CAVCO INDUSTRIES, INC. 10-Q

Item 1. Financial Statements CAVCO INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share amounts) December 30, 2023 April 1, 2023 ASSETS (Unaudited) Current assets Cash and cash equivalents $ 352,808 $ 271,427 Restricted cash, current 13,215 11,728 Accounts receivable, net 70,501 89,347 Short-term investments 16,819 14,978 Current portion of consumer loans receivable, net 11,855 17,019 Current portion of commercial loans receivable, net 48,817 43,414 Current portion of commercial loans receivable from affiliates, net 2,135 640 Inventories 236,649 263,150 Prepaid expenses and other current assets 80,248 92,876 Total current assets 833,047 804,579 Restricted cash 585 335 Investments 16,099 18,639 Consumer loans receivable, net 24,279 27,129 Commercial loans receivable, net 38,836 53,890 Commercial loans receivable from affiliates, net 2,784 4,033 Property, plant and equipment, net 224,216 228,278 Goodwill 120,744 114,547 Other intangibles, net 28,613 29,790 Operating lease right-of-use assets 37,393 26,755 Total assets $ 1,326,596 $ 1,307,975 LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 23,928 $ 30,730 Accrued expenses and other current liabilities 247,244 262,661 Total current liabilities 271,172 293,391 Operating lease liabilities 33,285 21,678 Other liabilities 7,651 7,820 Deferred income taxes 5,788 7,581 Redeemable noncontrolling interest — 1,219 Stockholders' equity Preferred stock, $ 0.01 par value; 1,000,000 shares authorized; No shares issued or outstanding — — Common stock, $ 0.01 par value; 40,000,000 shares authorized; Issued 9,381,147 and 9,337,125 shares, respectively; Outstanding 8,345,812 and 8,665,324 shares, respectively 94 93 Treasury stock, at cost; 1,035,335 and 671,801 shares, respectively ( 262,072 ) ( 164,452 ) Additional paid-in capital 277,847 271,950 Retained earnings 993,193 869,310 Accumulated other comprehensive loss ( 362 ) ( 615 ) Total stockholders' equity 1,008,700 976,286 Total liabilities, redeemable noncontrolling interest and stockholders' equity $ 1,326,596 $ 1,307,975 See accompanying Notes to Consolidated Financial Statements 1 Table of Contents CAVCO INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Dollars in thousands, except per share amounts) (Unaudited) Three Months Ended Nine Months Ended December 30, 2023 December 31, 2022 December 30, 2023 December 31, 2022 Net revenue $ 446,769 $ 500,603 $ 1,374,674 $ 1,666,333 Cost of sales 343,718 368,635 1,046,787 1,232,042 Gross profit 103,051 131,968 327,887 434,291 Selling, general and administrative expenses 63,312 58,904 186,498 191,934 Income from operations 39,739 73,064 141,389 242,357 Interest income 5,234 3,581 15,664 6,746 Interest expense ( 842 ) ( 216 ) ( 1,365 ) ( 610 ) Other (expense) income, net ( 224 ) ( 348 ) 557 ( 291 ) Income before income taxes 43,907 76,081 156,245 248,202 Income tax expense ( 7,920 ) ( 16,492 ) ( 32,274 ) ( 54,721 ) Net income 35,987 59,589 123,971 193,481 Less: net income attributable to redeemable noncontrolling interest — 65 88 239 Net income attributable to Cavco common stockholders $ 35,987 $ 59,524 $ 123,883 $ 193,242 Comprehensive income Net income $ 35,987 $ 59,589 $ 123,971 $ 193,481 Reclassification adjustment for securities sold 293 ( 13 ) 299 ( 19 ) Applicable income tax (expense) benefit ( 62 ) 3 ( 63 ) 4 Net change in unrealized position of investments held 13 107 22 ( 412 ) Applicable income tax (expense) benefit ( 3 ) ( 23 ) ( 5 ) 86 Comprehensive income 36,228 59,663 124,224 193,140 Less: comprehensive income attributable to redeemable noncontrolling interest — 65 88 239 Comprehensive income attributable to Cavco common stockholders $ 36,228 $ 59,598 $ 124,136 $ 192,901 Net income per share attributable to Cavco common stockholders Basic $ 4.31 $ 6.71 $ 14.47 $ 21.72 Diluted $ 4.27 $ 6.66 $ 14.34 $ 21.55 Weighted average shares outstanding Basic 8,358,389 8,870,565 8,561,209 8,897,405 Diluted 8,432,471 8,936,075 8,640,288 8,969,104 See accompanying Notes to Consolidated Financial Statements 2 Table of Contents CAVCO INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited) Nine Months Ended December 30, 2023 December 31, 2022 OPERATING ACTIVITIES Net income $ 123,971 $ 193,481 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 13,854 12,174 Provision for credit losses ( 121 ) ( 659 ) Deferred income taxes ( 1,861 ) 3,225 Stock-based compensation expense 4,698 4,855 Non-cash interest income, net ( 1,230 ) ( 527 ) Loss (gain) on sale or retirement of property, plant and equipment, net 186 ( 116 ) Gain on investments and sale of loans, net ( 5,958 ) ( 6,647 ) Distributions of earnings from equity method investments — 4,306 Changes in operating assets and liabilities, net of acquisitions Accounts receivable 18,161 15,988 Consumer loans receivable originated ( 74,306 ) ( 135,552 ) Proceeds from sales of consumer loans receivable 81,752 146,050 Principal payments received on