, dated as of April 1, 2019, by and between Mickey R.

1 unchanged sentence

Exhibit 10.6 to the Current Report on Form 8-K filed on April 2, 2019

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

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

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

Number Exhibit Filed/Furnished Herewith or

Incorporated by Reference

Compensatory Arrangements of Allison K.

Aden, dated as of August 5, 2021

Current Report on Form 8-K filed on August 10, 2021

Severance Agreement, dated as of November 2, 2021, by and between Allison K.

Aden and Cavco Industries, Inc.

Exhibit 10.1 to the Quarterly Report on Form 10-Q for the fiscal quarter ended October 2, 2021

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

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

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

and Daniel L.

Filed herewith

Executive Officer Incentive Plans for Fiscal Year 2020

Current Report on Form 8-K filed on July 12, 2018

Executive Officer Incentive Plans for Fiscal Year 2020

Current Report on Form 8-K filed on June 27, 2019

Executive Officer Incentive Plans for Fiscal Year 20 2 2

Current Report on Form 8-K filed on July 2, 2021

Form of Indemnification Agreement

Exhibit 10.5 to Current Report on Form 8-K filed on April 2, 2019

Form of Change in Control Agreement

Exhibit 10.2 to the Quarterly Report on Form 10-Q for the fiscal quarter ended October 2, 2021

Cavco Industries, Inc.

1 unchanged sentence

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

A sset Purchase Agreement, dated July 23, 2021, by and among Commodore Homes, LLC, The Commodore Corporation, TCC Clarion Limited Partnership, TCC Pennwest, LLC and each of the individual equityholders named therein, and Barry S.

Shein, in his capacity as Sellers' representative

Exhibit 10.3 to the Current Report on Form 8-K filed on July 26, 2021

List of Subsidiaries of Cavco

5 unchanged sentences

Filed herewith

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

Certificate of Allison K.

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

Filed herewith

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

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

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

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/s/ William C.

Boor Director, President and May 27, 2021

Boor Chief Executive Officer

(Principal Executive Officer)

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

Paul Bigbee (Principal Financial and Accounting Officer)

Boor Director, President and Chief Executive Officer May 31, 2022

Boor (Principal Executive Officer)

/s/ Allison K.

Aden Executive Vice President, Chief Financial Officer & Treasurer May 31, 2022

Aden (Principal Financial Officer)

Bigbee Chief Accounting Officer May 31, 2022

Bigbee (Principal Accounting Officer)

/s/ Steven G.

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Report of Independent Registered Public Accounting Firm

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

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

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

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

Consolidated Balance Sheets as of April 2, 2022 and April 3, 2021

Consolidated Statements of Comprehensive Income for the Years Ended April 2, 2022, April 3, 2021 and March 28, 2020

Consolidated Statements of Stockholders' Equity And Redeemable Noncontrolling Interest for the Years Ended April 2, 2022, April 3, 2021 and March 28, 2020

Consolidated Statements of Cash Flows for the Years Ended April 2, 2022, April 3, 2021 and March 28, 2020

Notes to Consolidated Financial Statements

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

and its subsidiaries (the Company) as of 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.

and its subsidiaries (the Company) as of April 2, 2022 and April 3, 2021, the related consolidated statements of comprehensive income, stockholders' equity and redeemable noncontrolling interest, and cash flows for each of the three years in the period ended April 2, 2022, 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 2, 2022 and April 3, 2021, and the results of its operations and its cash flows for each of the three years in the period ended April 2, 2022, 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 2, 2022, 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 31, 2022 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.

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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.

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;

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

(1) relates 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 matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Acquisition of The Commodore Corporation – Valuation of Acquired Customer-Related Intangibles, Trademarks, and Trade Names

As described in Note 22 to the consolidated financial statements, the Company completed the acquisition of certain manufactured housing assets and assumed certain liabilities of The Commodore Corporation for $146.2 million on September 24, 2021.

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

Accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on their respective fair values, including identified intangible assets of $12.5 million , and resulting goodwill of $21.3 million .

As described in Note 1 to the consolidated financial statements, to value the identified intangible assets, which consist of customer-related intangibles, trademarks, and trade names, the Company used the income approach, which is a method of using discounted cash flows to value intangible assets.

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

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

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

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

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

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

– Testing the source information underlying the determination of the royalty rates and discount rates by comparing it to independent sources and verifying that it reflects the nature and characteristics of underlying assets being valued;

– Testing the mathematical accuracy of the calculations;

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

/s/ RSM US LLP

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(Dollars in thousands, except per share amounts)

2021 March 28,

2022 April 3,

Current assets:

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Total assets $ 1,154,972 $ 951,833

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND STOCKHOLDERS' EQUITY

Current liabilities:

1 unchanged sentence

Accrued expenses and other current liabilities 250,304 203,133

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

Current portion of secured financings and other 784 1,851

Total current liabilities 294,170 237,104

Operating lease liabilities 13,158 13,361

Secured credit facilities and other 10,335 12,705

Secured financings and other 10,836 10,335

Deferred income taxes 5,528 7,393

Redeemable noncontrolling interest 825 —

Stockholders' equity:

6 unchanged sentences

Treasury stock, at cost;

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

241,773 and 6,600 shares, respectively

( 61,040 ) ( 1,441 )

