What changed in this filing

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Item 9A. Controls and Procedures

2023-05-19 compared with 2022-05-31 · 254 added, 226 removed, 1234 unchanged (28% of the section changed)

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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.

Management's Report on Internal Controls Over Financial Reporting

Based upon that evaluation, the Company's President and Chief Executive Officer and its Chief Financial Officer concluded that, as of April 1, 2023, its disclosure controls and procedures were effective.

Management's Report on Internal Control Over Financial Reporting

The management of Cavco Industries, Inc.

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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 1, 2023.

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 scope of management's assessment of the effectiveness of internal control over financial reporting did not include the internal controls of Solitaire Homes, which is included in the 2023 consolidated financial statements of Cavco Industries, Inc.

since the acquisition date of January 3, 2023 and which comprised approximately 11% of total assets and 1% of net revenues as of and for the year ended April 1, 2023, respectively.

The effectiveness of the Company's internal control over financial reporting as of April 1, 2023 has been audited by RSM US LLP, an independent registered public accounting firm, as stated in their report, which appears herein.

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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 1, 2023 and April 2, 2022, 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 1, 2023, and the related notes of the Company and our report dated May 19, 2023 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.

As described in Management's Report on Internal Controls Over Financial Reporting, management has excluded Solitaire Inc.

and other related entities (collectively "Solitaire Homes") from its assessment of internal control over financial reporting as of April 1, 2023, because it was acquired by the Company in a business combination completed in the fourth quarter of fiscal year 2023.

We have also excluded Solitaire Homes from our audit of internal control over financial reporting.

Solitaire Homes is a subsidiary whose total assets and net income represent approximately 11% and 0%, respectively, of the related consolidated financial statement amounts as of and for the year ended April 1, 2023.

Basis for Opinion

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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.

A copy of the Company's Code of Conduct is located on the Company's website at www.cavcoindustries.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 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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Financial Statements and Financial Statement Schedules

Financial Statements are listed in the Index to Consolidated Financial Statements on page F-1 of this report.

Financial Statements are listed in the Index to Consolidated Financial Statements on page F-1 of this Annual Report.

All schedules have been omitted because they are not applicable or the required information is included in the Consolidated Financial Statements or Notes thereto.

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Copies of any of the exhibits referred to below will be furnished at no cost to security holders who make a written request to Mickey R.

Dragash, Secretary, Cavco Industries, Inc., 3636 North Central Avenue, Suite 1200, Phoenix, Arizona, 85012 or via the Company website (www.cavco.com) .

Dragash, Secretary, Cavco Industries, Inc., 3636 North Central Avenue, Suite 1200, Phoenix, Arizona, 85012 or via the Company website (www.cavcoindustries.com).

Number Exhibit Filed/Furnished Herewith or

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Form of Cavco Industries, Inc.

2005 Stock Incentive Plan Restricted Stock Unit Agreement

2005 Stock Incentive Plan Restricted Stock Unit Agreement for Non-employee Directors

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

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2005 Stock Incentive Plan Performance-based Restricted Stock Unit Award Agreement (2022)

Exhibit 10.2.7 to the Annual Report on Form 10-K for the fiscal year ended April 2, 2022

Form of Cavco Industries, Inc.

2005 Stock Incentive Plan Restricted Stock Unit Agreement for Employees

Filed herewith

Number Exhibit Filed/Furnished Herewith or

Incorporated by Reference

Form of Cavco Industries, Inc.

2005 Stock Incentive Plan Performance-based Restricted Stock Unit Award Agreement (2023)

Filed herewith

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

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Exhibit 10.3.6 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.

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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.

Asset 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

Credit Agreement, dated as of November 22, 2022, among Cavco Industries, Inc., the guarantors party thereto, and Bank of America, N.A., as administrative agent, swing line lender and letter of credit issuer.

Exhibit 10.1 to the Current Report on Form 8-K filed on November 23, 2022

List of Subsidiaries of Cavco

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets as of April 1, 2023 and April 2, 2022

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

Consolidated Statements of Comprehensive Income for the Years Ended April 1, 2023, April 2, 2022 and April 3, 2021

Consolidated Statements of Stockholders' Equity And Redeemable Noncontrolling Interest for the Years Ended April 1, 2023, April 2, 2022 and April 3, 2021

Consolidated Statements of Cash Flows for the Years Ended April 1, 2023, April 2, 2022 and April 3, 2021

Notes to Consolidated Financial Statements

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We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical Audit Matter

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) 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.

The communication of the critical audit matter 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 account or disclosures to which it relates.

Warranty Reserve

As described in Note 1 to the consolidated financial statements, the Company provides retail home buyers, builders or developers with a one year warranty for manufacturing defects from the date of sale to the retail customer.

Nonstructural components of a cosmetic nature are warranted for 120 days, except in specific cases where state laws require longer warranty terms.

The Company's warranty reserves were $31.4 million and $26.3 million as of April 1, 2023 and April 2, 2022, respectively, and estimated warranty costs are accrued in cost of sales at the time of sale.

Management determines the warranty reserves based on estimates of the amounts necessary to settle existing and future claims on homes sold as of the balance sheet date.

