What changed in this filing

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Item 1. Financial Statements

2022-08-05 compared with 2022-02-07 · 96 added, 322 removed, 453 unchanged (48% of the section changed)

30 unchanged sentences

Accrued expenses and other current liabilities 259,778 251,088

Current portion of secured financings and other 798 1,851

Total current liabilities 304,675 294,170

Operating lease liabilities 13,135 13,158

Secured financings and other 11,030 10,335

Other liabilities 10,695 10,836

Deferred income taxes 3,056 5,528

12 unchanged sentences

Retained earnings 688,358 628,756

Accumulated other comprehensive (loss) income ( 42 ) 97

Accumulated other comprehensive loss ( 515 ) ( 403 )

Total stockholders' equity 851,562 830,455

4 unchanged sentences

(Dollars in thousands, except per share amounts)

Three Months Ended Nine Months Ended

2022 December 26,

2020 January 1,

2022 December 26,

Three Months Ended

$ 588,338 $ 330,422

9 unchanged sentences

Other income, net

4,258 2,243 11,387 5,821

Income before income taxes

79,310 35,478

Income tax benefit (expense) 20,680 ( 6,189 ) 910 ( 15,742 )

Income tax expense ( 19,616 ) ( 8,432 )

59,694 27,046

8 unchanged sentences

Applicable income taxes

27 1 34 ( 12 )

Comprehensive income 59,582 27,033

11 unchanged sentences

(Dollars in thousands)

Nine Months Ended

2022 December 26,

Three Months Ended

OPERATING ACTIVITIES

6 unchanged sentences

Non-cash interest income, net ( 257 ) ( 394 )

(Gain) loss on sale or retirement of property, plant and equipment, net ( 307 ) 220

Gain on sale or retirement of property, plant and equipment, net ( 232 ) ( 35 )

Gain on investments and sale of loans, net ( 288 ) ( 5,579 )

11 unchanged sentences

Purchases of property, plant and equipment ( 25,007 ) ( 2,593 )

Payments for acquisitions, net ( 141,428 ) —

Proceeds from sale of property, plant and equipment 283 38

3 unchanged sentences

FINANCING ACTIVITIES

Payments for taxes on exercises and releases of equity awards ( 848 ) —

Proceeds from exercise of stock options — 136

Proceeds from secured financings and other 47 64

Payments on secured financings and other ( 9,213 ) ( 1,984 )

Payments on finance leases and other secured financings ( 165 ) ( 444 )

Payments for common stock repurchases ( 38,960 ) ( 12,842 )

10 unchanged sentences

Right-of-use assets recognized and operating lease obligations incurred $ 1,159 $ 708

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

Finance lease obligations incurred $ 6,351 $ —

See accompanying Notes to Consolidated Financial Statements

8 unchanged sentences

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

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

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

These Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the Notes to the Consolidated Financial Statements included in our 2022 Annual Report on Form 10-K for the year ended April 2, 2022, filed with the SEC ("Form 10-K").

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

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

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

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

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

The Consolidated Statements of Comprehensive Income and Consolidated Statements of Cash Flows for the interim periods are not necessarily indicative of the results or cash flows for the full year.

11 unchanged sentences

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

See Note 22 .

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

Redeemable Noncontrolling Interest.

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

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

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

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

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

We accounted for this transaction as a business combination achieved in stages (see Note 22) and consolidated the Entities while recognizing a noncontrolling interest for the remaining Seller ownership, as discussed below.

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

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

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

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

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

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

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

Revenue from Contracts with Customers

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

Three Months Ended Nine Months Ended

January 1, 2022 December 26, 2020 January 1,

2022 December 26,

Three Months Ended

Factory-built housing

4 unchanged sentences

Park model RVs

10,709 8,296 30,108 31,045

Other 17,321 13,605

2 unchanged sentences

Insurance agency commissions received from third-party insurance companies

1,304 840 3,027 2,387

All other sources 14,344 17,266

7 unchanged sentences

14,890 15,184

Less current portion ( 15,542 ) ( 16,693 )

Current portion ( 14,555 ) ( 14,849 )

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 on the Consolidated Balance Sheets to the combined amounts shown on the Consolidated Statements of Cash Flows (in thousands):

2022 December 26,

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):

Cash and cash equivalents $ 238,072 $ 329,753

14 unchanged sentences

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):

January 1, 2022 April 3, 2021

July 2, 2022 April 2, 2022

Value Amortized Cost Fair

8 unchanged sentences

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

January 1, 2022

Due in less than one year $ 1,295 $ 1,281

4 unchanged sentences

$ 17,930 $ 17,278

Gross gains realized on the sale of available-for-sale debt securities during the three and nine months ended January 1, 2022 were $ 2,000 , and there were no gross losses.