Additional paid-in capital 263,049 253,835

Retained earnings 628,756 431,057

Accumulated other comprehensive income 97 90

Accumulated other comprehensive (loss) income ( 403 ) 97

Total stockholders' equity 830,455 683,640

Total liabilities and stockholders' equity $ 951,833 $ 810,431

Total liabilities, redeemable noncontrolling interest and stockholders' equity $ 1,154,972 $ 951,833

See accompanying Notes to Consolidated Financial Statements

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(Dollars in thousands, except per share amounts)

2021 March 28,

2022 April 3,

2021 March 28,

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197,742 76,646 75,066

net income attributable to redeemable noncontrolling interest

Net income attributable to Cavco common stockholders

$ 197,699 $ 76,646 $ 75,066

Comprehensive income

5 unchanged sentences

Applicable income taxes

2 ( 28 ) ( 26 )

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

Net income per share:

Comprehensive income 197,242 76,653 75,184

comprehensive income attributable to redeemable noncontrolling interest 43 — —

Comprehensive income attributable to Cavco common stockholders $ 197,199 $ 76,653 $ 75,184

Net income per share attributable to Cavco common stockholders

Basic $ 21.54 $ 8.34 $ 8.22

5 unchanged sentences

CAVCO INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND REDEEMABLE NONCONTROLLING INTEREST

(Dollars in thousands)

Stockholders' Equity

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

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

Shares Amount

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

Cumulative effect of implementing ASU 2016-01 — — — — 1,621 ( 1,621 ) —

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

Net income — — — — 75,066 — 75,066 —

3 unchanged sentences

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 —

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

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 )

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

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

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

Net income — — — — 197,699 — 197,699 43

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

Other comprehensive loss, net — — — — — ( 500 ) ( 500 ) —

Issuance of common stock under stock incentive plans 51,022 1 — 4,155 — — 4,156 —

1 unchanged sentence

Common stock repurchases — — ( 59,599 ) — — — ( 59,599 ) —

Distributions — — — — — — — ( 375 )

Subsequent change in redemption value — — — — — — — ( 78 )

Balance, April 2, 2022 9,292,278 $ 93 $ ( 61,040 ) $ 263,049 $ 628,756 $ ( 403 ) $ 830,455 $ 825

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(Dollars in thousands)

2021 March 28,

2022 April 3,

2021 March 28,

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Non-cash interest income, net ( 1,629 ) ( 3,312 ) ( 1,411 )

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

(Gain) loss on sale or retirement of property, plant and equipment, net ( 220 ) 116 ( 3,409 )

Gain on investments and sale of loans, net ( 18,364 ) ( 22,037 ) ( 10,977 )

Changes in operating assets and liabilities:

Changes in operating assets and liabilities, net of acquisitions

Accounts receivable ( 27,268 ) ( 4,597 ) ( 1,442 )

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Purchases of property, plant and equipment ( 18,653 ) ( 25,537 ) ( 14,340 )

Payments for acquisition, net — ( 15,937 ) —

Payments for acquisitions, net ( 141,429 ) — ( 15,937 )

Proceeds from sale of property, plant and equipment and assets held for sale 1,329 240 6,541

3 unchanged sentences

FINANCING ACTIVITIES

Payments for exercise of stock options ( 2,817 ) ( 1,067 ) ( 114 )

Proceeds from (payments for) exercise of stock options 4,156 ( 2,817 ) ( 1,067 )

Proceeds from secured financings and other 106 64 227

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

Payments on secured financings and other ( 9,383 ) ( 2,788 ) ( 19,916 )

Payments for common stock repurchases ( 59,599 ) ( 1,441 ) —

Distributions to noncontrolling interest ( 375 ) — —

Net cash used in financing activities ( 65,095 ) ( 6,982 ) ( 20,756 )

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

Net (decrease) increase in cash, cash equivalents and restricted cash ( 79,973 ) 83,700 55,738

Cash, cash equivalents and restricted cash at beginning of the fiscal year 339,307 255,607 199,869

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Operating lease obligations incurred $ 4,414 $ 5,985 $ 18,523

Fair value of assets acquired under finance lease $ 7,158 $ — $ —

Finance lease obligations incurred $ 6,351 $ — $ —

See accompanying Notes to Consolidated Financial Statements

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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 2, 2022, through the date of the filing of this report with the Securities and Exchange Commission (the "SEC") and there were no disclosable subsequent events .

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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;

("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" or "GNMA") 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.

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.

Th e current fiscal year ended on April 2, 2022 and includes 52 weeks, whereas fiscal year 2021 consisted of 53 weeks and fiscal year 2020 consisted of 52 weeks.

Accounting Estimates.

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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.

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.

Due to uncertainties, a ctual results could differ from the estimates and assumptions used in preparation of the consolidated financial statements.

Factory-Built Housing Revenue Recognition - Wholesale .

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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) :

We adopted Financial Accounting Standards Board ("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).

The remaining discount on the acquired consumer loans was determined to be related to non-credit factors and will continue to be accreted 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.

11 unchanged sentences

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.

As of April 2, 2022 and April 3, 2021, there were no allowances for doubtful accounts.

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

1 unchanged sentence

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.

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

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

2 unchanged sentences

As of April 2, 2022, 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.

Consumer loans receivable consist 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.

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Accordingly, we classify our loans receivable as follows:

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

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

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

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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).

