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Item 1. Financial Statements

2023-02-03 compared with 2022-11-04 · 182 added, 106 removed, 511 unchanged (36% of the section changed)

54 unchanged sentences

(Dollars in thousands, except per share amounts)

Three Months Ended Six Months Ended

2022 October 2,

2021 October 1,

2022 October 2,

Three Months Ended Nine Months Ended

2022 January 1,

2022 December 31,

2022 January 1,

$ 500,603 $ 431,714 $ 1,666,333 $ 1,121,679

12 unchanged sentences

76,081 58,935 248,202 143,434

Income tax expense ( 18,613 ) ( 11,338 ) ( 38,229 ) ( 19,770 )

Income tax (expense) benefit ( 16,492 ) 20,680 ( 54,721 ) 910

59,589 79,615 193,481 144,344

8 unchanged sentences

Applicable income taxes

( 23 ) 27 86 34

Comprehensive income 59,663 79,502 193,140 144,205

11 unchanged sentences

(Dollars in thousands)

Six Months Ended

2022 October 2,

Nine Months Ended

2022 January 1,

OPERATING ACTIVITIES

8 unchanged sentences

Gain on investments and sale of loans, net ( 6,647 ) ( 18,379 )

Distributions of earnings from equity method investments 4,306 —

Changes in operating assets and liabilities, net of acquisitions

14 unchanged sentences

Proceeds from sale of investments 9,230 9,457

Return of invested capital from equity method investments 12,213 —

Net cash used in investing activities ( 29,199 ) ( 147,842 )

2 unchanged sentences

Proceeds from exercise of stock options 1,591 4,328

Proceeds from secured financings and other — 47

Payments on finance leases and other secured financings ( 549 ) ( 9,213 )

23 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 from secured financings to accrued expenses to conform to current period classification.

Certain prior period amounts have been reclassified from secured financings to Accrued expenses and other current liabilities 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 except for the events set forth in Note 20 of the Notes to Consolidated Financial Statements ("Notes") of the Company's Quarterly Report on Form 10-Q for the period ended October 1, 2022, there were no subsequent events requiring disclosure.

and except for the events set forth in Note 23, there were no subsequent events requiring disclosure.

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").

12 unchanged sentences

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

During fiscal 2022, we acquired an additional 20% ownership in Craftsman Homes, LLC and Craftsman Homes Development, LLC (collectively known as "Craftsman"), which gave us a controlling interest and therefore became a consolidated entity, and we purchased certain manufactured housing assets and assumed certain liabilities of The Commodore Corporation ("Commodore").

During fiscal 2022, we acquired an additional 20 % ownership in Craftsman Homes, LLC and Craftsman Homes Development, LLC (collectively known as "Craftsman"), which gave us a 70 % majority controlling ownership and therefore became a consolidated entity.

We also purchased certain manufactured housing assets and assumed certain liabilities of The Commodore Corporation ("Commodore").

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

3 unchanged sentences

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

Three Months Ended Six Months Ended

October 1, 2022 October 2, 2021 October 1,

2022 October 2,

Three Months Ended Nine Months Ended

December 31, 2022 January 1, 2022 December 31,

2022 January 1,

Factory-built housing

22 unchanged sentences

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

2022 October 2,

2022 January 1,

Cash and cash equivalents $ 376,148 $ 267,265

8 unchanged sentences

38,429 55,019

54,690 55,019

Less short-term investments ( 16,607 ) ( 20,086 )

3 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):

October 1, 2022 April 2, 2022

December 31, 2022 April 2, 2022

Value Amortized Cost Fair

7 unchanged sentences

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

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

October 1, 2022

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

December 31, 2022

Due in less than one year $ 1,740 $ 1,715

4 unchanged sentences

$ 19,977 $ 19,036

There were no gross gains or losses realized on the sale of available-for-sale debt securities during the three and six months ended October 1, 2022 or October 2, 2021.