For the three and nine months ended December 26, 2020, there were no gross gains realized on the sale of available-for-sale debt securities and gross losses realized were $ 1,000 and $ 6,000 respectively.

There were no gross gains or losses realized on the sale of available-for-sale debt securities during the three months ended July 2, 2022 or July 3, 2021.

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

Three Months Ended Nine Months Ended

2022 December 26,

2020 January 1,

2022 December 26,

Three Months Ended

Marketable equity securities

Net gain recognized during the period $ 2,967 $ 2,008 $ 4,906 $ 5,289

Net gains recognized on securities sold during the period ( 257 ) ( 151 ) ( 536 ) ( 157 )

Unrealized gains recognized during the period on securities still held $ 2,710 $ 1,857 $ 4,370 $ 5,132

Net (loss) gain recognized during the period $ ( 2,342 ) $ 1,696

Net loss (gain) recognized on securities sold during the period 74 ( 136 )

Unrealized (loss) gain recognized during the period on securities still held $ ( 2,268 ) $ 1,560

Inventories consisted of the following (in thousands):

18 unchanged sentences

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

Three Months Ended Nine Months Ended

2022 December 26,

2020 January 1,

2022 December 26,

Three Months Ended

Allowance for loan losses at beginning of period $ 2,115 $ 3,188

Impact of adoption of Financial Accounting Standards Board's Accounting Standards Update 2016-13 Financial Instruments - Credit Losses (Topic 326):

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

Change in estimated loan losses, net ( 210 ) ( 267 )

Charge-offs ( 19 ) ( 3 )

Recoveries 19 —

Allowance for loan losses at end of period $ 1,905 $ 2,918

4 unchanged sentences

Weighted average months to maturity 151 151

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

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

2022 April 2,

4 unchanged sentences

$ 52,219 $ 52,832

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

January 1, 2022

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

2023 2022 2021 2020 2019 Prior Total

19 unchanged sentences

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

As of January 1, 2022 and April 3, 2021, 41 % and 35 % of the outstanding principal balance of the consumer loans receivable portfolio was concentrated in Texas, respectively, and 16 % and 20 % was concentrated in Florida, respectively.

Other than Texas and Florida, no sta te had concentrations in excess of 10 % of the principal balance of the consumer loans receivable as of January 1, 2022 or April 3, 2021.

Repossessed homes totaled approximately $ 404,000 and $ 518,000 as of January 1, 2022 and April 3, 2021, respectively, and are included in Prepaid expenses and other current assets on the Consolidated Balance Sheets.

Foreclosure or similar proceedings in progress totaled approximately $ 813,000 and $ 1.1 million as of January 1, 2022 and April 3, 2021, respectively.

As of July 2, 2022 and April 2, 2022, 40 % and 39 % of the outstanding principal balance of the consumer loans receivable portfolio was concentrated in Texas, respectively, and 17 % was concentrated in Florida in both periods.

Other than Texas and Florida, no sta te had concentrations in excess of 10 % of the principal balance of the consumer loans receivable as of July 2, 2022 or April 2, 2022.

Repossessed homes totaled approximately $ 78,000 and $ 499,000 as of July 2, 2022 and April 2, 2022, respectively, and are included in Prepaid expenses and other current assets on the Consolidated Balance Sheets.

Foreclosure or similar proceedings in progress totaled approximately $ 611,000 and $ 1.1 million as of July 2, 2022 and April 2, 2022, respectively.

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 and amounts loaned by us under participation financing programs.