consumer loans receivable 5,480 7,206 Inventories 51,182 28,513 Prepaid expenses and other current assets 9,909 ( 16,525 ) Commercial loans receivable originated ( 83,509 ) ( 71,183 ) Principal payments received on commercial loans receivable 87,591 61,605 Accounts payable, accrued expenses and other liabilities ( 23,695 ) ( 16,075 ) Net cash provided by operating activities 206,104 230,119 INVESTING ACTIVITIES Purchases of property, plant and equipment ( 13,237 ) ( 40,850 ) Payments for acquisitions, net ( 19,702 ) — Proceeds from sale of property, plant and equipment 4,514 406 Purchases of investments ( 7,408 ) ( 10,198 ) Proceeds from sale of investments 9,290 9,230 Return of invested capital from equity method investments — 12,213 Net cash used in investing activities ( 26,543 ) ( 29,199 ) FINANCING ACTIVITIES Payments for taxes on stock option exercises and releases of equity awards ( 1,898 ) ( 1,072 ) Proceeds from exercise of stock options 3,098 1,591 Payments on finance leases and other secured financings ( 442 ) ( 549 ) Payments for common stock repurchases ( 96,781 ) ( 73,230 ) Distributions to noncontrolling interest ( 420 ) ( 600 ) Net cash used in financing activities ( 96,443 ) ( 73,860 ) Net increase in cash, cash equivalents and restricted cash 83,118 127,060 Cash, cash equivalents and restricted cash at beginning of the fiscal year 283,490 259,334 Cash, cash equivalents and restricted cash at end of the period $ 366,608 $ 386,394 Supplemental disclosures of cash flow information Cash paid for income taxes $ 28,776 $ 71,137 Cash paid for interest $ 612 $ 430 Supplemental disclosures of noncash activity Change in GNMA loans eligible for repurchase $ ( 3,812 ) $ ( 2,914 ) Right-of-use assets recognized and operating lease obligations incurred $ 14,743 $ 3,535 Non-cash consideration for acquisitions $ 5,430 $ — See accompanying Notes to Consolidated Financial Statements 3 Table of Contents CAVCO INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Basis of Presentation The accompanying unaudited Consolidated Financial Statements of Cavco Industries, Inc. and its subsidiaries (collectively, "we," "us," "our," the "Company" or "Cavco") have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") for Quarterly Reports on Form 10-Q and Article 10 of SEC Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP") have been condensed or omitted pursuant to such rules and regulations. In addition, references throughout to numbered "Notes" refer to these Notes to Consolidated Financial Statements (Unaudited), unless otherwise stated. In the opinion of management, these financial statements include all adjustments, including normal recurring adjustments, which are necessary to fairly state the results for the periods presented. Certain prior period amounts have been reclassified including from Other (expense) income, net to Interest income to conform to current period classification. We have evaluated subsequent events after the balance sheet date through the date of the filing of this report with the SEC, and there were no disclosable subsequent events. These Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the Notes to the Consolidated Financial Statements included in our 2023 Annual Report on Form 10-K for the year ended April 1, 2023, filed with the SEC ("Form 10-K"). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying Notes. Due to uncertainties, actual results could differ from the estimates and assumptions used in preparation of the Consolidated Financial Statements. The Consolidated Statements of Comprehensive Income and Consolidated Statements of Cash Flows for the interim periods are not necessarily indicative of the results or cash flows for the full year. The Company operates on a 52-53 week fiscal year ending on the Saturday nearest to March 31 st of each year. Each fiscal quarter consists of 13 weeks, with an occasional fourth quarter extending to 14 weeks, if necessary, for the fiscal year to end on the Saturday nearest to March 31 st . The current fiscal year will end on March 30, 2024 and will include 52 weeks. We operate in two segments: (1) factory-built housing, which includes wholesale and retail factory-built housing operations, and (2) financial services, which includes manufactured housing consumer finance and insurance. We design and build a wide variety of affordable manufactured homes, modular homes and park model RVs through 29 homebuilding production lines located throughout the United States and two production lines in Mexico. We distribute our homes through a large network of independent distribution points in 48 states and Canada as well as 73 Company-owned U.S. retail stores, of which 43 are located in Texas. The financial services segment is comprised of a finance subsidiary, CountryPlace Acceptance Corp. ("CountryPlace"), and an insurance subsidiary, Standard Casualty Company ("Standard Casualty"). CountryPlace is an approved Federal National Mortgage Association and Federal Home Loan Mortgage Corporation seller/servicer and a Government National Mortgage Association ("GNMA") mortgage-backed securities issuer that offers conforming mortgages, non-conforming mortgages and home-only loans to purchasers of factory-built homes. Standard Casualty provides property and casualty insurance primarily to owners of manufactured homes. 