Factors used by management to calculate the warranty obligation are the estimated number of homes under warranty, including homes in distributor inventories, homes purchased by consumers within the one year warranty period, the timing in which work orders are completed and the historical average costs incurred to service a home.

We identified the warranty reserve as a critical audit matter because of the significant judgments made by management to estimate costs related to warranty reserves at the time of sale.

This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the reasonableness of management's estimates of future warranty claims based on historical claims paid, specifically due to significant growth since inception, introduction of new product lines, acquisitions, and variability in repair costs.

Our audit procedures related to the Company's significant estimates and assumptions of the warranty reserve include the following, among others:

• We obtained an understanding of the relevant controls related to the management's estimation of the warranty accrual, including controls over the historical warranty claim data and projected future warranty claims, and tested such controls for design and operating effectiveness.

We tested management's process for determining the warranty reserve by evaluating the reasonableness of significant assumptions related to the estimation of future claims and the related costs to repair items under warranty.

• We evaluated the accuracy, completeness and relevance of the historical warranty claims as an input to management's warranty accrual calculation.

• We evaluated management’s ability to accurately estimate the warranty accrual by comparing the warranty accrual from the prior year to the actual warranty claims paid in the subsequent year.

/s/ RSM US LLP

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Accrued expenses and other current liabilities 262,661 251,088

Current portion of secured financings and other 784 1,851

Total current liabilities 293,391 294,170

Operating lease liabilities 21,678 13,158

Secured financings and other 10,836 10,335

Other liabilities 7,820 10,836

Deferred income taxes 7,581 5,528

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Retained earnings 869,310 628,756

Accumulated other comprehensive (loss) income ( 403 ) 97

Accumulated other comprehensive loss ( 615 ) ( 403 )

Total stockholders' equity 976,286 830,455

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2023 April 2,

2021 March 28,

2022 April 3,

$ 2,142,713 $ 1,627,158 $ 1,108,051

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296,609 202,496 88,825

Interest income 10,679 3,537 2,144

Interest expense

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Reclassification adjustment for securities sold

( 16 ) ( 17 ) 19

Applicable income taxes 3 4 ( 4 )

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Stockholders' Equity

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

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 $ —

Net income — — — — 75,066 — 75,066 —

Other comprehensive income, net — — — — — 118 118 —

Issuance of common stock under stock incentive plans 74,922 1 — ( 1,068 ) — — ( 1,067 ) —

Stock-based compensation — — — 3,881 — — 3,881 —

Balance, March 28, 2020 9,173,242 $ 92 $ — $ 252,260 $ 355,144 $ 90 $ 607,586 $ —

Cumulative effect of implementing ASU 2016-13, net

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

Net income — — — — 240,554 — 240,554 287

Other comprehensive loss, net — — — — — ( 212 ) ( 212 ) —

Issuance of common stock under stock incentive plans 44,847 — — 2,637 — — 2,637 —

Stock-based compensation — — — 6,264 — — 6,264 —

Common stock repurchases — — ( 103,412 ) — — — ( 103,412 ) —

Distributions — — — — — — — ( 780 )

Subsequent change in redemption value — — — — — — — 887

Balance, April 1, 2023 9,337,125 $ 93 $ ( 164,452 ) $ 271,950 $ 869,310 $ ( 615 ) $ 976,286 $ 1,219

See accompanying Notes to Consolidated Financial Statements

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2023 April 2,

2021 March 28,

2022 April 3,

OPERATING ACTIVITIES

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Gain on investments and sale of loans, net ( 12,300 ) ( 18,364 ) ( 22,037 )

Distribution of earnings from equity method investments 4,306 — —

Changes in operating assets and liabilities, net of acquisitions

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Prepaid expenses and other current assets ( 20,037 ) ( 28,309 ) 6,380

Commercial loans receivable 6,415 1,825 ( 1,914 )

Commercial loans receivable originated ( 132,050 ) ( 67,896 ) ( 54,021 )

Principal payments received on commercial loans receivable 98,196 74,311 55,846

Accounts payable and accrued expenses and other current liabilities ( 13,403 ) 38,228 47,229

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Proceeds from sale of investments 18,931 12,450 19,466

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

Net cash used in investing activities ( 129,341 ) ( 159,102 ) ( 23,349 )

FINANCING ACTIVITIES

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

Payments for taxes on stock option exercises and releases of equity awards ( 1,072 ) ( 266 ) ( 5,493 )

Proceeds from exercise of stock options 3,709 4,422 2,676

Proceeds from secured financings and other — 106 64

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Net cash used in financing activities ( 102,196 ) ( 65,095 ) ( 6,982 )

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

Net increase (decrease) in cash, cash equivalents and restricted cash 24,156 ( 79,973 ) 83,700

Cash, cash equivalents and restricted cash at beginning of the fiscal year 259,334 339,307 255,607

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Change in GNMA loans eligible for repurchase $ ( 2,494 ) $ ( 16,238 ) $ 18,339

Right-of-use assets recognized $ 4,414 $ 5,985 $ 18,498

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

Right-of-use assets recognized and operating lease obligations incurred $ 14,455 $ 4,414 $ 5,985

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

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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.

