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 ~~July 2,~~December 31, 2022


☐			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)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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


Title of each class	Trading Symbol(s)	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 the 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 29, 2022, 8,894,547~~January 27, 2023, 8,693,699 shares of the registrant's Common Stock, $.01 par value, were outstanding.

CAVCO INDUSTRIES, INC.

FORM 10-Q

~~July 2,~~December 31, 2022

TABLE OF CONTENTS


			Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of ~~July 2,~~December 31, 2022 (unaudited) and April 2, 2022			1
Consolidated Statements of Comprehensive Income (unaudited) for the three and nine months ended ~~July 2,~~December 31, 2022 and ~~July 3, 2021~~January 1, 2022			2
Consolidated Statements of Cash Flows (unaudited) for the ~~three~~nine months ended ~~July 2,~~December 31, 2022 and ~~July 3, 2021~~January 1, 2022			3
Notes to Consolidated Financial Statements (unaudited)			4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			1822
Item 3. Quantitative and Qualitative Disclosures About Market Risk			2530
Item 4. Controls and Procedures			2531
PART II. OTHER INFORMATION
Item 1. Legal Proceedings			2632
Item 1A. Risk Factors			2632
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			2633
Item 3. Not applicable
Item 4. Not applicable
Item 5. Other Information			2633
Item 6. Exhibits			2734
SIGNATURES			2835

Table of Contents

PART 1. FINANCIAL INFORMATION

Item 1. Financial Statements

CAVCO INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share amounts)


		July 2, 2022		April 2, 2022			December 31, 2022		April 2, 2022
ASSETS	ASSETS	(Unaudited)				ASSETS	(Unaudited)
Current assets	Current assets					Current assets
Cash and cash equivalents	Cash and cash equivalents	$	238,072	$	244,150	Cash and cash equivalents	$	376,148	$	244,150
Restricted cash, current	Restricted cash, current	14,555		14,849		Restricted cash, current	9,911		14,849
Accounts receivable, net	Accounts receivable, net	108,128		96,052		Accounts receivable, net	80,062		96,052
Short-term investments	Short-term investments	15,864		20,086		Short-term investments	16,607		20,086
Current portion of consumer loans receivable, net	Current portion of consumer loans receivable, net	20,888		20,639		Current portion of consumer loans receivable, net	13,763		20,639
Current portion of commercial loans receivable, net	Current portion of commercial loans receivable, net	33,710		32,272		Current portion of commercial loans receivable, net	33,899		32,272
Current portion of commercial loans receivable from affiliates, net	Current portion of commercial loans receivable from affiliates, net	145		372		Current portion of commercial loans receivable from affiliates, net	298		372
Inventories	Inventories	254,722		243,971		Inventories	215,458		243,971
Prepaid expenses and other current assets	Prepaid expenses and other current assets	61,941		71,726		Prepaid expenses and other current assets	86,408		71,726
Total current assets	Total current assets	748,025		744,117		Total current assets	832,554		744,117
Restricted cash	Restricted cash	335		335		Restricted cash	335		335
Investments	Investments	36,815		34,933		Investments	21,822		34,933
Consumer loans receivable, net	Consumer loans receivable, net	28,699		29,245		Consumer loans receivable, net	26,903		29,245
Commercial loans receivable, net	Commercial loans receivable, net	36,811		33,708		Commercial loans receivable, net	40,727		33,708
Commercial loans receivable from affiliates, net	Commercial loans receivable from affiliates, net	1,652		2,214		Commercial loans receivable from affiliates, net	3,049		2,214
Property, plant and equipment, net	Property, plant and equipment, net	185,534		164,016		Property, plant and equipment, net	194,329		164,016
Goodwill	Goodwill	100,993		100,993		Goodwill	100,577		100,993
Other intangibles, net	Other intangibles, net	27,951		28,459		Other intangibles, net	26,948		28,459
Operating lease right-of-use assets	Operating lease right-of-use assets	16,985		16,952		Operating lease right-of-use assets	17,230		16,952
Total assets	Total assets	$	1,183,800	$	1,154,972	Total assets	$	1,264,474	$	1,154,972
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST, AND STOCKHOLDERS' EQUITY
LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND STOCKHOLDERS' EQUITY						LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND STOCKHOLDERS' EQUITY
Current liabilities	Current liabilities					Current liabilities
Accounts payable	Accounts payable	$	44,897	$	43,082	Accounts payable	$	26,788	$	43,082
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	259,778		251,088		Accrued expenses and other current liabilities	251,635		251,088
Total current liabilities	Total current liabilities	304,675		294,170		Total current liabilities	278,423		294,170
Operating lease liabilities	Operating lease liabilities	13,135		13,158		Operating lease liabilities	13,058		13,158
Other liabilities	Other liabilities	10,695		10,836		Other liabilities	7,898		10,836
Deferred income taxes	Deferred income taxes	3,056		5,528		Deferred income taxes	8,663		5,528
Redeemable noncontrolling interest	Redeemable noncontrolling interest	677		825		Redeemable noncontrolling interest	932		825
Stockholders' equity	Stockholders' equity					Stockholders' equity
Preferred stock, $0.01 par value; 1,000,000 shares authorized; No shares issued or outstanding	Preferred stock, $0.01 par value; 1,000,000 shares authorized; No shares issued or outstanding	—		—		Preferred stock, $0.01 par value; 1,000,000 shares authorized; No shares issued or outstanding	—		—
Common stock, $0.01 par value; 40,000,000 shares authorized; Issued 9,298,235 and 9,292,278 shares, respectively		93		93
Treasury stock, at cost; 404,813 and 241,773 shares, respectively		(100,000)		(61,040)
Common stock, $0.01 par value; 40,000,000 shares authorized; Issued 9,319,700 and 9,292,278 shares, respectively						Common stock, $0.01 par value; 40,000,000 shares authorized; Issued 9,319,700 and 9,292,278 shares, respectively	93		93
Treasury stock, at cost; 556,344 and 241,773 shares, respectively						Treasury stock, at cost; 556,344 and 241,773 shares, respectively	(134,270)		(61,040)
Additional paid-in capital	Additional paid-in capital	263,626		263,049		Additional paid-in capital	268,423		263,049
Retained earnings	Retained earnings	688,358		628,756		Retained earnings	821,998		628,756
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(515)		(403)		Accumulated other comprehensive loss	(744)		(403)
Total stockholders' equity	Total stockholders' equity	851,562		830,455		Total stockholders' equity	955,500		830,455
Total liabilities, redeemable noncontrolling interest and stockholders' equity	Total liabilities, redeemable noncontrolling interest and stockholders' equity	$	1,183,800	$	1,154,972	Total liabilities, redeemable noncontrolling interest and stockholders' equity	$	1,264,474	$	1,154,972