As of April 2, 2022, we had an allowance for loan losses of $ 2.1 million .

Our allowance for loan losses as of April 3, 2021 was $ 3.2 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.

1 unchanged sentence

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

To determine the appropriate level of the allowance for loan loss, we collectively evaluate loans based on their terms and duration.

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).

We recorded allowance for loan losses of $ 1.0 million and $ 816,000 at April 2, 2022 and April 3, 2021, respectively, related to commercial loans receivable (see Note 7).

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

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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.

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 group.

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.

Losses on long-lived assets to be disposed of are primarily determined based on independent appraisals and preliminary or definitive contractual arrangements less costs to dispose.

There were no impairment losses recognized in fiscal years 2022, 2021 or 2020 .

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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 .

We account for goodwill and other intangible assets in accordance with the provisions of FASB Accounting Standards Codification ("ASC") 350, Intangibles—Goodwill and Other .

As such, we test goodwill annually for impairment.

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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.

The applicable reserve balance was $ 8.1 million and $ 7.5 million as of April 2, 2022 and April 3, 2021, respectively, of which $ 3.8 million and $ 3.7 million related to incurred but not reported ("IBNR") losses, respectively.

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

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

Estimated self-insurance costs are accrued for incurred claims and estimated IBNR claims.

Estimated self-insurance costs are accrued for incurred claims and estimated IBNR losses.

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 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.

Advertising costs are expensed as incurred and were $ 1.4 million in fiscal year 2022, $ 807,000 in fiscal year 2021 and $ 900,000 in fiscal year 2020.

Fair Value of Financial Instruments.

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

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

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

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.

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

Income Taxes.

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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.

Stock-based compensation is measured based on the fair value of the award on the date of grant and the corresponding expense is recognized over the period during which an employee is required to provide service in exchange for the award.

Stock-based compensation expense is classified in the same line item of our Consolidated Statements of Comprehensive Income as other payroll-related expenses specific to the employee.

Compensation expense related to service-based restricted stock units ("RSUs") is recognized on a straight-line basis over the requisite service period for the entire award.

Compensation expense related to performance-based RSUs is recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in-substance, multiple awards (i.e., a graded vesting basis).

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.

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

Redeemable Noncontrolling Interest.

We have a 70 % interest in Craftsman Homes, LLC and Craftsman Homes Development, LLC (collectively known as "Craftsman" or the "Entities").

See Note 22 for a description of the transaction.

As a result, we consolidate the Entities while recognizing a noncontrolling interest for the remaining third party ("Craftsman Seller") ownership.

An additional 20 % of the remaining equity of Craftsman is to be purchased on December 31, 2023 by us for cash.

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

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.

The Craftsman Seller can require us to purchase their remaining 10 % ownership ("Put Right"), after December 31, 2023, for an amount specified in the Craftsman Purchase Agreement that is designed to approximate fair value.

Likewise, we can require the Craftsman Seller to sell us their remaining 10 % ownership ("Call Right") based on the same timing as described above for the Put Right.

As redemption of this remaining ownership is not a current obligation, the 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 Sheets as Redeemable noncontrolling interest.

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

Accumulated Other Comprehensive Income (loss).

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 .

Accumulated unrealized loss on available-for-sale debt securities at the end of fiscal year 2022 was $ 510,000 before tax, with an associated tax amount of $ 107,000 , resulting in a net unrealized loss of $ 403,000 .

Unrealized gain on available-for-sale debt securities for fiscal year 2021 was $ 123,000 , with an associated tax amount of $ 26,000 , for a net unrealized gain of $ 97,000 .

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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.

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

2021 March 28,

2022 April 3,

2021 March 28,

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Insurance agency commissions received from third-party insurance companies 4,055 3,102 3,352

Other 67,060 59,082 53,955

All other sources 66,820 67,060 59,082

70,875 70,162 62,434

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Restricted cash consisted of the following (in thousands):

2021 March 28,

2022 April 3,

Cash related to CountryPlace customer payments to be remitted to third parties $ 13,857 $ 16,049

1 unchanged sentence

15,184 17,028

Less current portion ( 14,849 ) ( 16,693 )

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

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

2021 March 28,

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 in the Consolidated Statements of Cash Flows (in thousands):

2022 April 3,

2021 March 28,

Cash and cash equivalents $ 244,150 $ 322,279 $ 241,826

Restricted cash, current 16,693 13,446 12,148

Restricted cash

15,184 17,028 13,781

$ 259,334 $ 339,307 $ 255,607

Investments consisted of the following (in thousands):

2021 March 28,

2022 April 3,

Available-for-sale debt securities

1 unchanged sentence

Marketable equity securities

16,780 17,600

Non-marketable equity investments

1 unchanged sentence

55,019 54,506

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

Less short-term investments ( 20,086 ) ( 19,496 )

$ 34,933 $ 35,010

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.

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.

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):

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):

April 2, 2022

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$ 18,270 $ 41 $ ( 551 ) $ 17,760

March 28, 2020

April 3, 2021

Residential mortgage-backed securities

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$ 10,147 $ ( 440 ) $ 2,133 $ ( 111 ) $ 12,280 $ ( 551 )

March 28, 2020

April 3, 2021

Less than 12 Months 12 Months or Longer Total

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Due after one year through five years

11,394 10,901

Due after five years through ten years

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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.