Commercial loans receivable, net consisted of the following (in thousands):

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

Commercial loans receivable (including from affiliates), net consisted of the following (in thousands):

2022 April 2,

3 unchanged sentences

72,318 68,566

Less current portion of commercial loans receivable (including from affiliates), net ( 29,525 ) ( 19,232 )

Less current portion ( 33,855 ) ( 32,644 )

$ 38,463 $ 35,922

3 unchanged sentences

Weighted average months outstanding 9 9

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

Three Months Ended Nine Months Ended

2022 December 26,

2020 January 1,

2022 December 26,

The following table represents changes in the estimated allowance for loan losses (in thousands):

Three Months Ended

Balance at beginning of period

$ 1,011 $ 816

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

Change in estimated loan losses, net

304 ( 24 ) 314 ( 63 )

Balance at end of period

$ 1,054 $ 785

As of January 1, 2022 and April 3, 2021, there were no commercial loans considered watch list or nonperforming.

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

January 1, 2022

Loans with indicators of potential performance problems are placed on watch list status and are subject to additional monitoring and scrutiny.

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

As of July 2, 2022 and April 2, 2022, there were no commercial loans considered watch list or nonperforming.

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

2023 2022 2021 2020 2019 Prior Total

3 unchanged sentences

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

At January 1, 2022, there were no commercial loans 90 days or more past due that were still accruing interest and we were not aware of any potential problem loans that would have a material effect on the commercial loans receivable balance.

As of January 1, 2022, 20 % of our outstanding commercial loans receivable principal balance was concentrated in Pennsylvania and 13 % was concentrated in New York.

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

No other state had concentrations in excess of 10 % of the principal balance of the commercial loans receivable as of January 1, 2022 or April 3, 2021.

We had concentrations with one independent third-party and its affiliates that equaled 12 % and 18 % of the net commercial loans receivable principal balance outstanding, all of which was secured, as of January 1, 2022 and April 3, 2021, respectively .

As of July 2, 2022, there were no commercial loans 90 days or more past due that were still accruing interest and we were not aware of any potential problem loans that would have a material effect on the commercial loans receivable balance.

As of July 2, 2022 and April 2, 2022, we had concentrations of our outstanding commercial loans receivable balance in New York of 20 % and 25 %, respectively.

No other state had concentrations in excess of 10 % of the principal balance of the commercial loans receivable as of July 2, 2022 or April 2, 2022.

One independent third-party and its affiliates comprised 14 % of the net commercial loans receivable principal balance outstanding, all of which was secured, as of both July 2, 2022 and April 2, 2022 .

Property, Plant and Equipment, net

5 unchanged sentences

Machinery and equipment 49,911 48,638

Construction in progress 37,010 29,281

238,725 210,848

1 unchanged sentence

$ 185,534 $ 164,016

Depreciation expense for the three months ended January 1, 2022 and December 26, 2020 was $ 3.0 million and $ 1.4 million, respectively.

Depreciation expense for the nine months ended January 1, 2022 and December 26, 2020 was $ 5.9 million and $ 4.2 million, respectively.

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

See Note 9 for further information.

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

During the period ended January 1, 2022, we executed various lease renewals and acquired certain assets under finance leases.

The following table provides information about the financial statement classification of our lease balances reported on the Consolidated Balance Sheets as of January 1, 2022 and April 3, 2021 (in thousands):

Classification January 1,

2022 April 3,

Operating lease assets Operating lease right-of-use assets

$ 15,974 $ 16,252

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

Total lease assets $ 23,088 $ 17,238

Lease Liabilities

Operating lease liabilities Accrued expenses and other current liabilities $ 4,773 $ 4,184

Finance lease liabilities Current portion of secured financings and other 347 71

Operating lease liabilities Operating lease liabilities 12,482 13,361

Finance lease liabilities Secured financings and other 5,986 233

Total lease liabilities $ 23,588 $ 17,849

(1) Recorded net of accumulated amortization of $ 44,000 and $ 143,000 as of January 1, 2022 and April 3, 2021, respectively.