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

Three Months Ended Six Months Ended

2022 October 2,

2021 October 1,

2022 October 2,

Three Months Ended Nine Months Ended

2022 January 1,

2022 December 31,

2022 January 1,

Marketable equity securities

Net (loss) gain recognized during the period $ ( 233 ) $ 243 $ ( 2,575 ) $ 1,939

Net loss (gain) recognized on securities sold during the period 216 ( 143 ) 290 ( 279 )

Unrealized (loss) gain recognized during the period on securities still held $ ( 17 ) $ 100 $ ( 2,285 ) $ 1,660

Net gain (loss) recognized during the period $ 707 $ 2,967 $ ( 1,868 ) $ 4,906

Net (gain) loss recognized on securities sold during the period ( 107 ) ( 257 ) 183 ( 536 )

Unrealized gain (loss) recognized during the period on securities still held $ 600 $ 2,710 $ ( 1,685 ) $ 4,370

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 Six Months Ended

2022 October 2,

2021 October 1,

2022 October 2,

Three Months Ended Nine Months Ended

2022 January 1,

2022 December 31,

2022 January 1,

Allowance for loan losses at beginning of period $ 1,739 $ 2,799 $ 2,115 $ 3,188

8 unchanged sentences

Weighted average months to maturity 156 151

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

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

2022 April 2,

5 unchanged sentences

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

October 1, 2022

December 31, 2022

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 October 1, 2022 and April 2, 2022, 43 % and 39 % of the outstanding principal balance of the consumer loans receivable portfolio was concentrated in Texas, respectively, and 16 % and 17 %, respectively was concentrated in Florida.

Other than Texas and Florida, no sta te had concentrations in excess of 10 % of the outstanding principal balance of the consumer loans receivable as of October 1, 2022 or April 2, 2022.

Repossessed homes totaled approximately $ 375,000 and $ 499,000 as of October 1, 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 $ 605,000 and $ 1.1 million as of October 1, 2022 and April 2, 2022, respectively.

As of December 31, 2022 and April 2, 2022, 39 % of the outstanding principal balance of the consumer loans receivable portfolio was concentrated in Texas, and 18 % and 17 %, respectively, were concentrated in Florida.

Other than Texas and Florida, no sta te had concentrations in excess of 10 % of the outstanding principal balance of the consumer loans receivable as of December 31, 2022 or April 2, 2022.

Repossessed homes totaled approximately $ 649,000 and $ 499,000 as of December 31, 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 $ 535,000 and $ 1.1 million as of December 31, 2022 and April 2, 2022, respectively.

Commercial Loans Receivable

13 unchanged sentences

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

Three Months Ended Six Months Ended

2022 October 2,

2021 October 1,

2022 October 2,

Three Months Ended Nine Months Ended

2022 January 1,

2022 December 31,

2022 January 1,

Balance at beginning of period

1 unchanged sentence

Change in estimated loan losses, net

132 304 244 314

Balance at end of period

2 unchanged sentences

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 October 1, 2022 and April 2, 2022, there were no commercial loans considered watch list or nonperforming.

As of December 31, 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):

October 1, 2022

December 31, 2022

2023 2022 2021 2020 2019 Prior Total

3 unchanged sentences

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

As of October 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 October 1, 2022 and April 2, 2022, we had concentrations of our outstanding principal balance of the commercial loans receivable balance in New York of 19 % and 25 %, respectively.

No other state had concentrations in excess of 10 % of the outstanding principal balance of the commercial loans receivable as of October 1, 2022 or April 2, 2022.

As of October 1, 2022 and April 2, 2022, one independent third-party and its affiliates comprised 13 % and 14 %, respectively, of the net commercial loans receivable principal balance outstanding, all of which was secured .

As of December 31, 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 December 31, 2022 and April 2, 2022, we had concentrations of our outstanding principal balance of the commercial loans receivable balance in New York of 22 % and 25 %, respectively.

No other state had concentrations in excess of 10 % of the outstanding principal balance of the commercial loans receivable as of December 31, 2022 or April 2, 2022.

As of December 31, 2022 and April 2, 2022, one independent third-party and its affiliates comprised 12 % and 14 %, respectively, of the net commercial loans receivable principal balance outstanding, all of which was secured .

Property, Plant and Equipment, net

9 unchanged sentences

$ 194,329 $ 164,016

Depreciation expense for the three and six months ended October 1, 2022 was $ 3.8 million and $ 7.3 million, respectively.

