UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 27, 2020~~July 3, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 000-08822

CAVCO INDUSTRIES INC.

(Exact name of registrant as specified in its charter)

Delaware

56-2405642

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

3636 North Central Ave, Ste 1200

Phoenix

Arizona

85012

(Address of principal executive offices, including zip code)

(602) 256-6263

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.01	CVCO	The Nasdaq Stock Market LLC
		(Nasdaq Global Select Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer	☒	Accelerated Filer	☐
Non-accelerated Filer	☐	Smaller Reporting Company	☐
Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July ~~24, 2020, 9,180,229~~30, 2021, 9,187,030 shares of the registrant's Common Stock, $.01 par value, were outstanding.

CAVCO INDUSTRIES, INC.

FORM 10-Q

~~June 27, 2020~~July 3, 2021

TABLE OF CONTENTS


			Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of ~~June 27, 2020~~July 3, 2021 (unaudited) and ~~March 28, 2020~~April 3, 2021			1
Consolidated Statements of Comprehensive Income (unaudited) for the three months ended July 3, 2021 and June 27, 2020 ~~and June 29, 2019~~			2
Consolidated Statements of Cash Flows (unaudited) for the three months ended July 3, 2021 and June 27, 2020 ~~and June 29, 2019~~			3
Notes to Consolidated Financial Statements			4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			2618
Item 3. Quantitative and Qualitative Disclosures About Market Risk			3624
Item 4. Controls and Procedures			3625
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			3626
Item 1A. Risk Factors			3726
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			26
Item 5. Other Information			3726
Item 6. Exhibits			3727
SIGNATURES			3828

Table of Contents

PART 1. FINANCIAL INFORMATION

Item 1. Financial Statements

CAVCO INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share amounts)

June 27,
2020 March 28,
2020
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 270,547 $ 241,826
Restricted cash, current 19,600 13,446
Accounts receivable, net 38,171 42,800
Short-term investments 16,374 14,582
Current portion of consumer loans receivable, net 44,830 32,376
Current portion of commercial loans receivable, net 13,628 14,657
Current portion of commercial loans receivable from affiliates, net 803 766
Inventories 106,396 113,535
Prepaid expenses and other current assets 37,642 42,197
Total current assets 547,991 516,185
Restricted cash 335 335
Investments 30,506 31,557
Consumer loans receivable, net 44,129 49,928
Commercial loans receivable, net 20,097 23,685
Commercial loans receivable from affiliates, net 9,481 7,457
Property, plant and equipment, net 77,326 77,190
Goodwill 75,090 75,090
Other intangibles, net 14,923 15,110
Operating lease right-of-use assets 18,378 13,894
Total assets $ 838,256 $ 810,431
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 34,658 $ 29,924
Accrued expenses and other current liabilities 142,193 139,930
Current portion of secured credit facilities and other 2,205 2,248
Total current liabilities 179,056 172,102
Operating lease liabilities 15,398 10,743
Secured credit facilities and other 12,307 12,705
Deferred income taxes 7,488 7,295
Stockholders' equity:
Preferred stock, $0.01 par value; 1,000,000 shares authorized; NaN shares issued or outstanding — —
Common stock, $0.01 par value; 40,000,000 shares authorized; Outstanding 9,177,064 and 9,173,242 shares, respectively 92 92
Additional paid-in capital 252,672 252,260
Retained earnings 371,085 355,144
Accumulated other comprehensive income 158 90
Total stockholders' equity 624,007 607,586
Total liabilities and stockholders' equity $ 838,256 $ 810,431


	July 3, 2021		April 3, 2021
ASSETS	(Unaudited)
Current assets
Cash and cash equivalents	$	329,753	$	322,279
Restricted cash, current	16,728		16,693
Accounts receivable, net	51,054		47,396
Short-term investments	19,749		19,496
Current portion of consumer loans receivable, net	32,429		37,690
Current portion of commercial loans receivable, net	16,500		14,568
Current portion of commercial loans receivable from affiliates, net	2,113		4,664
Inventories	150,917		131,234
Prepaid expenses and other current assets	48,621		57,779
Total current assets	667,864		651,799
Restricted cash	335		335
Investments	38,192		35,010
Consumer loans receivable, net	35,095		37,108
Commercial loans receivable, net	21,245		20,281
Commercial loans receivable from affiliates, net	4,730		4,801
Property, plant and equipment, net	97,981		96,794
Goodwill	75,090		75,090
Other intangibles, net	14,190		14,363
Operating lease right-of-use assets	16,150		16,252
Total assets	$	970,872	$	951,833
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	30,175	$	32,120
Accrued expenses and other current liabilities	210,190		203,133
Current portion of secured financings and other	1,822		1,851
Total current liabilities	242,187		237,104
Operating lease liabilities	13,085		13,361
Secured financings and other	9,927		10,335
Deferred income taxes	6,606		7,393
Stockholders' equity
Preferred stock, $0.01 par value; 1,000,000 shares authorized; NaN shares issued or outstanding	0		0
Common stock, $0.01 par value; 40,000,000 shares authorized; Issued 9,245,721 and 9,241,256 shares, respectively	92		92
Treasury stock, at cost; 67,901 and 6,600 shares, respectively	(14,283)		(1,441)
Additional paid-in capital	255,071		253,835
Retained earnings	458,103		431,057
Accumulated other comprehensive income	84		97
Total stockholders' equity	699,067		683,640
Total liabilities and stockholders' equity	$	970,872	$	951,833

See accompanying Notes to Consolidated Financial Statements

Table of Contents

CAVCO INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands, except per share amounts)

(Unaudited)


		Three Months Ended					Three Months Ended
		June 27, 2020		June 29, 2019			July 3, 2021		June 27, 2020
Net revenue	Net revenue	$	254,801	$	264,042	Net revenue	$	330,422	$	254,801
Cost of sales	Cost of sales	199,478		203,744		Cost of sales	256,409		199,478
Gross profit	Gross profit	55,323		60,298		Gross profit	74,013		55,323
Selling, general and administrative expenses	Selling, general and administrative expenses	35,323		35,264		Selling, general and administrative expenses	40,832		35,323
Income from operations	Income from operations	20,000		25,034		Income from operations	33,181		20,000
Interest expense	Interest expense	(196)		(486)		Interest expense	(164)		(196)
Other income, net	Other income, net	1,876		2,814		Other income, net	2,461		1,876
Income before income taxes	Income before income taxes	21,680		27,362		Income before income taxes	35,478		21,680
Income tax expense	Income tax expense	(5,006)		(6,080)		Income tax expense	(8,432)		(5,006)
Net income	Net income	$	16,674	$	21,282	Net income	$	27,046	$	16,674

Comprehensive income:
Comprehensive income						Comprehensive income
Net income	Net income	$	16,674	$	21,282	Net income	$	27,046	$	16,674
Reclassification adjustment for securities sold or matured		26		2
Reclassification adjustment for securities sold						Reclassification adjustment for securities sold	1		26
Applicable income taxes	Applicable income taxes	(5)		(1)		Applicable income taxes	0		(5)
Net change in unrealized position of investments held	Net change in unrealized position of investments held	59		111		Net change in unrealized position of investments held	(18)		59
Applicable income taxes	Applicable income taxes	(12)		(23)		Applicable income taxes	4		(12)
Comprehensive income		$	16,742	$	21,371
							$	27,033	$	16,742
Net income per share:

Net income per share						Net income per share
Basic	Basic	$	1.82	$	2.34	Basic	$	2.94	$	1.82
Diluted	Diluted	$	1.80	$	2.31	Diluted	$	2.92	$	1.80
Weighted average shares outstanding:
Weighted average shares outstanding						Weighted average shares outstanding
Basic	Basic	9,174,182		9,102,685		Basic	9,198,229		9,174,182
Diluted	Diluted	9,264,661		9,217,599		Diluted	9,276,529		9,264,661

See accompanying Notes to Consolidated Financial Statements

Table of Contents

CAVCO INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)


		Three Months Ended							Three Months Ended
		June 27, 2020		June 29, 2019			July 3, 2021		June 27, 2020
OPERATING ACTIVITIES	OPERATING ACTIVITIES					OPERATING ACTIVITIES
Net income	Net income	$	16,674	$	21,282	Net income	$	27,046	$	16,674
Adjustments to reconcile net income to net cash provided by operating activities:
Adjustments to reconcile net income to net cash provided by operating activities						Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	Depreciation and amortization	1,613		1,240		Depreciation and amortization	1,576		1,613
Provision for credit losses	Provision for credit losses	(884)		213		Provision for credit losses	(239)		(884)
Deferred income taxes	Deferred income taxes	406		(69)		Deferred income taxes	(783)		406
Stock-based compensation expense	Stock-based compensation expense	945		630		Stock-based compensation expense	1,100		945
Non-cash interest income, net	Non-cash interest income, net	(2,186)		(359)		Non-cash interest income, net	(394)		(2,186)
Gain on sale of property, plant and equipment, net		289		—
Gain (loss) on sale or retirement of property, plant and equipment, net						Gain (loss) on sale or retirement of property, plant and equipment, net	(35)		289
Gain on investments and sale of loans, net	Gain on investments and sale of loans, net	(4,982)		(4,031)		Gain on investments and sale of loans, net	(5,579)		(4,982)
Changes in operating assets and liabilities:
Changes in operating assets and liabilities						Changes in operating assets and liabilities
Accounts receivable	Accounts receivable	4,629		(1,252)		Accounts receivable	(3,659)		4,629
Consumer loans receivable originated	Consumer loans receivable originated	(47,356)		(37,586)		Consumer loans receivable originated	(42,706)		(47,356)
Proceeds from sales of consumer loans	Proceeds from sales of consumer loans	39,271		37,625		Proceeds from sales of consumer loans	49,631		39,271
Principal payments received on consumer loans receivable	Principal payments received on consumer loans receivable	3,261		2,176		Principal payments received on consumer loans receivable	3,929		3,261
Inventories	Inventories	7,139		(2,329)		Inventories	(19,683)		7,139
Prepaid expenses and other current assets	Prepaid expenses and other current assets	7,128		4,321		Prepaid expenses and other current assets	2,801		7,128
Commercial loans receivable	Commercial loans receivable	2,556		(3,682)		Commercial loans receivable	(243)		2,556
Accounts payable and accrued expenses and other current liabilities	Accounts payable and accrued expenses and other current liabilities	7,189		(1,381)		Accounts payable and accrued expenses and other current liabilities	11,513		7,189
Net cash provided by operating activities	Net cash provided by operating activities	35,692		16,798		Net cash provided by operating activities	24,275		35,692
INVESTING ACTIVITIES	INVESTING ACTIVITIES					INVESTING ACTIVITIES
Purchases of property, plant and equipment	Purchases of property, plant and equipment	(1,856)		(2,063)		Purchases of property, plant and equipment	(2,593)		(1,856)

Proceeds from sale of property, plant and equipment and assets held for sale		5		42
Proceeds from sale of property, plant and equipment						Proceeds from sale of property, plant and equipment	38		5
Purchases of investments	Purchases of investments	(1,160)		(2,110)		Purchases of investments	(4,429)		(1,160)
Proceeds from sale of investments	Proceeds from sale of investments	3,116		2,662		Proceeds from sale of investments	3,368		3,116
Net cash provided by (used in) investing activities		105		(1,469)
Net cash (used in) provided by investing activities						Net cash (used in) provided by investing activities	(3,616)		105
FINANCING ACTIVITIES	FINANCING ACTIVITIES					FINANCING ACTIVITIES
Payments for exercise of stock options		(533)		(1,252)
Proceeds from (payments for) exercise of stock options						Proceeds from (payments for) exercise of stock options	136		(533)
Proceeds from secured financings and other	Proceeds from secured financings and other	64		75		Proceeds from secured financings and other	0		64
Payments on securitized financings and other		(453)		(997)
Payments on secured financings and other						Payments on secured financings and other	(444)		(453)
Payments for common stock repurchases						Payments for common stock repurchases	(12,842)		0
Net cash used in financing activities	Net cash used in financing activities	(922)		(2,174)		Net cash used in financing activities	(13,150)		(922)
Net increase in cash, cash equivalents and restricted cash	Net increase in cash, cash equivalents and restricted cash	34,875		13,155		Net increase in cash, cash equivalents and restricted cash	7,509		34,875
Cash, cash equivalents and restricted cash at beginning of the fiscal year	Cash, cash equivalents and restricted cash at beginning of the fiscal year	255,607		199,869		Cash, cash equivalents and restricted cash at beginning of the fiscal year	339,307		255,607
Cash, cash equivalents and restricted cash at end of the period	Cash, cash equivalents and restricted cash at end of the period	$	290,482	$	213,024	Cash, cash equivalents and restricted cash at end of the period	$	346,816	$	290,482
Supplemental disclosures of cash flow information:
Supplemental disclosures of cash flow information						Supplemental disclosures of cash flow information
Cash paid for income taxes	Cash paid for income taxes	$	2,536	$	4,512	Cash paid for income taxes	$	4,774	$	2,536
Cash paid for interest	Cash paid for interest	$	127	$	289	Cash paid for interest	$	100	$	127
Supplemental disclosures of noncash activity:
Right-of-use assets recognized		$	5,559	$	13,043
Operating lease obligations incurred		$	5,559	$	13,505
Supplemental disclosures of noncash activity						Supplemental disclosures of noncash activity
Change in GNMA loans eligible for repurchase						Change in GNMA loans eligible for repurchase	$	(6,607)	$	1,242
Right-of-use assets recognized and operating lease obligations incurred						Right-of-use assets recognized and operating lease obligations incurred	$	708	$	5,559

See accompanying Notes to Consolidated Financial Statements

Table of Contents

CAVCO INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 the opinion of management, these financial statements include all adjustments, including normal recurring adjustments, that ~~the Company believes~~ are necessary to fairly state the results for the periods presented. ~~Certain prior period amounts~~We have ~~been reclassified to conform to current period classification. The Company has~~ evaluated subsequent events after the balance sheet date through the date of the filing of this report with the ~~SEC,~~SEC; and except for the events set forth in Note 20 of the Notes to Consolidated Financial Statements ("Notes") of the Company's Quarterly Report on Form 10-Q for the period ended July 3, 2021, there were no subsequent events requiring disclosure. These Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the Notes to the Consolidated Financial Statements included in ~~the Company's 2020~~our 2021 Annual Report on Form 10-K for the year ended ~~March 28, 2020,~~April 3, 2021, filed with the SEC ~~on May 27, 2020~~ ("Form 10-K").

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and the accompanying ~~Notes to the Consolidated Financial Statements ("Notes").~~Notes. The uncertainty created by the novel coronavirus COVID-19 pandemic ("COVID-19") ~~have~~has made such estimates more difficult and subjective. ~~Accordingly,~~Due to that and other uncertainties, actual results could differ from those estimates. 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 ~~Company's~~ current fiscal year will end on April ~~3, 2021.~~2, 2022 and will include 52 weeks.

~~The Company operates principally~~We operate in 2 segments: (1) factory-built housing, which includes wholesale and retail ~~systems-built~~factory-built housing operations, and (2) financial services, which includes manufactured housing consumer finance and insurance. ~~The Company designs~~We design and ~~builds~~build a wide variety of affordable manufactured homes, modular homes and park model RVs through 20 homebuilding production lines located throughout the United States, which are sold to a network of independent distributors, community owners and developers and through ~~the Company's 39~~our 40 Company-owned retail stores. ~~Our~~The financial services segment is comprised of a finance subsidiary, CountryPlace Acceptance Corp. ("CountryPlace"), and an insurance subsidiary, Standard Casualty ~~Co.~~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.

~~Recently Issued or Adopted Accounting Standards.~~

~~On March 29, 2020, the Company adopted the Financial Accounting Standards Board's ("FASB") Accounting Standards Update 2016-13,~~ ~~Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~ ("ASU 2016-13"). ASU 2016-13 changes the impairment model for most financial assets and certain other instruments and requires a forward-looking impairment model based on expected losses rather than incurred losses. We adopted the standard by recognizing the cumulative effect of initially applying the new credit loss standard as an adjustment to the opening balance of Retained earnings. The comparative information has not been restated and continues to be reported under the accounting standard in effect for the applicable prior periods. The cumulative effect of the changes made to our consolidated balance sheet at March 29, 2020, for the adoption of ASU 2016-13 was $733,000, net of taxes. The application of ASU 2016-13 increased our allowance for loan losses by $435,000 for commercial loans receivable and $528,000 for non-acquired consumer loans receivable. It had an insignificant impact to our allowance for credit losses for Accounts receivable, net.