The present value of minimum payments for future fiscal years under non-cancelable leases as of January 1, 2022 was as follows (in thousands):

Operating Leases Finance Leases Total

Remainder of 2022 $ 1,225 $ 89 $ 1,314

2023 4,748 356 5,104

2024 4,210 356 4,566

2025 3,188 356 3,544

2026 3,133 356 3,489

2027 1,086 356 1,442

Thereafter 1,439 10,941 12,380

19,029 12,810 31,839

Less amount representing interest ( 1,774 ) ( 6,477 ) ( 8,251 )

17,255 6,333 23,588

Less current portion ( 4,773 ) ( 347 ) ( 5,120 )

$ 12,482 $ 5,986 $ 18,468

The following table provides information about the weighted average remaining lease terms and weighted average discount rates as of January 1, 2022 :

Remaining Lease Term (Years) Discount Rate

Operating leases 4.6 4.5 %

Finance leases 35.9 4.5 %

Depreciation expense for the three months ended July 2, 2022 and July 3, 2021 was $ 3.4 million and $ 1.4 million, respectively.

Goodwill and Other Intangibles

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

January 1, 2022 April 3, 2021

July 2, 2022 April 2, 2022

Amount Accumulated

12 unchanged sentences

$ 139,197 $ ( 10,253 ) $ 128,944 $ 139,197 $ ( 9,745 ) $ 129,452

Changes in the carrying amount of Goodwill were as follows for the nine months ended January 1, 2022 (in thousands).

See Note 22 for further information.

Balance at beginning of period

Goodwill recognized on Craftsman acquisition 4,363

Goodwill recognized on Commodore acquisition 22,492

Balance at end of period

Amortization expense recognized on intangible assets was $ 523,000 and $ 186,000 for the three months ended January 1, 2022 and December 26, 2020, respectively.

Amortization expense recognized on intangible assets was $ 862,000 and $ 560,000 for the nine months ended January 1, 2022 and December 26, 2020, respectively.

Amortization expense recognized on intangible assets was $ 508,000 and $ 173,000 for the three months ended July 2, 2022 and July 3, 2021, respectively.

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

9 unchanged sentences

Accrued volume rebates 22,532 18,641

Company repurchase options on certain loans sold 12,731 25,938

Other 75,177 70,790

1 unchanged sentence

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

Three Months Ended Nine Months Ended

2022 December 26,

2020 January 1,

2022 December 26,

Three Months Ended

Balance at beginning of period $ 26,250 $ 18,032

Purchase accounting additions — — 6,928 —

Charged to costs and expenses 15,004 9,125

1 unchanged sentence

Balance at end of period $ 28,802 $ 19,344

Debt, Finance Lease and Mandatorily Redeemable Noncontrolling Interest Obligations

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

Other Liabilities

The following table summarizes the non-current portion of our other liabilities (in thousands):

2022 April 2,

Finance lease obligations $ 6,333 $ 304

Other secured financings

Finance lease payables $ 6,298 $ 6,316

Other secured financing 2,791 2,933

Mandatorily redeemable noncontrolling interest 2,371 2,371

Secured term loans — 8,210

11,460 11,620

Less current portion ( 798 ) ( 1,851 )

Less current portion included in Accrued expenses and other current liabilities ( 765 ) ( 784 )

$ 10,695 $ 10,836

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 January 1, 2022.

Reinsurance and Insurance Loss Reserves

3 unchanged sentences

Three Months Ended

January 1, 2022 December 26, 2020

Written Earned Written Earned

Direct premiums

$ 6,380 $ 6,557 $ 5,420 $ 5,429

Assumed premiums—nonaffiliated

7,023 7,822 6,541 7,195

Ceded premiums—nonaffiliated

( 3,866 ) ( 3,866 ) ( 3,146 ) ( 3,146 )

$ 9,537 $ 10,513 $ 8,815 $ 9,478

Nine Months Ended

January 1, 2022 December 26, 2020

July 2, 2022 July 3, 2021

Written Earned Written Earned

7 unchanged sentences

Typical insurance policies written or assumed have a maximum coverage of $ 300,000 per claim, of which we cede $ 125,000 of the risk of loss per reinsurance.

Therefore, our risk of loss is limited to the first $ 175,000 per claim on typical policies, subject to the reinsurers meeting their obligations.

Therefore, our risk of loss is limited to $ 175,000 per claim on typical policies, subject to the reinsurers meeting their obligations.

After this limit, amounts are recoverable through reinsurance for catastrophic losses in excess of $ 2 million per occurrence, up to a maximum of $ 70 million in the aggregate for that occurrence.