Depreciation expense for the three and six months ended October 2, 2021 was $ 1.4 million and $ 2.9 million, respectively.

Depreciation expense for the three and nine months ended December 31, 2022 was $ 3.4 million and $ 10.7 million, respectively.

Depreciation expense for the three and nine months ended January 1, 2022 was $ 3.0 million and $ 5.9 million, respectively.

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

The following table provides information about the financial statement classification of our lease balances reported within the Consolidated Balance Sheets as of December 31, 2022 and April 2, 2022 (in thousands):

Classification December 31,

2022 April 2,

Operating lease assets Operating lease right-of-use assets $ 17,230 $ 16,952

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

Total lease assets $ 23,362 $ 24,022

Lease Liabilities

Operating lease liabilities Accrued expenses and other current liabilities $ 5,389 $ 5,085

Finance lease liabilities Accrued expenses and other current liabilities 347 347

Operating lease liabilities Operating lease liabilities 13,058 13,158

Finance lease liabilities Other liabilities 5,914 5,969

Total lease liabilities $ 24,708 $ 24,559

(1) Recorded net of accumulated amortization of $ 219,000 and $ 87,000 as of December 31, 2022 and April 2, 2022, 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 three and nine months ended December 31, 2022 and January 1, 2022 (in thousands):

Three Months Ended Nine Months Ended

Lease Expense Category Classification December 31,

2022 January 1,

2022 December 31,

2022 January 1,

Operating lease expense (2) :

Cost of sales $ 297 $ 286 $ 898 $ 858

Selling, general and administrative expenses 1,057 910 3,012 2,640

Finance lease expense:

Amortization of leased assets Cost of sales 44 9 131 26

Interest on lease liabilities Interest expense 71 73 212 80

Total lease expense $ 1,469 $ 1,278 $ 4,253 $ 3,604

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

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

Three Months Ended Nine Months Ended

2022 January 1,

2022 December 31,

2022 January 1,

Operating leases $ 1,372 $ 1,190 $ 4,003 $ 2,277

Finance leases 89 18 267 37

The present value of the minimum payments for future fiscal years under non-cancelable leases as of December 31, 2022 was as follows (in thousands):

Operating Leases Finance Leases Total

Remainder of 2023 $ 1,405 $ 89 $ 1,494

2024 5,308 356 5,664

2025 4,318 356 4,674

2026 3,897 356 4,253

2027 1,686 356 2,042

2028 1,203 356 1,559

Thereafter 2,795 10,585 13,380

Total lease payments 20,612 12,454 33,066

Less amount representing interest ( 2,165 ) ( 6,193 ) ( 8,358 )

Present value of lease liabilities $ 18,447 $ 6,261 $ 24,708

The following table provides information about the weighted average remaining lease terms and weighted average discount rates as of December 31, 2022:

Remaining Lease Term (Years) Discount Rate

Operating leases 4.9 4.6 %

Finance leases 34.9 4.5 %

Goodwill and Other Intangibles

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

October 1, 2022 April 2, 2022

December 31, 2022 April 2, 2022

Amount Accumulated

12 unchanged sentences

$ 133,271 $ ( 5,746 ) $ 127,525 $ 139,197 $ ( 9,745 ) $ 129,452

Amortization expense recognized on intangible assets was $ 502,000 and $ 1.0 million for the three and six months ended October 1, 2022, respectively.

Amortization expense recognized on intangible assets was $ 166,000 and $ 339,000 for the three and six months ended October 2, 2021, respectively.

Amortization expense recognized on intangible assets was $ 501,000 and $ 1.5 million for the three and nine months ended December 31, 2022, respectively.

Amortization expense recognized on intangible assets was $ 523,000 and $ 862,000 for the three and nine months ended January 1, 2022, respectively.

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

1 unchanged sentence

Thereafter 3,506

During the second fiscal quarter, we finalized the purchase price allocation related to the Commodore acquisition, and recorded purchase accounting adjustments that did not have a material effect on the Consolidated Financial Statements.