4 Table of Contents During fiscal 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 results of operations are included in our Consolidated Financial Statements from the date of acquisition. See Note 21, Acquisition. At December 30, 2023 we have a 70% interest in Craftsman Homes, LLC and Craftsman Homes Development, LLC (collectively "Craftsman"). On September 28, 2023, we executed an amendment to the Membership Interest Purchase Agreement (the "Agreement") for Craftsman to acquire the remaining 30% interest in Craftsman for cash on December 31, 2023. An additional amendment was signed in December 2023 to move the acquisition date to January 1, 2024. As the entire 30% is mandatorily redeemable, the value attributed to this noncontrolling interest at December 30, 2023 is included in Accrued expenses and other current liabilities on the Consolidated Balance Sheets at fair value. On January 1, 2024 we acquired the remaining 30% interest in Craftsman for cash. On November 15, 2023, the Company acquired certain assets and liabilities of Kentucky Dream Homes, LLC, a manufactured home retailer with locations in Kentucky and Florida. The results of operations are included in our Consolidated Financial Statements from the date of acquisition. See Note 21, Acquisition For a description of significant accounting policies we used in the preparation of our Consolidated Financial Statements, please refer to Note 1 of the Notes to Consolidated Financial Statements included in the Form 10-K. 2. Revenue from Contracts with Customers The following table summarizes Net revenue disaggregated by reportable segment and source (in thousands): Three Months Ended Nine Months Ended December 30, 2023 December 31, 2022 December 30, 2023 December 31, 2022 Factory-built housing Home sales $ 400,633 $ 455,459 $ 1,250,417 $ 1,555,236 Delivery, setup and other revenues 26,306 25,734 67,697 58,156 426,939 481,193 1,318,114 1,613,392 Financial services Insurance agency commissions received from third-party insurance companies 1,229 887 3,145 3,313 All other sources 18,601 18,523 53,415 49,628 19,830 19,410 56,560 52,941 $ 446,769 $ 500,603 $ 1,374,674 $ 1,666,333 3. Cash and Cash Equivalents and Restricted Cash 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): December 30, 2023 April 1, 2023 Cash and cash equivalents $ 352,808 $ 271,427 Restricted cash, current 13,215 11,728 Restricted cash 585 335 $ 366,608 $ 283,490 5 Table of Contents 4. Investments Investments consisted of the following (in thousands): December 30, 2023 April 1, 2023 Available-for-sale debt securities $ 19,207 $ 18,555 Marketable equity securities 8,788 9,989 Non-marketable equity investments 4,923 5,073 32,918 33,617 Less short-term investments ( 16,819 ) ( 14,978 ) $ 16,099 $ 18,639 Investments in marketable equity securities consist of investments in the common stock of industrial and other companies. Our non-marketable equity investments include investments in other retail distribution operations and community-based initiatives. 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): December 30, 2023 April 1, 2023 Amortized Cost Fair Value Amortized Cost Fair Value Residential mortgage-backed securities $ 1,888 $ 1,836 $ 2,567 $ 2,488 State and political subdivision debt securities 5,652 5,515 6,023 5,769 Corporate debt securities 12,124 11,856 10,745 10,298 $ 19,664 $ 19,207 $ 19,335 $ 18,555 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. December 30, 2023 Amortized Cost Fair Value Due in less than one year $ 7,585 $ 7,453 Due after one year through five years 9,804 9,532 Due after five years through ten years — — Due after ten years 387 386 Mortgage-backed securities 1,888 1,836 $ 19,664 $ 19,207 6 Table of Contents Net investment gains and losses on marketable equity securities were as follows (in thousands): Three Months Ended Nine Months Ended December 30, 2023 December 31, 2022 December 30, 2023 December 31, 2022 Marketable equity securities Net gain (loss) recognized during the period $ 776 $ 707 $ 1,051 $ ( 1,868 ) Less: Net (gain) loss recognized on securities sold during the period ( 235 ) ( 107 ) ( 365 ) 183 Unrealized gain (loss) recognized during the period on securities still held $ 541 $ 600 $ 686 $ ( 1,685 ) 5. Inventories Inventories consisted of the following (in thousands): December 30, 2023 April 1, 2023 Raw materials $ 80,630 $ 92,045 Work in process 25,969 29,022 Finished goods 130,050 142,083 $ 236,649 $ 263,150 6. Consumer Loans Receivable The following table summarizes consumer