Specifically, amounts previously included in the current portion of secured financings are now recorded in Accrued expenses and other current liabilities, and Interest income, which was previously included in Other income, net, has been moved to Interest income.

We have evaluated subsequent events after the balance sheet date of April 1, 2023, 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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Nature of Operations.

Headquartered in Phoenix, Arizona, we design and produce factory-built housing products primarily distributed through a network of independent distributors located throughout the continental United States, as well as through Company-owned retail stores which offer our homes to retail customers.

Headquartered in Phoenix, Arizona, we design and produce factory-built housing products primarily distributed through a network of independent distributors located throughout the continental United States and Canada, as well as through Company-owned retail stores which offer our homes to retail customers.

Our financial services segment is comprised of:

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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 2, 2022 and includes 52 weeks, whereas fiscal year 2021 consisted of 53 weeks and fiscal year 2020 consisted of 52 weeks.

Th e current fiscal year ended on April 1, 2023.

Fiscal years 2023 and 2022 consisted of 52 weeks, and fiscal year 2021 consisted of 53 weeks.

Accounting Estimates.

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Homes sold to independent distributors are generally either paid upon shipment or floor plan financed by the independent distributor through standard industry financing arrangements, which can include repurchase agreements.

Manufacturing sales financed under floor plan arrangements that include repurchase agreements are reduced by a provision for estimated repurchase obligations (see Note 16).

Manufacturing sales financed under floor plan arrangements that include repurchase agreements are reduced by a reserve for repurchase commitments (see Note 17).

Some of our independent distributors operate multiple sales outlets.

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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 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 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.

We provide third-party servicing of mortgages and earn s ervicing fees each month based on the aggregate outstanding balances.

We provide third-party servicing of mortgages and earn servicing fees each month based on the aggregate outstanding balances.

Servicing fees are recognized in Net revenue when earned.

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Treasury and other money market funds and other depository accounts, some of which are in excess of Federal Deposit Insurance Corporation insured limits.

We have not experienced any losses on such excesses.

Restricted Cash .

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

As discussed above, we adopted ASU 2016-13 on March 29, 2020.

Under this standard, declines in the fair value of individual available-for-sale debt securities that are related to credit losses are recorded as a valuation allowance against the investment balance, with the loss recorded in earnings.

As of April 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.

As of April 1, 2023, we have determined that all losses on available-for-sale debt securities were from market factors, and therefore we had no valuation allowance on such investments.

Consumer Loans Receivable.

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Loans held for sale are loans that, at the time of origination, are originated with the intent to resell to investors with which the Company has pre-existing purchase agreements, such as Fannie Mae and Freddie Mac, or to sell as part of a Ginnie Mae insured pool of loans and consist of loan contracts collateralized by single-family residential mortgages.

Loans held for sale are stated at the lower of cost or market on an aggregate basis.

Loans held for sale are stated at the lower of amortized cost or fair value on an aggregate basis.

Combined land and home mortgages are further disaggregated by the type of loan documentation:

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Under the terms of certain programs, we have entered into direct commercial loan arrangements with independent distributors and community operators wherein we provide funds to purchase home inventory or homes for placement in communities.

Interest income on commercial loans receivable is recognized in Other income, net in the Consolidated Statements of Comprehensive Income on an accrual basis.

Interest income on commercial loans receivable is recognized in Interest income in the Consolidated Statements of Comprehensive Income on an accrual basis.

Allowance for Loan Losses.

ASU 2016-13 requires a forward-looking impairment model based on expected losses rather than incurred losses.

The primary portion of the allowance for loan losses reflects our judgment of the incurred loss exposure on our consumer loans receivable.

As of April 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.

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") requires a forward-looking impairment model based on expected losses rather than incurred losses.

As of April 1, 2023 and April 2, 2022, we had an allowance for loan losses of $ 1.2 million and $ 2.1 million, respectively, on our consumer loans receivable (see Note 6).

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

We have historically been able to resell repossessed homes, thereby mitigating loss exposure.

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

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 $ 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.

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

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 $ 1.6 million and $ 1.0 million at April 1, 2023 and April 2, 2022, respectively, related to commercial loans receivable (see Note 7).

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

Finished goods and work-in-process inventories are valued at the lower of cost or market, using the specific identification method.

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There were no impairment losses recognized in fiscal years 2023, 2022 or 2021 .

Goodwill and Other Intangibles.

We account for business combinations using the acquisition method of accounting, which allocates the fair value of the purchase consideration to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values.

Business Combinations.

We account for business combinations in accordance with FASB Accounting Standards Codification ("ASC") 805, Business Combinations, using the acquisition method of accounting, which allocates the fair value of the purchase consideration to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values.

In the fair value evaluation of intangible assets acquired, there are significant estimates and assumptions, including forecasts of future cash flows, pre-tax income and revenue growth rates, as well as the selection of the royalty rates and discount rates.

The excess of the purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill.

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

As such, we test goodwill annually for impairment.

Goodwill and Other Intangibles.

We account for goodwill and other intangible assets in accordance with the provisions of ASC 350, Intangibles—Goodwill and Other .

As such, we test goodwill at least annually for impairment.