The Company adopted ASU 2016-13 using the prospective transition approach for acquired consumer loans receivable assets that were previously accounted for under FASB Accounting Standards Codification ("ASC") 310-30, ~~Loans and Debt Securities Acquired with Deteriorated Credit Quality~~ ("ASC 310-30"). The Company determined that $1.7 million of the existing purchase discount for acquired consumer loans was related to credit factors and was reclassified to the allowance for loan loss upon adoption. The remaining discount on the acquired consumer loans was determined to be related to non-credit factors and will be accreted into interest income over the life of the loans.

From time to time, new accounting pronouncements are issued by the FASB and other regulatory bodies that are adopted by the Company as of the specified effective dates. Management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company's Consolidated Financial Statements upon adoption.

For a description of ~~other~~ significant accounting policies we used ~~by the Company~~ in the preparation of ~~its~~our Consolidated Financial Statements, please refer to Note 1 of the Notes to Consolidated Financial Statements included in the Form 10-K.

Table of Contents

2. Revenue from Contracts with Customers

The following table summarizes customer contract revenues disaggregated by reportable segment and ~~the~~ source ~~of revenue for the three months ended June 27, 2020 and June 29, 2019~~ (in thousands):

Three Months Ended
June 27,
2020 June 29,
2019
Factory-built housing
     U.S. Housing and Urban Development code homes $ 189,446 $ 202,479
     Modular homes 20,783 19,407
     Park model RVs 13,722 12,861
     Other ⁽¹⁾
14,139 14,021
       Net revenue from factory-built housing 238,090 248,768
Financial services
     Insurance agency commissions received from third-party insurance companies 770 1,155
     Other ⁽²⁾
15,941 14,119
       Net revenue from financial services 16,711 15,274
Total Net revenue $ 254,801 $ 264,042

~~(1) Other factory-built housing revenue from ancillary products and services including used homes, freight and other services.~~

~~(2) Other financial services revenue includes consumer finance and insurance revenue that is not within the scope of ASU 2014-09,~~ ~~Revenue from Contracts with Customers ("Topic 606")~~.


	Three Months Ended
		July 3, 2021		June 27, 2020
Factory-built housing
U.S. Housing and Urban Development code homes		$	262,390	$	189,446
Modular homes		26,617		20,783
Park model RVs		9,671		13,722
Other		13,605		14,139
		312,283		238,090
Financial services
Insurance agency commissions received from third-party insurance companies		873		770
Other		17,266		15,941
		18,139		16,711
		$	330,422	$	254,801

3. Restricted Cash

Restricted cash consisted of the following (in thousands):


		June 27, 2020		March 28, 2020			July 3, 2021		April 3, 2021
Cash related to CountryPlace customer payments to be remitted to third parties	Cash related to CountryPlace customer payments to be remitted to third parties	$	18,739	$	12,740	Cash related to CountryPlace customer payments to be remitted to third parties	$	15,928	$	16,049
Other restricted cash	Other restricted cash	1,196		1,041		Other restricted cash	1,135		979
		$	19,935	$	13,781		17,063		17,028
Less current portion						Less current portion	(16,728)		(16,693)
							$	335	$	335

Corresponding amounts for customer payments to be remitted to third parties are recorded in Accounts ~~payable and Accrued expenses and other current liabilities for customer payments and deposits, respectively.~~payable.

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


		June 27, 2020		March 28, 2020		June 29, 2019		March 30, 2019			July 3, 2021		April 3, 2021
Cash and cash equivalents	Cash and cash equivalents	$	270,547	$	241,826	$	199,820	$	187,370	Cash and cash equivalents	$	329,753	$	322,279
Restricted cash, current		19,600		13,446		12,853		12,148
Restricted cash	Restricted cash	335		335		351		351		Restricted cash	17,063		17,028
Cash, cash equivalents and restricted cash per statement of cash flows		$	290,482	$	255,607	$	213,024	$	199,869
											$	346,816	$	339,307

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4. Investments

Investments consisted of the following (in thousands):


		June 27, 2020		March 28, 2020			July 3, 2021		April 3, 2021
Available-for-sale debt securities	Available-for-sale debt securities	$	13,975	$	14,774	Available-for-sale debt securities	$	17,962	$	14,946
Marketable equity securities	Marketable equity securities	11,611		9,829		Marketable equity securities	17,550		17,600
Non-marketable equity investments	Non-marketable equity investments	21,294		21,536		Non-marketable equity investments	22,429		21,960
		$	46,880	$	46,139		57,941		54,506
Less current portion						Less current portion	(19,749)		(19,496)
							$	38,192	$	35,010

~~The Company's investments~~Investments in marketable equity securities consist of investments in the common stock of industrial and other companies.

As of ~~June 27, 2020~~July 3, 2021 and ~~March 28, 2020,~~April 3, 2021, non-marketable equity investments included contributions of $15.0 million to equity-method investments in community-based initiatives that buy and sell ~~the Company's~~our homes and provide home-only financing to residents of certain manufactured home communities. Other non-marketable equity investments included investments in other distribution operations.

The Company records investments in fixed maturity securities classified as available-for-sale at fair value and records the difference between fair value and cost in Accumulated other comprehensive income.

~~Table of Contents~~

~~The~~ following tables summarize ~~the Company's~~our available-for-sale debt securities, gross unrealized gains and losses and fair value, aggregated by investment category (in thousands):


		June 27, 2020															July 3, 2021
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Residential mortgage-backed securities	Residential mortgage-backed securities	$	4,637	$	65	$	(31)	$	4,671	Residential mortgage-backed securities	$	2,609	$	26	$	(11)	$	2,624
State and political subdivision debt securities	State and political subdivision debt securities	4,426		155		—		4,581		State and political subdivision debt securities	8,265		109		(19)		8,355
Corporate debt securities	Corporate debt securities	4,713		24		(14)		4,723		Corporate debt securities	6,982		12		(11)		6,983
		$	13,776	$	244	$	(45)	$	13,975		$	17,856	$	147	$	(41)	$	17,962


		March 28, 2020															April 3, 2021
		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value			Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Residential mortgage-backed securities	Residential mortgage-backed securities	$	5,400	$	69	$	(26)	$	5,443	Residential mortgage-backed securities	$	2,787	$	30	$	(13)	$	2,804
State and political subdivision debt securities	State and political subdivision debt securities	4,239		134		(3)		4,370		State and political subdivision debt securities	7,239		125		(19)		7,345
Corporate debt securities	Corporate debt securities	5,021		5		(65)		4,961		Corporate debt securities	4,797		11		(11)		4,797

		$	14,660	$	208	$	(94)	$	14,774		$	14,823	$	166	$	(43)	$	14,946

The following tables show gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities had been in a continuous unrealized loss position (in thousands):

June 27, 2020
Less than 12 Months 12 Months or Longer Total
Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses
Residential mortgage-backed securities $ 721 $ (11) $ 951 $ (20) $ 1,672 $ (31)
State and political subdivision debt securities 300 — — — 300 —
Corporate debt securities 787 (14) — — 787 (14)
$ 1,808 $ (25) $ 951 $ (20) $ 2,759 $ (45)

March 28, 2020
Less than 12 Months 12 Months or Longer Total
Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses Fair
Value Unrealized
Losses
Residential mortgage-backed securities $ 133 $ — $ 1,779 $ (26) $ 1,912 $ (26)
State and political subdivision debt securities 601 (2) 101 (1) 702 (3)
Corporate debt securities 3,747 (65) — — 3,747 (65)
$ 4,481 $ (67) $ 1,880 $ (27) $ 6,361 $ (94)

~~Table of Contents~~

~~The Company is~~We are not aware of any changes to the securities or issuers that would indicate the losses above are indicative of credit impairment as of ~~June 27, 2020, and the Company does~~July 3, 2021. Further, we do not intend to sell the investments, and it is ~~not~~ more likely than not that ~~the Company~~we will not be required to sell the investments, before recovery of their amortized ~~cost base.~~cost.

Table of Contents

The amortized cost and fair value of ~~the Company's~~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.


		June 27, 2020							July 3, 2021
		Amortized Cost		Fair Value			Amortized Cost		Fair Value
Due in less than one year	Due in less than one year	$	4,414	$	4,431	Due in less than one year	$	1,518	$	1,519
Due after one year through five years	Due after one year through five years	2,376		2,389		Due after one year through five years	11,033		11,028
Due after five years through ten years	Due after five years through ten years	773		840		Due after five years through ten years	1,391		1,450
Due after ten years	Due after ten years	1,576		1,644		Due after ten years	1,305		1,341
Mortgage-backed securities	Mortgage-backed securities	4,637		4,671		Mortgage-backed securities	2,609		2,624
		$	13,776	$	13,975		$	17,856	$	17,962

~~The Company recognizes investment gains and losses on available-for-sale debt securities when it sells or otherwise disposes of securities using the specific identification method.~~ There were 0 gross gains or losses realized on the sale of available-for-sale debt securities during ~~the~~the three months ended July 3, 2021 or June 27, ~~2020 or June 29, 2019.~~2020.

The Company recognizes 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. Net investment gains and losses on marketable equity securities ~~for the three months ended June 27, 2020 and June 29, 2019~~ were as follows (in thousands):

Three Months Ended
June 27,
2020 June 29,
2019
Marketable equity securities:
      Net gains on securities held $ 1,997 $ 952
      Net gains (losses) on securities sold 33 (1)
      Total net gain on marketable equity securities $ 2,030 $ 951


	Three Months Ended
		July 3, 2021		June 27, 2020
Marketable equity securities
Net gain recognized during the period		$	1,696	$	2,030
Less: Net gains recognized on securities sold during the period		(136)		(33)
Unrealized gains recognized during the period on securities still held		$	1,560	$	1,997

5. Inventories

Inventories consisted of the following (in thousands):


		June 27, 2020		March 28, 2020			July 3, 2021		April 3, 2021
Raw materials	Raw materials	$	35,552	$	35,691	Raw materials	$	69,123	$	54,336
Work in process	Work in process	13,120		13,953		Work in process	20,426		19,149
Finished goods	Finished goods	57,724		63,891		Finished goods	61,368		57,749
		$	106,396	$	113,535		$	150,917	$	131,234

Table of Contents

6. Consumer Loans Receivable

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

June 27,
2020 March 28,
2020
Loans held for investment (at Acquisition Date, defined below) $ 37,650 $ 37,779
Loans held for investment (originated after Acquisition Date) 19,917 20,140
Loans held for sale 25,297 14,671
Construction advances 12,240 13,400
Consumer loans receivable 95,104 85,990
Deferred financing fees and other, net (2,133) (1,919)
Allowance for loan losses (4,012) (1,767)
$ 88,959 $ 82,304

The Company acquired consumer loans receivable as part of its acquisition of Palm Harbor Homes, Inc. in April 2011 ("Acquisition Date"). The allowance for loan losses is developed at the loan level and allocated to specific individual loans or to impaired loans. A range of probable losses is calculated after giving consideration to, among other things, the loan characteristics and historical loss experience. The Company then makes a determination of the best estimate within the range of loan losses. The allowance for loan losses reflects the Company's judgment of the probable loss exposure on its loans held for investment portfolio. On March 29, 2020, the Company adopted ASU 2016-13 using the prospective transition approach for acquired consumer loans receivable assets that were previously accounted for under ASC 310-30. The Company determined that $1.7 millionof the existing purchase discount for such consumer loans was related to credit factors and was reclassified to the allowance for loan loss upon adoption. The remaining discount on the acquired consumer loans was determined to be related to non-credit factors and will be accredited into interest income over the life of the loans.


	July 3, 2021		April 3, 2021
Loans held for investment, previously securitized	$	30,384	$	31,949
Loans held for investment	17,565		18,690
Loans held for sale	13,542		15,587
Construction advances	10,479		13,801
	71,970		80,027
Deferred financing fees and other, net	(1,528)		(2,041)
Allowance for loan losses	(2,918)		(3,188)
	67,524		74,798
Less current portion	(32,429)		(37,690)
	$	35,095	$	37,108

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


		Three Months Ended					Three Months Ended
		June 27, 2020		June 29, 2019			July 3, 2021		June 27, 2020
Allowance for loan losses at beginning of period	Allowance for loan losses at beginning of period	$	1,767	$	415	Allowance for loan losses at beginning of period	$	3,188	$	1,767
Impact of adoption of ASU 2016-13		2,276		—
Provision for loan losses		161		6
Impact of adoption of Financial Accounting Standards Board's Accounting Standards Update 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13")						Impact of adoption of Financial Accounting Standards Board's Accounting Standards Update 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13")	0		2,276
Change in estimated loan losses, net						Change in estimated loan losses, net	(267)		161
Charge-offs	Charge-offs	(192)		—		Charge-offs	(3)		(192)
Recoveries		—		—
Allowance for loan losses at end of period	Allowance for loan losses at end of period	$	4,012	$	421	Allowance for loan losses at end of period	$	2,918	$	4,012

The consumer loans held for investment had the following characteristics:

June 27,
2020 March 28,
2020
Weighted average contractual interest rate 8.4 % 8.4 %
Weighted average effective interest rate 9.2 % 9.3 %
Weighted average months to maturity 164 164

The Company's policy is to place loans on non-accrual status when interest is past due and remains unpaid 90 days or more or when there is a clear indication that the borrower is unable or unwilling to make payments as they become due. The Company will resume accrual of interest once these factors have been remedied. Payments received on non-accrual loans are recorded on a cash basis, first to interest and then to principal. Charge-offs occur when it becomes probable that outstanding amounts will not be recovered.

~~Table of Contents~~


	July 3, 2021		April 3, 2021
Weighted average contractual interest rate	8.2	%	8.3	%
Weighted average effective interest rate	8.8	%	9.3	%
Weighted average months to maturity	160		162

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


		June 27, 2020		March 28, 2020			July 3, 2021		April 3, 2021
Current	Current	$	92,390	$	83,861	Current	$	68,258	$	76,378
31-to-60 days		751		547
61-to-90 days		258		307
31 to 60 days						31 to 60 days	192		508
61 to 90 days						61 to 90 days	3,112		21
91+ days	91+ days	1,705		1,275		91+ days	408		3,120
		$	95,104	$	85,990		$	71,970	$	80,027

Table of Contents

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


		June 27, 2020																													July 3, 2021
		2021		2020		2019		2018		2017		Prior		Total		March 28, 2020			2022		2021		2020		2019		2018		Prior		Total
Prime- FICO score 680 and greater	Prime- FICO score 680 and greater	$	10,464	$	14,349	$	2,761	$	1,693	$	2,105	$	27,404	$	58,776	$	55,513	Prime- FICO score 680 and greater	$	5,068	$	10,500	$	2,970	$	1,578	$	770	$	24,028	$	44,914
Near Prime- FICO score 620-679	Near Prime- FICO score 620-679	6,522		10,390		2,300		1,263		667		11,677		32,819		27,767		Near Prime- FICO score 620-679	2,312		6,528		2,159		1,676		1,360		10,353		24,388
Sub-Prime- FICO score less than 620	Sub-Prime- FICO score less than 620	78		90		—		—		86		2,042		2,296		2,142		Sub-Prime- FICO score less than 620	0		260		53		0		0		1,605		1,918
No FICO score	No FICO score	637		21		29		—		—		526		1,213		568		No FICO score	150		149		0		27		0		424		750
		$	17,701	$	24,850	$	5,090	$	2,956	$	2,858	$	41,649	$	95,104	$	85,990		$	7,530	$	17,437	$	5,182	$	3,281	$	2,130	$	36,410	$	71,970


	April 3, 2021
	2021		2020		2019		2018		2017		Prior		Total
Prime- FICO score 680 and greater	$	18,250	$	3,575	$	1,718	$	971	$	1,959	$	23,375	$	49,848
Near Prime- FICO score 620-679	10,227		2,744		1,794		1,364		500		10,401		27,030
Sub-Prime- FICO score less than 620	348		53		0		0		84		1,579		2,064
No FICO score	576		0		28		0		0		481		1,085
	$	29,401	$	6,372	$	3,540	$	2,335	$	2,543	$	35,836	$	80,027

Loan contracts secured by geographically concentrated collateral could experience higher rates of delinquencies, default and foreclosure losses than loan contracts secured by collateral that is more geographically dispersed. As of ~~June 27, 2020~~July 3, 2021 and April 3, 2021, ~~36% of the outstanding principal balance of consumer loans receivable portfolio was concentrated in Texas and 17% was concentrated in Florida. As of March 28, 2020, 36%~~35% of the outstanding principal balance of the consumer loans receivable portfolio was concentrated in Texas and ~~16%~~20% was concentrated in Florida. Other than Texas and Florida, no ~~state~~state had concentrations in excess of 10% of the principal balance of the consumer loans receivable as of ~~June 27, 2020~~July 3, 2021 or ~~March 28, 2020.~~April 3, 2021.