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						Nine Months Ended
			July 2, 2022			July 3, 2021			December 31, 2022		January 1, 2022		December 31, 2022		January 1, 2022
Net revenue	Net revenue		$	588,338		$	330,422	Net revenue	$	500,603	$	431,714	$	1,666,333	$	1,121,679
Cost of sales	Cost of sales		443,614			256,409		Cost of sales	368,635		316,506		1,232,042		842,530
Gross profit	Gross profit		144,724			74,013		Gross profit	131,968		115,208		434,291		279,149
Selling, general and administrative expenses	Selling, general and administrative expenses		66,136			40,832		Selling, general and administrative expenses	58,904		60,322		191,934		146,526
Income from operations	Income from operations		78,588			33,181		Income from operations	73,064		54,886		242,357		132,623
Interest expense	Interest expense		(161)			(164)		Interest expense	(216)		(209)		(610)		(576)
Other income, net	Other income, net		883			2,461		Other income, net	3,233		4,258		6,455		11,387
Income before income taxes	Income before income taxes		79,310			35,478		Income before income taxes	76,081		58,935		248,202		143,434
Income tax expense			(19,616)			(8,432)
Income tax (expense) benefit								Income tax (expense) benefit	(16,492)		20,680		(54,721)		910
Net income	Net income		59,694			27,046		Net income	59,589		79,615		193,481		144,344
Less: net income attributable to redeemable noncontrolling interest	Less: net income attributable to redeemable noncontrolling interest		92			—		Less: net income attributable to redeemable noncontrolling interest	65		196		239		269
Net income attributable to Cavco common stockholders	Net income attributable to Cavco common stockholders		$	59,602		$	27,046	Net income attributable to Cavco common stockholders	$	59,524	$	79,419	$	193,242	$	144,075

Comprehensive income	Comprehensive income							Comprehensive income
Net income	Net income		$	59,694		$	27,046	Net income	$	59,589	$	79,615	$	193,481	$	144,344
Reclassification adjustment for securities sold	Reclassification adjustment for securities sold		—			1		Reclassification adjustment for securities sold	(13)		(16)		(19)		(15)
Applicable income taxes	Applicable income taxes		—			—		Applicable income taxes	3		3		4		3
Net change in unrealized position of investments held	Net change in unrealized position of investments held		(142)			(18)		Net change in unrealized position of investments held	107		(127)		(412)		(161)
Applicable income taxes	Applicable income taxes		30			4		Applicable income taxes	(23)		27		86		34
Comprehensive income	Comprehensive income		59,582			27,033		Comprehensive income	59,663		79,502		193,140		144,205
Less: comprehensive income attributable to redeemable noncontrolling interest	Less: comprehensive income attributable to redeemable noncontrolling interest		92			—		Less: comprehensive income attributable to redeemable noncontrolling interest	65		196		239		269
Comprehensive income attributable to Cavco common stockholders	Comprehensive income attributable to Cavco common stockholders		$	59,490		$	27,033	Comprehensive income attributable to Cavco common stockholders	$	59,598	$	79,306	$	192,901	$	143,936

Net income per share attributable to Cavco common stockholders	Net income per share attributable to Cavco common stockholders							Net income per share attributable to Cavco common stockholders
Basic	Basic		$	6.68		$	2.94	Basic	$	6.71	$	8.66	$	21.72	$	15.68
Diluted	Diluted		$	6.63		$	2.92	Diluted	$	6.66	$	8.57	$	21.55	$	15.54
Weighted average shares outstanding	Weighted average shares outstanding							Weighted average shares outstanding
Basic	Basic		8,918,280			9,198,229		Basic	8,870,565		9,174,224		8,897,405		9,187,828
Diluted	Diluted		8,988,929			9,276,529		Diluted	8,936,075		9,270,438		8,969,104		9,270,855