The Company has two reporting segments:

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Certain intangibles are considered indefinite-lived and others are finite-lived and are amortized over their useful lives.

Finite-lived intangibles are amortized over 3 to 15 years on a straight-line basis and are reviewed for possible impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable.

Finite-lived intangibles are generally amortized over 3 to 15 years on a straight-line basis and are reviewed for possible impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable.

Indefinite-lived intangible assets are assessed annually for impairment first by making a qualitative assessment, and if necessary, performing a quantitative assessment and recording an impairment charge if the fair value of the asset is less than its carrying amount.

We performed our annual goodwill impairment analysis as of April 2, 2022, and the analysis determined that the fair value of the reporting unit was greater than the carrying value.

There was no impairment recognized during fiscal years 2022, 2021 or 2020.

We performed our annual goodwill impairment analysis as of April 1, 2023, and as the fair value of the factory-built housing reporting unit was greater than the carrying value, there was no impairment recognized during fiscal years 2023, 2022 or 2021.

We provide retail home buyers, builders or developers with a one year warranty for manufacturing defects from the date of sale to the retail customer.

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The warranty provision and reserves are based on estimates of the amounts necessary to settle existing and future claims on homes sold as of the balance sheet date.

Factors used to calculate the warranty obligation are the estimated amount of homes still under warranty including homes in distributor inventories, homes purchased by consumers still within the one year warranty period, the timing in which work orders are completed and the historical average costs incurred to service a home.

Factors used to calculate the warranty obligation are the estimated amount of homes still under warranty, including homes in distributor inventories, homes purchased by consumers within the one year warranty period, the timing in which work orders are completed and the historical average costs incurred to service a home.

Volume Rebates .

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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 $ 1.4 million in fiscal year 2022, $ 807,000 in fiscal year 2021 and $ 900,000 in fiscal year 2020.

Advertising costs are expensed as incurred and were $ 2.0 million in fiscal year 2023, $ 1.4 million in fiscal year 2022 and $ 0.8 million in fiscal year 2021.

Fair Value of Financial Instruments.

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See Note 20 for the fair values of our other financial instruments and the inputs used.

Foreign Currency.

We have certain assets and liabilities in Ojinaga, Mexico related to a production facility that imports raw materials and exports finished homes to our retail lots located in the United States.

The monetary assets and liabilities of this production facility are remeasured at each balance sheet date at the current exchange rate.

Monetary assets and liabilities and related revenues and expenses are remeasured monthly using the average rates for the fiscal month.

Remeasurement adjustments are recorded in Other income, net in the Consolidated Statements of Comprehensive Income.

Income Taxes.

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This approach involves recognizing any tax positions that are more likely than not to occur and then measuring those positions to determine the amounts to be recognized in the Consolidated Financial Statements.

Interest Income.

Interest income consists of the interest earned on invested cash as well as interest earned from our commercial loan programs, recorded on an accrual basis.

Other Income, net.

Other income primarily consists of realized and unrealized gains and losses on corporate investments, interest income related to commercial loan receivables and earned on cash balances, gains and losses on the sale of property, plant and equipment or assets held for sale and impairment of such assets, if necessary.

Other income primarily consists of realized and unrealized gains and losses on corporate investments, gains and losses on the sale of property, plant and equipment or assets held for sale and impairment of such assets, if necessary.

Stock-Based Compensation .

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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.

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

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.

As mandatory redemption of this ownership interest is required and is due in less than one year, the fair value of this portion of the noncontrolling interest is recorded in Accrued expenses and other current liabilities of the Consolidated Balance Sheet.

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.

Adjustments in the redemption value to the mandatorily redeemable noncontrolling interest are recorded to Other income, net.

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.

Likewise, we can require the Craftsman Seller to sell us their remaining 10% ownership 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.

2 unchanged sentences

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 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 .

Accumulated unrealized loss on available-for-sale debt securities at the end of fiscal year 2023 was $ 0.8 million before tax, with an associated tax amount of $ 0.2 million, resulting in a net unrealized loss of $ 0.6 million.

Unrealized loss on available-for-sale debt securities for fiscal year 2022 was $ 0.5 million, with an associated tax amount of $ 0.1 million, for a net unrealized loss of $ 0.4 million.

Treasury Stock.

1 unchanged sentence

As we do not have a formal retirement plan for the shares acquired, and the ultimate disposition has not yet been decided, we show the cost of the acquired stock separately as a deduction from equity.

Beginning Janua ry 1, 2023, the Inflation Reduction Act of 2022 imposed a 1% excise tax on the aggregate fair market value of stock repurchased by certain corporations during the taxable year, subject to adjustments.

We have calculated the excise tax on purchases from the effective date through April 1, 2023, and this amount is recorded as an increase in our Treasury Sto ck.

Net Income Per Share.

26 unchanged sentences

Disaggregation of Revenue .

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

The following table summarizes Net revenue disaggregated by reportable segment and source (in thousands).