Collateral for repossessed loans is acquired through foreclosure or similar proceedings and is recorded at the estimated fair value of the home, less the costs to sell. At repossession, the fair value of the collateral is determined based on the historical recovery rates of previously charged-off loans; the loan is charged off and the loss is recorded to the allowance for loan losses. 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 ~~$842,000~~$493,000 and ~~$1.5 million~~$518,000 as of ~~June 27, 2020~~July 3, 2021 and ~~March 28, 2020,~~April 3, 2021, respectively, and are included in Prepaid expenses and other current assets in the Consolidated Balance Sheets. Foreclosure or similar proceedings in progress totaled approximately ~~$674,000~~$1.0 million and ~~$560,000~~$1.1 million as of ~~June 27, 2020~~July 3, 2021 and ~~March 28, 2020,~~April 3, 2021, respectively.

7. Commercial Loans Receivable

The ~~Company's~~ commercial loans receivable balance consists of ~~two classes: (i)~~ direct financing arrangements for the home product needs of ~~the Company's~~our independent distributors, ~~communities~~community owners and ~~developers;~~developers and ~~(ii)~~ amounts loaned by ~~the Company~~us under participation financing programs.

Under the terms of the direct programs, the Company provides funds for financed home purchases by independent distributors, communities and developers. The notes are secured by the homes as collateral and, in some instances, other security. Other terms of direct arrangements vary, depending on the needs of the borrower and the opportunity for the Company.

~~Table of Contents~~

Under the terms of the participation programs, the Company provides loans to independent floor plan lenders, representing a significant portion of the funds that such financiers then lend to distributors to finance their inventory purchases. The participation commercial loans receivables are unsecured general obligations of the independent floor plan lenders.

Commercial loans receivable, net consisted of the following ~~by class of financing notes receivable~~ (in thousands):


		June 27, 2020		March 28, 2020			July 3, 2021		April 3, 2021
Direct loans receivable		$	44,915	$	47,058
Participation loans receivable		166		144
Loans receivable						Loans receivable	$	45,620	$	45,377
Allowance for loan losses	Allowance for loan losses	(828)		(393)		Allowance for loan losses	(785)		(816)
Deferred financing fees, net	Deferred financing fees, net	(244)		(244)		Deferred financing fees, net	(247)		(247)
		$	44,009	$	46,565		44,588		44,314
Less current portion of commercial loans receivable (including from affiliates), net						Less current portion of commercial loans receivable (including from affiliates), net	(18,613)		(19,232)
							$	25,975	$	25,082

Table of Contents

The commercial loans receivable balance had the following characteristics:

June 27,
2020 March 28,
2020
Weighted average contractual interest rate 5.3 % 5.7 %
Weighted average months to maturity 11 10

The risk of loss is spread over numerous borrowers. Borrower activity is monitored on a regular basis and contractual arrangements are in place to provide adequate loss mitigation in the event of a default. The Company has historically been able to sell repossessed homes, thereby mitigating loss exposure. If a default occurs and collateral is lost, the Company is exposed to loss of the full value of the home loan. The Company evaluates the potential for loss from its commercial loan programs based on the borrower's risk rating, overall financial stability, historical experience and estimates of other economic factors. The Company has included considerations related to the COVID-19 pandemic when assessing its risk of loan loss and setting reserve amounts for its commercial finance portfolio as of June 27, 2020.


	July 3, 2021		April 3, 2021
Weighted average contractual interest rate	6.0	%	6.4	%
Weighted average months to maturity	10		11

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


		Three Months Ended					Three Months Ended
		June 27, 2020		June 29, 2019			July 3, 2021		June 27, 2020
Balance at beginning of period	Balance at beginning of period	$	393	$	180	Balance at beginning of period	$	816	$	393
Impact of adoption of ASU 2016-13	Impact of adoption of ASU 2016-13	435		—		Impact of adoption of ASU 2016-13	0		435
Change in estimated loan losses, net	Change in estimated loan losses, net	—		11		Change in estimated loan losses, net	(31)		0
Loans charged off, net of recoveries		—		—
Balance at end of period	Balance at end of period	$	828	$	191	Balance at end of period	$	785	$	828

~~Table~~As of ~~Contents~~

July 3, 2021 and April 3, 2021, there were 0 commercial loans considered watch list or nonperforming. The following table disaggregates ~~the Company's~~our commercial loans receivable by ~~credit quality indicator and~~ fiscal year of origination (in thousands):

June 27, 2020
2021 2020 2019 2018 2017 Total March 28,
2020
Risk profile based on payment activity:
Performing $ 13,074 $ 18,359 $ 9,370 $ 2,534 $ 1,619 $ 44,956 $ 47,016
Watch list — — 125 — — 125 186
Nonperforming — — — — — — —
$ 13,074 $ 18,359 $ 9,495 $ 2,534 $ 1,619 $ 45,081 $ 47,202


	July 3, 2021
	2022		2021		2020		2019		2018		Prior		Total
Performing	$	15,150	$	19,119	$	5,973	$	2,689	$	1,743	$	946	$	45,620

Loans are subject to regular review and are given management's attention whenever a problem situation appears to be developing. Loans with indicators of potential performance problems are placed on watch list status and are subject to additional monitoring and scrutiny. Nonperforming status includes loans accounted for on a non-accrual basis and accruing loans with principal payments 90 days or more past due. The Company's policy is to place loans on non-accrual status when interest is past due and remains unpaid 90 days or more or when there is a clear indication that the borrower is unable or unwilling to make payments as they become due. The Company will resume accrual of interest once these factors have been remedied.


	April 3, 2021
	2021		2020		2019		2018		2017		Prior		Total
Performing	$	30,627	$	8,677	$	3,206	$	1,864	$	1,003	$	0	$	45,377

At ~~June 27, 2020,~~July 3, 2021, there were no0 commercial loans 90 days or more past due that were still accruing ~~interest. Payments received on non-accrual loans are recorded on a cash basis, first to~~ interest and ~~then to principal. At June 27, 2020, the Company was~~we were not aware of any potential problem loans that would have a material effect on the commercial loans receivable balance. ~~Charge-offs occur when it becomes probable that outstanding amounts will not be recovered.~~

As of ~~June 27, 2020 and March 28, 2020, 10.0% and 11.0%, respectively,~~July 3, 2021, 14% of ~~the Company's~~our outstanding commercial loans receivable principal balance was concentrated in Arizona and 13% was concentrated in California. ~~Other than California, no~~As of April 3, 2021, 13% of our outstanding commercial loans receivable principal balance was concentrated in Arizona. No other state had concentrations in excess of 10% of the principal balance of the consumer loans receivable as of ~~June 27, 2020~~July 3, 2021 or ~~March 28, 2020.~~April 3, 2021.

~~The Company~~We had concentrations with one independent third-party and its affiliates that equaled ~~19.8% and 21.0%~~18% of the net commercial loans ~~receivables~~receivable principal balance outstanding, all of which was secured, as of ~~June 27, 2020~~July 3, 2021 and ~~March 28, 2020 respectively. T~~April 3, 2021.

~~he risks created by these concentrations have been considered in the determination~~Table of ~~the adequacy of the allowance for loan loss.~~Contents

8. Property, Plant and Equipment, net

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


		June 27, 2020		March 28, 2020			July 3, 2021		April 3, 2021
Property, plant and equipment, at cost:
Property, plant and equipment, at cost						Property, plant and equipment, at cost
Land	Land	$	26,827	$	26,827	Land	$	28,314	$	28,314
Buildings and improvements	Buildings and improvements	52,820		52,011		Buildings and improvements	73,415		71,827
Machinery and equipment	Machinery and equipment	31,369		30,984		Machinery and equipment	35,075		34,146
		111,016		109,822			136,804		134,287
Accumulated depreciation	Accumulated depreciation	(33,690)		(32,632)		Accumulated depreciation	(38,823)		(37,493)
		$	77,326	$	77,190		$	97,981	$	96,794

Depreciation expense was $1.4 million ~~and $1.2 million~~ for each of the three ~~months~~month periods ended July 3, 2021 and June 27, ~~2020 and June 29, 2019, respectively.~~

~~Included in the amounts above are certain assets under finance leases. See Note 9 for additional information.~~

~~Table of Contents~~

~~9. Leases~~

The Company leases certain production and retail locations, office space and equipment. The Company determines if a contract or arrangement is, or contains, a lease at inception. Lease agreements with an initial term of 12 months or less are not recorded on the Consolidated Balance Sheet. Certain lease agreements include one or more options to renew, with renewal terms that can extend the lease term by one to three years or more. Generally, the exercise of lease renewal options is at the Company's discretion. Some agreements also include options to purchase the leased property. The estimated life of assets and leasehold improvements is limited by the expected lease term, unless there is a transfer of title or purchase option that the Company is reasonably certain to exercise.

The following table provides information about the financial statement classification of the Company's lease balances reported within the Consolidated Balance Sheets as of June 27, 2020 and March 28, 2020 (in thousands):

Classification June 27,
2020 March 28,
2020
ROU assets
Operating lease assets Operating lease right-of-use assets $ 18,378 $ 13,894
Finance lease assets
Property, plant and equipment, net ⁽¹⁾
1,015 1,025
Total lease assets $ 19,393 $ 14,919
Lease Liabilities
Current:
   Operating lease liabilities Accrued expenses and other current liabilities $ 4,097 $ 4,170
   Finance lease liabilities Current portion of secured credit facilities and other 74 77
Non-current:
   Operating lease liabilities Operating lease liabilities 15,398 10,743
   Finance lease liabilities Secured credit facilities and other 275 289
Total lease liabilities $ 19,844 $ 15,279

~~(1) Recorded net of accumulated amortization of $113,000 and $103,000 as of June 27, 2020 and March 28, 2020, respectively.~~

~~The balance increased from a five-year lease extension at one of our active manufacturing facilities.~~

~~The present value of the minimum payments for future fiscal years under non-cancelable leases as of June 27, 2020 were as follows (in thousands):~~

Operating Leases Finance Leases Total
Remainder of 2021 $ 3,189 $ 58 $ 3,247
2022 4,148 73 4,221
2023 3,814 73 3,887
2024 3,480 73 3,553
2025 2,706 73 2,779
Thereafter 5,005 49 5,054
Total lease payments 22,342 399 22,741
Less: Amount representing interest (2,847) (50) (2,897)
Present value of lease liabilities $ 19,495 $ 349 $ 19,844

~~Table of Contents~~

~~The following table provides information about the weighted average remaining lease terms and weighted average discount rates as of June 27, 2020:~~

Remaining Lease Term (Years) Discount Rate
Operating leases 5.8 4.5 %
Finance leases 5.3 5.0 %
2020.

~~10.~~9. Goodwill and Other Intangibles

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


		June 27, 2020										March 28, 2020											July 3, 2021				April 3, 2021
		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount			Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Indefinite-lived:
Indefinite-lived														Indefinite-lived
Goodwill	Goodwill	$	75,090	$	—	$	75,090	$	75,090	$	—	$	75,090	Goodwill	$	75,090	$	—	$	75,090	$	75,090	$	—	$	75,090
Trademarks and trade names	Trademarks and trade names	8,900		—		8,900		8,900		—		8,900		Trademarks and trade names	8,900		—		8,900		8,900		—		8,900
State insurance licenses	State insurance licenses	1,100		—		1,100		1,100		—		1,100		State insurance licenses	1,100		—		1,100		1,100		—		1,100
Total indefinite-lived intangible assets		85,090		—		85,090		85,090		—		85,090
Finite-lived:
															85,090		—		85,090		85,090		—		85,090
Finite-lived														Finite-lived
Customer relationships	Customer relationships	11,300		(6,622)		4,678		11,300		(6,463)		4,837		Customer relationships	11,300		(7,255)		4,045		11,300		(7,097)		4,203
Other	Other	1,424		(1,179)		245		1,424		(1,151)		273		Other	1,424		(1,279)		145		1,424		(1,264)		160
		$	97,814	$	(7,801)	$	90,013	$	97,814	$	(7,614)	$	90,200		$	97,814	$	(8,534)	$	89,280	$	97,814	$	(8,361)	$	89,453

Amortization expense recognized on intangible assets was ~~$187,000~~$173,000 and ~~$80,000~~$187,000 for the three months ~~ending~~ended July 3, 2021 and June 27, 2020, ~~and June 29, 2019,~~ respectively.

~~11.~~

Table of Contents

10. Accrued Expenses and Other Current Liabilities

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

June 27,
2020 March 28,
2020
Salaries, wages and benefits $ 23,958 $ 25,885
Customer deposits 22,090 22,055
Unearned insurance premiums 21,710 20,614
Estimated warranties 18,538 18,678
Accrued volume rebates 10,155 9,801
Company repurchase options on certain loans sold 8,714 7,444
Insurance loss reserves 6,730 5,582
Accrued self-insurance 5,273 5,112
Operating lease liabilities 4,097 4,170
Reserve for repurchase commitments 2,475 2,679
Accrued taxes 2,385 1,908
Other 16,068 16,002
$ 142,193 $ 139,930


	July 3, 2021		April 3, 2021
Customer deposits	$	48,989	$	41,835
Salaries, wages and benefits	37,176		37,737
Unearned insurance premiums	24,125		22,643
Company repurchase options on certain loans sold	19,432		25,938
Estimated warranties	19,344		18,032
Accrued volume rebates	14,097		12,132





Other	47,027		44,816
	$	210,190	$	203,133

~~Table of Contents~~

~~12.~~11. Warranties

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


		Three Months Ended					Three Months Ended
		June 27, 2020		June 29, 2019			July 3, 2021		June 27, 2020
Balance at beginning of period	Balance at beginning of period	$	18,678	$	17,069	Balance at beginning of period	$	18,032	$	18,678

Charged to costs and expenses	Charged to costs and expenses	6,347		7,821		Charged to costs and expenses	9,125		6,347
Payments and deductions	Payments and deductions	(6,487)		(7,130)		Payments and deductions	(7,813)		(6,487)
Balance at end of period	Balance at end of period	$	18,538	$	17,760	Balance at end of period	$	19,344	$	18,538

~~13.~~12. Debt and Finance Lease Obligations

Debt and finance lease obligations primarily ~~consisted~~consist of secured ~~credit facilities~~financings at ~~the Company's~~our finance subsidiary and lease obligations infor which it is expected that ~~the Company~~we will obtain ownership of athe leased ~~asset~~assets at the end of the lease term. The following table summarizes debt and finance lease obligations (in thousands):

June 27,
2020 March 28,
2020
Secured credit facilities $ 10,178 $ 10,474
Other secured financings 3,985 4,113
Finance lease liabilities 349 366
$ 14,512 $ 14,953


	July 3, 2021		April 3, 2021
Secured term loan	$	7,980	$	8,210
Other secured financings	3,473		3,672
Finance lease obligations	296		304
	11,749		12,186
Less current portion	(1,822)		(1,851)
	$	9,927	$	10,335

~~The Company's finance subsidiary~~We entered into secured credit facilities with independent third-party banks ~~with draw periods from one to fifteen months and maturity dates of ten years after the expiration of the draw periods, which have now expired. The proceeds were used by the Company~~ to originate and hold consumer home-only loans secured by manufactured homes, which ~~are~~were pledged as collateral to the facilities. ~~Upon completion of the draw down periods, the~~Those facilities ~~were~~have since been converted into an amortizing loan with maturity dates starting in 2028 and payments based on a ~~20-year~~20 or 25-year amortization period, ~~with~~resulting in a balloon payment due upon maturity. The ~~maximum advance for loans under this program was 80% of the outstanding collateral principal balance, with the Company providing the remaining funds. As of June 27, 2020, the~~ outstanding balance of the converted loans was ~~$10.2~~$8.0 million atas of July 3, 2021 and $8.2 million as of April 3, 2021 with a weighted average interest rate of ~~4.91%~~4.9%.