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					Nine Months Ended
		July 2, 2022		July 3, 2021			December 31, 2022		January 1, 2022
OPERATING ACTIVITIES	OPERATING ACTIVITIES					OPERATING ACTIVITIES
Net income	Net income	$	59,694	$	27,046	Net income	$	193,481	$	144,344
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	3,946		1,576		Depreciation and amortization	12,174		6,750
Provision for credit losses	Provision for credit losses	(167)		(239)		Provision for credit losses	(585)		(220)
Deferred income taxes	Deferred income taxes	(2,442)		(783)		Deferred income taxes	3,225		1,186
Stock-based compensation expense	Stock-based compensation expense	1,425		1,100		Stock-based compensation expense	4,855		3,460
Non-cash interest income, net	Non-cash interest income, net	(257)		(394)		Non-cash interest income, net	(527)		(1,115)
Gain on sale or retirement of property, plant and equipment, net	Gain on sale or retirement of property, plant and equipment, net	(232)		(35)		Gain on sale or retirement of property, plant and equipment, net	(116)		(307)
Gain on investments and sale of loans, net	Gain on investments and sale of loans, net	(288)		(5,579)		Gain on investments and sale of loans, net	(6,647)		(18,379)
Distributions of earnings from equity method investments						Distributions of earnings from equity method investments	4,306		—
Changes in operating assets and liabilities, net of acquisitions	Changes in operating assets and liabilities, net of acquisitions					Changes in operating assets and liabilities, net of acquisitions
Accounts receivable	Accounts receivable	(12,076)		(3,659)		Accounts receivable	15,988		4,366
Consumer loans receivable originated	Consumer loans receivable originated	(47,467)		(42,706)		Consumer loans receivable originated	(135,552)		(122,872)
Proceeds from sales of consumer loans	Proceeds from sales of consumer loans	47,881		49,631		Proceeds from sales of consumer loans	146,050		142,445
Principal payments received on consumer loans receivable	Principal payments received on consumer loans receivable	2,421		3,929		Principal payments received on consumer loans receivable	7,206		8,861
Inventories	Inventories	(10,751)		(19,683)		Inventories	28,513		(29,899)
Prepaid expenses and other current assets	Prepaid expenses and other current assets	7,359		2,801		Prepaid expenses and other current assets	(16,525)		(33,746)
Commercial loans receivable	Commercial loans receivable	(3,795)		(243)		Commercial loans receivable	(9,652)		8,080
Accounts payable and accrued expenses and other current liabilities	Accounts payable and accrued expenses and other current liabilities	12,989		11,513		Accounts payable and accrued expenses and other current liabilities	(16,075)		13,013
Net cash provided by operating activities	Net cash provided by operating activities	58,240		24,275		Net cash provided by operating activities	230,119		125,967
INVESTING ACTIVITIES	INVESTING ACTIVITIES					INVESTING ACTIVITIES
Purchases of property, plant and equipment	Purchases of property, plant and equipment	(25,007)		(2,593)		Purchases of property, plant and equipment	(40,850)		(8,938)

Payments for acquisitions, net						Payments for acquisitions, net	—		(141,428)
Proceeds from sale of property, plant and equipment	Proceeds from sale of property, plant and equipment	283		38		Proceeds from sale of property, plant and equipment	406		1,291
Purchases of investments	Purchases of investments	(4,228)		(4,429)		Purchases of investments	(10,198)		(8,224)
Proceeds from sale of investments	Proceeds from sale of investments	4,553		3,368		Proceeds from sale of investments	9,230		9,457
Return of invested capital from equity method investments						Return of invested capital from equity method investments	12,213		—
Net cash used in investing activities	Net cash used in investing activities	(24,399)		(3,616)		Net cash used in investing activities	(29,199)		(147,842)
FINANCING ACTIVITIES	FINANCING ACTIVITIES					FINANCING ACTIVITIES
Payments for taxes on exercises and releases of equity awards		(848)		—
Payments for taxes on stock option exercises and releases of equity awards						Payments for taxes on stock option exercises and releases of equity awards	(1,072)		(26)
Proceeds from exercise of stock options	Proceeds from exercise of stock options	—		136		Proceeds from exercise of stock options	1,591		4,328
Proceeds from secured financings and other						Proceeds from secured financings and other	—		47
Payments on finance leases and other secured financings	Payments on finance leases and other secured financings	(165)		(444)		Payments on finance leases and other secured financings	(549)		(9,213)
Payments for common stock repurchases	Payments for common stock repurchases	(38,960)		(12,842)		Payments for common stock repurchases	(73,230)		(29,126)
Distributions to noncontrolling interest	Distributions to noncontrolling interest	(240)		—		Distributions to noncontrolling interest	(600)		(300)
Net cash used in financing activities	Net cash used in financing activities	(40,213)		(13,150)		Net cash used in financing activities	(73,860)		(34,290)
Net (decrease) increase in cash, cash equivalents and restricted cash		(6,372)		7,509
Net increase (decrease) in cash, cash equivalents and restricted cash						Net increase (decrease) in cash, cash equivalents and restricted cash	127,060		(56,165)
Cash, cash equivalents and restricted cash at beginning of the fiscal year	Cash, cash equivalents and restricted cash at beginning of the fiscal year	259,334		339,307		Cash, cash equivalents and restricted cash at beginning of the fiscal year	259,334		339,307
Cash, cash equivalents and restricted cash at end of the period	Cash, cash equivalents and restricted cash at end of the period	$	252,962	$	346,816	Cash, cash equivalents and restricted cash at end of the period	$	386,394	$	283,142
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	$	18,486	$	4,774	Cash paid for income taxes	$	71,137	$	21,573
Cash paid for interest	Cash paid for interest	$	71	$	100	Cash paid for interest	$	430	$	302
Supplemental disclosures of noncash activity	Supplemental disclosures of noncash activity					Supplemental disclosures of noncash activity
Change in GNMA loans eligible for repurchase	Change in GNMA loans eligible for repurchase	$	(2,620)	$	(6,607)	Change in GNMA loans eligible for repurchase	$	(2,914)	$	(13,185)
Right-of-use assets recognized and operating lease obligations incurred	Right-of-use assets recognized and operating lease obligations incurred	$	1,159	$	708	Right-of-use assets recognized and operating lease obligations incurred	$	3,535	$	2,455
Fair value of assets acquired under finance leases						Fair value of assets acquired under finance leases	$	—	$	7,158
Finance lease obligations incurred						Finance lease obligations incurred	$	—	$	6,351