Accrued Expenses and Other Current Liabilities

1 unchanged sentence

2022 April 2,

Salaries, wages and benefits $ 55,232 $ 54,172

Customer deposits $ 46,399 $ 56,318

Salaries, wages and benefits 43,365 54,172

Estimated warranties 30,946 26,250

4 unchanged sentences

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

Three Months Ended Six Months Ended

2022 October 2,

2021 October 1,

2022 October 2,

Three Months Ended Nine Months Ended

2022 January 1,

2022 December 31,

2022 January 1,

Balance at beginning of period $ 30,841 $ 25,745 $ 26,250 $ 18,032

12 unchanged sentences

$ 7,898 $ 10,836

On November 22, 2022 , we entered into a Credit Agreement among the Company, Bank of America, N.A., as administrative agent, swing line lender and letter of credit issuer, and the guarantors party thereto (the "Credit Agreement"), providing for a $ 50.0 million revolving credit facility (the "Revolving Credit Facility").

Loans under the Revolving Credit Facility will bear interest at a rate equal to (i) the Secured Overnight Financing Rate, plus a credit spread adjustment of 0.10% (as adjusted, "Term SOFR"), plus the "applicable rate" or (ii) the "base rate" (defined as the highest of (a) the Bank of America prime rate, (b) the Federal Funds rate plus 0.50%, and (c) Term SOFR plus 1.00%) plus the "applicable rate." The applicable rate will be determined in accordance with a pricing grid based on the Company's Consolidated Total Leverage Ratio (as defined in the Credit Agreement) ranging from 1.125% to 1.350% per annum for Term SOFR rate loans and from 0.125% to 0.350% per annum for base rate loans.

In addition, the Company will pay a commitment fee on the unused portion of the Revolving Credit Facility of 0.15 % per annum.

The Revolving Credit Facility is guaranteed, on a joint and several basis, by certain of the Company’s subsidiaries.

The Credit Agreement contains customary representations and warranties, affirmative and negative covenants (including restrictions, subject to customary exceptions, qualifications, and baskets, on the ability of the Company and its subsidiaries to incur additional indebtedness or guarantees of indebtedness, pay dividends or distributions on, redeem, repurchase, or retire capital stock, make investments, loans, advances, or acquisitions, enter into sale and leaseback transactions, engage in transactions with affiliates, create liens, transfer, or sell assets, create restrictions on the payment of dividends or other amounts from their subsidiaries, and consolidate, merge, or transfer all or substantially all of the assets of the Company and its subsidiaries taken as a whole), and events of default (as defined in the Credit Agreement).

In addition, the Credit Agreement includes the following financial covenants (i) as of the end of any fiscal quarter, the Consolidated Total Leverage Ratio (as defined in the Credit Agreement) cannot exceed 3.25 to 1.00 and (ii) a requirement to maintain Consolidated EBITDA (as defined in the Credit Agreement) for any period of four fiscal quarters of at least $75 million.

As of December 31, 2022, there were no borrowings outstanding under the Revolving Credit Facility and we were in compliance with all covenants.

Reinsurance and Insurance Loss Reserves

3 unchanged sentences

Three Months Ended

October 1, 2022 October 2, 2021

December 31, 2022 January 1, 2022

Written Earned Written Earned

6 unchanged sentences

$ 10,750 $ 11,474 $ 9,537 $ 10,513

Six Months Ended

October 1, 2022 October 2, 2021

Nine Months Ended

December 31, 2022 January 1, 2022

Written Earned Written Earned

11 unchanged sentences

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 six months ended October 1, 2022 and October 2, 2021 (in thousands):

Three Months Ended Six Months Ended

2022 October 2,

2021 October 1,

2022 October 2,

The following details the activity in the reserve for the three and nine months ended December 31, 2022 and January 1, 2022 (in thousands):

Three Months Ended Nine Months Ended

2022 January 1,

2022 December 31,

2022 January 1,

Balance at beginning of period $ 7,790 $ 7,350 $ 8,149 $ 7,451

2 unchanged sentences

Balance at end of period $ 9,091 $ 7,480 $ 9,091 $ 7,480

For the three and nine months ended December 31, 2022, Income tax (expense) benefit included $ 2.4 million and $ 5.1 million, respectively, of estimated tax credits related to the manufacture and sale of energy efficient homes.