loans receivable (in thousands): December 30, 2023 April 1, 2023 Loans held for investment, previously securitized $ 18,001 $ 21,000 Loans held for investment 12,901 13,117 Loans held for sale 6,236 10,846 Construction advances 464 706 37,602 45,669 Deferred financing fees and other, net ( 362 ) ( 368 ) Allowance for loan losses ( 1,106 ) ( 1,153 ) 36,134 44,148 Less current portion ( 11,855 ) ( 17,019 ) $ 24,279 $ 27,129 The consumer loans held for investment had the following characteristics: December 30, 2023 April 1, 2023 Weighted average contractual interest rate 8.0 % 8.2 % Weighted average effective interest rate 8.6 % 8.8 % Weighted average months to maturity 173 150 7 Table of Contents The following table is a consolidated summary of the delinquency status of the outstanding principal balance of consumer loans receivable (in thousands): December 30, 2023 April 1, 2023 Current $ 35,403 $ 43,252 31 to 60 days 951 1,247 61 to 90 days 311 213 91+ days 937 957 $ 37,602 $ 45,669 The following table disaggregates the outstanding principal balance of consumer loans receivable by credit quality indicator and fiscal year of origination (in thousands): December 30, 2023 2024 2023 2022 2021 2020 Prior Total Prime- FICO score 680 and greater $ 5,628 $ 329 $ 97 $ 985 $ 1,914 $ 15,413 $ 24,366 Near Prime- FICO score 620-679 744 — — 1,208 949 9,146 12,047 Sub-Prime- FICO score less than 620 — — — 18 49 803 870 No FICO score — — — — — 319 319 $ 6,372 $ 329 $ 97 $ 2,211 $ 2,912 $ 25,681 $ 37,602 April 1, 2023 2023 2022 2021 2020 2019 Prior Total Prime- FICO score 680 and greater $ 9,471 $ 185 $ 1,051 $ 1,982 $ 1,191 $ 16,601 $ 30,481 Near Prime- FICO score 620-679 1,695 — 1,012 1,131 1,550 8,244 13,632 Sub-Prime- FICO score less than 620 84 — 19 51 — 1,033 1,187 No FICO score — — — — 24 345 369 $ 11,250 $ 185 $ 2,082 $ 3,164 $ 2,765 $ 26,223 $ 45,669 As of December 30, 2023, 42 % of the outstanding principal balance of the consumer loans receivable portfolio was concentrated in Texas and 14 % was concentrated in Florida. As of April 1, 2023, 44 % of the outstanding principal balance of the consumer loans receivable portfolio was concentrated in Texas and 13 % 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 December 30, 2023 or April 1, 2023. Repossessed homes totaled approximately $ 0.8 million and $ 1.1 million as of December 30, 2023 and April 1, 2023, respectively, and are included in Prepaid expenses and other current assets in the Consolidated Balance Sheets. Homes undergoing foreclosure or similar proceedings in progress totaled approximately $ 0.4 million and $ 0.5 million as of December 30, 2023 and April 1, 2023, respectively. 7. Commercial Loans Receivable The commercial loans receivable balance consists of direct financing arrangements for the home product needs of our independent distributors, community owners and developers. 8 Table of Contents Commercial loans receivable, net consisted of the following (in thousands): December 30, 2023 April 1, 2023 Loans receivable $ 94,178 $ 103,726 Allowance for loan losses ( 1,423 ) ( 1,586 ) Deferred financing fees, net ( 183 ) ( 163 ) 92,572 101,977 Less current portion of commercial loans receivable (including from affiliates), net ( 50,952 ) ( 44,054 ) $ 41,620 $ 57,923 The commercial loans receivable balance had the following characteristics: December 30, 2023 April 1, 2023 Weighted average contractual interest rate 6.5 % 7.6 % Weighted average months outstanding 11 9 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 December 30, 2023 and April 1, 2023, there were no commercial loans considered nonperforming. The following table disaggregates the outstanding principal balance of our commercial loans receivable by fiscal year of origination (in thousands): December 30, 2023 2024 2023 2022 2021 2020 Prior Total Performing $ 48,598 $ 34,344 $ 6,522 $ 2,462 $ 1,478 $ 774 $ 94,178 April 1, 2023 2023 2022 2021 2020 2019 Prior Total Performing $ 80,193 $ 16,028 $ 4,071 $ 2,203 $ 1,231 $ — $ 103,726 As of December 30, 2023 and April 1, 2023, 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 30, 2023, we had concentrations of our outstanding principal balance of the commercial loans receivable balance in New York of 15 % and California of 16 %. As of April 1, 2023, 18 % of our outstanding principal balance of the commercial loans receivable balance was in New York. No other state had concentrations in excess of 10 % of the outstanding principal balance of the commercial loans receivable as of December 30, 2023 or April 1, 2023. As of December 30, 2023 and April 1, 2023, one independent third-party and its affiliates comprised 14 % and 12 %, respectively, of the net commercial loans receivable principal balance outstanding, all of which was secured . 