See accompanying Notes to Consolidated Financial Statements

Table of Contents

CAVCO INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. Basis of Presentation

The accompanying unaudited Consolidated Financial Statements of Cavco Industries, Inc. and its subsidiaries (collectively, "we," "us," "our," the "Company" or "Cavco") have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") for Quarterly Reports on Form 10-Q and Article 10 of SEC Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP") have been condensed or omitted pursuant to such rules and regulations. In addition, references throughout to numbered "Notes" refer to these Notes to Consolidated Financial Statements, unless otherwise stated.

In the opinion of management, these financial statements include all adjustments, including normal recurring adjustments, that are necessary to fairly state the results for the periods presented. Certain prior period amounts have been reclassified from secured financings to Accrued expenses and other current liabilities to conform to current period classification. We have evaluated subsequent events after the balance sheet date through the date of the filing of this report with the ~~SEC,~~SEC; and except for the events set forth in Note 23, there were no ~~disclosable~~ subsequent ~~events.~~events requiring disclosure. These Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the Notes to the Consolidated Financial Statements included in our 2022 Annual Report on Form 10-K for the year ended April 2, 2022, filed with the SEC ("Form 10-K").

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~~Consolidated Financial Statements and accompanying notes. Due to uncertainties, actual results could differ from the estimates and assumptions used in preparation of the ~~consolidated financial statements.~~Consolidated Financial Statements. The Consolidated Statements of Comprehensive Income and Consolidated Statements of Cash Flows for the interim periods are not necessarily indicative of the results or cash flows for the full year. The Company operates on a 52-53 week fiscal year ending on the Saturday nearest to March 31st 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 31st. The current fiscal year will end on April 1, 2023 and will include 52 weeks.

We operate in 2two segments: (1) factory-built housing, which includes wholesale and retail factory-built housing operations, and (2) financial services, which includes manufactured housing consumer finance and insurance. We design and build a wide variety of affordable manufactured homes, modular homes and park model RVs through 2627 homebuilding production lines located throughout the United States, which are sold to a network of independent distributors, community ~~owners~~operators and residential developers and through our 4542 Company-owned retail stores. The financial services segment is comprised of a finance subsidiary, CountryPlace Acceptance Corp. ("CountryPlace"), and an insurance subsidiary, Standard Casualty Company ("Standard Casualty"). CountryPlace is an approved Federal National Mortgage Association ("Fannie Mae") and Federal Home Loan Mortgage Corporation ("Freddie Mac") seller/servicer and a Government National Mortgage Association ("~~GNMA"~~Ginnie Mae") 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.

~~On September 24, 2021,~~During fiscal 2022, we acquired ~~the business~~an additional 20% ownership in Craftsman Homes, LLC and Craftsman Homes Development, LLC (collectively known as "Craftsman"), which gave us a 70% majority controlling ownership and therefore became a consolidated entity. We also purchased certain manufactured housing assets and assumed certain liabilities of The Commodore Corporation ("Commodore")~~, including its~~. Craftsman is a manufactured home retailer with four locations in Nevada selling Company and other manufacturer branded homes. Commodore added six manufacturing facilities and two wholly-owned retail ~~locations. The results of~~locations, and also participates in commercial lending operations ~~are included in our Consolidated Financial Statements from the date of acquisition. See Note 19.~~with its dealers.

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

Table of Contents

2. Revenue from Contracts with Customers

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


		Three Months Ended			Three Months Ended						Nine Months Ended
			July 2, 2022			July 3, 2021			December 31, 2022		January 1, 2022		December 31, 2022		January 1, 2022
Factory-built housing	Factory-built housing							Factory-built housing
U.S. Housing and Urban Development code homes	U.S. Housing and Urban Development code homes		$	507,183		$	262,390	U.S. Housing and Urban Development code homes	$	398,859	$	357,453	$	1,402,805	$	905,790
Modular homes	Modular homes		34,338			26,617		Modular homes	36,498		30,451		108,072		88,454
Park model RVs	Park model RVs		13,755			9,671		Park model RVs	20,102		10,709		44,359		30,108
Other	Other		17,321			13,605		Other	25,734		14,977		58,156		43,615
			572,597			312,283			481,193		413,590		1,613,392		1,067,967
Financial services	Financial services							Financial services
Insurance agency commissions received from third-party insurance companies	Insurance agency commissions received from third-party insurance companies		1,397			873		Insurance agency commissions received from third-party insurance companies	887		1,304		3,313		3,027
All other sources	All other sources		14,344			17,266		All other sources	18,523		16,820		49,628		50,685
			15,741			18,139			19,410		18,124		52,941		53,712
			$	588,338		$	330,422		$	500,603	$	431,714	$	1,666,333	$	1,121,679

3. Restricted Cash

Restricted cash consisted of the following (in thousands):


		July 2, 2022		April 2, 2022			December 31, 2022		April 2, 2022
Cash related to CountryPlace customer payments to be remitted to third parties	Cash related to CountryPlace customer payments to be remitted to third parties	$	13,562	$	13,857	Cash related to CountryPlace customer payments to be remitted to third parties	$	9,309	$	13,857
Other restricted cash	Other restricted cash	1,328		1,327		Other restricted cash	937		1,327
		14,890		15,184			10,246		15,184
Current portion	Current portion	(14,555)		(14,849)		Current portion	(9,911)		(14,849)
		$	335	$	335		$	335	$	335

Corresponding amounts for customer payments to be remitted to third parties are recorded in Accounts payable.