~~See Note 9 for further discussion~~

Table of ~~the finance lease obligations.~~Contents

13. Reinsurance and Insurance Loss Reserves

~~14. Reinsurance~~

~~Standard Casualty is primarily a specialty writer of manufactured home physical damage insurance.~~ Certain of Standard Casualty's premiums and benefits are assumed from and ceded to other insurance companies under various reinsurance agreements. ~~The ceded reinsurance agreements provide Standard Casualty with increased capacity to write larger risks and maintain its exposure to loss within its capital resources. Standard Casualty remains~~We remain obligated for amounts ceded in the event that the reinsurers do not meet their obligations. ~~Substantially all of Standard Casualty's assumed reinsurance is with one entity.~~

~~Table of Contents~~

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


		Three Months Ended															Three Months Ended
		June 27, 2020						June 29, 2019							July 3, 2021				June 27, 2020
		Written		Earned		Written		Earned			Written		Earned		Written		Earned
Direct premiums	Direct premiums	$	5,765	$	5,185	$	5,033	$	4,570	Direct premiums	$	6,839	$	5,996	$	5,765	$	5,185
Assumed premiums—nonaffiliated	Assumed premiums—nonaffiliated	7,653		6,790		7,513		6,435		Assumed premiums—nonaffiliated	8,574		7,378		7,653		6,790
Ceded premiums—nonaffiliated	Ceded premiums—nonaffiliated	(3,202)		(3,202)		(2,987)		(2,987)		Ceded premiums—nonaffiliated	(3,647)		(3,647)		(3,202)		(3,202)
Net premiums		$	10,216	$	8,773	$	9,559	$	8,018
											$	11,766	$	9,727	$	10,216	$	8,773

Typical insurance policies written or assumed ~~by Standard Casualty~~ have a maximum coverage of $300,000 per claim, of which ~~Standard Casualty cedes $175,000~~we cede $150,000 of the risk of loss per reinsurance. Therefore, ~~Standard Casualty's~~our risk of loss is limited to ~~$125,000~~$150,000 per claim on typical policies, subject to the reinsurers meeting their obligations. After this limit, amounts are recoverable ~~by Standard Casualty~~ through reinsurance for catastrophic losses in excess of ~~$1.5~~$2 million per occurrence, up to a maximum of ~~$43.5~~$55 million in the ~~aggregate.~~aggregate for that occurrence.

~~Purchasing reinsurance contracts protects~~ Standard Casualty ~~from frequency and/or severity~~establishes reserves for claims and claims expense on reported and unreported claims of ~~losses incurred on insurance policies issued, such as~~non-reinsured losses. The following details the activity in the case of a catastrophe that generates a large number of serious claims on multiple policies at the same time. Under these agreements, the Company may be required to repurchase and reestablish its reinsurance contracts reserve for the ~~remainder of the year to the extent that they have been utilized.~~

~~The Company has reinsurance reinstatement premium protection coverage, which will assist in reducing premium repurchase expense in the event of a catastrophic weather claim.~~three months ended July 3, 2021 and June 27, 2020 (in thousands):


	Three Months Ended
	July 3, 2021		June 27, 2020
Balance at beginning of period	$	7,451	$	5,582
Net incurred losses during the year	7,975		5,982
Net claim payments during the year	(7,078)		(4,834)
Balance at end of period	$	8,348	$	6,730

~~15. Income Taxes~~

Our tax provision for interim periods is determined by estimating an annual effective tax rate, adjusted for discrete items arising in the fiscal quarters. Each quarter we update the annual effective tax rate and record a year to date adjustment to the tax provision.

Income taxes totaled $5.0 million in the first quarter of fiscal 2021, a 23.1% reported effective tax rate compared to $6.1 million in the first quarter of fiscal 2020, a 22.2% effective tax rate. The higher effective tax rate in the current quarter was primarily from lower tax benefits from the exercise of stock options compared to the same period last year.

~~16.~~14. Commitments and Contingencies

Repurchase Contingencies. ~~The Company is~~We are contingently liable under terms of repurchase agreements with financial institutions providing inventory financing ~~for~~to independent distributors of ~~its~~our products. These arrangements, which are customary in the industry, provide for the repurchase of products sold to distributors in the event of default by the distributor. The risk of loss under these agreements is spread over numerous distributors. The price the Company is obligated to pay generally declines over the period of the agreement (generally 18 to 36 months, calculated from the date of sale to the distributor) and the risk of loss is further reduced by the resale value of the repurchased homes.

The maximum amount for which ~~the Company was~~we were liable under such agreements approximated ~~$78.8~~$80.9 million and ~~$79.3~~$74.2 million at ~~June 27, 2020~~July 3, 2021 and ~~March 28, 2020,~~April 3, 2021, respectively, without reduction for the resale value of the ~~homes. The Company applies ASC 460,~~homes that are repurchased. We ~~Guarantees~~ ~~("ASC 460"), and ASC 450-20,~~ ~~Loss Contingencies~~ ("ASC 450-20"), to account for its liability for repurchase commitments. Under the provisions of ASC 460, during the period in which a home is sold (inception of the purchase commitment), the Company records the greater of the estimated value of the non-contingent obligation (accounted for pursuant to ASC 460) or a contingent liability for each repurchase arrangement (accounted for under the provisions of ASC 450-20) as a liability. ~~The Company~~ had a reserve for repurchase commitments of ~~$2.5 million and $2.7~~$2.3 million at ~~June 27, 2020~~July 3, 2021 and ~~March 28, 2020, respectively.~~

~~Table of Contents~~

~~Letter of Credit.~~ To secure certain reinsurance contracts, Standard Casualty maintains an irrevocable letter of credit of $11.0 million to provide assurance that Standard Casualty will fulfill its reinsurance obligations. This letter of credit is secured by certain of Standard Casualty's investments. There were no amounts outstanding against the letter of credit at either June 27, 2020 or March 28, 2020.April 3, 2021.

Construction-Period Mortgages. ~~CountryPlace funds~~We fund construction-period mortgages through periodic advances during home construction. At the time of initial funding, ~~CountryPlace commits~~we commit to fully fund the loan contract in accordance with a predetermined schedule. Subsequent advances are contingent upon the performance of contractual obligations by the seller of the home and the borrower. Cumulative advances on construction-period mortgages are carried on the Consolidated Balance Sheets at the amount advanced less a valuation allowance, and are included in Consumer loans receivable, net. The total loan contract amount, less cumulative advances, represents an off-balance sheet contingent commitment ~~of CountryPlace~~ to fund future advances.

Table of Contents

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


		June 27, 2020		March 28, 2020			July 3, 2021		April 3, 2021
Construction loan contract amount	Construction loan contract amount	$	31,376	$	31,136	Construction loan contract amount	$	28,204	$	37,628
Cumulative advances	Cumulative advances	(12,240)		(13,400)		Cumulative advances	(10,479)		(13,801)
Remaining construction contingent commitment		$	19,136	$	17,736
							$	17,725	$	23,827

Representations and Warranties of Mortgages Sold. ~~CountryPlace sells~~ We sell loans to Government-Sponsored Enterprises ("GSEs") and whole-loan purchasers and ~~finances~~finance certain loans with long-term credit facilities secured by the respective loans. In connection with these activities, ~~CountryPlace provides~~we provide to ~~the~~ GSEs and whole-loan purchasers and lenders representations and warranties related to the loans sold or financed. ~~These representations and warranties generally relate to the ownership of the loan, the validity of the lien securing the loan,~~ the loan's compliance with the criteria for inclusion in the sale transactions, including compliance with underwriting standards or loan criteria established by the buyer, and CountryPlace's ability to deliver documentation in compliance with applicable laws. Generally, representations and warranties may be enforced at any time over the life of the loan. Upon a breach of a representation, ~~CountryPlace~~we may be required to ~~repurchase~~repurchase the loan or to indemnify a party for incurred losses. Repurchase demands and claims for indemnification payments are reviewed on a loan-by-loan basis to validate if there has been a breach requiring repurchase. CountryPlace manages the risk of repurchase through underwriting and quality assurance practices and by servicing the mortgage loans to investor standards. The Company maintainsWe maintain a reserve for these contingent repurchase and indemnification ~~obligations.~~obligations. This reserve of ~~$1.1~~$1.3 million as of ~~June 27, 2020~~July 3, 2021 and ~~$1.0~~$1.2 million as of ~~March 28, 2020,~~April 3, 2021, included in Accrued expenses and other current liabilities, reflects management's estimate of probable loss. CountryPlace considers a variety of assumptions, including borrower performance (both actual and estimated future defaults), historical repurchase demands and loan default rates to estimate the liability for loan repurchases and indemnifications. During the three months ended June 27, 2020, noThere were 0 claim ~~request~~requests that resulted in the execution of an indemnification agreement or in the repurchase of a ~~loan.~~loan during the three months ended July 3, 2021.

Interest Rate Lock Commitments. In originating loans for sale, ~~CountryPlace issues~~we issue interest rate lock commitments ("IRLCs") to prospective borrowers. These IRLCs ~~represent an agreement to extend credit to a loan applicant, whereby the interest rate on the loan is set prior to loan closing or sale. These IRLCs~~ bind ~~the Company~~us to fund the approved loan at the specified rate regardless of whether interest rates or market prices for similar loans have changed between the commitment date and the closing date. As ~~such, outstanding IRLCs are subject to interest rate risk and related loan sale price risk during the period from the date~~ of the IRLC through the earlier of the loan sale date or IRLC expiration date. The loan commitments generally range between 30 and 180 days; however, borrowers are not obligated to close the related loans. As a result, the Company is subject to fallout risk related to IRLCs, which is realized if approved borrowers choose not to close on the loans within the terms of the IRLCs unless the commitment is successfully paired with another loan that may mitigate losses from fallout.

~~Table of Contents~~

~~As of June 27, 2020, CountryPlace~~July 3, 2021, we had outstanding IRLCs with a notional amount of ~~$27.0~~$32.1 million ~~which are recorded at fair value in accordance with ASC 815,~~ ~~Derivatives~~ and ~~Hedging~~ ~~("ASC 815"). ASC 815 clarifies that the expected net future cash flows related to the associated servicing~~recognized a gain of ~~a loan should be included~~ $47,000 in the ~~measurement~~2022first quarter and a loss of ~~all written loan commitments that are accounted for at fair value through earnings. The estimated fair value of IRLCs is recorded in Prepaid expenses and other current assets~~$125,000 in the Consolidated Balance Sheets. The fair value of IRLCs is based on the value of the underlying loan adjusted for: (1) estimated cost to complete and originate the loan and (2) the estimated percentage of IRLCs that will result in closed loans. The initial and subsequent changes in the value of IRLCs are a component of gain (loss) on loans held for sale. During the three months ended June 27, 2020 and June 29, 2019, the Company recognized losses of $125,000 and $1,0002021, ~~respectively, on outstanding IRLCs.~~first quarter.

Forward Sales Commitments. ~~CountryPlace manages~~We manage the risk profiles of a portion of ~~its~~the outstanding IRLCs and mortgage loans held for sale by entering into forward sales of mortgage-backed securities ("MBS") and whole loan sale ~~commitments.~~commitments (collectively "Commitments"). As of ~~June 27, 2020, CountryPlace~~July 3, 2021, we had ~~$60.8~~$42.9 million in outstanding ~~notional forward sales~~Commitments and recognized a non-cash loss of MBSs and forward sales commitments. Commitments for forward sales of whole loans are typically in an amount proportionate with the amount of IRLCs expected to close in particular time frames, assuming no change in mortgage interest rates, for the respective loan products intended for whole loan sale.

~~The estimated fair values of forward sales of MBS and forward sale commitments are based on quoted market values and are recorded within Prepaid expenses and other current assets~~$347,000 in the ~~Consolidated Balance Sheets. During the three months ended June 27, 2020~~2022first quarter and ~~June 29, 2019, the Company recognized gains~~gain of $1.0 million ~~and $35,000~~in the 2021 ~~on forward sales and whole loan sale commitments, respectively.~~first quarter.

Legal Matters.Since 2018, ~~the Company has~~we have been cooperating with an investigation by the enforcement staff of the ~~SEC~~SEC's Los Angeles Regional Office regarding securities trading in personal and Company accounts directed by the ~~Company's~~Company's former Chief Executive Officer, Joseph Stegmayer. ~~The Audit Committee of the Board conducted an internal investigation led by independent legal counsel and other advisers and, following the completion of its work~~As previously disclosed, in ~~early 2019, the results of the Audit Committee's work were shared with the Company's auditors, listing exchange and the SEC staff. The Company continues to make documents and personnel available to~~November 2020, the SEC staff ~~and~~issued a Wells Notice to Cavco stating that the staff intends to ~~continue cooperating~~recommend an enforcement action against us in connection with ~~its~~the investigation. While we cannot predict with certainty the resolution of this matter, we do not expect it to have a material adverse effect on our Consolidated Financial Statements.

~~Joseph D. Robles v. Cavco Industries, Inc.,~~ ~~was filed in the Superior Court for the State of California, Riverside on June 25, 2019 and~~ ~~Malik Griffin v. Fleetwood Homes, Inc~~., was filed in the Superior Court for the State of California, San Bernardino on September 19, 2019, seeking recovery on behalf of a putative class of current and former hourly employees for certain alleged wage-and-hour violations, including, among other things: (i) alleged failure to comply with certain wage statement formatting requirements; (ii) alleged failure to compensate employees for straight-time and overtime hours worked; and (iii) alleged failure to provide employees with all requisite work breaks.

~~The Company is~~We are party to certain other lawsuits in the ordinary course of business. Based on management's present knowledge of the facts and, ~~(in~~in certain ~~cases)~~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 ~~the Company's~~our consolidated financial position, liquidity or results of operations after taking into account any existing reserves, which reserves are included in Accrued expenses and other current liabilities in the Consolidated Balance Sheets. 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 ~~the Company's~~our consolidated financial position, liquidity or results of operations in any future reporting periods.

1814

Table of Contents

~~17.~~15. Stockholders' Equity

The following table represents changes in stockholders' equity during the three months ended July 3, 2021 (dollars in thousands):


				Treasury Stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive income		Total
	Common Stock
	Shares	Amount
Balance, April 3, 2021	9,241,256	$	92	$	(1,441)	$	253,835	$	431,057	$	97	$	683,640
Net income	—	0		0		0		27,046		0		27,046
Other comprehensive income, net	—	0		0		0		0		(13)		(13)
Issuance of common stock under stock incentive plans	4,465	0		—		136		0		0		136
Stock-based compensation	—	0		0		1,100		0		0		1,100
Common stock repurchases	—	—		(12,842)		—		—		—		(12,842)
Balance, July 3, 2021	9,245,721	$	92	$	(14,283)	$	255,071	$	458,103	$	84	$	699,067

The following table represents changes in stockholders' equity during the three months ended June 27, 2020 (dollars in thousands):

Additional paid-in capital Retained earnings Accumulated other comprehensive income Total
Common Stock
Shares Amount
Balance, March 28, 2020 9,173,242 $ 92 $ 252,260 $ 355,144 $ 90 $ 607,586
Cumulative effect of implementing ASU 2016-13, net — — — (733) — (733)
Net income — — — 16,674 — 16,674
Issuance of common stock under stock incentive plans 3,822 — (533) — — (533)
Stock-based compensation — — 945 — — 945
Other comprehensive income, net — — — — 68 68
Balance, June 27, 2020 9,177,064 $ 92 $ 252,672 $ 371,085 $ 158 $ 624,007

~~The following table represents changes in stockholders' equity during the three months ended June 29, 2019 (dollars in thousands):~~

Additional paid-in capital Retained earnings Accumulated other comprehensive income (loss) Total
Common Stock
Shares Amount
Balance, March 30, 2019 9,098,320 $ 91 $ 249,447 $ 280,078 $ (28) $ 529,588
Net income — — — 21,282 — 21,282
Issuance of common stock under stock incentive plans 13,304 — (1,252) — — (1,252)
Stock-based compensation — — 630 — — 630
Other comprehensive income, net — — — — 89 89
Balance, June 29, 2019 9,111,624 $ 91 $ 248,825 $ 301,360 $ 61 $ 550,337

~~18. Stock-Based Compensation~~

The Company maintains stock incentive plans whereby stock option grants or awards of restricted stock may be made to certain officers, directors and key employees. The plans, which are shareholder approved, permit the award of up to 1,650,000 shares of the Company's common stock, of which 246,157 shares were still available for grant as of June 27, 2020. Upon option exercise, new shares of the Company's common stock are issued and when restricted stock vests, restricted stock shares issued become unrestricted. Awards may not be granted below 100% of the fair market value of the Company's common stock at the date of grant and generally expire seven years from the date of grant. Stock options and awards of restricted stock vest over a defined period or based on certain performance criteria, as determined by the plan administrator (the Compensation Committee of the Board of Directors, which consists of independent directors), but typically is no more than five years. The stock incentive plans provide for accelerated vesting of stock options and removal of restrictions on restricted stock awards upon a change in control (as defined in the plans).

~~Stock-based compensation charged against income for the three months ended June 27, 2020 and June 29, 2019 was $945,000 and $630,000, respectively.~~


				Treasury Stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive income		Total
	Common Stock
	Shares	Amount
Balance, March 28, 2020	9,173,242	$	92	$	0	$	252,260	$	355,144	$	90	$	607,586
Cumulative effect of implementing ASU 2016-13, net	—	0		0		0		(733)		0		(733)
Net income	—	0		0		0		16,674		0		16,674
Other comprehensive income, net	—	0		0		0		0		68		68
Issuance of common stock under stock incentive plans	3,822	0		0		(533)		0		0		(533)
Stock-based compensation	—	0		0		945		0		0		945
Balance, June 27, 2020	9,177,064	$	92	$	0	$	252,672	$	371,085	$	158	$	624,007

~~Table of Contents~~

As of June 27, 2020, total unrecognized compensation cost related to stock options was approximately $5.7 million and the related weighted-average period over which it is expected to be recognized is approximately 2.49 years.