Gross gains realized on the sale of available-for-sale debt securities totaled $ 2,000 for fiscal year 2022, and there were none in 2021 or 2020.

There were no gross losses realized on the sale of available-for-sale debt securities in fiscal year 2022.

Gross losses in fiscal year 2021 were $ 6,000 and there were none in fiscal year 2020.

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.

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Net investment gains and losses on marketable equity securities for fiscal years 2022, 2021 and 2020 were as follows (in thousands):

2021 March 28, 2020 March 30, 2019

2022 April 3,

2021 March 28, 2020

Marketable equity securities:

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Inventories consisted of the following (in thousands):

2021 March 28,

2022 April 3,

Raw materials $ 95,929 $ 54,336

$ 54,336 $ 35,691

Work in process 30,638 19,149

19,149 13,953

Finished goods 117,404 57,749

$ 243,971 $ 131,234

$ 131,234 $ 113,535

Consumer Loans Receivable

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

2021 March 28,

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

Loans held for investment (originated after Acquisition Date)

18,690 20,140

2022 April 3,

Loans held for investment, previously securitized $ 26,014 $ 31,949

Loans held for investment 14,771 18,690

Loans held for sale

15,587 14,671

Construction advances

52,832 80,027

80,027 85,990

Deferred financing fees and other, net

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

2021 March 28,

2022 April 3,

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

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The consumer loans held for investment had the following characteristics:

2021 March 28,

2022 April 3,

Weighted average contractual interest rate 8.32 % 8.26 %

8.26 % 8.42 %

Weighted average effective interest rate 9.21 % 9.34 %

9.34 % 9.27 %

Weighted average months to maturity 151 162

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

2021 March 28,

2022 April 3,

Current $ 49,546 $ 76,378

5 unchanged sentences

April 2, 2022

2021 2020 2019 2018 2017 Prior Total March 28,

2022 2021 2020 2019 2018 Prior Total

Prime- FICO score 680 and greater $ 8,155 $ 1,615 $ 2,371 $ 1,339 $ 853 $ 20,485 $ 34,818

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

Near Prime- FICO score 620-679 1,661 1,274 1,413 1,976 617 9,266 16,207

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

Sub-Prime- FICO score less than 620 45 20 52 — — 1,318 1,435

348 53 — — 84 1,579 2,064 2,142

No FICO score — — — 26 — 346 372

$ 9,861 $ 2,909 $ 3,836 $ 3,341 $ 1,470 $ 31,415 $ 52,832

April 3, 2021

2021 2020 2019 2018 2017 Prior Total

Prime- FICO score 680 and greater $ 18,250 $ 3,575 $ 1,718 $ 971 $ 1,959 $ 23,375 $ 49,848

Near Prime- FICO score 620-679 10,227 2,744 1,794 1,364 500 10,401 27,030

Sub-Prime- FICO score less than 620 348 53 — — 84 1,579 2,064

No FICO score 576 — 28 — — 481 1,085

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

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As of April 2, 2022, 39 % of the outstanding principal balance of the consumer loans receivable portfolio was concentrated in Texas and 17 % 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.

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 state had concentrations in excess of 10 % of the principal balance of consumer loans receivable as of April 2, 2022 or April 3, 2021.

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 estimated costs to sell.

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

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

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

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

Commercial Loans Receivable and Allowance for Loan Losses

The 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.

Repossessed homes totaled approximately $ 499,000 as of April 2, 2022 and $ 518,000 as of April 3, 2021, 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 as of April 2, 2022 and April 3, 2021.

Commercial Loans Receivable

The commercial loans receivable balance consists of direct financing arrangements for the home product needs of our independent distributors, community owners and developers .

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

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):

2021 March 28,

2022 April 3,

Loans receivable $ 69,693 $ 45,377

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The commercial loans receivable balance had the following characteristics:

2021 March 28,

2022 April 3,

Weighted average contractual interest rate 6.4 % 6.4 %

Weighted average months to maturity

Weighted average months outstanding 9 11

The risk of loss is spread over numerous borrowers.

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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.

We evaluate the potential for loss from the commercial loan programs on a collective basis, aggregating similar loans based on their terms.

Our evaluation also considers the borrower's risk rating, overall financial stability, historical experience and estimates of other economic factors.

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

2021 March 28,

2022 April 3,

Balance at beginning of period $ 816 $ 393

Impact of adoption of ASU 2016-13 — 435

Purchase accounting additions 408 —

Change in estimated loan losses, net ( 213 ) ( 12 )

10 unchanged sentences

April 2, 2022

2021 2020 2019 2018 2017 Total March 28,

Risk profile based on payment activity:

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

— — — — — — 186

Nonperforming

— — — — — — —

$ 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.

2022 2021 2020 2019 2018 Total

Performing $ 52,592 $ 10,181 $ 4,031 $ 1,391 $ 1,498 $ 69,693

April 3, 2021

2021 2020 2019 2018 2017 Total

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

As of April 2, 2022, 24.9 % of our outstanding commercial loans receivable principal balance was concentrated in New York.

As of April 3, 2021, 13.1 % of the 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 commercial loans receivable as of April 2, 2022 or April 3, 2021.

We had concentrations with one independent third-party and its affiliates that equaled 13.7 % and 17.8 % of the net commercial loans receivables principal balance outstanding, all of which was secured, as of April 2, 2022 and April 3, 2021, respectively.