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


		July 2, 2022		July 3, 2021			December 31, 2022		January 1, 2022
Cash and cash equivalents	Cash and cash equivalents	$	238,072	$	329,753	Cash and cash equivalents	$	376,148	$	267,265
Restricted cash	Restricted cash	14,890		17,063		Restricted cash	10,246		15,877
		$	252,962	$	346,816		$	386,394	$	283,142

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4. Investments

Investments consisted of the following (in thousands):


		July 2, 2022		April 2, 2022			December 31, 2022		April 2, 2022
Available-for-sale debt securities	Available-for-sale debt securities	$	17,278	$	17,760	Available-for-sale debt securities	$	19,036	$	17,760
Marketable equity securities	Marketable equity securities	14,583		16,780		Marketable equity securities	14,103		16,780
Non-marketable equity investments	Non-marketable equity investments	20,818		20,479		Non-marketable equity investments	5,290		20,479
		52,679		55,019			38,429		55,019
Less short-term investments	Less short-term investments	(15,864)		(20,086)		Less short-term investments	(16,607)		(20,086)
		$	36,815	$	34,933		$	21,822	$	34,933

Investments in marketable equity securities consist of investments in the common stock of industrial and other companies.

Our non-marketable equity investments include investments in community-based initiatives that buy and sell our homes and provide home-only financing to residents of certain manufactured home communities and other ~~distribution operations.~~investments in manufactured housing distributors.

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


		July 2, 2022				April 2, 2022					December 31, 2022				April 2, 2022
		Amortized Cost		Fair Value		Amortized Cost		Fair Value			Amortized Cost		Fair Value		Amortized Cost		Fair Value
Residential mortgage-backed securities	Residential mortgage-backed securities	$	1,574	$	1,504	$	1,668	$	1,613	Residential mortgage-backed securities	$	2,670	$	2,572	$	1,668	$	1,613
State and political subdivision debt securities	State and political subdivision debt securities	7,480		7,232		10,100		9,906		State and political subdivision debt securities	6,542		6,228		10,100		9,906
Corporate debt securities	Corporate debt securities	8,876		8,542		6,502		6,241		Corporate debt securities	10,765		10,236		6,502		6,241
		$	17,930	$	17,278	$	18,270	$	17,760		$	19,977	$	19,036	$	18,270	$	17,760

The amortized cost and fair value of our investments in available-for-sale debt securities, by contractual maturity, are shown in the table below (in thousands). ~~Expected~~Actual maturities may differ from contractual maturities as borrowers may have the right to call or prepay obligations, with or without penalties.

July 2, 2022
Amortized
Cost Fair
Value
Due in less than one year $ 1,295 $ 1,281
Due after one year through five years 13,158 12,566
Due after five years through ten years 1,258 1,269
Due after ten years 645 658
Mortgage-backed securities 1,574 1,504
$ 17,930 $ 17,278

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


	December 31, 2022
	Amortized Cost		Fair Value
Due in less than one year	$	1,740	$	1,715
Due after one year through five years	14,172		13,355
Due after five years through ten years	1,003		1,004
Due after ten years	392		390
Mortgage-backed securities	2,670		2,572
	$	19,977	$	19,036

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

Three Months Ended
July 2,
2022 July 3,
2021
Marketable equity securities
Net (loss) gain recognized during the period $ (2,342) $ 1,696
Less: Net loss (gain) recognized on securities sold during the period 74 (136)
Unrealized (loss) gain recognized during the period on securities still held $ (2,268) $ 1,560


	Three Months Ended				Nine Months Ended
	December 31, 2022		January 1, 2022		December 31, 2022		January 1, 2022
Marketable equity securities
Net gain (loss) recognized during the period	$	707	$	2,967	$	(1,868)	$	4,906
Less: Net (gain) loss recognized on securities sold during the period	(107)		(257)		183		(536)
Unrealized gain (loss) recognized during the period on securities still held	$	600	$	2,710	$	(1,685)	$	4,370

5. Inventories

Inventories consisted of the following (in thousands):


		July 2, 2022		April 2, 2022			December 31, 2022		April 2, 2022
Raw materials	Raw materials	$	97,935	$	95,929	Raw materials	$	87,239	$	95,929
Work in process	Work in process	30,549		30,638		Work in process	29,400		30,638
Finished goods	Finished goods	126,238		117,404		Finished goods	98,819		117,404
		$	254,722	$	243,971		$	215,458	$	243,971