~~Stock Options.~~ The fair value of each stock option award is estimated on the date of the grant using the Black-Scholes-Merton option pricing model, which requires the input of assumptions. The Company estimates the risk-free interest rate based on the U.S. Treasury security rate in effect at the time of the grant. The expected life of the options, volatility and dividend rates are estimated based on historical data.

~~The following table summarizes stock option activity for the three months ended June 27, 2020:~~


			Number of Options
~~Outstanding at March 28, 2020~~			~~364,174~~
~~Granted~~			~~15,250~~
~~Exercised~~			~~(9,100)~~
~~Canceled or expired~~			~~(6,200)~~
~~Outstanding at June 27, 2020~~			~~364,124~~
~~Exercisable at June 27, 2020~~			~~194,058~~

~~Restricted Stock Awards.~~ ~~The fair value of restricted stock awards is estimated as the closing price of the Company's common stock on the date of grant. A summary of restricted stock award activity is as follows:~~

Number of Shares
Performance-Based Awards Service-Based Awards Total
Outstanding at March 28, 2020 7,305 4,500 11,805
Awarded 7,300 — 7,300
Released — — —
Canceled or expired (350) — (350)
Outstanding at June 27, 2020 14,255 4,500 18,755
Unvested target stock awards that vest based upon performance conditions through fiscal year 2022 6,955
Unvested target stock awards that vest based upon performance conditions through fiscal year 2023 7,300

2015

Table of Contents

~~19.~~16. 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					Three Months Ended
		June 27, 2020		June 29, 2019			July 3, 2021		June 27, 2020
Net income	Net income	$	16,674	$	21,282	Net income	$	27,046	$	16,674
Weighted average shares outstanding:
Weighted average shares outstanding						Weighted average shares outstanding
Basic	Basic	9,174,182		9,102,685		Basic	9,198,229		9,174,182
Effect of dilutive securities	Effect of dilutive securities	90,479		114,914		Effect of dilutive securities	78,300		90,479
Diluted	Diluted	9,264,661		9,217,599		Diluted	9,276,529		9,264,661
Net income per share:
Net income per share						Net income per share
Basic	Basic	$	1.82	$	2.34	Basic	$	2.94	$	1.82
Diluted	Diluted	$	1.80	$	2.31	Diluted	$	2.92	$	1.80

~~Anti-dilutive~~There were 8,366 anti-dilutive common stock equivalents excluded from the computation of diluted earnings per share for the three months ended ~~June 27, 2020~~July 3, 2021 and ~~June 29, 2019 were~~ 39,996 ~~and 60,600, respectively. In addition, 14,255 and~~ ~~7,600~~ ~~outstanding restricted share awards were excluded from the calculation of diluted earnings per share~~ for ~~both~~ the three months ended June 27, ~~2020 and June 29, 2019, respectively, because the underlying performance criteria had not yet been met.~~2020.

~~20.~~17. Fair Value Measurements

The book value and estimated fair value of ~~the Company's~~our financial instruments were as follows (in thousands):


		June 27, 2020						March 28, 2020							July 3, 2021				April 3, 2021
		Book Value		Estimated Fair Value		Book Value		Estimated Fair Value			Book Value		Estimated Fair Value		Book Value		Estimated Fair Value
Available-for-sale debt securities	Available-for-sale debt securities	$	13,975	$	13,975	$	14,774	$	14,774	Available-for-sale debt securities	$	17,962	$	17,962	$	14,946	$	14,946
Marketable equity securities	Marketable equity securities	11,611		11,611		9,829		9,829		Marketable equity securities	17,550		17,550		17,600		17,600
Non-marketable equity investments	Non-marketable equity investments	21,294		21,294		21,536		21,536		Non-marketable equity investments	22,429		22,429		21,960		21,960
Consumer loans receivable	Consumer loans receivable	88,959		102,578		82,304		97,395		Consumer loans receivable	67,524		76,466		74,798		86,209
Interest rate lock commitment derivatives		40		40		164		164
Forward loan sale commitment derivatives		5		5		(1,011)		(1,011)

Commercial loans receivable	Commercial loans receivable	44,009		47,503		46,565		46,819		Commercial loans receivable	44,588		42,586		44,314		42,379
Securitized financings and other		(14,512)		(14,099)		(14,953)		(15,592)
Secured financings other										Secured financings other	(11,749)		(11,810)		(12,186)		(12,340)

See Note 19, Fair Value Measurements and the Fair Value of Financial Instruments caption in Note 1, Summary of Significant Accounting Policies in ~~our 2020~~the Form 10-K for more information on the ~~input levels and~~ methodologies we use in determining fair value.

~~Table of Contents~~

~~Assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):~~

June 27, 2020
Total Level 1 Level 2 Level 3
Residential mortgage-backed securities ⁽¹⁾
$ 4,671 $ — $ 4,671 $ —
State and political subdivision debt securities ⁽¹⁾
4,581 — 4,581 —
Corporate debt securities ⁽¹⁾
4,723 — 4,723 —
Marketable equity securities ⁽²⁾
11,611 11,611 — —
Interest rate lock commitment derivatives ⁽³⁾
40 — — 40
Forward loan sale commitment derivatives ⁽³⁾
5 — — 5
Mortgage servicing rights ⁽⁴⁾
1,195 — — 1,195

March 28, 2020
Total Level 1 Level 2 Level 3
Residential mortgage-backed securities ⁽¹⁾
$ 5,443 $ — $ 5,443 $ —
State and political subdivision debt securities ⁽¹⁾
4,370 — 4,370 —
Corporate debt securities ⁽¹⁾
4,961 — 4,961 —
Marketable equity securities ⁽²⁾
9,829 9,829 — —
Interest rate lock commitment derivatives ⁽³⁾
164 — — 164
Forward loan sale commitment derivatives ⁽³⁾
(1,011) — — (1,011)
Mortgage servicing rights ⁽⁴⁾
1,225 — — 1,225

~~(1)Unrealized gains or losses on investments are recorded in Accumulated other comprehensive income at each measurement date.~~

~~(2)Unrealized gains or losses on investments are recorded in earnings at each measurement date.~~

~~(3)Gains or losses on derivatives are recognized in current period earnings through Cost of sales.~~

~~(4)Changes in the fair value of mortgage servicing rights are recognized in the current period earnings through Net revenue.~~

NaN transfers between Level 1, Level 2 or Level 3 occurred during the three months ended June 27, 2020. The Company's policy regarding the recording of transfers between levels is to record any such transfers at the end of the reporting period.

~~Financial instruments for which fair value is disclosed but not required to be recognized in the balance sheet on a recurring basis are summarized below (in thousands):~~

June 27, 2020
Total Level 1 Level 2 Level 3
Loans held for investment $ 63,647 $ — $ — $ 63,647
Loans held for sale 26,691 — — 26,691
Loans held—construction advances 12,240 — — 12,240
Commercial loans receivable 47,503 — — 47,503
Securitized financings and other (14,099) — (14,099) —
Non-marketable equity investments 21,294 — — 21,294

~~Table of Contents~~

March 28, 2020
Total Level 1 Level 2 Level 3
Loans held for investment $ 68,503 $ — $ — $ 68,503
Loans held for sale 15,492 — — 15,492
Loans held—construction advances 13,400 — — 13,400
Commercial loans receivable 46,819 — — 46,819
Securitized financings and other (15,592) — (15,592) —
Non-marketable equity investments 21,536 — — 21,536

No recent sales have been executed in an orderly market of manufactured home loan portfolios with comparable product features, credit characteristics or performance. Therefore, loans held for investment are measured using Level 3 inputs that are calculated using estimated discounted future cash flows from the evaluation of loan credit quality and performance history to determine expected prepayments and defaults on the portfolio, discounted with rates considered to reflect current market conditions. Loans held for sale are measured at the lower of cost or fair value using inputs that consist of quoted market prices for mortgage-backed securities or investor purchase commitments for similar types of loan commitments on hand from investors. These loans are held for relatively short periods, typically no more than 45 days. As a result, changes in loan-specific credit risk are not a significant component of the change in fair value and changes are largely driven by changes in interest rates or investor yield requirements. The cost of loans held for sale was lower than the fair value as of June 27, 2020. As noted above, activity in the manufactured housing asset-backed securities market is infrequent with no reliable market price information. As such, to determine the fair value of securitized financings, management evaluates the credit quality and performance history of the underlying loan assets to estimate the expected prepayment of the debt and credit spreads, based on market activity for similar rated bonds from other asset classes with similar durations.

The Company records impairment losses on long-lived assets held for sale when the fair value of such long-lived assets is below their carrying values. The Company records impairment charges on long-lived assets used in operations when events and circumstances indicate that long-lived assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than their carrying amounts. NaN impairment charges were recorded during the three months ended June 27, 2020.

Mortgage Servicing. Mortgage Servicing Rights ("MSRs") are the rights to receive a portion of the interest coupon and fees collected from the mortgagors for performing specified mortgage servicing activities, which consist of collecting loan payments, remitting principal and interest payments to investors, managing escrow accounts, performing loss mitigation activities on behalf of investors and otherwise administering the loan servicing portfolio.activities. MSRs are initially recorded at fair value. Changes in fair value subsequent to the initial capitalization are recorded in the Company's results of operations. The Company recognizes MSRs on all loans sold to investors that meet the requirements for sale accounting and for which servicing rights are retained.

~~The Company applies fair value accounting to MSRs, with all changes in fair value recorded to Net revenue in accordance with ASC 860-50,~~ ~~Servicing Assets and Liabilities~~. The fair value of MSRs is based on the present value of the expected future cash flows related to servicing these loans. The revenue components of the cash flows are servicing fees, interest earned on custodial accounts and other ancillary income. The expense components include operating costs related to servicing the loans (including delinquency and foreclosure costs) and interest expenses on servicer advances that are consistent with the assumptions major market participants use in valuing MSRs. The expected cash flows are primarily impacted by prepayment estimates, delinquencies and market discounts. Generally, the value of MSRs is expected to increase when interest rates rise and decrease when interest rates decline, due to the effect those changes in interest rates have on prepayment estimates. Other factors noted above as well as the overall market demand for MSRs may also affect the valuation.


	July 3, 2021			April 3, 2021
Number of loans serviced with MSRs	4,614			4,647
Weighted average servicing fee (basis points)	33.86			33.57
Capitalized servicing multiple	67.3		%	45.9		%
Capitalized servicing rate (basis points)	22.78			15.42
Serviced portfolio with MSRs (in thousands)	$	594,373		$	593,939
MSRs (in thousands)	$	1,354		$	916

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June 27,
2020 March 28,
2020
Number of loans serviced with MSRs 4,660 4,688
Weighted average servicing fee (basis points) 31.07 31.12
Capitalized servicing multiple 65.92 % 67.19 %
Capitalized servicing rate (basis points) 20.48 20.91
Serviced portfolio with MSRs (in thousands) $ 583,372 $ 585,777
Mortgage servicing rights (in thousands) $ 1,195 $ 1,225

~~21.~~18. Related Party Transactions

~~The Company has~~We have non-marketable equity investments in other distribution operations outside of Company-owned retail ~~locations.~~stores. In the ordinary course of business, ~~the Company sells~~we sell homes and ~~lends~~lend to certain of these operations through ~~its~~our commercial lending programs. For the three months ended July 3, 2021 and June 27, 2020, ~~and June 29, 2019,~~ the total amount of sales to related parties ~~were $12.7~~was $14.8 million and $~~13.2~~12.7 million, respectively. As of ~~June 27, 2020,~~July 3, 2021, receivables from related parties included ~~$2.5~~$4.3 million of accounts receivable and ~~$10.3~~$6.8 million of commercial loans outstanding. As of ~~March 28, 2020,~~April 3, 2021, receivables from related parties ~~included $1.7~~included $4.7 million of accounts receivable and ~~$8.2~~$9.5 million of commercial loans outstanding.

~~22. Acquisition of Destiny Homes~~

On August 2, 2019, the Company purchased certain manufactured housing assets and assumed certain liabilities of Destiny Homes, which operates one manufacturing facility located in Moultrie, Georgia and produces and distributes manufactured and modular homes through a network of independent retailers in the Southeastern United States, further expanding the Company's reach. 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 Company has not made any purchase accounting adjustments during the quarter. However, the allocation of the purchase price is still preliminary and will be finalized upon completion of the analysis of the fair values of Destiny Home's assets and specified liabilities. The Company 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.

~~Destiny Homes contributed Net revenue of $9.8 million and~~ ~~increased consolidated Net income on the Company's Consolidated Statements of Comprehensive Income by~~ ~~$125,000~~ ~~for the three months ended June 27, 2020.~~

~~Pro Forma Impact of Acquisition. The following table presents supplemental pro forma information as if the acquisition of Destiny Homes had occurred on March 31, 2019 (in thousands, except per share data):~~

Three Months Ended
June 27,
2020 June 29,
2019
Net revenue $ 254,801 $ 273,713
Net income 16,674 21,855
Diluted net income per share 1.80 2.37

~~Table of Contents~~

~~23.~~19. Business Segment Information

~~The Company operates~~We operate principally in 2 segments: (1) factory-built housing, which includes wholesale and retail ~~systems-built~~factory-built housing operations and (2) financial services, which includes manufactured housing consumer finance and insurance. The following table ~~details Net revenue and Income before income taxes~~provides selected financial data by segment (in thousands):


		Three Months Ended					Three Months Ended
		June 27, 2020		June 29, 2019			July 3, 2021		June 27, 2020
Net revenue:
Net revenue						Net revenue
Factory-built housing	Factory-built housing	$	238,090	$	248,768	Factory-built housing	$	312,283	$	238,090
Financial services	Financial services	16,711		15,274		Financial services	18,139		16,711
		$	254,801	$	264,042		$	330,422	$	254,801

Income before income taxes:
Income before income taxes						Income before income taxes
Factory-built housing	Factory-built housing	$	18,450	$	24,313	Factory-built housing	$	33,559	$	18,450
Financial services	Financial services	3,230		3,049		Financial services	1,919		3,230
		$	21,680	$	27,362		$	35,478	$	21,680

20. Subsequent Event

On July 23, 2021, we entered into an agreement to acquire the business and certain assets and liabilities of The Commodore Corporation ("Commodore"), including its 6 manufacturing and 2 retail locations. Commodore is the largest private independent builder of manufactured and modular housing in the United States, operating under a variety of strong brand names. Commodore operates across the Northeast, Midwest and Mid-Atlantic regions, with wholly owned retail stores. In addition to manufacturing, Commodore also has a commercial lending portfolio with its dealers that we will acquire and continue. For the last 12 months ended March 31, 2021, Commodore generated net sales of approximately $258 million and sold over 6,600 modules, equating to over 3,700 homes.

The purchase price totals $153 million, before certain adjustments that will be determined upon close of the transaction. The estimated cash outlay is $140 million after adjustments and including transaction fees. We expect to fund the acquisition entirely with cash on hand. The transaction is expected to close in our third quarter of fiscal year 2022, subject to applicable regulatory approvals and satisfaction of certain customary conditions.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

Statements in this Report on Form 10-Q include "forward-looking statements," within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Private Securities Litigation Reform Act of 1995. Forward-looking statements are often characterized by the use of words such as "believes," "estimates," "expects," "projects," "may," "will," "intends," "plans," or "anticipates," or by discussions of strategy, plans or intentions. Forward-looking statements are typically included, for example, in discussions regarding the manufactured housing and site-built housing industries; ~~the Company's~~our financial performance and operating results; ~~and~~ the expected effect of certain risks and uncertainties on ~~the Company's~~our business, financial condition and results of ~~operations,~~operations; economic conditions and consumer ~~confidence,~~confidence; operational and legal ~~risks,~~risks; how the Company may be affected by the novel coronavirus COVID-19 pandemic ("COVID-19") or any other pandemic or outbreak; governmental regulations and legal ~~proceedings,~~proceedings; the availability of favorable consumer and wholesale manufactured home ~~financing,~~financing; market interest rates and Company investments and the ultimate outcome of ~~the Company's~~our commitments and contingencies. Forward-looking statements contained in this Report on Form 10-Q speak only as of the date of this report or, in the case of any document incorporated by reference, the date of that document. ~~The Company does~~We do not intend to publicly update or revise any forward-looking statement contained in this Report on Form 10-Q or in any document incorporated herein by reference to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time.