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

2023 April 2,

2021 March 28,

2022 April 3,

Factory-built housing

19 unchanged sentences

2023 April 2,

2021 March 28,

2022 April 3,

Cash and cash equivalents $ 271,427 $ 244,150 $ 322,279

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Marketable equity securities

16,780 17,600

Non-marketable equity investments

33,617 55,019

55,019 54,506

Less short-term investments ( 14,978 ) ( 20,086 )

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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.

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.

There were no gross gains realized on the sale of available-for-sale debt securities for fiscal year 2023, an insignificant amount of gross gains realized on the sale of available-for-sale debt securities in fiscal year 2022 and none in fiscal year 2021.

There were no gross losses realized on the sale of available-for-sale debt securities in either fiscal year 2023 or 2022, and the gross losses realized on the sale of available-for-sale debt securities in fiscal year 2021 were insignificant.

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.

2 unchanged sentences

2023 April 2,

2021 March 28, 2020

2022 April 3,

Marketable equity securities:

Net gain (loss) recognized during the period $ 2,160 $ 8,515 $ ( 2,264 )

Net (gains) losses recognized on securities sold during the period ( 551 ) ( 2,191 ) 232

Unrealized gains (losses) recognized during the period on securities still held $ 1,609 $ 6,324 $ ( 2,032 )

Net gain recognized during the period $ 561 $ 2,160 $ 8,515

Net (gains) recognized on securities sold during the period ( 958 ) ( 551 ) ( 2,191 )

Unrealized (losses) gains recognized during the period on securities still held $ ( 397 ) $ 1,609 $ 6,324

Inventories consisted of the following (in thousands):

4 unchanged sentences

$ 263,150 $ 243,971

The inventories above include $ 34.1 million of inventory that was acquired with Solitaire Homes and remains on hand at April 1, 2023.

Such inventory is recorded at fair value which approximates sales price.

Consumer Loans Receivable

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

Impact of adoption of ASU 2016-13 — 2,276

Change in estimated loan losses, net ( 944 ) ( 541 )

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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 $ 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.

Repossessed homes totaled approximately $ 1.1 million as of April 1, 2023 and $ 0.5 million as of April 2, 2022, and are included in Pre paid expenses and other current assets in the Consolidated Balance Sheets.

Foreclosure or similar proceedings in progress totaled approximately $ 0.5 million and $ 1.1 million as of April 1, 2023 and April 2, 2022, respectively.

Commercial Loans Receivable

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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):

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):

2023 April 2,

Balance at beginning of period $ 1,011 $ 816

Impact of adoption of ASU 2016-13 — 435

Purchase accounting additions — 408

Change in estimated loan losses, net 575 ( 213 )

Loans charged off, net of recoveries — —

Balance at end of period $ 1,586 $ 1,011

13 unchanged sentences

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

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.

As of April 1, 2023 and April 2, 2022, 17.8 % and 24.9 %, respectively, of our outstanding commercial loans receivable principal balance was concentrated in New York.

No other state had concentrations in excess of 10 % of the principal balance of the commercial loans receivable as of April 1, 2023 or April 2, 2022.

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.

We had concentrations with one independent third-party and its affiliates that equaled 12.0 % and 13.7 % of the net commercial loans receivable principal balance outstanding, all of which was secured, as of April 1, 2023 and April 2, 2022, 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, at cost:

Land $ 32,154 $ 28,314

Buildings and improvements $ 167,291 $ 100,775

Machinery and equipment 76,826 48,638

Land 39,822 32,154

Construction in progress 5,472 29,281

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Operating lease liabilities Accrued expenses and other current liabilities $ 6,262 $ 5,085

Finance lease liabilities Current portion of secured credit facilities and other 347 71

Finance lease liabilities Accrued expenses and other current liabilities 347 347

Operating lease liabilities Operating lease liabilities 21,678 13,158

Finance lease liabilities Secured credit facilities and other 5,969 233

Finance lease liabilities Other liabilities 5,896 5,969

Total lease liabilities $ 34,183 $ 24,559

(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):

(1) Recorded net of accumulated amortization of $ 0.3 million and $ 0.1 million as of April 1, 2023 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 years ended April 1, 2023, April 2, 2022 and April 3, 2021 (in thousands):

Lease Expense Category Classification April 1,

2023 April 2,

2021 March 28,

2022 April 3,

Operating lease expense (2)

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2023 April 2,

2021 March 28,

2022 April 3,

Operating leases $ 5,609 $ 4,794 $ 4,164

Finance leases 356 220 79

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

The present value of minimum payments for future fiscal years under non-cancelable leases as of April 1, 2023 was as follows (in thousands):

Operating Leases Finance Leases Total

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$ 150,641 $ ( 6,304 ) $ 144,337 $ 139,197 $ ( 9,745 ) $ 129,452

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

Changes in the carrying amount of Goodwill were as follows for the years ended April 1, 2023 and April 2, 2022 (in thousands).

See Note 23 for further information.

2023 April 2,

Balance at beginning of period $ 100,993 $ 75,090

Goodwill recognized on Craftsman acquisition 4,595

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

Change in goodwill from Solitaire Homes acquisition 13,970 —

Change in goodwill from Commodore acquisition ( 416 ) 21,308

Change in goodwill from Craftsman acquisition — 4,595

Balance at end of period $ 114,547 $ 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.