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

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

2021 March 28,

2022 April 3,

Property, plant and equipment, at cost:

$ 28,314 $ 26,827

Land $ 32,154 $ 28,314

Buildings and improvements 100,775 52,174

71,827 52,011

Machinery and equipment 48,638 32,528

34,146 30,984

Construction in progress 29,281 21,271

210,848 134,287

1 unchanged sentence

$ 164,016 $ 96,794

$ 96,794 $ 77,190

Depreciation expense was $ 9.6 million in fiscal year 2022, $ 5.6 million in fiscal year 2021 and $ 5.2 million in fiscal year 2020.

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

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

See Note 9 for additional information.

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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.

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

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.

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

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

The following table provides information about the financial statement classification of our lease balances reported within the Consolidated Balance Sheets as of April 2, 2022 and April 3, 2021 (in thousands):

Classification April 2,

2021 March 28,

2022 April 3,

Operating lease assets Operating lease right-of-use assets $ 16,952 $ 16,252

7 unchanged sentences

Total lease liabilities $ 24,559 $ 17,849

(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):

(1) Recorded net of accumulated amortization of $ 87,000 and $ 143,000 as of April 2, 2022 and April 3, 2021, respectively.

The following table provides information about the financial statement classification of our lease expenses reported within the Consolidated Statements of Comprehensive Income for the years ended April 2, 2022, April 3, 2021 and March 28, 2020 (in thousands):

Lease Expense Category Classification April 2,

2022 April 3,

2021 March 28,

7 unchanged sentences

(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.

Cash payments for operating and finance leases were as follows (in thousands):

2022 April 3,

2021 March 28,

Operating leases $ 4,794 $ 4,164 $ 3,375

Finance leases 220 79 142

The present value minimum payments for future fiscal years under non-cancelable leases as of April 2, 2022 was as follows (in thousands):

15 unchanged sentences

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

April 3, 2021 March 28, 2020

April 2, 2022 April 3, 2021

Amount Accumulated

14 unchanged sentences

$ 139,197 $ ( 9,745 ) $ 129,452 $ 97,814 $ ( 8,361 ) $ 89,453

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.

Changes in the carrying amount of Goodwill were as follows for the year ended April 2, 2022 (in thousands).

See Note 22 for further information.

Balance at beginning of period $ 75,090

Goodwill recognized on Craftsman acquisition 4,595

Goodwill recognized on Commodore (as defined in Note 22) acquisition 21,308

Balance at end of period $ 100,993

Amortization expense recognized on intangible assets was $ 1.4 million during fiscal year 2022, $ 747,000 during fiscal year 2021 and $ 606,000 during fiscal year 2020.

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

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

2021 March 28,

2022 April 3,

Customer deposits $ 56,318 $ 41,835

Salaries, wages and benefits 54,172 37,737

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

Unearned insurance premiums 22,643 20,614

Estimated warranties 26,250 18,032

Unearned insurance premiums 24,917 22,643

Accrued volume rebates 18,641 12,132

Company repurchase options on certain loans sold 9,375 25,938

Other 60,631 44,816

$ 250,304 $ 203,133

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

2021 March 28,

Activity in the liability for estimated warranties for fiscal years 2022, 2021 and 2020 was as follows (in thousands):

2022 April 3,

2021 March 28,

2 unchanged sentences

Purchase accounting additions

5,909 — 1,192

Charged to costs and expenses

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$ 26,250 $ 18,032 $ 18,678

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):

2021 March 28,

Secured credit facilities

$ 8,210 $ 10,474

Other secured financings

Finance lease obligations 304 366

Secured Financings and Other

The following table summarizes secured financings and other obligations (in thousands):

2022 April 3,

Finance lease payables $ 6,316 $ 304

Other secured financing 2,933 3,672

Mandatorily redeemable noncontrolling interest 2,371 —

Secured term loans — 8,210

11,620 12,186

1 unchanged sentence

$ 10,836 $ 10,335

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):

We previously entered into secured credit facilities with independent third-party banks to originate and hold consumer home-only loans secured by manufactured homes Those facilities were then converted into amortizing loans, which were paid in full as of April 2, 2022.

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

Thereafter 7,146

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

April 3, 2021 March 28, 2020

April 2, 2022 April 3, 2021

Written Earned Written Earned

Direct premiums $ 27,639 $ 25,543 $ 23,226 $ 21,424

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

Assumed premiums—nonaffiliated 31,693 30,579 29,167 28,160

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

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

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

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

The following details the activity in the reserve for fiscal years 2022, 2021 and 2020 (in thousands):

2021 March 28,

2022 April 3,

2021 March 28,

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2022 2021 2020

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

3,128 3,084 2,209

19,951 17,709 18,295

302 246 ( 347 )

Federal $ 7,271 $ 16,823 $ 14,625

State 8,768 3,128 3,084

16,039 19,951 17,709

Federal ( 1,257 ) 302 246

State ( 535 ) 13 ( 42 )

( 1,792 ) 315 204

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Federal income tax at statutory rate $ 44,518 $ 20,351 $ 19,525

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

State income taxes, net of federal benefit 8,075 3,422 3,297

3,422 3,297 3,111

Stock-based compensation ( 1,421 ) ( 2,710 ) ( 2,994 )

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

Tax credits ( 37,488 ) ( 1,356 ) ( 2,401 )