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

The three and nine months ended January 1, 2022 included $ 34.4 million of such credits, which included catch up credits for homes sold between 2018 through 2021, and resulted in a net Income tax benefit of $ 20.7 million and $ 0.9 million, respectively.

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 the Company was liable under such agreements approximated $ 189.4 million and $ 141.0 million at October 1, 2022 and April 2, 2022, respectively, without reduction for the resale value of the homes.

We had a reserve for repurchase commitments of $ 5.0 million at October 1, 2022 and $ 3.6 million at April 2, 2022, and there were no repurchases during either period.

The maximum amount for which the Company was liable under such agreements approximated $ 193.5 million and $ 141.0 million at December 31, 2022 and April 2, 2022, respectively, without reduction for the resale value of the homes.

We had a reserve for repurchase commitments of $ 4.9 million at December 31, 2022 and $ 3.6 million at April 2, 2022, and there were no repurchases during either period.

Construction-Period Mortgages.

9 unchanged sentences

We sell loans to Government-Sponsored Enterprises ("GSEs") and whole-loan purchasers.

In connection with these activities, we provide to GSEs and whole-loan purchasers and lenders representations and warranties related to the loans sold or financed.

In connection with these activities, we provide representations and warranties related to the loans sold or financed.

Upon a breach of a representation, we may be required to repurch ase the loan or to indemnify a party for incurred losses.

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

This reserve of $ 816,000 as of October 1, 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 six months ended October 1, 2022.

This reserve of $ 819,000 as of December 31, 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 nine months ended December 31, 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 October 1, 2022, we had outstanding IRLCs with a notional amount of $ 37.0 million.

For the three months ended October 1, 2022 and October 2, 2021, we recognized losses of $ 9,000 and $ 5,000 respectively on outstanding IRLCs.

For the six months ended October 1, 2022 and October 2, 2021, we recognized gains of $ 31,000 and $ 42,000 , respectively.

As of December 31, 2022, we had outstanding IRLCs with a notional amount of $ 41.0 million.

For the three months ended December 31, 2022, we recognized gains of $ 12,000 on outstandin g IRLCs.

There were no gains or losses on outstanding IRLCs for the three months ended January 1, 2022.

For the nine months ended December 31, 2022 and January 1, 2022, we recognized gains of $ 43,000 and $ 42,000 , respectively.

Forward Sales Commitments .

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

As of October 1, 2022, we had $ 6.6 million in outstanding Commitments.

We recognized non-cash gains of $ 178,000 and $ 79,000 in the second quarter of fiscal 2023 and 2022, respectively .

During the six months ended October 1, 2022 and October 2, 2021, we recognized losses of $ 84,000 and $ 268,000 , respectively.

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

As of December 31, 2022, we had $ 3.9 million in outstanding Commitments.

We recognized non-cash losses of $ 197,000 and $ 61,000 during the three months ended December 31, 2022 and January 1, 2022 , respectively .

During the nine months ended December 31, 2022 and January 1, 2022, we recognized losses of $ 282,000 and $ 329,000 , respectively.

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 ("former 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 (the "Exchange Act") based on trading in the shares of another company directed by the former CEO that resulted in an unrealized gain of approximately $ 265,000 .

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

On September 23, 2022, the United States District Court for the District of Arizona approved the settlement of the SEC action against the Company.

Without admitting or denying the findings of the consent judgment, the Company agreed to the imposition of an injunction against future violations of the antifraud and internal accounting control provisions of the Exchange Act and a monetary penalty of $ 1.5 million, which did not have a material impact on the Company's financial statements.

The settlement resolves all claims in such action against the Company.

We are party to certain other lawsuits in the ordinary course of business.

We are party to certain 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.