9 Table of Contents 8. Property, Plant and Equipment, net Property, plant and equipment, net, consisted of the following (in thousands): December 30, 2023 April 1, 2023 Property, plant and equipment, at cost Buildings and improvements $ 170,423 $ 167,291 Machinery and equipment 78,496 76,826 Land 39,822 39,822 Construction in progress 7,913 5,472 296,654 289,411 Accumulated depreciation ( 72,438 ) ( 61,133 ) $ 224,216 $ 228,278 Depreciation expense for the three and nine months ended December 30, 2023 was $ 4.2 million and $ 12.7 million, respectively. Depreciation expense for the three and nine months ended December 31, 2022 was $ 3.4 million and $ 10.7 million, respectively. 9. Leases 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 30, 2023 and April 1, 2023 (in thousands): Classification December 30, 2023 April 1, 2023 ROU assets Operating lease assets Operating lease right-of-use ("ROU") assets $ 37,393 $ 26,755 Finance lease assets Property, plant and equipment, net (1) 6,351 6,088 Total lease assets $ 43,744 $ 32,843 Lease Liabilities Current: Operating lease liabilities Accrued expenses and other current liabilities $ 5,305 $ 6,262 Finance lease liabilities Accrued expenses and other current liabilities 79 347 Non-current: Operating lease liabilities Operating lease liabilities 33,285 21,678 Finance lease liabilities Other liabilities 6,107 5,896 Total lease liabilities $ 44,776 $ 34,183 (1) Recorded net of accumulated amortization of $ 0.4 million and $ 0.3 million as of December 30, 2023 and April 1, 2023, respectively. 10 Table of Contents The present value of future minimum payments under non-cancelable leases as of December 30, 2023 was as follows (in thousands): Operating Leases Finance Leases Total Remainder of fiscal 2024 $ 1,688 $ 89 $ 1,777 Fiscal 2025 7,035 356 7,391 Fiscal 2026 6,980 356 7,336 Fiscal 2027 4,545 356 4,901 Fiscal 2028 3,649 356 4,005 Fiscal 2029 3,456 356 3,812 Thereafter 20,276 10,230 30,506 47,629 12,099 59,728 Less: Amount representing interest ( 9,039 ) ( 5,913 ) ( 14,952 ) $ 38,590 $ 6,186 $ 44,776 10. Goodwill and Other Intangibles, net Goodwill and other intangibles, net, consisted of the following (in thousands): December 30, 2023 April 1, 2023 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Indefinite-lived Goodwill $ 120,744 $ — $ 120,744 $ 114,547 $ — $ 114,547 Trademarks and trade names 16,980 — 16,980 16,980 — 16,980 State insurance licenses 1,100 — 1,100 1,100 — 1,100 138,824 — 138,824 132,627 — 132,627 Finite-lived Customer relationships 15,000 ( 4,965 ) 10,035 16,900 ( 5,818 ) 11,082 Other 1,114 ( 616 ) 498 1,114 ( 486 ) 628 $ 154,938 $ ( 5,581 ) $ 149,357 $ 150,641 $ ( 6,304 ) $ 144,337 Changes to Goodwill for the nine months ended December 30, 2023 were as follows (in thousands): Goodwill beginning of the period $ 114,547 Solitaire Goodwill adjustments (1) 1,137 Kentucky Dream Homes (1) 4,591 Other immaterial acquisition 469 $ 120,744 (1) See Note 21, Acquisitions 11 Table of Contents Amortization expense recognized on intangible assets for the three and nine months ended December 30, 2023 was $ 0.4 million and $ 1.2 million, respectively. Amortization expense recognized on intangible assets for the three and nine months ended December 31, 2022 was $ 0.5 million and $ 1.5 million, respectively. Customer relationships have a weighted average remaining life of 7.1 years and other finite lived intangibles have a weighted average remaining life of 2.8 years. Expected future amortization is as follows (in thousands): Remainder of fiscal year 2024 $ 392 Fiscal 2025 1,530 Fiscal 2026 1,488 Fiscal 2027 1,415 Fiscal 2028 1,299 Fiscal 2029 1,265 Thereafter 3,144 $ 10,533 11. Accrued Expenses and Other Current Liabilities Accrued expenses and other current liabilities consisted of the following (in thousands): December 30, 2023 April 1, 2023 Salaries, wages and benefits $ 41,023 $ 47,100 Customer deposits 40,698 45,193 Estimated warranties 32,822 31,368 Unearned insurance premiums 30,192 27,901 Accrued volume rebates 25,086 22,858 Accrued self-insurance 13,671 11,467 Other 63,752 76,774 $ 247,244 $ 262,661 12. Warranties Activity in the liability for estimated warranties was as follows (in thousands): Three Months Ended Nine Months Ended December 30, 2023 December 31, 2022 December 30, 2023 December 31, 2022 Balance at beginning of period $ 33,015 $ 30,841 $ 31,368 $ 26,250 Charged to costs and expenses 11,341 12,036 36,956 40,663 Payments and deductions ( 11,534 ) ( 11,931 ) ( 35,502 ) ( 35,967 ) Balance at end of period $ 32,822 $ 30,946 $ 32,822 $ 30,946 12 Table of Contents 13. Other Liabilities The following table summarizes secured financings and other obligations (in thousands): December 30, 2023 April 1, 2023 Finance lease liabilities $ 6,186 $ 6,243 Mandatorily redeemable noncontrolling interest 2,796 2,268 Other secured financing 1,942 2,379 10,924 10,890 Less current portion included in Accrued expenses and other current liabilities ( 3,273 ) ( 3,070 ) $ 7,651 $ 7,820 14. Debt We are party to a Credit Agreement (the "Credit Agreement") that expires in 2027 with Bank of America, N.A., providing for a $ 50 million revolving credit facility (the "Revolving Credit Facility"), which may be increased up to an aggregate amount of $ 100 million. As of December 30, 2023 and April 1, 2023, there were no borrowings outstanding under the Revolving Credit Facility and we were in compliance with all covenants. 