Amortization expense recognized on intangible assets was $ 2.1 million during fiscal year 2023, $ 1.4 million during fiscal year 2022 and $ 0.7 million during fiscal year 2021.

Customer relationships have a weighted average remaining life of 7.9 years and other finite lived intangibles have a weighted average remaining life of 3.5 years.

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

3 unchanged sentences

2023 April 2,

Customer deposits $ 56,318 $ 41,835

Salaries, wages and benefits $ 47,100 $ 54,172

Customer deposits 45,193 56,318

Estimated warranties 31,368 26,250

1 unchanged sentence

Accrued volume rebates 22,858 18,641

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

Other 88,241 70,790

2 unchanged sentences

2023 April 2,

2021 March 28,

2022 April 3,

Balance at beginning of period

8 unchanged sentences

$ 31,368 $ 26,250 $ 18,032

Secured Financings and Other

Other Liabilities

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

3 unchanged sentences

Mandatorily redeemable noncontrolling interest 2,268 2,371

Secured term loans — 8,210

10,890 11,620

Less current portion ( 784 ) ( 1,851 )

Less current portion included in Accrued expenses and other current liabilities ( 3,070 ) ( 784 )

$ 7,820 $ 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 April 2, 2022.

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

The mandatorily redeemable noncontrolling interest is due in December 2023 and is included in the current portion, recorded in Accrued expenses and other current liabilities.

Thereafter 6,314

1 unchanged sentence

See Note 9 for further discussion of the finance lease obligations.

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 million revolving credit facility (the "Revolving Credit Facility"), which may be increased from time to time through adding one or more tranches of term loans (each an "Incremental Term Facility") up to an aggregate amount of $ 100 million.

Loans under the Revolving Credit Facility and any Incremental Term Facilities 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 recourse to certain of the Company's subsidiaries, on a joint and several basis as guarantors, but is unsecured.

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.

The Credit Agreement also contains customary representations and warranties, and affirmative negative covenants.

As of April 1, 2023, there were no borrowings outstanding under the Revolving Credit Facility and we were in compliance with all covenants.

Reinsurance and Insurance Loss Reserves

11 unchanged sentences

$ 48,524 $ 44,284 $ 44,100 $ 40,890

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 $ 175,000 per claim on typical policies, subject to the reinsurers meeting their obligations.

Typical insurance policies written or assumed have a maximum coverage of $ 0.4 million per claim, of which we cede $ 0.2 million of the risk of loss per reinsurance.

Therefore, our risk of loss is limited to $ 0.2 million 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 $ 3.0 million per occurrence, up to a maximum of $ 100.0 million in the aggregate for that occurrence.

4 unchanged sentences

2023 April 2,

2021 March 28,

2022 April 3,

Balance at beginning of period $ 8,149 $ 7,451 $ 5,582

7 unchanged sentences

State 12,709 8,768 3,128

Foreign 50 — —

63,949 16,039 19,951

14 unchanged sentences

Net deferred tax (liabilities) assets

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

Property, plant and equipment $ ( 16,763 ) $ ( 7,030 )

Goodwill ( 16,041 ) ( 16,675 )

Warranty reserves 7,355 5,913

3 unchanged sentences

Accrued volume rebates 2,713 2,600

Stock-based compensation 2,199 2,177

Research and experimentation expenditures 2,712 —

Inventory 2,151 2,192

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

Stock-based compensation 2,086 2,199

Loan discount 970 1,275

Other intangibles — ( 1,538 )

Unrealized gains on marketable equity investments ( 5 ) ( 1,715 )

Other 3,293 1,487

1 unchanged sentence

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.

Of the total tax credits, $ 9.8 million related to the sale of energy efficient homes and energy start credits available under the Internal Revenue Code §45L and $ 1.0 million related 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 was extended through December 31, 2022 by the Inflation Reduction Act of 2022.

The Company determined eligibility for the program in consultation with third-party qualified experts.

We recorded an insignificant amount of unrecognized tax benefits during fiscal years 2023, 2022 and 2021, and there would be an insignificant effect on the effective tax rate if all unrecognized tax benefits were recognized.

4 unchanged sentences

The determination of the need for, or amount of, any valuation allowance involves significant management judgment and is based upon the evaluation of both positive and negative evidence, including management projections of anticipated taxable income.

At April 2, 2022, we had state net operating loss carryforwards that total $ 8.6 million, which begin to expire in 2038.

We recorded a $ 308,000 valuation allowance against the related deferred tax asset.

At April 2, 2022, we evaluated our historical profits earned and forecasted taxable income and determined that, except as described above, all of the deferred tax assets would be utilized in future periods.

At April 1, 2023, we had state net operating loss carryforwards totaling $ 8.4 million, which begin to expire in 2036, and an associated valuation allowance of $ 0.3 million.

We have evaluated our historical profits earned and forecasted taxable income and determined that, except as described above, all of the deferred tax assets would be utilized in future periods.

Ultimate realization of the deferred tax assets depends on our ability to continue to earn profits, as we have historically, and to meet these forecasts in future periods.

2 unchanged sentences

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 2019;

however, we have filed refund claims for fiscal 2018 and 2019 which are currently being processed by the IRS.