Other 563 559 486

$ 14,247 $ 20,266 $ 17,913

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

2021 March 28,

2022 April 3,

Net deferred tax (liabilities) assets

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

Property, plant, equipment and depreciation

( 5,121 ) ( 5,084 )

Goodwill $ ( 16,675 ) $ ( 16,327 )

Property, plant and equipment ( 7,030 ) ( 5,121 )

Warranty reserves 5,913 4,277

Lease - Operating lease liability 4,270 4,123

Lease - Right of use asset

( 3,820 ) ( 3,295 )

Lease - Right of use assets ( 3,968 ) ( 3,820 )

Salaries and wages 3,924 3,065

Accrued volume rebates 2,600 1,494

Stock-based compensation 2,199 2,177

Inventory 2,192 1,271

Unrealized gains on marketable equity investments ( 1,715 ) ( 1,695 )

1 unchanged sentence

Other intangibles — ( 1,538 )

( 1,538 ) ( 1,534 )

Accrued volume rebates

Other 1,487 3,070

$ ( 5,528 ) $ ( 7,393 )

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.

The effective income tax rate for the current year was positively impacted by the recognition of tax credits and stock option exercises.

The net tax credit benefit predominantly related to the sale of energy efficient homes between fiscal year 2018 and fiscal third quarter 2022 available under the Internal Revenue Code §45L.

Of the total tax credit benefit, $ 30.6 million relates to fiscal year 2018 through fiscal year 2021 and $ 6.4 million relates to fiscal year 2022, which includes non-recurring credits that were recognized during the 2022 fiscal year.

The remaining $ 500,000 relates to the Research and Development and Work Opportunity Tax Credits.

The §45L tax credit was initially established under the Federal Energy Policy Act of 2005 and most recently extended in the Consolidated Appropriations Act, 2021.

The §45L credit expired in its current form as of December 31, 2021.

The Company determined eligibility for the program in consultation with third-party qualified experts and recognized the benefit for the five eligible years during fiscal year 2022.

We recorded an insignificant amount of unrecognized tax benefits during fiscal years 2022, 2021 and 2020, and there would be an insignificant effect on the effective tax rate if all unrecognized tax benefits were recognized.

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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.

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

Commitments and Contingencies

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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.

The maximum amount for which the Company was liable under such agreements approximated $ 141.0 million and $ 74.2 million at April 2, 2022 and April 3, 2021, respectively, without reduction for the resale value of the homes.

We had a reserve for repurchase commitments of $ 3.6 million and $ 2.3 million at April 2, 2022 and April 3, 2021, respectively.

Constru ction-Period Mortgages.

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Loan contracts with off-balance sheet commitments are summarized below (in thousands):

2021 March 28,

2022 April 3,

Construction loan contract amount $ 9,330 $ 37,628

$ 37,628 $ 31,136

Cumulative advances ( 3,547 ) ( 13,801 )

$ 5,783 $ 23,827

$ 23,827 $ 17,736

Representations and Warranties of Mortgages Sold .

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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.

This reserve of $ 866,000 as of April 2, 2022 and $ 1.2 million as of April 3, 2021, 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 2, 2022.

In addition, we are subject to minimum net worth requirements and was in compliance for the year ended April 2, 2022.

Interest Rate Lock Commitments .

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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 estimated fair value of IRLCs is recorded in Prepaid expenses and other current assets, if in a net favorable position, or Accrued expenses and other current liabilities, if in a net unfavorable position, in the Consolidated Balance Sheets.

The fair value of IRLCs is based on the value of the underlying loan adjusted for:

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The initial and subsequent changes in the value of IRLCs are a component of gain (loss) on loans held for sale.

During fiscal years 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.

During fiscal year 2022, we recognized a non-cash gain of $ 1,000 on outstanding IRLCs.

During fiscal years 2021 and 2020, we recognized a non-cash loss of $ 208,000 and non-cash gain of $ 153,000 , respectively, on outstanding IRLCs.

Forward Sales Commitments .

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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.

During the year ended April 2, 2022, we recognized a non-cash loss of $ 92,000 on Commitments.

During the fiscal years ended April 3, 2021 and March 28, 2020, we recognized a non-cash gain of $ 1.4 million and a non-cash loss of $ 951,000 , 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.

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.

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 ("CEO") 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.

On November 2, 2021, the Company filed a motion to dismiss the claim.

On January 25, 2022, the court denied the motion to dismiss and the matter is now in the discovery phase of litigation.

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 included in this Annual Report on Form 10-K.

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

Stock-Based Compensation

The Company maintains stock incentive plans whereby stock option grants or awards of restricted stock may be made to certain officers, directors and key employees.

The Company maintains stock incentive plans whereby stock option grants or awards of RSUs 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 283,208 shares were still available for grant as of April 2, 2022.

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).

Upon option exercise, new shares of the Company's common stock are issued and when RSUs vest, unrestricted shares are issued.

The exercise price of stock option awards may not be below 100 % of the fair market value of the Company's common stock at the date of grant.

Stock options generally expire seven years from the date of grant.

Stock options and awards of RSUs 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 RSUs 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.

Stock compensation expense was approximately $ 5.1 million, $ 4.4 million and $ 3.9 million for fiscal years 2022, 2021 and 2020, respectively.

As of April 2, 2022, 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 1.87 years.