6. Consumer Loans Receivable

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


		July 2, 2022		April 2, 2022			December 31, 2022		April 2, 2022
Loans held for investment, previously securitized	Loans held for investment, previously securitized	$	24,732	$	26,014	Loans held for investment, previously securitized	$	22,221	$	26,014
Loans held for investment	Loans held for investment	14,670		14,771		Loans held for investment	14,513		14,771
Loans held for sale	Loans held for sale	10,909		8,500		Loans held for sale	5,049		8,500
Construction advances	Construction advances	1,908		3,547		Construction advances	757		3,547
		52,219		52,832			42,540		52,832
Deferred financing fees and other, net	Deferred financing fees and other, net	(727)		(833)		Deferred financing fees and other, net	(590)		(833)
Allowance for loan losses	Allowance for loan losses	(1,905)		(2,115)		Allowance for loan losses	(1,284)		(2,115)
		49,587		49,884			40,666		49,884
Less current portion	Less current portion	(20,888)		(20,639)		Less current portion	(13,763)		(20,639)
		$	28,699	$	29,245		$	26,903	$	29,245

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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
July 2,
2022 July 3,
2021
Allowance for loan losses at beginning of period $ 2,115 $ 3,188
Change in estimated loan losses, net (210) (267)
Charge-offs (19) (3)
Recoveries 19 —
Allowance for loan losses at end of period $ 1,905 $ 2,918

~~Table of Contents~~


	Three Months Ended				Nine Months Ended
	December 31, 2022		January 1, 2022		December 31, 2022		January 1, 2022
Allowance for loan losses at beginning of period	$	1,739	$	2,799	$	2,115	$	3,188
Change in estimated loan losses, net	(436)		(327)		(812)		(384)
Charge-offs	(19)		(85)		(38)		(417)
Recoveries	—		—		19		—
Allowance for loan losses at end of period	$	1,284	$	2,387	$	1,284	$	2,387

The consumer loans held for investment had the following characteristics:


		July 2, 2022		April 2, 2022			December 31, 2022		April 2, 2022
Weighted average contractual interest rate	Weighted average contractual interest rate	8.3	%	8.3	%	Weighted average contractual interest rate	8.1	%	8.3	%
Weighted average effective interest rate	Weighted average effective interest rate	9.3	%	9.2	%	Weighted average effective interest rate	8.9	%	9.2	%
Weighted average months to maturity	Weighted average months to maturity	151		151		Weighted average months to maturity	156		151

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


		July 2, 2022		April 2, 2022			December 31, 2022		April 2, 2022
Current	Current	$	50,382	$	49,546	Current	$	40,022	$	49,546
31 to 60 days	31 to 60 days	192		1,202		31 to 60 days	1,140		1,202
61 to 90 days	61 to 90 days	348		41		61 to 90 days	163		41
91+ days	91+ days	1,297		2,043		91+ days	1,215		2,043
		$	52,219	$	52,832		$	42,540	$	52,832

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


		July 2, 2022															December 31, 2022
		2023		2022		2021		2020		2019		Prior		Total			2023		2022		2021		2020		2019		Prior		Total
Prime- FICO score 680 and greater	Prime- FICO score 680 and greater	$	7,796	$	3,095	$	1,092	$	2,300	$	1,330	$	19,940	$	35,553	Prime- FICO score 680 and greater	$	4,788	$	1,085	$	1,059	$	2,124	$	1,198	$	17,690	$	27,944
Near Prime- FICO score 620-679	Near Prime- FICO score 620-679	335		727		1,389		1,240		1,962		9,304		14,957		Near Prime- FICO score 620-679	479		154		1,017		967		1,562		8,667		12,846
Sub-Prime- FICO score less than 620	Sub-Prime- FICO score less than 620	—		—		20		52		—		1,257		1,329		Sub-Prime- FICO score less than 620	125		—		20		51		—		1,106		1,302
No FICO score	No FICO score	—		—		—		—		26		354		380		No FICO score	69		—		—		—		25		354		448
		$	8,131	$	3,822	$	2,501	$	3,592	$	3,318	$	30,855	$	52,219		$	5,461	$	1,239	$	2,096	$	3,142	$	2,785	$	27,817	$	42,540


	April 2, 2022
	2022		2021		2020		2019		2018		Prior		Total
Prime- FICO score 680 and greater	$	8,155	$	1,615	$	2,371	$	1,339	$	853	$	20,485	$	34,818
Near Prime- FICO score 620-679	1,661		1,274		1,413		1,976		617		9,266		16,207
Sub-Prime- FICO score less than 620	45		20		52		—		—		1,318		1,435
No FICO score	—		—		—		26		—		346		372
	$	9,861	$	2,909	$	3,836	$	3,341	$	1,470	$	31,415	$	52,832

As of ~~July 2,~~December 31, 2022 and April 2, 2022, ~~40% and~~ 39% of the outstanding principal balance of the consumer loans receivable portfolio was concentrated in Texas, ~~respectively,~~and 18% and 17% ~~was~~, respectively, were concentrated in ~~Florida in both periods.~~Florida. Other than Texas and Florida, no state had concentrations in excess of 10% of the outstanding principal balance of the consumer loans receivable as of ~~July 2,~~December 31, 2022 or April 2, 2022.

Repossessed homes totaled approximately ~~$78,000~~$649,000 and $499,000 as of ~~July 2,~~December 31, 2022 and April 2, 2022, respectively, and are included in Prepaid expenses and other current assets on the Consolidated Balance Sheets. Foreclosure or similar proceedings in progress totaled approximately ~~$611,000~~$535,000 and $1.1 million as of ~~July 2,~~December 31, 2022 and April 2, 2022, respectively.