Commitments and Contingencies

5 unchanged sentences

The maximum amount for which the Company was liable under such agreements approximated $ 178 million and $ 141 million at April 1, 2023 and April 2, 2022, 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.

During the fourth quarter of fiscal 2023, we received one repurchase demand notice and the inventory was obtained shortly after year end.

As the fair value of the inventory exceeded the amount for which it was repurchased, no reserve was deemed necessary.

There were no other repurchases during the year.

Our reserve for repurchase commitments was $ 5.2 million at April 1, 2023 and $ 3.6 million at April 2, 2022.

Constru ction-Period Mortgages.

18 unchanged sentences

We maintain a reserve for these contingent repurchase and indemnification obligations.

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.

This reserve of $ 0.7 million as of April 1, 2023 and $ 0.9 million as of April 2, 2022, 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.

There were no claim requests that resulted in the repurchase of a loan during the year ended April 1, 2023.

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

In addition, we are subject to minimum net worth requirements and were in compliance for the year ended April 1, 2023.

Interest Rate Lock Commitments .

12 unchanged sentences

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

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.

During fiscal years 2023 and 2022, we recognized insignificant non-cash gains on outstanding IRLCs.

During fiscal year 2021, we recognized a non-cash loss of $ 0.2 million on outstanding IRLCs.

Forward Sales Commitments .

3 unchanged sentences

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 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.

During the years ended April 1, 2023 and April 2, 2022, we recognized non-cash losses of $ 0.3 million and $ 0.1 million, respectively.

During the fiscal year ended April 3, 2021, we recognized a non-cash gain of $ 1.4 million on Commitments.

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 ("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.

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, as amended (the "Exchange Act"), based on trading in the shares of another company directed by the former CEO.

In fiscal 2022, 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, but we remain obligated for ongoing indemnification for a former officer of the Company.

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

3 unchanged sentences

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 RSUs vest, unrestricted shares are issued.

The plans, which were approved by the Company's stockholders, permit the award of up to 1,650,000 shares of the Company's common stock, of which 271,080 shares were still available for grant as of April 1, 2023.

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 options vest over a defined period 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 and generally expire seven years from the date of grant.

Upon option exercise, new shares of the Company's common stock are issued.

Service-based RSUs vest over a defined period, typically three years .

Performance-based RSUs vest based on the achievement of certain criteria, determined by the plan administrator, over the measurement period which is generally three years .

When RSUs vest, unrestricted shares are issued.

The stock incentive plans provide for accelerated vesting of stock option awards and RSUs when the participant is involuntarily terminated upon a change in control (as defined in the plans).

We apply the fair value recognition provisions of ASC 718, Compensation - Stock Compensation .

Stock compensation expense was approximately $ 6.3 million, $ 5.1 million and $ 4.4 million for fiscal years 2023, 2022 and 2021, respectively.

3 unchanged sentences

of Shares Weighted

Price Weighted

Price per share Weighted

Term (years) Aggregate

4 unchanged sentences

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

4 unchanged sentences

Outstanding at April 1, 2023 143,576 $ 160.40 2.88 $ 22,591

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

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:

Exercisable at April 1, 2023 116,434 $ 155.38 2.70 $ 18,887

There were no grants of stock options in fiscal years 2023 or 2022.

The weighted-average estimated fair value of employee stock options granted during fiscal year 2021 was $ 69.65 per share using the following weighted average assumptions:

Volatility 47.5 %

6 unchanged sentences

A summary of RSU activity for fiscal years 2023, 2022 and 2021 is as follows:

Number of Shares

Performance-Based Awards Service-Based Awards Total

Number of Service-based units Weighted Average Grant Date Fair Value per share

Outstanding at March 28, 2020 4,500 $ 157.82

1 unchanged sentence

Released ( 3,465 ) 158.97

Canceled or expired — — —

Outstanding at March 28, 2020 7,305 4,500 11,805

Outstanding at April 3, 2021 4,585 $ 177.08

Awarded 16,902 233.60

Released ( 3,335 ) 180.83

Canceled or expired ( 1,816 ) — ( 1,816 )

Forfeited ( 505 ) 215.90

Outstanding at April 2, 2022 17,647 $ 229.39

1 unchanged sentence

Released ( 6,714 ) 234.55

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

Forfeited ( 1,030 ) 283.27

Outstanding at April 1, 2023 28,868 $ 225.35

The total intrinsic value of RSUs released during fiscal years 2023, 2022 and 2021 was $ 1.6 million, $ 0.8 million and $ 0.6 million, respectively.

Number of Performance-based units Weighted Average Grant Date Fair Value per share

Outstanding at March 28, 2020 7,305 $ 158.93

Awarded 7,450 167.93

Forfeited ( 1,816 ) 163.19

Outstanding at April 3, 2021 12,939 $ 163.51

Awarded 7,920 217.39

Forfeited ( 805 ) 192.64

Outstanding at April 2, 2022 20,054 $ 183.62

Awarded 11,730 209.87

Additional shares granted by performance 2,489 158.36

Released ( 8,822 ) 158.36

Outstanding at April 1, 2023 25,451 $ 202.00

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

4 unchanged sentences

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.