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Canceled or expired ( 20,658 ) 148.95

Outstanding at March 28, 2020 364,174 $ 123.93 4.02 $ 49,000

Granted 39,800 177.61

Outstanding at April 3, 2021 251,749 $ 146.86 4.04 $ 34,266

Exercised ( 53,550 ) 107.58

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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:

2021 2020 2019

47.5 % 36.0 % 31.5 %

Exercisable at April 2, 2022 126,948 $ 149.90 2.82 $ 11,941

There were no grants of stock options in fiscal year 2022.

The weighted-average estimated fair value of employee stock options granted during fiscal years 2021 and 2020 was $ 69.65 and $ 46.84 per share, respectively, using the following weighted average assumptions:

Volatility 47.5 % 36.0 %

Risk-free interest rate 0.3 % 2.0 %

0.3 % 2.0 % 2.7 %

Dividend yield — % — %

Expected option life in years 4.56 4.33

4.56 4.33 5.18

Estimated forfeiture rate 7.0 % 7.0 %

7.0 % 7.0 % 7.0 %

The total intrinsic value of options exercised during fiscal years 2022, 2021 and 2020 was $ 7.9 million, $ 16.7 million and $ 15.7 million, respectively.

Restricted Stock Awards.

A summary of restricted stock award activity for fiscal years 2021 and 2020 is as follows:

A summary of RSU activity for fiscal years 2022, 2021 and 2020 is as follows:

Number of Shares

9 unchanged sentences

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

Awarded 7,920 16,902 24,822

Released — ( 3,335 ) ( 3,335 )

Canceled or expired ( 805 ) ( 505 ) ( 1,310 )

Outstanding at April 2, 2022 20,054 17,647 37,701

Unvested target performance-based RSUs that may vest based upon performance conditions through fiscal year 2022 6,333

Unvested target performance-based RSUs that may vest based upon performance conditions through fiscal year 2023 6,201

Unvested target performance-based RSUs that may vest based upon performance conditions through fiscal year 2024 7,520

Grants of performance-based RSUs are shown in the table above at the target amount in the year of the award.

Additional shares awarded based upon achievement above target specified performance criteria are shown in the table above when they vest, which is generally in the first quarter of the fiscal year following the performance year.

Cancellations of target awards based upon achievement below target specified performance criteria are shown in the table above in the period they are canceled, which is generally in the first quarter of the fiscal year following the performance year.

Actual performance exceeded the target established for the three-year performance-based RSUs granted in fiscal year 2020.

As a result, in the first quarter of fiscal year 2023, we expect 2,489 performance-based RSUs will vest and be released, in addition to the unvested target performance-based RSUs shown in the table above.

Earnings Per Share

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2022 2021 2020

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

Net income attributable to Cavco common stockholders $ 197,699 $ 76,646 $ 75,066

Weighted average shares outstanding:

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

Basic 9,178,593 9,189,052 9,129,639

Effect of dilutive securities 85,560 104,082 139,145

104,082 139,145 187,859

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

Net income per share:

$ 8.34 $ 8.22 $ 7.56

Diluted 9,264,153 9,293,134 9,268,784

Net income per share attributable to Cavco common stockholders

Basic $ 21.54 $ 8.34 $ 8.22

Diluted $ 21.34 $ 8.25 $ 8.10

Anti-dilutive common stock equivalents excluded

405 19,440 23,336

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.

Outstanding RSUs excluded, as underlying performance criteria has not yet been met 20,054 12,939 7,305

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

April 2, 2022 April 3, 2021

Value Estimated

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Includes consumer loans receivable held for investment, held for sale and construction advances.

See discussion of fair value inputs below.

The fair value is estimated using market interest rates of comparable loans.

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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.

Loans held for sale are measured at the lower of cost or fair value, less costs to sell, 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 2, 2022.

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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.

2021 March 28,

MSRs are recorded at fair value in Prepaid expenses and other current assets in the Consolidated Balance Sheets based on the present value of the expected future cash flows related to servicing these loans.

2022 April 3,

Number of loans serviced with MSRs

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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.

Incurred claims identified under the third-party administrator's incident reporting system and IBNR 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 $ 22.8 million, $ 15.8 million and $ 15.7 million for fiscal years 2022, 2021 and 2020, respectively.

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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.

Employer matching contribution expense was $ 1.3 million in fiscal year 2022 and $ 1.1 million each in fiscal year 2021 and 2020.

Certain Commodore (as defined in Note 22) manufacturing facilities participate 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.

Beginning January 1, 2022, we 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.

The Company's participation in multiemployer plans for the fiscal year ended April 2, 2022 is outlined in the table below, with the following information:

• The Employer Identification Number is 51-6031295 and the three-digit plan number assigned to a plan by the Internal Revenue Service is 002.

• The most recent Pension Protection Act Zone Status available is for plan years that ended in calendar years 2021 and 2020, based on information provided to the Company by the plan.

A plan in the "red" zone has been determined to be in "critical status," based on criteria established under the Internal Revenue Code ("Code"), and is generally less than 65% funded.

• The "RP Status Pending/Implemented" column indicates whether a Rehabilitation Plan ("RP") for plans in the "red" zone, as required by the Code, is pending or has been implemented by the plan as of the end of the plan year that ended in calendar year 2021.