15. Reinsurance and Insurance Loss Reserves Certain of Standard Casualty's premiums and benefits are assumed from and ceded to other insurance companies under various reinsurance agreements. We remain obligated for amounts ceded in the event that the reinsurers do not meet their obligations. The effects of reinsurance on premiums written and earned were as follows (in thousands): Three Months Ended December 30, 2023 December 31, 2022 Written Earned Written Earned Direct premiums $ 11,135 $ 10,693 $ 7,454 $ 7,529 Assumed premiums—nonaffiliated 8,430 8,459 7,709 8,358 Ceded premiums—nonaffiliated ( 6,406 ) ( 6,406 ) ( 4,413 ) ( 4,413 ) $ 13,159 $ 12,746 $ 10,750 $ 11,474 Nine Months Ended December 30, 2023 December 31, 2022 Written Earned Written Earned Direct premiums $ 31,581 $ 28,740 $ 22,350 $ 21,917 Assumed premiums—nonaffiliated 27,735 25,880 25,555 24,526 Ceded premiums—nonaffiliated ( 18,971 ) ( 18,971 ) ( 13,056 ) ( 13,056 ) $ 40,345 $ 35,649 $ 34,849 $ 33,387 13 Table of Contents 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 million in the aggregate for that occurrence. Standard Casualty establishes reserves for claims and claims expense on reported and incurred but not reported ("IBNR") claims of non-reinsured losses. The following details the activity in the reserve for the three and nine months ended December 30, 2023 and December 31, 2022 (in thousands): Three Months Ended Nine Months Ended December 30, 2023 December 31, 2022 December 30, 2023 December 31, 2022 Balance at beginning of period $ 9,154 $ 7,790 $ 10,939 $ 8,149 Net incurred losses during the period 9,489 8,464 29,152 25,050 Net claim payments during the period ( 9,189 ) ( 7,163 ) ( 30,637 ) ( 24,108 ) Balance at end of period $ 9,454 $ 9,091 $ 9,454 $ 9,091 16. Commitments and Contingencies Repurchase Contingencies . The maximum amount for which the Company was liable under the terms of repurchase agreements with financial institutions that provide inventory financing to independent distributors of our products approximated $ 116 million and $ 178 million at December 30, 2023 and April 1, 2023, respectively, without reduction for the estimated resale value of the homes. During the third quarter of fiscal 2024, we received one repurchase demand notice for three homes. During the nine months ended December 30, 2023, we received three repurchase demand notices covering nine homes, of which six homes had been repurchased by period end. In all cases, the estimated fair value exceeded the repurchase price so no loss reserve was deemed necessary. Our reserve for repurchase commitments, recorded in Accrued expenses and other current liabilities, was $ 2.7 million at December 30, 2023 and $ 5.2 million at April 1, 2023 . Construction-Period Mortgages. Loan contracts with off-balance sheet commitments are summarized below (in thousands): December 30, 2023 April 1, 2023 Construction loan contract amount $ 1,361 $ 2,214 Cumulative advances ( 464 ) ( 706 ) $ 897 $ 1,508 Representations and Warranties of Mortgages Sold . The reserve for contingent repurchases and indemnification obliga tions was $ 0.6 million as of December 30, 2023 and $ 0.7 million as of April 1, 2023, included in Accrued expenses and other current liabilities on the Consolidated Balance Sheets. There were no claim requests that resulted in the repurchase of any loans during the nine months ended December 30, 2023 or December 31, 2022 . Interest Rate Lock Commitments ("IRLCs") . As of December 30, 2023 and April 1, 2023, w e had outstanding IRLCs with a notional amount of $ 24.1 million and $ 64.9 million, respectively. For the three and nine months ended December 30, 2023, we recognized insignificant non-cash gains and losses, respectively, on outstanding IRLCs. For the three and nine months ended December 31, 2022, we recognized insignificant non-cash gains on outstanding IRLCs. Forward Sales Commitments . As of December 30, 2023 and April 1, 2023, we had $ 0.8 million and $ 1.6 million in outstanding forward sales commitments ("Commitments"), respectively. During the three and nine months ended December 30, 2023, we recognized insignificant non-cash losses. During the three and nine months ended December 31, 2022, we recognized non-cash losses of $ 0.2 million and $ 0.3 million, respectively, relating to our Commitments. 14 Table of Contents Legal Matters. 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. However, future events or circumstances that may currently be unknown to management will determine whether the resolution of pending or threatened litigation or claims will ultimately have a material effect on our consolidated financial position, liquidity or results of operations in any future reporting periods. 