Standard Casualty establishes reserves for claims and related expenses on reported and unreported non-reinsured losses.

Reserves for claims are included in the Accrued expenses and other current liabilities line item on the Consolidated Balance Sheet and claims expenses is recorded in Cost of sales on the Consolidated Statement of Comprehensive Income.

The following details the activity in the reserve for the nine months ended January 1, 2022 and December 26, 2020 (in thousands):

Three Months Ended Nine Months Ended

2022 December 26,

2020 January 1,

2022 December 26,

Standard Casualty establishes reserves for claims and claims expense on reported and incurred but not reported ("IBNR") claims of non-reinsured losses.

Reserves for claims are included in the Accrued expenses and other current liabilities line item on the Consolidated Balance Sheets and claims expenses are recorded in Cost of sales on the Consolidated Statements of Comprehensive Income.

The following details the activity in the reserve for the three months ended July 2, 2022 and July 3, 2021 (in thousands):

Three Months Ended

Balance at beginning of period $ 8,149 $ 7,451

2 unchanged sentences

Balance at end of period $ 8,574 $ 8,348

For the three and nine months ended January 1, 2022, income taxes resulted in a benefit of $ 20.7 million and $ 0.9 million, respectively.

This is due to $ 34.4 million of estimated non-recurring net tax credits 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 this amount, $ 4.0 million is related to fiscal year 2022.

A receivable for the refunds related to the net tax credits is recorded in Prepaid expenses and other current assets.

This credit was initially established under the Federal Energy Policy Act of 2005 and most recently extended in the Consolidated Appropriations Act, 2021.

The credit expired in its current format 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 in the fiscal third quarter of 2022.

Excluding these credits, the effective income tax rate was consistent between periods.

Commitments and Contingencies

2 unchanged sentences

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

The maximum amount for which we were liable under such agreements approximated $ 117.3 million and $ 74.2 million at January 1, 2022 and April 3, 2021, respectively, without reduction for the resale value of the homes that are repurchased.

We had a reserve for repurchase commitments of $ 3.2 million at January 1, 2022 and $ 2.3 million at April 3, 2021.

The maximum amount for which the Company was liable under such agreements approximated $ 167.2 million and $ 141.0 million at July 2, 2022 and April 2, 2022, respectively, without reduction for the resale value of the homes.

We had a reserve for repurchase commitments of $ 4.4 million at July 2, 2022 and $ 3.6 million at April 2, 2022, and there were no repurchases during either period.

Construction-Period Mortgages.

12 unchanged sentences

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

This reserve of $ 1.2 million as of January 1, 2022 and April 3, 2021, included in Accrued expenses and other current liabilities, reflects management's estimate of probable loss.

There were no claim requests that resulted in the execution of an indemnification agreement or in the repurchase of a loan during the nine months ended January 1, 2022.

This reserve of $ 1.0 million as of July 2, 2022 and $ 866,000 as of April 2, 2022, included in Accrued expenses and other current liabilities on the Consolidated Balance Sheets, reflects management's estimate of probable loss.

There were no claim requests that resulted in the repurchase of a loan during the three months ended July 2, 2022.

Interest Rate Lock Commitments .

1 unchanged sentence

These IRLCs bind us to fund the approved loan at the specified rate regardless of whether interest rates or market prices for similar loans have changed between the commitment date and the closing date.

As of January 1, 2022, we had outstanding IRLCs with a notional amount of $ 29.7 million.

During the three months ended January 1, 2022, there were no gains or losses on outstanding IRLCs, and we recognized non-cash gains of $ 57,000 during the three months ended December 26, 2020 .

For the nine months ended January 1, 2022 and December 26, 2020, w e recognized gains of $ 42,000 and losses of $ 87,000 , respectively.

As of July 2, 2022, we had outstanding IRLCs with a notional amount of $ 49.9 million and recognized a gain of $ 40,000 in the fiscal 2023 first quarter and a gain of $ 47,000 in the fiscal 2022 first quarter.

Forward Sales Commitments .

We manage the risk profiles of a portion of the outstanding IRLCs and mortgage loans held for sale by entering into forward sales of mortgage-backed securities ("MBS") and whole loan sale commitments (collectively "Commitments").

As of January 1, 2022, we had $ 21.5 million in outstanding Commitments.