The total intrinsic value of performance based RSUs released during fiscal year 2023 was $ 1.9 million and there was none in either fiscal year 2022 or fiscal year 2021.

Actual performance exceeded the target established for the three-year performance-based RSUs granted in fiscal year 2021.

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101,977 97,106 68,566 65,942

Secured credit facilities and other (6)

Other secured financing (6)

( 2,379 ) ( 2,332 ) ( 2,933 ) ( 3,119 )

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We have self-funded group medical plans which are administered by third-party administrators.

The medical plans have reinsurance coverage limiting liability for general individual employee loss to a maximum of $ 400,000 .

The medical plans have reinsurance coverage limiting liability for general individual employee loss to a maximum of $ 0.4 million.

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.

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Employees may contribute their eligible compensation up to federal limits to the 401k Plan.

The Company match is discretionary and may be up to 50 % of the first 5 % of eligible compensation contributed by employees up to a maximum of $ 1,000 .

The Company match is discretionary and may be up to 50 % of the first 5 % of eligible compensation contributed by employees.

For calendar year 2022, the Company match was 30 % of the first 5 % of eligible compensation contributed by employees.

Employees are eligible to participate on the first of the month following 90 days of service and employer matching contributions are vested progressively over 4 years.

Employer matching contribution expense was $ 1.3 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.

Employer matching contribution expense was $ 4.0 million in fiscal year 2023, $ 1.3 million in fiscal year 2022 and $ 1.1 million in fiscal year 2021.

Certain Commodore 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.

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IAM National Pension Fund Red Red Implemented $ 1,507 $ 312 $ — Yes (1)

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

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

The CBA for the Clarion and Colony manufacturing facilities was unanimously ratified in April 2023, which extended the expiration date to May 30, 2026.

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 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.

For the years ended April 1, 2023 , April 2, 2022 and April 3, 2021, the total amount of sales to related parties was $ 65.6 million , $ 58.1 million and $ 46.7 million, respectively.

As of April 1, 2023, receivables from related parties included $ 5.7 million of accounts receivable and $ 4.7 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.

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.

FY22 Craftsman Acquisition

On July 4, 2021 , we obtained an additional 20 % ownership interest in Craftsman Homes, LLC and Craftsman Homes Development, LLC (collectively known as "Craftsman" or the "Entities"), which gave us a 70 % controlling ownership interest and resulted in consolidation of the Entities.

See Redeemable Noncontrolling Interest policy in Note 1.

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).

The remeasurement of the Entities assets and liabilities to fair value resulted in a non-cash gain of $ 3.3 million, recorded in Other income, net in the Consolidated Statements of Comprehensive Income.

FY22 Commodore Acquisition

On September 24, 2021 , we purchased certain manufactured housing assets and assumed certain liabilities of The Commodore Corporation ("Commodore").

The acquisition-date fair value of the total consideration was $ 146.0 million .

During the second fiscal quarter of 2023, we finalized the purchase price allocation related to the Commodore acquisition, which did not have a material effect on the Consolidated Financial Statements.

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

September 24,

(as finalized)

Accounts receivable 20,930

Commercial loans 30,922

Inventories 31,787

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Other current assets 534

Indefinite lived intangible assets (1)

Intangible assets (2)

Total identifiable assets acquired 156,631

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Net assets acquired $ 145,987

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

(1) Includes assets acquired under finance leases.

(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.

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.

FY23 Solitaire Acquisition

On January 3, 2023 , we completed the acquisition of Solitaire Inc.

and other related entities (collectively "Solitaire Homes"), including their four manufacturing facilities and twenty-two retail locations by acquiring 100% of the outstanding stock of Solitaire Homes.

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

The acquisition-date fair value of the total consideration was $ 110.8 million , which is subject to customary adjustments.

We have expensed $ 2.4 million in acquisition related transaction costs in Selling, general and administrative expenses in the Consolidated Statements of Comprehensive Income and have not incurred debt in connection with the purchase or subsequent operations.

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

Certain estimated fair values for Inventories, Property, plant and equipment and Other current assets are not yet finalized and are subject to change, which could be signifi cant.

We will finalize the amounts recognized as we obtain the information necessary to complete the analysis.

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

September 24,

Investments 334

Accounts receivable 3,536

Commercial loans 30,922

Inventories 58,045

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Net assets acquired $ 110,781

(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.

(1) Includes $ 1.3 million assigned to trade names, which are considered indefinite lived intangible assets and are not subject to amortization, $ 1.9 million assigned to customer-related intangibles, subject to a useful life of 10 years amortized on a straight-line basis, and $ 0.2 million for covenants not to compete from the sellers, amortized on a straight-line basis over the term of 5 years.

(2) 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.

Since the acquisition date, Solitaire Homes contributed Net revenue of $ 28.3 million and a Net loss of $ 0.9 million for the fiscal year ended April 1, 2023.

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):

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

2023 April 2,

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2023 April 2,

2021 March 28,

2022 April 3,

Factory-built housing

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2023 April 2,

2021 March 28,

2022 April 3,

Gross margin %:

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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-K

Item 9A. Controls and Procedures