15 Table of Contents 17. 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 nine months ended December 30, 2023 (dollars in thousands): Equity Attributable to Cavco Stockholders Treasury stock Additional paid-in capital Retained earnings Accumulated other comprehensive income (loss) Total Redeemable noncontrolling interest Common Stock Shares Amount Balance, April 1, 2023 9,337,125 $ 93 $ ( 164,452 ) $ 271,950 $ 869,310 $ ( 615 ) $ 976,286 $ 1,219 Net income — — — — 46,357 — 46,357 54 Other comprehensive loss, net — — — — — ( 42 ) ( 42 ) — Issuance of common stock under stock incentive plans, net 10,095 — — ( 1,213 ) — — ( 1,213 ) — Stock-based compensation — — — 1,438 — — 1,438 — Distributions — — — — — — — ( 120 ) Valuation adjustment — — — — — — — ( 33 ) Balance, July 1, 2023 9,347,220 93 ( 164,452 ) 272,175 915,667 ( 657 ) 1,022,826 1,120 Net income — — — — 41,539 — 41,539 34 Other comprehensive income, net — — — — — 54 54 — Issuance of common stock under stock incentive plans, net 9,201 1 — 478 — — 479 — Stock-based compensation — — — 1,551 — — 1,551 — Common stock repurchases — — ( 47,194 ) — — — ( 47,194 ) — Distributions — — — — — — — ( 180 ) Conversion to mandatorily redeemable noncontrolling interest — — — — — — — ( 974 ) Balance, September 30, 2023 9,356,421 94 ( 211,646 ) 274,204 957,206 ( 603 ) 1,019,255 — Net income — — — — 35,987 — 35,987 — Other comprehensive income, net — — — — — 241 241 — Issuance of common stock under stock incentive plans, net 24,726 — — 1,934 — — 1,934 — Stock-based compensation — — — 1,709 — — 1,709 — Common stock repurchases — — ( 50,426 ) — — — ( 50,426 ) — Balance, December 30, 2023 9,381,147 $ 94 $ ( 262,072 ) $ 277,847 $ 993,193 $ ( 362 ) $ 1,008,700 $ — 16 Table of Contents 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 Treasury stock Additional paid-in capital Retained earnings Accumulated other comprehensive income (loss) Total Redeemable noncontrolling interest Common Stock Shares Amount Balance, April 2, 2022 9,292,278 $ 93 $ ( 61,040 ) $ 263,049 $ 628,756 $ ( 403 ) $ 830,455 $ 825 Net income — — — — 59,602 — 59,602 92 Other comprehensive loss, net — — — — — ( 112 ) ( 112 ) — Issuance of common stock under stock incentive plans, net 5,957 — — ( 848 ) — — ( 848 ) — Stock-based compensation — — — 1,425 — — 1,425 — Common stock repurchases — — ( 38,960 ) — — — ( 38,960 ) — Distributions — — — — — — — ( 240 ) Balance, July 2, 2022 9,298,235 93 ( 100,000 ) 263,626 688,358 ( 515 ) 851,562 677 Net income — — — — 74,116 — 74,116 82 Other comprehensive loss, net — — — — — ( 303 ) ( 303 ) — Issuance of common stock under stock incentive plans, net 15,917 — — 1,457 — — 1,457 — Stock-based compensation — — — 2,100 — — 2,100 — Distributions — — — — — — — ( 240 ) 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 ) Valuation adjustment — — — — — — — 61 Balance, December 31, 2022 9,319,700 $ 93 $ ( 134,270 ) $ 268,423 $ 821,998 $ ( 744 ) $ 955,500 $ 932 17 Table of Contents 18. Earnings Per Share The following table sets forth the computation of basic and diluted earnings per share (dollars in thousands, except per share amounts): Three Months Ended Nine Months Ended December 30, 2023 December 31, 2022 December 30, 2023 December 31, 2022 Net income attributable to Cavco common stockholders $ 35,987 $ 59,524 $ 123,883 $ 193,242 Weighted average shares outstanding Basic 8,358,389 8,870,565 8,561,209 8,897,405 Effect of dilutive securities 74,082 65,510 79,079 71,699 Diluted 8,432,471 8,936,075 8,640,288 8,969,104 Net income per share attributable to Cavco common stockholders Basic $ 4.31 $ 6.71 $ 14.47 $ 21.72 Diluted $ 4.27 $ 6.66 $ 14.34 $ 21.55 Anti-dilutive common stock equivalents excluded — 930 316 776 19. Fair Value Measurements The book value and estimated fair value of our financial instruments were as follows (in thousands): December 30, 2023 April 1, 2023 Book Value Estimated Fair Value Book Value Estimated Fair Value Available-for-sale debt securities $ 19,207 $ 19,207 $ 18,555 $ 18,555 Marketable equity securities 8,788 8,788 9,989 9,989 Non-marketable equity investments 4,923 4,923 5,073 5,073 Consumer loans receivable 36,134 41,661 44,148 50,686 Commercial loans receivable 92,572 78,191 101,977 97,106 Other secured financing ( 1,942 ) ( 1,894 ) ( 2,379 ) ( 2,332 ) See Note 20, Fair Value Measurements, and the Fair Value of Financial Instruments caption in Note 1, Summary of Significant Accounting Policies, in the Form 10-K for more information on the methodologies we use in determining fair value. Mortgage Servicing . Mortgage Servicing Rights ("MSRs") are recorded at fair value in Prepaid expenses and other current assets on the Consolidated Balance Sheets. December 30, 2023 April 1, 2023 Number of loans serviced with MSRs 3,894 4,070 Weighted average servicing fee (basis points) 34.79 34.71 Capitalized servicing multiple 187.1 % 98.99 % Capitalized servicing rate (basis points) 65.10 34.36 Serviced portfolio with MSRs (in thousands) $ 491,887 $ 520,458 MSRs (in thousands) $ 3,202 $ 1,788 18 Table of Contents 20. Related Party Transactions We have non-marketable equity investments in other distribution operations outside of Company-owned retail stores. In the ordinary course of business, we sell homes and lend to certain of these operations through our commercial lending programs. For the three and nine months ended December 30, 2023, the total amount of sales to related parties was $ 11.6 million and $ 42.6 million, respectively. 