We recognized non-cash losses of $ 61,000 and $ 318,000 for the three months ended January 1, 2022 and December 26, 2020, respectively.

During the nine months ended January 1, 2022 and December 26, 2020, we recognized losses of $ 329,000 and gains of $ 816,000 , respectively.

As of July 2, 2022, we had $ 10.2 million in outstanding Commitments and recognized a non-cash loss of $ 262,000 in the fiscal 2023 first quarter and a non-cash loss of $ 347,000 in the fiscal 2022 first quarter.

Legal Matters.

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

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 proceeding to discovery.

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.

The Company has reached a settlement in principle with the SEC staff regarding the pending litigation.

The settlement is subject to SEC approval that is expected within the next 60 days.

A related notice has been filed with the Court in that action.

We do not believe that the settlement will have a material impact on our results of operations or financial position.

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 on the Consolidated Balance Sheets.

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

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

Stockholders' Equity and Redeemable Noncontrolling Interest

The following table represents changes in stockholders' equity attributable to Cavco's stockholders and redeemable noncontrolling interest for each quarterly period during the nine months ended January 1, 2022 (dollars in thousands):

The following table represents changes in stockholders' equity attributable to Cavco's stockholders and redeemable noncontrolling interest during the three months ended July 2, 2022 (dollars in thousands):

Equity Attributable to Cavco Stockholders

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

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

Shares Amount

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Common stock repurchases — — ( 38,960 ) — — — ( 38,960 ) —

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

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

Net income — — — — 37,610 — 37,610 73

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

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

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

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

Distributions — — — — — — — ( 240 )

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

Net income — — — — 79,419 — 79,419 196

Other comprehensive loss, net — — — — — ( 113 ) ( 113 ) —

Issuance of common stock under stock incentive plans 14,592 — — 1,437 — — 1,437 —

Stock-based compensation — — — 1,043 — — 1,043 —

Common stock repurchases — — ( 8,690 ) — — — ( 8,690 ) —

Distributions — — — — — — — ( 120 )

Balance, January 1, 2022 9,289,608 $ 93 $ ( 30,567 ) $ 261,596 $ 575,132 $ ( 42 ) $ 806,212 $ 1,204

The following table represents changes in stockholders' equity attributable to Cavco's stockholders for each quarterly period during the nine months ended December 26, 2020 (dollars in thousands):

Balance, July 2, 2022 9,298,235 $ 93 $ ( 100,000 ) $ 263,626 $ 688,358 $ ( 515 ) $ 851,562 $ 677

Equity Attributable to Cavco Stockholders

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

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

Shares Amount

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 — — — — 16,674 — 16,674

Other comprehensive income, net — — — — — 68 68

Issuance of common stock under stock incentive plans 3,822 — — ( 533 ) — — ( 533 )

Stock-based compensation — — — 945 — — 945

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

Net income — — — — 15,049 — 15,049

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

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

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

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

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

Net income — — — — 27,046 — 27,046 —

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Stock-based compensation — — — 1,100 — — 1,100 —

Balance, December 26, 2020 9,192,237 $ 92 $ — $ 255,664 $ 405,835 $ 150 $ 661,741

Common stock repurchases — — ( 12,842 ) — — — ( 12,842 ) —

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

Earnings Per Share

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

Three Months Ended Nine Months Ended

2022 December 26,

2020 January 1,

2022 December 26,

Three Months Ended

Net income attributable to Cavco common stockholders $ 59,602 $ 27,046

Weighted average shares outstanding

9,174,224 9,190,254 9,187,828 9,182,491

Basic 8,918,280 9,198,229

Effect of dilutive securities 70,649 78,300

96,214 105,299 83,027 102,747

9,270,438 9,295,553 9,270,855 9,285,238

Diluted 8,988,929 9,276,529

Net income per share attributable to Cavco common stockholders

$ 8.66 $ 2.14 $ 15.68 $ 5.60

$ 8.57 $ 2.12 $ 15.54 $ 5.54

Anti-dilutive common stock equivalents excluded from the computation of diluted earnings per share for the three months ended January 1, 2022 and December 26, 2020 were 1,640 and 26,601 , respectively.