1 unchanged sentence

Stockholders' Equity and Redeemable Noncontrolling Interest

The following table represents changes in stockholders' equity attributable to Cavco's stockholders and redeemable noncontrolling interest during the six months ended October 1, 2022 (dollars in thousands):

The following table represents changes in stockholders' equity attributable to Cavco's stockholders and redeemable noncontrolling interest during the nine months ended December 31, 2022 (dollars in thousands):

Equity Attributable to Cavco Stockholders

14 unchanged sentences

Distributions — — — — — — — ( 240 )

Subsequent change in redemption value — — — — — — — 407

Subsequent valuation adjustment — — — — — — — 407

Balance, October 1, 2022 9,314,152 $ 93 $ ( 100,000 ) $ 267,183 $ 762,474 $ ( 818 ) $ 928,932 $ 926

Net income — — — — 59,524 — 59,524 65

Other comprehensive income, net — — — — — 74 74 —

Issuance of common stock under stock incentive plans, net 5,548 — — ( 90 ) — — ( 90 ) —

Stock-based compensation — — — 1,330 — — 1,330 —

Common stock repurchases — — ( 34,270 ) — — — ( 34,270 ) —

Distributions — — — — — — — ( 120 )

Subsequent valuation adjustment — — — — — — — 61

Balance, December 31, 2022 9,319,700 $ 93 $ ( 134,270 ) $ 268,423 $ 821,998 $ ( 744 ) $ 955,500 $ 932

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

Equity Attributable to Cavco Stockholders

10 unchanged sentences

Net income — — — — 37,610 — 37,610 73

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

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

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

3 unchanged sentences

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, net 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

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 Six Months Ended

2022 October 2,

2021 October 1,

2022 October 2,

Three Months Ended Nine Months Ended

2022 January 1,

2022 December 31,

2022 January 1,

Net income attributable to Cavco common stockholders $ 59,524 $ 79,419 $ 193,242 $ 144,075

9 unchanged sentences

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

October 1, 2022 April 2, 2022

December 31, 2022 April 2, 2022

Value Estimated

25 unchanged sentences

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

For the three and six months ended October 1, 2022, the total amount of sales to related parties was $ 20.1 million and $ 37.3 million, respectively.

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

As of October 1, 2022, receivables from related parties included $ 5.1 million of accounts receivable and $ 2.2 million of commercial loans outstanding.

For the three and nine months ended December 31, 2022, the total amount of sales to related parties was $ 18.7 million and $ 56.0 million, respectively.

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

As of December 31, 2022, receivables from related parties included $ 6.3 million of accounts receivable and $ 3.3 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.

3 unchanged sentences

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

Three Months Ended Six Months Ended

2022 October 2,

2021 October 1,

2022 October 2,

Three Months Ended Nine Months Ended

2022 January 1,

2022 December 31,

2022 January 1,

Factory-built housing $ 481,193 $ 413,590 $ 1,613,392 $ 1,067,967

1 unchanged sentence

$ 500,603 $ 431,714 $ 1,666,333 $ 1,121,679

Income (loss) before income taxes

Income before income taxes

Factory-built housing $ 71,813 $ 52,905 $ 241,959 $ 133,357

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Subsequent Event

As announced on October 27, 2022 in a current report on Form 8-K, we have signed a binding offer to acquire the business of Solitaire Homes, Inc.

and other related entities (collectively “Solitaire Homes”), including its four manufacturing facilities, twenty-two retail locations and its dedicated transportation operations.

The addition of Solitaire Homes strengthens our position in the Southwest, with high quality products that complement our existing home offerings.

The purchase price totals $ 93 million, before certain adjustments that will be determined upon close of the transaction.

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

The transaction is expected to close early in the Company's fourth quarter of fiscal year 2023, subject to applicable regulatory approvals and the satisfaction of certain customary conditions.

As announced on January 3, 2023 in a current report on Form 8-K, we completed the acquisition of Solitaire Inc.

and other related entities (collectively "Solitaire Homes"), including their four manufacturing facilities and twenty-two retail locations.

The addition of Solitaire Homes to our existing manufacturing and retail system strengthens our position in the Southwest and expands our manufacturing capabilities into Mexico.

The purchase price totaled $ 93 million, before certain customary adjustments, and was funded with cash on hand.

The allocation of the purchase price is still preliminary as of the date of this report and will be finalized upon completion of the analysis of the fair values of the acquired assets, liabilities assumed and intangible assets.

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

Accordingly, supplemental pro-forma information is not available and is therefore omitted.

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