Forward-looking statements involve risks, uncertainties and other factors that may cause ~~the Company's~~our actual results, performance or achievements to be materially different from those expressed or implied by such forward-looking statements, many of which are beyond our control. To the extent that ~~the Company's~~our assumptions and expectations differ from actual results, ~~the Company's~~our ability to meet such forward-looking statements, including the ability to generate positive cash flow from operations, may be significantly hindered. Factors that could affect ~~the Company's~~our results and cause them to materially differ from those contained in the forward-looking statements include, without limitation, those discussed in Risk Factors in Part I, Item 1A of ~~the Company's 2020~~our 2021 Annual Report on Form 10-K filed with the Securities and Exchange Commission ("Form 10-K")~~, which Risk Factors are incorporated herein.~~.

Introduction

The following should be read in conjunction with Cavco Industries, Inc. and its subsidiaries' (collectively, "we," "us," "our," the "Company" or "Cavco") Consolidated Financial Statements and the related Notes that appear in Item 1 of this Report. References to "Note" or "Notes" pertain to the Notes to ~~the Company's~~our Consolidated Financial Statements.

Company Overview

Headquartered in Phoenix, Arizona, ~~the Company designs~~we design and ~~produces~~produce factory-built ~~homes~~housing products primarily distributed through a network of independent and Company-owned retailers, planned community operators and residential developers. ~~The Company is~~We are one of the largest producers of manufactured homes in the United States, based on reported wholesale shipments, marketed under a variety of brand names including Cavco, Fleetwood, Palm Harbor, Fairmont, Friendship, Chariot Eagle and Destiny. ~~The Company is~~We are also one of the leading producers of park model RVs, vacation cabins and ~~systems-built~~factory-built commercial structures, as well as modular homes built primarily under the Nationwide Homes brand. ~~Cavco's~~Our finance subsidiary, CountryPlace Acceptance Corp. ("CountryPlace"), is an approved Federal National Mortgage Association ~~("Fannie Mae")~~ and Federal Home Loan Mortgage Corporation ("Freddie Mac") seller/servicer and a Government National Mortgage Association ("Ginnie Mae") mortgage-backed securities issuer that offers conforming mortgages, non-conforming mortgages and home-only loans to purchasers of factory-built homes. ~~Cavco's~~Our insurance subsidiary, Standard Casualty ~~Co.~~Company ("Standard Casualty"), provides property and casualty insurance to owners of manufactured homes.

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~~Company Growth~~

From its inception in 1965, Cavco traditionally served affordable housing markets in the southwestern United States principally through manufactured home production. During the period from 1997 to 2000, Cavco was purchased by, and became a wholly-owned subsidiary of, Centex Corporation, which operated the Company until 2003, when Cavco became a stand-alone publicly-held company traded on the Nasdaq Global Select Market under the ticker symbol CVCO.

The Company has strategically expanded its factory operations and related business activities primarily through the acquisition of other industry participants. This has enabled Cavco to meet the needs of the affordable housing market on a national basis.

The purchase of the Fleetwood and Palm Harbor assets in August 2009 and April 2011, respectively, increased home production and distribution capabilities and provided for vertical integration through entry into financial services businesses specific to the Company's industry. These transactions expanded the Company's geographic reach at a national level by adding factories and retail locations serving the Northwest, West, South, South Central and Mid-Atlantic regions.

The purchases of Chariot Eagle, Fairmont, Lexington and Destiny, in March 2015, May 2015, April 2017 and August 2019, respectively, provided additional operating capacity, increased home production capabilities and further strengthened the Company's market in certain areas of the United States and several provinces in Canada.

In April 2020, the Company decided to shut down production and close its Lexington, Mississippi plant. Ongoing market and operating challenges were exacerbated by decreased business and uncertainty resulting from the novel coronavirus COVID-19 ("COVID-19") pandemic. This location finalized production in June 2020, however, the Company remains available to fulfill the needs of wholesale customers previously served by the Lexington facility from its other production lines in the southeast. The Company does not expect that closing the Lexington facility will have a significant adverse financial effect on the Company. The production facility has been placed on the market for sale.

~~The Company operates~~We operate 20 homebuilding production lines located in Millersburg and Woodburn, Oregon; Nampa, Idaho; Riverside, California; Phoenix and Goodyear, Arizona; Austin, Fort Worth, Seguin and Waco, Texas; Montevideo, Minnesota; Nappanee, Indiana; Lafayette, Tennessee; Martinsville and Rocky Mount, Virginia; Douglas and Moultrie, Georgia; and Ocala and Plant City, Florida. The majority of the homes produced are sold to, and distributed by, independently owned and controlled retail operations located throughout the United States and Canada. In addition, ~~the Company's~~our homes are sold through 3940 Company-owned U.S. retail locations.

Company ~~operations are generally managed on a decentralized basis with oversight from~~and Industry Outlook

According to data reported by the Manufactured Housing Institute, industry home ~~office. This decentralization enables~~shipments increased 14.9% for the ~~Company's operators~~first 5 months of calendar year 2021 compared to the ~~flexibility~~same period in the prior year, which was impacted by shutdowns related to ~~adapt to local market demand, be more customer focused and have~~COVID-19. However, we did not experience any significant factory shutdowns in the ~~autonomy to make swift decisions, while still being held accountable for operational and financial performance.~~prior year period like some other industry participants did.

The ~~Company regularly reviews its product offerings~~industry offers solutions to the affordable housing crisis and strives to improve designs, production methods and marketing strategies. The Company continues to focus on gaining operational efficiencies among its operations, all of which have organic growth potential.

~~Company Outlook~~

The Company maintains a conservative cost structure in an effort to build added value into its homes and has worked diligently to maintain a solid financial position. The balance sheet strength, includingthese industry shipment numbers do not represent demand; instead, they represent the ~~position in cash and cash equivalents, should help avoid liquidity problems and enable the Company to act effectively as market opportunities or challenges present themselves.~~

~~Table of Contents~~

The Company's manufacturing facilities are strategically positioned across the United States, and utilize local market research to design homes to meet the demands of its customers. The Company has theindustry's ability to ~~customize floor plans~~produce in the current environment. The average price per square foot for a manufactured home is lower than a site-built home. Also, based on the relatively low cost associated with manufactured home ownership, our products have traditionally competed with rental housing's monthly payment affordability.

The two largest manufactured housing consumer demographics, young adults and ~~designs to fulfill specific needs~~those who are age 55 and ~~interests. By offering a full range~~older, are both growing. "First-time" and "move-up" buyers of affordable homes ~~from entry-level models to large custom homes~~are historically among the largest segments of new manufactured home purchasers. Included in this group are lower-income households that are particularly affected by periods of low employment rates and ~~with the ability to engineer designs in-house, the Company can accommodate virtually any customer request. In addition to homes built~~underemployment. Consumer confidence is especially important among manufactured home buyers interested in accordance with the National Manufacturing Home Construction and Safety Standards ("HUD code") promulgated by the U.S. Department of Housing and Urban Development ("HUD"), the Company also constructs modular homes that conform to state and local codes, park model RVs and cabins and light commercial buildings at many of its manufacturing facilities.our products for seasonal or retirement living.

~~The Company seeks~~We seek out niche market opportunities where ~~its~~our diverse product lines and custom building capabilities provide a competitive advantage. Our green building initiatives involve the creation of an energy efficient envelope and higher utilization of renewable materials. These homes provide environmentally-friendly maintenance requirements, typically lower utility costs and sustainability. ~~The Company also builds homes designed~~

We maintain a conservative cost structure in an effort to use alternative energy sources, such as solar and wind. From bamboo flooring and tankless water heaters to solar-powered homes, the Company's products are diverse and tailored to a wide range of consumer interests. Innovation in housing design is a forte of the Company and it continues to introduce new models at competitive price points with expressive interiors and exteriors that complement home styles in the areas in which they are located.

Based on the relatively low cost associated with manufactured home ownership, the Company's products have traditionally competed with rental housing's monthly payment affordability. Rental housing activity is reported to have continued to increase in recent years, which has contributed to a decline in tenant housing vacancy rates. These factors, should they persist, as well as other market and economic factors may cause some renters to become buyers of affordable-housing alternatives, including manufactured homes.

Further, with respect to the general rise in demand for rental housing, during fiscal year 2020, the Company realized a larger proportion of orders and interest from developers and community owners for new manufactured homes intended for use as rental homes, alternative dwelling units and seasonal living.

In March 2020, the World Health Organization declared COVID-19 a global pandemic. The Company continued to operate substantially all of its homebuilding and retail sales facilities while working to follow COVID-19 health guidelines. The Company has worked to minimize exposure and transmission risks by implementing enhanced facility cleaning, social distancing and related protocols while continuing to serve its customers. Operational efficiencies declined from adjusting home production processes to comply with health guidelines, managing higher factory employee absenteeism, limited new-hire availability and certain building material supply shortages. Accordingly, the Company's total average plant capacity utilization rate fell to as low as approximately 45% during the early part of the first fiscal year quarter, compared to pre-pandemic levels of more than 80%. By the end of the quarter, overall plant capacity utilization rates were approximately 70% compared to approximately 80% during last year's first fiscal quarter as the Company continues to work to increase production.

Sales order activity declined substantially at the beginning of the quarter due to the onset of COVID-19. The pandemic had a cascading effect on every point in the home sales process, including delaying some orders and sales. While Company-owned retail stores and most independently owned retail sales locations remained open for business since the onset of the pandemic, customer traffic initially declined, resulting in declining home sales orders. In addition, as a result of the pandemic, home orders from developers and community owners were put (and generally remain) on hold, causing sales to these customers to decline substantially.

Subsequently, retail traffic and sales activity continuously improved over the balance of the quarter to the point where sales order rates were somewhat higher than the comparable prior year at quarter's end. Increased order volume is the result of a higher number of well-qualified home-buyers making purchase decisions supported by reduced home loan interest rates. Increased orders outpaced the challenging production environment during the quarter, raising order backlogs 20% to $157 million at June 27, 2020, compared to $131 million at June 29, 2019. This backlog of home orders excludes orders that have been paused or canceled at the request of the customer.

~~Table of Contents~~

The financial services segment also maintained operations since the onset of the COVID-19 pandemic, largely through the implementation of work-from-home solutions. This includes accepting and processing new applications as well as servicing home loans and insurance policies. The financial services operations are complying with state and federal regulations regarding loan forbearance, home foreclosures and policy cancellations and are assisting customers in need. Because of changed economic conditions, loan loss reserves were increased at the end of fiscal year 2020 and continue to be adjusted as considered appropriate.

Certain loans serviced by CountryPlace for investors expose the Company to cash flow deficits if customers do not make contractual monthly payments of principal and interest in a timely manner. Our primary investor, Ginnie Mae, permits cash obligations on loans in forbearance from COVID-19 to be offset by other incoming cash flows from loans such as loan pre-payments. While monthly collections of principal and interest from borrowers has normally exceeded scheduled principal and interest payments owed to investors, given various state and local emergency orders in light of COVID-19, this could change.

~~It is difficult to predict the future impacts of the COVID-19 pandemic on housing demand or operations at each of~~build added value into our ~~locations. However, our wholesale customers have been positive about continuing the process of delivering~~ homes and ~~supportive of our efforts~~we work diligently to ~~continue~~maintain a solid financial position. Our balance sheet strength, including the position in cash and cash equivalents, helps avoid liquidity problems and enables us to ~~meet affordable housing needs.~~act effectively as market opportunities or challenges present themselves.

The Company continues to focus on developing order volume growth opportunities by working to improve its production capabilities and adjusting product offerings where appropriate. The Company strives to balance the production levels and workforce size with the demand for its product offerings to attain efficient use of its production capabilities. The Company continually reviews wage rates of its production employees and has established other monetary incentive programs to ensure competitive compensation. The Company is working to more extensively use on-line recruiting tools, update recruitment brochures and improve the appearance and appeal of its production facilities in order to improve the recruitment and retention of qualified production employees and reduce annualized turnover rates. Maintaining an appropriately sized and well-trained workforce is key to increasing production to meet increased demand. The Company views overcoming labor-related difficulties in the COVID-19 environment to increase home production rates as a major challenge.

~~The Company continues~~We continue to make certain commercial loan programs available to members of ~~the Company's independent~~our wholesale distribution chain. Under these programs, the Company provides a significant amount of the funds that independent financiers then lend to distributors to finance retail inventories of its products. In addition, the Company has entered into direct commercial loan arrangements, ~~with distributors, communities and developers under which the Company provides~~we provide funds for ~~financing homes~~financed home purchases by distributors, community owners and developers (see Note 7 to the Consolidated Financial Statements). ~~The Company's~~Our involvement in commercial loans helps to increase the availability of manufactured home financing to distributors, ~~communities~~community owners and ~~developers. Participation in wholesale financing is helpful to these customers~~developers and provides additional opportunity for product exposure to potential home buyers. ~~These~~While these initiatives support ~~the Company's~~our ongoing efforts to expand product ~~distribution. However, these initiatives do~~distribution, they expose ~~the Company~~us to risks associated with the creditworthiness of this customer base and ~~the Company's~~our inventory financing partners. ~~The Company has included considerations related to the COVID-19 pandemic when assessing its risks of loan loss and setting reserve amounts for its commercial finance portfolio.~~

The lack of an efficient secondary market for manufactured home-only loans and the limited number of institutions providing such loans results in higher borrowing costs for home-only loans and continues to constrain industry growth. ~~The Company is working~~We work directly with other industry participants to develop secondary market opportunities for manufactured home-only loan portfolios and expand lending availability in the industry. Additionally, ~~the Company continues~~we continue to invest in community-based lending initiatives that provide home-only financing to new residents of certain manufactured home communities. ~~Our mortgage subsidiary~~We also ~~develops~~develop and ~~invests~~invest in home-only lending programs to grow sales of homes through traditional distribution points. ~~The Company believes~~We believe that growing ~~its~~our investment and participation in home-only lending may provide additional sales growth opportunities for ~~the~~our financial services segment, as well as provide a means that could lead to increased home sales for ~~its~~our factory-built housing operations.

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Operational efficiencies have declined from hiring challenges, higher and largely unpredictable factory employee absenteeism and other inefficiencies from building material supply shortages. Accordingly, our total average plant capacity utilization rate was approximately 75% during the first fiscal quarter of 2022, which remains consistent with that of our fourth quarter of fiscal 2021.

~~The Company~~Sales order activity remained exceptionally strong during the first fiscal quarter of 2022 and was nearly 50% higher than the comparable prior year quarter. Increased order volume is ~~also working through industry trade associations~~the result of a higher number of well-qualified home buyers making purchase decisions, supported by reduced home loan interest rates. Increased orders outpaced the challenging production environment during the quarter, raising order backlogs to ~~encourage favorable legislative~~$792 million at July 3, 2021, up 31.3% compared to $603 million at April 3, 2021 and up 404.5% compared to $157 million at June 27, 2020. Backlog excludes home orders that have been paused or canceled at the request of the customer.

Key housing building materials include wood and wood products, gypsum wallboard, steel, windows, appliances, insulation and other petroleum-based produ~~Government-Sponsored Enterprise ("GSE")~~cts. Pricing and availability of certain raw materials have recently been volatile due to a number of factors in th ~~action~~e current environment. We continue to ~~address~~monitor and react to inflation in these materials by maintaining a focus on our product pricing in response to higher materials costs, but such increases may lag behind the ~~mortgage financing needs~~escalation of ~~buyers~~such costs. Availability of ~~affordable homes. Federal law requires the GSEs to implement the "Duty to Serve" requirements specified~~these products has not caused a production halt in the ~~Federal Housing Enterprises Financial Safety~~current period, but we have experienced periodic shutdowns in other periods and ~~Soundness Act~~shortages of ~~1992,~~primary building materials have caused production inefficiencies as ~~amended~~we have needed to change processes in response to the delay in materials.

While it is difficult to predict the future of housing demand, employee availability, supply chain and Company performance and operations, maintaining an appropriately sized and well-trained workforce is key to increasing production to meet increased demand, and we face challenges in overcoming labor-related difficulties in the current environment to increase home production. We continually review the wage rates of our production employees, and have established other monetary incentive and benefit programs, with a goal of providing competitive compensation. We also provide leadership training to new managers and other employees in supervisory roles to enhance communication and improve the oversight and motivation of other employees, more extensively use online recruiting tools, update our recruitment brochures and improve the appearance and appeal of our manufacturing facilities to improve the recruitment and retention of qualified production employees and reduce annualized turnover rates. Regardless, we believe our ability to recruit the workforce we need to meet the overall need for affordable housing continues to improve.