• The "Surcharge Imposed" column indicates whether the Company contribution rate for its fiscal year that ended on April 2, 2022 included an amount in addition to the contribution rate specified in the applicable collective bargaining agreement ("CBA"), as imposed by a plan in "critical status," in accordance with the requirements of the Code.

Pension Protection Act Zone Status RP Status Pending / Implemented Contributions by the Company by fiscal year (in thousands) Expiration Date of CBAs

Pension Fund 2021 2020 2022 2021 2020 Surcharge Imposed

IAM National Pension Fund Red Red Implemented $ 312 $ — $ — Yes (1)

(1) The CBA for the Clarion and Colony manufacturing facilities expires in April 2023.

The expiration date of the CBA for the Pennwest manufacturing facility is February 2024.

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 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.

For the years ended April 2, 2022 , April 3, 2021 and March 28, 2020, the total amount of sales to related parties was $ 58.1 million , $ 46.7 million and $ 51.0 million, respectively.

As of April 2, 2022, receivables from related parties included $ 3.3 million of accounts receivable and $ 2.6 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.

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

Craftsman 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 that time, 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 previously had 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 fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands).

Accounts receivable 577

Inventories 7,146

Property, plant and equipment 205

Other current assets 416

Indefinite lived intangible assets (1)

Total identifiable assets acquired 17,790

Accounts payable and accrued liabilities 10,028

Net identifiable assets acquired 7,762

Net assets acquired $ 12,357

(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 Craftsman Purchase Agreement, $ 2.5 million for the acquisition date fair value of this portion of the noncontrolling interest was recorded in the long-term liabilities section of the Consolidated Balance Sheet within Secured financings and other.

As we are not currently obligated for the redemption of the remaining 10 % ownership, $ 1.2 million for the acquisition date 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 Sheets as Redeemable noncontrolling interest.

Since the acquisition date, Craftsman contributed Net revenue and Net income of $ 13.8 million and $ 0.4 million, respectively, for the fiscal year ended April 2, 2022.

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

Commodore Acquisition

On September 24, 2021 , we purchased certain manufactured housing assets and assumed certain liabilities of The Commodore Corporation ("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 $ 146.2 million , subject to future adjustments upon the finalization of closing financial statements.

During the period, certain adjustments were made to these closing financial statements, which resulted in changes to the initial purchase price allocation and impacted the amount of goodwill recognized.

We have expensed $ 2.7 million in acquisition related transaction costs in Selling, general and administrative expenses i n 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.

The allocation of the purchase price is still preliminary due to the time between the acquisition date and reporting date and will be finalized upon completion of the analysis of the fair values of Commodore's acquired commercial loans, intangible assets and resulting goodwill and deferred taxes.

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 30,922

Inventories 31,787

Property, plant and equipment (1)

Other current assets 534

Intangible assets (2)

Total identifiable assets acquired 156,398

Accounts payable and accrued liabilities 31,536

Net identifiable assets acquired 124,862

Net assets acquired $ 146,170

(1) Includes assets acquired under finance leases.

See Note 9 for additional information.

(2) Includes $ 7.2 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;

$ 1.0 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 and Net income of $ 166.7 million and $ 6.6 million, respectively, for the fiscal year ended April 2, 2022.

Cost of sales 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 (Unaudited) .

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

2022 April 3,

Net revenue $ 1,793,247 $ 1,369,244

Net income attributable to Cavco common stockholders 199,820 84,448

Diluted net income per share 21.57 9.09

Business Segment Information

1 unchanged sentence

(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):

The following tables provide selected financial data by segment (dollars in thousands):

Fiscal Year Ended

2021 March 28,

2022 April 3,

2021 March 28,

35 unchanged sentences

$ 18,653 $ 25,537 $ 14,340

2021 March 28,

2022 April 3,

Total assets:

Factory-built housing $ 929,535 $ 711,579

$ 711,579 $ 607,808

Financial services 225,437 240,254

$ 1,154,972 $ 951,833

$ 951,833 $ 810,431

Quarterly Financial Data (Unaudited)

The following tables set forth certain unaudited quarterly financial information for fiscal years 2021 and 2020 (dollars in thousands, except per share amounts):

Quarter Second

Quarter Third

Quarter Fourth

Quarter Total

Fiscal year ended April 3, 2021

$ 254,801 $ 257,976 $ 288,772 $ 306,502 $ 1,108,051

55,323 53,541 59,238 70,875 238,977

16,674 15,049 19,701 25,222 76,646

Net income per share:

$ 1.82 $ 1.64 $ 2.14 $ 2.74 $ 8.34

$ 1.80 $ 1.62 $ 2.12 $ 2.71 $ 8.25

Fiscal year ended March 28, 2020

$ 264,042 $ 268,675 $ 273,722 $ 255,335 $ 1,061,774

60,298 58,467 59,855 51,898 230,518

21,282 20,885 20,898 12,001 75,066

Net income per share:

$ 2.34 $ 2.29 $ 2.29 $ 1.31 $ 8.22

$ 2.31 $ 2.25 $ 2.25 $ 1.29 $ 8.10

2022 April 3,

2021 March 28,

Gross margin %:

Consolidated 25.1 % 21.6 % 21.7 %

Factory-built housing 23.9 % 19.2 % 19.5 %

Financial services 51.5 % 56.1 % 56.5 %

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

What changed 10-K

Item 9A. Controls and Procedures