~~Table of Contents~~

7. Commercial Loans Receivable

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

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


		July 2, 2022		April 2, 2022			December 31, 2022		April 2, 2022
Loans receivable	Loans receivable	$	73,489	$	69,693	Loans receivable	$	79,345	$	69,693
Allowance for loan losses	Allowance for loan losses	(1,054)		(1,011)		Allowance for loan losses	(1,255)		(1,011)
Deferred financing fees, net	Deferred financing fees, net	(117)		(116)		Deferred financing fees, net	(117)		(116)
		72,318		68,566			77,973		68,566
Less current portion	Less current portion	(33,855)		(32,644)		Less current portion	(34,197)		(32,644)
		$	38,463	$	35,922		$	43,776	$	35,922

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The commercial loans receivable balance had the following characteristics:


		July 2, 2022		April 2, 2022			December 31, 2022		April 2, 2022
Weighted average contractual interest rate	Weighted average contractual interest rate	5.9	%	6.4	%	Weighted average contractual interest rate	6.7	%	6.4	%
Weighted average months outstanding	Weighted average months outstanding	9		9		Weighted average months outstanding	9		9

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


		Three Months Ended			Three Months Ended						Nine Months Ended
			July 2, 2022			July 3, 2021			December 31, 2022		January 1, 2022		December 31, 2022		January 1, 2022
Balance at beginning of period	Balance at beginning of period		$	1,011		$	816	Balance at beginning of period	$	1,123	$	826	$	1,011	$	816
Change in estimated loan losses, net	Change in estimated loan losses, net		43			(31)		Change in estimated loan losses, net	132		304		244		314
Balance at end of period	Balance at end of period		$	1,054		$	785	Balance at end of period	$	1,255	$	1,130	$	1,255	$	1,130

Loans with indicators of potential performance problems are placed on watch list status and are subject to additional monitoring and scrutiny. Nonperforming status includes loans accounted for on a non-accrual basis and accruing loans with principal payments 90 days or more past due. As of ~~July 2,~~December 31, 2022 and April 2, 2022, there were no commercial loans considered watch list or nonperforming. The following table disaggregates the principal value of our commercial loans receivable by fiscal year of origination (in thousands):

July 2, 2022
2023 2022 2021 2020 2019 Prior Total
Performing $ 26,909 $ 32,564 $ 8,326 $ 3,165 $ 1,371 $ 1,154 $ 73,489


	December 31, 2022
	2023		2022		2021		2020		2019		Prior		Total
Performing	$	52,498	$	18,324	$	4,770	$	2,321	$	682	$	750	$	79,345


	April 2, 2022
	2022		2021		2020		2019		2018		Prior		Total
Performing	$	52,592	$	10,181	$	4,031	$	1,391	$	1,498	$	—	$	69,693

As of ~~July 2,~~December 31, 2022, there were no commercial loans 90 days or more past due that were still accruing interest, and we were not aware of any potential problem loans that would have a material effect on the commercial loans receivable balance.

As of ~~July 2,~~December 31, 2022 and April 2, 2022, we had concentrations of our outstanding principal balance of the commercial loans receivable balance in New York of ~~20%~~22% and 25%, respectively. No other state had concentrations in excess of 10% of the outstanding principal balance of the commercial loans receivable as of ~~July 2,~~December 31, 2022 or April 2, 2022.

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

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

Table of ~~both July 2, 2022 and April 2, 2022.~~Contents

8. Property, Plant and Equipment, net

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


		July 2, 2022		April 2, 2022			December 31, 2022		April 2, 2022
Property, plant and equipment, at cost	Property, plant and equipment, at cost					Property, plant and equipment, at cost
Land	Land	$	36,096	$	32,154	Land	$	36,193	$	32,154
Buildings and improvements	Buildings and improvements	115,708		100,775		Buildings and improvements	142,420		100,775
Machinery and equipment	Machinery and equipment	49,911		48,638		Machinery and equipment	63,795		48,638
Construction in progress	Construction in progress	37,010		29,281		Construction in progress	8,713		29,281
		238,725		210,848			251,121		210,848
Accumulated depreciation	Accumulated depreciation	(53,191)		(46,832)		Accumulated depreciation	(56,792)		(46,832)
		$	185,534	$	164,016		$	194,329	$	164,016

Depreciation expense for the three and nine months ended ~~July 2,~~December 31, 2022 ~~and July 3, 2021~~ was $3.4 million and ~~$1.4~~$10.7 million, respectively. Depreciation expense for the three and nine months ended January 1, 2022 was $3.0 million and $5.9 million, respectively.

9. Leases

We lease certain production and retail locations, office space and equipment. The following table provides information about the financial statement classification of our lease balances reported within the Consolidated Balance Sheets as of December 31, 2022 and April 2, 2022 (in thousands):


	Classification	December 31, 2022		April 2, 2022
ROU assets
Operating lease assets	Operating lease right-of-use assets	$	17,230	$	16,952
Finance lease assets	Property, plant and equipment, net (1)	6,132		7,070
Total lease assets		$	23,362	$	24,022

Lease Liabilities
Current:
Operating lease liabilities	Accrued expenses and other current liabilities	$	5,389	$	5,085
Finance lease liabilities	Accrued expenses and other current liabilities	347		347
Non-current:
Operating lease liabilities	Operating lease liabilities	13,058		13,158
Finance lease liabilities	Other liabilities	5,914		5,969
Total lease liabilities		$	24,708	$	24,559

(1) Recorded net of accumulated amortization of $219,000 and $87,000 as of December 31, 2022 and April 2, 2022, respectively.