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. As of December 30, 2023, receivables from related parties included $ 6.5 million of accounts receivable and $ 4.9 million of commercial loans outstanding. As of April 1, 2023, receivables from related parties included $ 5.7 million of accounts receivable and $ 4.7 million of commercial loans outstanding. 21. Acquisitions Solitaire Acquisition On January 3, 2023 (the "Acquisition Date"), we completed the acquisition of Solitaire Homes, including their four manufacturing facilities and 22 retail locations, by acquiring 100% of the outstanding stock of Solitaire Homes for $ 110.8 million. Our estimates of the fair values of the assets that we acquired and the liabilities that we assumed were based on the information that was available as of the Acquisition Date. During the nine months ended December 30, 2023, we made certain adjustments to the assets and liabilities based on information that became available. The following table presents the fair values of the assets that we acquired and the liabilities that we assumed on the Acquisition Date as of December 30, 2023 (in thousands): January 3, 2023 Adjustments January 3, 2023 (as Adjusted at December 30, 2023) Cash $ 5,119 $ ( 79 ) $ 5,040 Investments 334 — 334 Accounts receivable 3,536 ( 787 ) 2,749 Inventories 58,045 ( 143 ) 57,902 Property, plant and equipment 36,109 ( 103 ) 36,006 Other current assets 1,519 59 1,578 Intangible assets 3,400 — 3,400 Total identifiable assets acquired 108,062 ( 1,053 ) 107,009 Accounts payable and accrued liabilities 11,251 84 11,335 Net identifiable assets acquired 96,811 ( 1,137 ) 95,674 Goodwill 13,970 1,137 15,107 Net assets acquired $ 110,781 $ — $ 110,781 19 Table of Contents Pro Forma Impact of Solitaire Acquisition (Unaudited) . The following table presents supplemental pro forma information as if the above acquisition had occurred on April 3, 2022 (in thousands, except per share data): December 31, 2022 Three Months Ended Nine Months Ended Net revenue $ 536,776 $ 1,774,853 Net income attributable to Cavco common stockholders 61,567 199,371 Diluted net income per share 6.89 22.23 Kentucky Dream Homes Acquisition On November 15, 2023, the Company acquired certain assets and assumed certain liabilities of Kentucky Dream Homes, LLC ("KDH"), a manufactured home retailer with locations in Kentucky and Florida for total consideration of $ 23.8 million, which includes $ 5.4 million non-cash commercial loan forgiveness. The remaining $ 18.4 million was paid with cash on hand. The final purchase price is subject to customary adjustments. The business is included in the Factory-built housing reportable business segment. The fair value of the assets acquired and liabilities assumed are included in the Consolidated Balance Sheet as of December 30, 2023, including $ 4.6 million allocated to goodwill. The purchase accounting is subject to final adjustment, primarily for the working capital and amounts allocated to goodwill. We have included the financial results in our unaudited Consolidated Financial Statements from the date of acquisition. Pro forma historical results of operations related to this acquisition have not been presented because they are not significant to our unaudited Consolidated Financial Statements for the periods presented. 22. Business Segment Information We operate principally in two segments: (1) factory-built housing, which includes wholesale and retail factory-built housing operations, and (2) financial services, which includes manufactured housing consumer finance and insurance. The following table provides selected financial data by segment (in thousands): Three Months Ended Nine Months Ended December 30, 2023 December 31, 2022 December 30, 2023 December 31, 2022 Net revenue: Factory-built housing $ 426,939 $ 481,193 $ 1,318,114 $ 1,613,392 Financial services 19,830 19,410 56,560 52,941 $ 446,769 $ 500,603 $ 1,374,674 $ 1,666,333 Income before income taxes: Factory-built housing $ 42,070 $ 71,813 $ 154,121 $ 241,959 Financial services 1,837 4,268 2,124 6,243 $ 43,907 $ 76,081 $ 156,245 $ 248,202 December 30, 2023 April 1, 2023 Total assets: Factory-built housing $ 1,125,581 $ 1,107,555 Financial services 201,015 200,420 $ 1,326,596 $ 1,307,975 20 Table of Contents