In the financial services segment, we continue to assist customers in need by ~~the Housing~~servicing existing loans and ~~Economic Recovery Act~~insurance policies and complying with state and federal regulations regarding loan forbearance, home foreclosures and policy cancellations. Certain loans serviced for investors expose us to cash flow deficits if customers do not make contractual monthly payments of ~~2008. In December 2017, Fannie~~principal and interest in a timely manner. For certain loans serviced for Ginnie Mae and Freddie Mac, ~~each released their final Underserved Markets Plan that describes, with specificity,~~and home-only loans serviced for certain other investors, we must remit scheduled monthly principal and/or interest payments and principal curtailments regardless of whether monthly mortgage payments are collected from borrowers. Ginnie Mae permits cash obligations on loans in forbearance from COVID-19 to be offset by other incoming cash flows from loans such as loan pre-payments. Although monthly collections of principal and interest from borrowers have exceeded scheduled principal and interest payments owed to investors, mandatory extended forbearance under the ~~actions they will take over a three-year period~~Coronavirus Aid, Relief and Economic Security Act and certain other regulations related to fulfill their "Duty to Serve" obligation. These plans became effective on January 1, 2018. Each of the three-year plans offers an enhanced mortgage loan product through their "MH Advantage" and "ChoiceHome" programs, respectively, that beganCOVID-19 could negatively impact cash obligations in the latter part of calendar year 2018. Small-scale pilot programs for the purchase of home-only loans that were expected to commence towards the end of calendar year 2019 have not occurred. Expansion of the secondary market for lending through the GSEs could support further demand for housing as lending options would likely become more available to home buyers. Although some progress has been made in this area, meaningful positive impact in the form of increased home orders has yet to be realized.

On January 25, 2018, HUD announced a top-to-bottom review of its manufactured housing rules as part of a broader effort to identify regulations that may be ineffective, overly burdensome, or excessively costly given the critical need for affordable housing. In addition, on June 25, 2019, President Trump signed an Executive Order directing federal agencies to work together to alleviate barriers that impede the production of affordable housing. The Executive Order created a White House Council on Eliminating Regulatory Barriers to Affordable Housing, consisting of members from eight federal agencies and chaired by the HUD Secretary. While there has been no timeline established, if certain changes are made, the Company may be able to serve a broader range of home buyers.

The insurance subsidiary is subject to adverse effects from excessive policy claims that may occur during periods of inclement weather, including seasonal spring storms or fall hurricane activity in Texas where most of its policies are underwritten. Where applicable, losses from catastrophic events are mitigated by reinsurance contracts in place as part of the Company's loss mitigation structure.future.

~~As disclosed in Part II, Item 1,~~ ~~Legal Proceedings~~, since 2018, the Company has been cooperating with an investigation by the enforcement staff of the Securities and Exchange Commission ("SEC") regarding trading in personal and Company accounts directed by the Company's former Chief Executive Officer ("CEO"), Joseph Stegmayer. The Audit Committee of the Board of Directors conducted an internal investigation led by independent legal counsel and other advisers and, following the completion of its work in early 2019, the results of the Audit Committee's work were shared with the Company's auditors, listing exchange and the SEC staff. The Company continues to make documents and personnel available to the SEC staff and intends to continue cooperating with its investigation.

~~As a result of the ongoing independent investigation, the Company recorded $0.1 million, net of a~~ ~~$0.5~~ million insurance recovery of prior expenses, and $0.8 million of expenses related to legal and other expenses during the three months ended June 27, 2020 and June 29, 2019, respectively, and expects to continue to incur related costs pertaining to this matter. During the third quarter of fiscal year 2019, the Company also reviewed the sufficiency of its insurance coverage and as a result, Cavco's Board of Directors made a decision to purchase additional director and officer ("D&O") liability insurance coverage with 22-month terms for a total premium of $15.3 million. As a result, the Company recorded $2.1 million of additional D&O policy premium expense during each of the three months ended June 27, 2020 and June 29, 2019, and expects to incur approximately $2.1 million per quarter in Selling, general and administrative expenses from the amortization of these policy premiums through the second quarter of fiscal year 2021, at which point D&O policy needs and related premium costs will be assessed further.

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~~Industry Overview~~

According to data reported by the Manufactured Housing Institute, industry home shipments decreased 0.9% for the first 5 months of calendar year 2020 compared to the same period in the prior year. During calendar year 2019, the manufactured housing industry shipped approximately 95,000 HUD code manufactured homes, a decrease of 2.1% from the approximately 97,000 units shipped in 2018. Excess inventory in the market from accelerated purchasing in 2018 slowed shipment levels in 2019. Prior to 2019, annual shipments had increased each year since calendar year 2009 when 50,000 HUD code manufactured homes were shipped, the lowest level since the industry began recording statistics in 1959. While shipments of HUD code manufactured homes have improved in recent years, the industry continues to operate at relatively low levels compared to historical shipment statistics.

"First-time" and "move-up" buyers of affordable homes are historically among the largest segments of new manufactured home purchasers. Included in this group are lower-income households that are particularly affected by their particular employment status to qualify for a new home loan and their down payment capability. Consumer confidence, as in indicator of retirement security, is especially important among manufactured home buyers interested in our products for seasonal or retirement living.

The two largest manufactured housing consumer demographics, young adults and those who are age 55 and older, are both growing. The U.S. adult population is estimated to expand by approximately 9.2 million between 2020 and 2025. Young adults born from 1976 to 1995, often referred to as Gen Y, represent a large segment of the population. Late-stage Gen Y is approximately 4.3 million people larger than the next age category born from 1966 to 1975, Gen X, and is considered to be in the peak home-buying years. Gen Y represents prime first-time home buyers who may be attracted by the affordability, sustainability, diversity and location flexibility of factory-built homes. The age 55 and older category is reported to be the fastest growing segment of the U.S. population. This group is similarly interested in the value proposition; however, they are also motivated by the energy efficiency and low maintenance requirements of systems-built homes, and by the lifestyle offered by planned communities specifically designed for homeowners that fall into this age group.

Results of Operations

~~Three Months Ended June 27, 2020 compared to June 29, 2019~~

Net Revenue.

~~Net revenue consisted of the following for the three months ended June 27, 2020 and June 29, 2019, respectively (dollars in thousands, except net factory-built housing revenue per home sold):~~


	Three Months Ended
($ in thousands, except revenue per home sold)	July 3, 2021		June 27, 2020		Change
Factory-built housing	$	312,283	$	238,090	$	74,193	31.2	%
Financial services	18,139		16,711		1,428		8.5	%
	$	330,422	$	254,801	$	75,621	29.7	%





Factory-built homes sold
by Company-owned retail sales centers	723		752		(29)		(3.9)	%
to independent retailers, builders, communities & developers	2,977		2,597		380		14.6	%
	3,700		3,349		351		10.5	%
Net factory-built housing revenue per home sold	$	84,401	$	71,093	$	13,308	18.7	%

Three Months Ended
June 27,
2020 June 29,
2019 Change % Change
Net revenue:
Factory-built housing $ 238,090 $ 248,768 $ (10,678) (4.3) %
Financial services 16,711 15,274 1,437 9.4 %
$ 254,801 $ 264,042 $ (9,241) (3.5) %
Total homes sold 3,349 3,807 (458) (12.0) %
Net factory-built housing revenue per home sold $ 71,093 $ 65,345 $ 5,748 8.8 %

In the factory-built housing segment, the ~~decrease~~increase in Net ~~revenue~~revenues was primarily due to a 10.5% increase in units sold and 18.7% increase in the average sales price. The higher home prices were driven by product price increases and a shift toward more multi-section homes. Home sales volume increased from higher factory capacity utilization. On a sequential basis, adjusting for the ~~three months ended June 27, 2020 compared to~~extra week of production in the ~~same period last~~fourth quarter of fiscal year ~~was primarily from 12% lower~~2021, home sales volume would have also increased from ~~challenges related to the COVID-19 pandemic. This was partially offset by~~ slightly higher ~~home selling prices and changes in product mix compared to the prior year.~~factory capacity utilization.

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Net factory-built housing revenue per home sold is a volatile metric dependent upon several factors. A primary factor is the price disparity between sales of homes to independent distributors, builders, communities and developers ~~("Wholesale")~~ and sales of homes to consumers by Company-owned retail ~~centers ("Retail").~~stores. Wholesale sales prices are primarily comprised of the home and the cost to ship the home from a homebuilding facility to the home-site. Retail home prices include these items and retail markup, as well as items that are largely subject to home buyer discretion, including, but not limited to, installation, utility connections, site improvements, landscaping and additional services. Our homes are constructed in one or more floor sections ("modules") which are then installed on the customer's site. Changes toin the ~~proportion~~number of ~~home sales among these distribution channels between reporting periods impact the overall net revenue~~modules per home, ~~sold. For~~the selection of different home types/models and optional home upgrades create changes in product mix, also causing fluctuations in this metric. The table below presents the mix of modules and homes shipped for the three months ended July 3, 2021 and June 27, 2020, the Company sold 2,597 homes Wholesale and 752 homes Retail versus 3,058 homes Wholesale and 749 homes Retail in the comparable prior year period. Further, fluctuations in net factory-built housing revenue per home sold are the result of changes in product mix, which result from home buyer tastes and preferences as they select home types/models, as well as optional home upgrades when purchasing the home. These selections vary regularly based on consumer interests, local housing preferences and economic circumstances. Our product prices are also periodically adjusted for the cost and availability of raw materials included in, and labor used to produce, each home. For these reasons, the Company has experienced, and expects to continue to experience, volatility in overall net factory-built housing revenue per home sold.2020:


	Three Months Ended
	July 3, 2021		June 27, 2020		Change
	Modules	Homes	Modules	Homes	Modules		Homes
U.S. Housing and Urban Development code homes	5,652	3,276	4,881	2,865	15.8	%	14.3	%
Modular homes	468	226	466	215	0.4	%	5.1	%
Park model RVs	198	198	269	269	(26.4)	%	(26.4)	%
	6,318	3,700	5,616	3,349	12.5	%	10.5	%

Financial services segment revenue increased ~~for the three months ended June 27, 2020 from greater unrealized gains on investments in the insurance subsidiary's portfolio, an increase~~primarily due to higher volume in home loan sales ~~compared to the prior year period~~ and more insurance policies in force in the current year compared to the prior year. ~~The overall increase is~~These gains were partially offset by lower ~~interest income earned~~unrealized gains on marketable equity securities in the ~~acquired loan portfolios that continue to amortize.~~

~~Gross Profit.~~

~~Gross profit consisted of the following~~insurance subsidiary's portfolio, which were $0.4 million and $1.0 million for the three months ended July 3, 2021 and June 27, 2020, ~~and June 29, 2019,~~ respectively, ~~(in thousands):~~

Three Months Ended
June 27,
2020 June 29,
2019 $ Change % Change
Gross profit:
Factory-built housing $ 46,992 $ 52,135 $ (5,143) (9.9) %
Financial services 8,331 8,163 168 2.1 %
$ 55,323 $ 60,298 $ (4,975) (8.3) %
Gross profit as % of Net revenue:
Consolidated 21.7 % 22.8 % N/A (1.1) %
Factory-built housing 19.7 % 21.0 % N/A (1.3) %
Financial services 49.9 % 53.4 % N/A (3.5) %

Factory-built housing Gross profit and Gross profit as a percentage of Net revenue for the three months ended June 27, 2020 decreased primarily from lower sales volume and production inefficiencies caused by the COVID-19 pandemic.

~~Gross profit as a percentage of Net revenue decreased as a result of higher weather related claims volume at our insurance subsidiary~~ and lower interest income earned on the acquired consumer loan portfolios that continue to amortize.

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Gross Profit.


	Three Months Ended
($ in thousands)	July 3, 2021			June 27, 2020			Change
Factory-built housing	$	66,273		$	46,992		$	19,281	41.0	%
Financial services	7,740			8,331			(591)		(7.1)	%
	$	74,013		$	55,323		$	18,690	33.8	%
Gross profit as % of Net revenue
Consolidated	22.4		%	21.7		%	N/A		0.7	%
Factory-built housing	21.2		%	19.7		%	N/A		1.5	%
Financial services	42.7		%	49.9		%	N/A		(7.2)	%

Factory-built housing gross profit increased primarily due to increased home sales volume and higher average sales prices. We continue to monitor and react to inflation in building material prices by maintaining a focus on our product pricing; however, product price increases may lag behind the escalation of building costs. Gross profit as a percentage of Net revenue also increased this period from a shift toward more multi-section homes.

Financial services gross profit decreased due to higher weather-related claims volume and lower unrealized gains on marketable equity securities.

Selling, General and Administrative Expenses.

~~Selling, general and administrative expenses consisted of the following for the three months ended June 27, 2020 and June 29, 2019, respectively (in thousands):~~


	Three Months Ended
($ in thousands)	July 3, 2021			June 27, 2020			Change
Factory-built housing	$	35,497		$	30,737		$	4,760	15.5	%
Financial services	5,335			4,586			749		16.3	%
	$	40,832		$	35,323		$	5,509	15.6	%
Selling, general and administrative expenses as % of Net revenue	12.4		%	13.9		%	N/A		(1.5)	%

Three Months Ended
June 27,
2020 June 29,
2019 $ Change % Change
Selling, general and administrative expenses:
Factory-built housing $ 30,737 $ 30,751 $ (14) — %
Financial services 4,586 4,513 73 1.6 %
$ 35,323 $ 35,264 $ 59 0.2 %
Selling, general and administrative expenses as % of Net revenue: 13.9 % 13.4 % N/A 0.5 %

Selling, general and administrative expenses related to factory-built housing ~~remained consistent~~increased between ~~periods. Increases in salaries~~periods primarily from higher salary and ~~employee related expenses during the current period were~~incentive-based compensation expense. This was partially offset by a reduction in ~~legal expenses. Expenses related to~~ the ~~SEC inquiry during~~amortization of the ~~three months ended June 27, 2020 were $0.1 million, net~~additional Director and Officer insurance premium, added in the third quarter of ~~a $0.5 million insurance recovery of prior SEC related expenses. For the three months ended June 29,~~fiscal year 2019, ~~the Company incurred $0.8 million in costs related to the Company's response to the SEC inquiry.~~

~~Selling, general and administrative expenses related to financial services were relatively consistent each period.~~

~~Interest Expense.~~

~~Interest expense~~which was ~~$0.2 million and $0.5~~$2.1 million for the three months ended June 27, 2020, with no expense in the current period.

In Financial services, Selling, general and ~~June 29, 2019, respectively.~~ administrative expenses increased primarily from greater expensing of deferred origination costs on higher loan sales and higher compensation expense.

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Other Components of Net Income.


	Three Months Ended
($ in thousands)	July 3, 2021			June 27, 2020			Change
Interest expense	$	164		$	196		$	(32)	(16.3)	%
Other income, net	2,461			1,876			585		31.2	%
Income tax expense	8,432			5,006			3,426		68.4	%
Effective tax rate	23.8		%	23.1		%	N/A		0.7	%

Interest expense consists primarily of debt service on the ~~CountryPlace~~ financings of manufactured home-only loans and interest related to finance leases. The decrease for the three months ended June 27, 2020 is primarily the result of a reduction in securitized bond interest expense, as the Company exercised its right to repurchase the 2007-1 securitized loan portfolio in August 2019, thereby eliminating the related interest expense. This decrease is partially offset by increases in interest expense from secured credit facilities at CountryPlace.

~~Other Income, net.~~

Other income, net primarily consists of realized and unrealized gains and losses on corporate ~~marketable equity~~ investments, interest income related to commercial ~~loans~~loan receivable balances, interest income earned on cash balances and gains and losses ~~(including impairments)~~ from the sale of property, plant and equipment.

~~Other~~ The increase is driven by more interest income ~~net was $1.9 million and $2.8 million for the three months ended June 27, 2020 and June 29, 2019, respectively. The decrease is primarily from a~~ ~~$0.9 million reduction in interest~~ earned on larger cash ~~balances~~ and commercial ~~loans~~loan receivables ~~given~~than the ~~lower interest rate environment.~~

~~Income Before Income Taxes.~~

~~Income before income taxes consisted of the following for the three months ended June 27, 2020 and June 29, 2019, respectively (in thousands):~~

Three Months Ended
June 27,
2020 June 29,
2019 $ Change % Change
Income before income taxes:
Factory-built housing $ 18,450 $ 24,313 $ (5,863) (24.1) %
Financial services 3,230 3,049 181 5.9 %
$ 21,680 $ 27,362 $ (5,682) (20.8) %

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~~Income tax expense.~~

~~Income tax expense was $5.0 million and $6.1 million for the three months ended June 27, 2020~~ ~~and June 29, 2019, respectively, for an effective income tax rate for the 2021 first quarter of 23.1% compared to an effective tax rate of 22.2% for the same period last year.~~ The higher effective tax rate in the current quarter was primarily due to lower tax benefits from the exercise of stock options, which provided a benefit of $0.3 million compared to the $0.6 million in the same period last year.prior year period.