Anti-dilutive common stock equivalents excluded from the computation of diluted earnings per share for the nine months ended January 1, 2022 and December 26, 2020 were 2,449 and 26,357 , respectively.

Basic $ 6.68 $ 2.94

Diluted $ 6.63 $ 2.92

Anti-dilutive common stock equivalents excluded 1,617 8,366

Fair Value Measurements

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

January 1, 2022 April 3, 2021

July 2, 2022 April 2, 2022

Value Estimated

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72,318 69,509 68,566 65,942

Secured financings and other ( 11,828 ) ( 12,019 ) ( 12,186 ) ( 12,340 )

Other secured financing ( 2,791 ) ( 2,781 ) ( 2,933 ) ( 3,119 )

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

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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.

MSRs are initially recorded at fair value.

MSRs are recorded at fair value in Prepaid expenses and other current assets on the Consolidated Balance Sheets.

2022 April 2,

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MSRs (in thousands) $ 1,915 $ 1,656

Employee Benefit Plans

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

Expenses related to the TSA totaled $ 15.3 million and $ 16.7 million for the three and nine months ended January 1, 2022, respectively.

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

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

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

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

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

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

Related Party Transactions

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

For the three and nine months ended January 1, 2022, the total amount of sales to non-consolidated related parties was $ 15.8 million and $ 44.6 million, respectively.

For the three and nine months ended December 26, 2020, the total amount of sales to non-consolidated related parties was $ 11.2 million and $ 34.2 million, respectively.

As of January 1, 2022, receivables from non-consolidated related parties included $ 3.3 million of accounts receivable and $ 2.6 million of commercial loans outstanding.

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

Craftsman Homes, LLC and Craftsman Development, LLC Acquisition

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

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

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

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

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

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

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

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

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

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

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

Accounts receivable 577

Inventories 7,393

Property, plant and equipment 189

Other current assets 416

Intangible assets (1)

Total identifiable assets acquired 18,021

Accounts payable and accrued liabilities 10,028

Net identifiable assets acquired 7,993

Net assets acquired $ 12,356

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

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

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

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

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

Since the acquisition date, Craftsman contributed Net revenue of $ 4.5 million and $ 9.0 million for the three and nine months ended January 1, 2022, respectively.

Craftsman contributed Net income of $ 654,000 and $ 897,000 for the three and nine months ended January 1, 2022, respectively.

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

Commodore Homes Acquisition

For the three months ended July 2, 2022 and July 3, 2021, the total amount of sales to related parties was $ 17.2 million and $ 14.8 million, respectively.

As of July 2, 2022, receivables from related parties included $ 5.3 million of accounts receivable and $ 1.8 million of commercial loans outstanding.

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

On July 4, 2021, we obtained an additional 20 % ownership interest in Craftsman Homes, LLC and Craftsman Homes Development, LLC (“the Entities”) which gave us a controlling interest.

Accordingly, we now consolidate the Entities and the results of operations have been included in the accompanying Consolidated Financial Statements since the date of acquisition.

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

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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, which was paid in cash and is subject to future adjustments upon the finalization of closing financial statements.

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

We have expensed $ 2.7 million in acquisition related deal costs in Selling, general and administrative expenses o 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 assets, liabilities and intangible assets.

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 156,234

Accounts payable and accrued liabilities 32,556

Net identifiable assets acquired 123,678

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 of $ 73.1 million and $ 77.5 million for the three and nine months ended January 1, 2022, respectively.

Commodore contributed Net income of $ 2.5 million and $ 1.8 million for the three and nine months ended January 1, 2022, respectively.

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 .

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

Three Months Ended Nine Months Ended

2022 December 26,

2020 January 1,

2022 December 26,

Pro Forma Impact of Acquisitions (unaudited) .

The following table presents supplemental pro forma information as if the acquisitions occurred on April 4, 2021 (in thousands, except per share data):

Three Months Ended

Net revenue $ 411,752

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

Three Months Ended Nine Months Ended

2022 December 26,

2020 January 1,

2022 December 26,

Three Months Ended

Factory-built housing $ 572,597 $ 312,283

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$ 588,338 $ 330,422

Income before income taxes

Income (loss) before income taxes

Factory-built housing $ 79,772 $ 33,559

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

What changed 10-Q

Item 1. Financial Statements