Liquidity and Capital Resources

~~The Company believes~~We believe that cash and cash equivalents at ~~June 27, 2020,~~July 3, 2021, together with cash flow from operations, will be sufficient to fund ~~its~~our operations and provide for growth for the next 12 months and into the foreseeable future. ~~The Company maintains~~We maintain cash in U.S. Treasury and other money market funds, some of which are in excess of federally insured limits. ~~The Company expects~~We expect to continue to evaluate potential acquisitions of, or strategic investments in, businesses that are complementary to the Company, as well as other expansion opportunities. Such transactions may require the use of cash and have other impacts on ~~the Company's~~our liquidity and capital resources. ~~The acquisition of Destiny Homes did not have a significant impact on our liquidity or capital resources.~~ Because of ~~the Company's~~our sufficient cash position, ~~the Company has~~we have not historically sought external sources of liquidity, with the exception of certain credit facilities for ~~its~~the home-only lending programs. ~~However,~~Regardless, depending on ~~the Company's~~our operating results and strategic opportunities, itwe may need to seek additional or alternative sources of ~~financing.~~financing in the future. There can be no assurance that such financing would be available on satisfactory terms, if at all. If this financing were not available, it could be necessary for ~~the Company~~us to reevaluate ~~its~~our long-term operating plans to make more efficient use of ~~its~~our existing capital ~~resources.~~resources at such time. The exact nature of any changes to ~~the Company's~~our plans that would be considered depends on various factors, such as conditions in the factory-built housing industry and general economic conditions outside of ~~the Company's~~our control.

State insurance regulations restrict the amount of dividends that can be paid to stockholders of insurance companies. As a result, the assets owned by ~~the Company's~~our insurance subsidiary are generally not available to satisfy the claims of Cavco or its legal subsidiaries. ~~The Company believes~~We believe that stockholders' equity at ~~its~~the insurance subsidiary remains sufficient and ~~does~~do not believe that ~~its~~the ability to pay ordinary dividends to Cavco will be restricted per state regulations.

The following is a summary of the Company's cash flows for the three months ended July 3, 2021 and June 27, 2020, ~~and June 29, 2019, respectively (in thousands):~~respectively:


		Three Months Ended									Three Months Ended
		June 27, 2020		June 29, 2019		$ Change
(in thousands)								(in thousands)	July 3, 2021		June 27, 2020		$ Change
Cash, cash equivalents and restricted cash at beginning of the fiscal year	Cash, cash equivalents and restricted cash at beginning of the fiscal year	$	255,607	$	199,869	$	55,738	Cash, cash equivalents and restricted cash at beginning of the fiscal year	$	339,307	$	255,607	$	83,700
Net cash provided by operating activities	Net cash provided by operating activities	35,692		16,798		18,894		Net cash provided by operating activities	24,275		35,692		(11,417)
Net cash provided by (used in) investing activities		105		(1,469)		1,574
Net cash (used in) provided by investing activities								Net cash (used in) provided by investing activities	(3,616)		105		(3,721)
Net cash used in financing activities	Net cash used in financing activities	(922)		(2,174)		1,252		Net cash used in financing activities	(13,150)		(922)		(12,228)
Cash, cash equivalents and restricted cash at end of the period	Cash, cash equivalents and restricted cash at end of the period	$	290,482	$	213,024	$	77,458	Cash, cash equivalents and restricted cash at end of the period	$	346,816	$	290,482	$	56,334

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Net cash provided by operating activities ~~increased during~~decreased primarily due to the rising material costs of our raw materials and higher purchases of such materials. This was partially offset by higher proceeds from consumer loan sales of $49.6 million compared to $39.3 million in the previous year.

Consumer loan originations decreased $4.7 million to $42.7 million for the three months ended ~~June 27, 2020, compared to the three months ended June 29, 2019 primarily~~July 3, 2021 from decreased finished goods inventories at Company-owned stores, lower levels of commercial lending, higher accrued taxes and sales of consumer loans, partially offset by lower net income and more consumer loans originated.

~~Consumer loan originations increased by $9.8 million to~~ $47.4 million for the three months ended June 27, 2020 ~~from $37.6 million for the three months ended June 29, 2019. Proceeds from sales of consumer loans provided $39.3 million in cash, compared~~due to ~~$37.6 million in the previous year.~~

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With respect to consumer lending for the purchase of manufactured housing, states may classify manufactured homes for both legal and tax purposes as personal property rather than real estate. As a result, financing for the purchase of manufactured homes is characterized by shorter loan maturities and higher interest rates. Unfavorable changes in these factors may have material negative effects on the Company's results of operations and financial condition. See Item IA, "Risk Factors" in the Company's Form 10-K.origination personnel shortages.

~~Cavco has entered~~We enter into ~~commercial loan arrangements with certain distributors of its products under which the Company provides funds for Wholesale purchases. In addition, the Company has entered into direct~~ commercial loan arrangements with distributors, communities and developers under which the Company provides funds for financing homes. ~~The~~In addition, we enter into commercial loan arrangements with certain distributors of our products under which the Company ~~has~~provides funds for wholesale purchases. We have also invested in community-based lending initiatives that provide home-only financing to new residents of certain manufactured home communities. For additional information regarding our commercial loans receivable, see Note 7 to the Consolidated Financial Statements. Further, ~~the Company has invested~~we invest in and ~~developed~~develop home-only loan pools and lending programs to attract third party financier interest in order to grow sales of new homes through traditional distribution points. Increased lending activity resulted in a net use of $0.2 million while the prior period net activity provided $2.6 million.

~~Investing~~Net cash used in or provided by investing activities ~~primarily~~ consist of buying and selling ~~bonds~~debt and marketable equity securities in our Financial Services segment, ~~to support~~purchases of property, plant and equipment and funding strategic growth acquisitions. Greater cash was used in the ~~operational strategies. As compared to~~current period for the ~~same period last year,~~purchase of debt securities.

Net cash used in financing activities was primarily for the ~~Company used $1.0 million less on purchases, while proceeds and distributions provided $0.5 million more during the three months ended June 27, 2020.~~

~~Financing activities used $1.3 million less cash during the period compared to the same period last year, from lower payments~~repurchase of ~~taxes for employees' net exercise of stock options, as well as lower payments on securitized financings, as the Company repurchased the 2007-1 securitized loan portfolio in August 2019.~~common stock.

~~Financings.~~ ~~The Company's finance subsidiary~~We entered into secured credit facilities with independent third-party banks ~~with draw periods from one~~ to ~~fifteen months and maturity dates~~facilitate the origination of ~~ten years after the expiration of the draw periods, which have now expired. The proceeds were used by the Company to originate and hold~~ consumer home-only loans to be held for investment, secured by the manufactured homes which ~~are~~were subsequently pledged as collateral to the facilities. Upon completion of the draw down periods, ~~the~~these facilities were converted into an amortizing loan based on a ~~20-year~~20 or 25-year amortization period with a balloon payment due upon maturity. ~~The maximum advance for loans under this program was 80% of the outstanding collateral principal balance, with the Company providing the remaining funds.~~ As of ~~June 27, 2020,~~July 3, 2021, the outstanding balance of the converted loans was ~~$10.2~~$8.0 million atwith a weighted average interest rate of 4.91%.

Contractual Commitments and Contingencies. There were no material changes to the contractual obligations as set forth in ~~the Company's~~our Annual Report on Form 10-K.

Critical Accounting Policies

~~On March 29, 2020, the Company adopted Accounting Standards Update 2016-13,~~ ~~Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,~~ which changes the impairment model for most financial assets and certain other instruments. We adopted the standard by recognizing the cumulative effect of initially applying the new credit loss standard as an adjustment to the opening balance of Retained earnings. Refer to Note 1 to the Consolidated Financial Statements for additional discussion. There have been no other significant changes to ~~the Company's~~our critical accounting policies during the three months ended ~~June 27, 2020,~~July 3, 2021, as compared to those disclosed in Part II, Item 7 of ~~the Company's~~our Form 10-K, under the heading "Critical Accounting Policies," which provides a discussion of the critical accounting policies that management believes affect its more significant judgments and estimates used in the preparation of the Company's Consolidated Financial Statements.

~~Recent Accounting Pronouncements~~

~~See Note 1 to the Consolidated Financial Statements~~ ~~for a discussion of recently issued and adopted accounting pronouncements~~.

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Other Matters

Related Party Transactions. See Note 2118 to the Consolidated Financial Statements for a discussion of ~~the Company's~~our related party transactions.

Off Balance Sheet Arrangements

See Note 1614 to the Consolidated Financial Statements for a discussion of ~~the Company's~~our off-balance sheet commitments, which discussion is incorporated herein by reference.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes from the quantitative and qualitative disclosures about market risk previously disclosed in the Form 10-K.

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Item 4. Controls and Procedures

(a) Disclosure Controls and Procedures

The Company carried out an evaluation, under the supervision and with the participation of the Company's management, including its President and Chief Executive Officer and ~~Chief~~its Principal Financial Officer, of the effectiveness of ~~the design and operation of the Company's~~its disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, the Company's President and Chief Executive Officer and ~~Chief~~its Principal Financial Officer concluded that, as of ~~June 27, 2020,~~July 3, 2021, its disclosure controls and procedures were effective.

(b) Changes in Internal Control over Financial Reporting

There have been no changes in the Company's internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the fiscal quarter ended ~~June 27, 2020,~~July 3, 2021 which have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

~~Information regarding reportable legal proceedings is contained~~See the information under the "Legal Matters" caption in ~~Part I, Item 3,~~Note ~~Legal Proceedings~~14, in the Form 10-K. The following describes legal proceedings, if any, that became reportable during the period ended June 27, 2020, and, if applicable, amends and restates descriptions of previously reported legal proceedings in which th~~ere have been material developments during such quarter.~~

Since 2018, the Company has been cooperating with an investigation by the enforcement staff of the SEC regarding trading in personal and Company accounts directed by the Company's former CEO, Joseph Stegmayer. The Audit Committee of the Board of Directors conducted an internal investigation led by independent legal counsel and other advisers and, following the completion of its work in early 2019, the results of the Audit Committee's work were shared with the Company's auditors, listing exchange and with the SEC staff. The Company continues to make documents and personnel available to the ~~SEC staff and intends to continue cooperating with its investigation.~~

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The Company is party to certain other lawsuits in the ordinary course of business. Based on management's present knowledge of the facts and (in certain cases) advice of outside counsel, management does not believe that loss contingencies arising from pending matters are likely to have a material adverse effect on the Company's consolidated financial position, liquidity or results of operations after taking into account any existing reserves, which reserves are included in Accrued expenses and other current liabilities in the Consolidated Balance Sheets. 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 the Company's consolidated financial position, liquidity or results of operations in any future reporting periods.

Item 1A. Risk Factors

In addition to the other information set forth in this Report, you should carefully consider the factors discussed in Part I, Item 1A, Risk Factors, in the Form 10-K, which could materially affect ~~the Company's~~our business, financial condition or future results. The risks described in this Report and in the Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to ~~the Company~~us or that itwe currently ~~deems~~deem to be immaterial also may materially adversely affect ~~the Company's~~our business, financial condition and/or operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

On October 27, 2020, the Company's Board of Directors approved a $100 million stock repurchase program, which was announced on a Current Report on Form 8-K filed with the Securities and Exchange Commission on October 29, 2020, and that may be used to purchase its outstanding common stock. The repurchases may be made in the open market or in privately negotiated transactions in compliance with applicable state and federal securities laws and other legal requirements. The level of repurchase activity is subject to market conditions and other investment opportunities. The repurchase program does not obligate us to acquire any particular amount of common stock and may be suspended or discontinued at any time. The repurchase program is funded using our available cash. The following table sets forth repurchases of our common stock during the first quarter of fiscal year 2022:


Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of the Publically Announced Program	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program (in thousands)
April 4, 2021 to May 8, 2021	32,984	$	212.87	32,984	$	91,538
May 9, 2021 to June 5, 2021	28,317	205.56		28,317	85,717
June 6, 2021 to July 3, 2021	—	—		—	85,717
	61,301			61,301

Item 5. Other Information

There is no other information required to be disclosed under this item which was not previously disclosed.

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Item 6. Exhibits


Exhibit No.		Exhibit
31.1	(1)	Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Rule 13a-14(a)/15d-14(a)
31.2	(1)	Certification of Principal Financial and Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Rule 13a-14(a)/15d-14(a)
32	(2)	Certification Pursuant to 18 U.S.C. 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

All other items required under Part II are omitted because they are not applicable.

(1) Filed herewith.

(2) Furnished herewith.

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Cavco Industries, Inc.
Registrant

Signature	Title	Date

/s/ William C. Boor	Director, President and Chief Executive Officer	~~July 31, 2020~~August 6, 2021
William C. Boor	(Principal Executive Officer)

/s/ ~~Daniel L. Urness~~Paul Bigbee	~~Executive Vice President,~~ Chief ~~Financial~~Accounting Officer ~~and Treasurer~~	~~July 31, 2020~~August 6, 2021
~~Daniel L. Urness~~Paul Bigbee	(Principal Financial and Accounting Officer)

3828


	June 27, 2020
	Less than 12 Months						12 Months or Longer						Total
	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Residential mortgage-backed securities	$	721	$	(11)	$	951	$	(20)	$	1,672	$	(31)
State and political subdivision debt securities	300		—		—		—		300		—
Corporate debt securities	787		(14)		—		—		787		(14)
	$	1,808	$	(25)	$	951	$	(20)	$	2,759	$	(45)


	June 27, 2020		March 28, 2020
Loans held for investment (at Acquisition Date, defined below)	$	37,650	$	37,779
Loans held for investment (originated after Acquisition Date)	19,917		20,140
Loans held for sale	25,297		14,671
Construction advances	12,240		13,400
Consumer loans receivable	95,104		85,990
Deferred financing fees and other, net	(2,133)		(1,919)
Allowance for loan losses	(4,012)		(1,767)
	$	88,959	$	82,304


	Classification	June 27, 2020		March 28, 2020
ROU assets
Operating lease assets	Operating lease right-of-use assets	$	18,378	$	13,894
Finance lease assets	Property, plant and equipment, net ⁽¹⁾	1,015		1,025
Total lease assets		$	19,393	$	14,919

Lease Liabilities
Current:
Operating lease liabilities	Accrued expenses and other current liabilities	$	4,097	$	4,170
Finance lease liabilities	Current portion of secured credit facilities and other	74		77
Non-current:
Operating lease liabilities	Operating lease liabilities	15,398		10,743
Finance lease liabilities	Secured credit facilities and other	275		289
Total lease liabilities		$	19,844	$	15,279


	Operating Leases		Finance Leases		Total
Remainder of 2021	$	3,189	$	58	$	3,247
2022	4,148		73		4,221
2023	3,814		73		3,887
2024	3,480		73		3,553
2025	2,706		73		2,779
Thereafter	5,005		49		5,054
Total lease payments	22,342		399		22,741
Less: Amount representing interest	(2,847)		(50)		(2,897)
Present value of lease liabilities	$	19,495	$	349	$	19,844


	Remaining Lease Term (Years)	Discount Rate
Operating leases	5.8	4.5	%
Finance leases	5.3	5.0	%


	June 27, 2020		March 28, 2020
Secured credit facilities	$	10,178	$	10,474
Other secured financings	3,985		4,113
Finance lease liabilities	349		366
	$	14,512	$	14,953


				Additional paid-in capital		Retained earnings		Accumulated other comprehensive income (loss)		Total
	Common Stock
	Shares	Amount
Balance, March 30, 2019	9,098,320	$	91	$	249,447	$	280,078	$	(28)	$	529,588
Net income	—	—		—		21,282		—		21,282
Issuance of common stock under stock incentive plans	13,304	—		(1,252)		—		—		(1,252)
Stock-based compensation	—	—		630		—		—		630
Other comprehensive income, net	—	—		—		—		89		89
Balance, June 29, 2019	9,111,624	$	91	$	248,825	$	301,360	$	61	$	550,337


	Number of Shares
	Performance-Based Awards	Service-Based Awards	Total
Outstanding at March 28, 2020	7,305	4,500	11,805
Awarded	7,300	—	7,300
Released	—	—	—
Canceled or expired	(350)	—	(350)
Outstanding at June 27, 2020	14,255	4,500	18,755
Unvested target stock awards that vest based upon performance conditions through fiscal year 2022	6,955
Unvested target stock awards that vest based upon performance conditions through fiscal year 2023	7,300


	June 27, 2020
	Total		Level 1		Level 2		Level 3

Residential mortgage-backed securities ⁽¹⁾	$	4,671	$	—	$	4,671	$	—
State and political subdivision debt securities ⁽¹⁾	4,581		—		4,581		—
Corporate debt securities ⁽¹⁾	4,723		—		4,723		—
Marketable equity securities ⁽²⁾	11,611		11,611		—		—
Interest rate lock commitment derivatives ⁽³⁾	40		—		—		40
Forward loan sale commitment derivatives ⁽³⁾	5		—		—		5
Mortgage servicing rights ⁽⁴⁾	1,195		—		—		1,195