Table of Contents

The following table provides information about the financial statement classification of our lease expenses reported within the Consolidated Statements of Comprehensive Income for the three and nine months ended December 31, 2022 and January 1, 2022 (in thousands):


		Three Months Ended				Nine Months Ended
Lease Expense Category	Classification	December 31, 2022		January 1, 2022		December 31, 2022		January 1, 2022
Operating lease expense(2):
	Cost of sales	$	297	$	286	$	898	$	858
	Selling, general and administrative expenses	1,057		910		3,012		2,640
Finance lease expense:
Amortization of leased assets	Cost of sales	44		9		131		26
Interest on lease liabilities	Interest expense	71		73		212		80
Total lease expense		$	1,469	$	1,278	$	4,253	$	3,604

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

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


	Three Months Ended				Nine Months Ended
	December 31, 2022		January 1, 2022		December 31, 2022		January 1, 2022
Operating leases	$	1,372	$	1,190	$	4,003	$	2,277
Finance leases	89		18		267		37

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


	Operating Leases		Finance Leases		Total
Remainder of 2023	$	1,405	$	89	$	1,494
2024	5,308		356		5,664
2025	4,318		356		4,674
2026	3,897		356		4,253
2027	1,686		356		2,042
2028	1,203		356		1,559
Thereafter	2,795		10,585		13,380
Total lease payments	20,612		12,454		33,066
Less amount representing interest	(2,165)		(6,193)		(8,358)
Present value of lease liabilities	$	18,447	$	6,261	$	24,708

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


	Remaining Lease Term (Years)	Discount Rate
Operating leases	4.9	4.6	%
Finance leases	34.9	4.5	%

10. Goodwill and Other Intangibles

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

July 2, 2022 April 2, 2022
Gross
Carrying
Amount Accumulated
Amortization Net
Carrying
Amount Gross
Carrying
Amount Accumulated
Amortization Net
Carrying
Amount
Indefinite-lived
Goodwill $ 100,993 $ — $ 100,993 $ 100,993 $ — $ 100,993
Trademarks and trade names 15,680 — 15,680 15,680 — 15,680
State insurance licenses 1,100 — 1,100 1,100 — 1,100
117,773 — 117,773 117,773 — 117,773
Finite-lived
Customer relationships 19,500 (8,866) 10,634 19,500 (8,392) 11,108
Other 1,924 (1,387) 537 1,924 (1,353) 571
$ 139,197 $ (10,253) $ 128,944 $ 139,197 $ (9,745) $ 129,452

~~Table of Contents~~


	December 31, 2022						April 2, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Indefinite-lived
Goodwill	$	100,577	$	—	$	100,577	$	100,993	$	—	$	100,993
Trademarks and trade names	15,680		—		15,680		15,680		—		15,680
State insurance licenses	1,100		—		1,100		1,100		—		1,100
	117,357		—		117,357		117,773		—		117,773
Finite-lived
Customer relationships	15,000		(5,302)		9,698		19,500		(8,392)		11,108
Other	914		(444)		470		1,924		(1,353)		571
	$	133,271	$	(5,746)	$	127,525	$	139,197	$	(9,745)	$	129,452

Amortization expense recognized on intangible assets was ~~$508,000~~$501,000 and ~~$173,000~~$1.5 million for the three and nine months ended ~~July 2,~~December 31, 2022, respectively. Amortization expense recognized on intangible assets was $523,000 and ~~July 3, 2021,~~$862,000 for the three and nine months ended January 1, 2022, respectively.

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


Remainder of fiscal year		$	1,504
Remainder of fiscal year 2023				Remainder of fiscal year 2023	$	501
2024	2024	1,339		2024	1,339
2025	2025	1,300		2025	1,300
2026	2026	1,258		2026	1,258
2027	2027	1,185		2027	1,185
2028	2028	1,079		2028	1,079
Thereafter	Thereafter	3,506		Thereafter	3,506
					$	10,168

~~10.~~

Table of Contents

11. Accrued Expenses and Other Current Liabilities

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


		July 2, 2022		April 2, 2022			December 31, 2022		April 2, 2022
Customer deposits	Customer deposits	$	54,161	$	56,318	Customer deposits	$	46,399	$	56,318
Salaries, wages and benefits	Salaries, wages and benefits	52,899		54,172		Salaries, wages and benefits	43,365		54,172
Estimated warranties	Estimated warranties	28,802		26,250		Estimated warranties	30,946		26,250
Unearned insurance premiums	Unearned insurance premiums	26,207		24,917		Unearned insurance premiums	25,758		24,917
Accrued volume rebates	Accrued volume rebates	22,532		18,641		Accrued volume rebates	25,660		18,641

Other	Other	75,177		70,790		Other	79,507		70,790
		$	259,778	$	251,088		$	251,635	$	251,088

~~11.~~12. Warranties

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


		Three Months Ended			Three Months Ended						Nine Months Ended
			July 2, 2022			July 3, 2021			December 31, 2022		January 1, 2022		December 31, 2022		January 1, 2022
Balance at beginning of period	Balance at beginning of period		$	26,250		$	18,032	Balance at beginning of period	$	30,841	$	25,745	$	26,250	$	18,032
Purchase accounting additions								Purchase accounting additions	—		—		—		6,928
Charged to costs and expenses	Charged to costs and expenses		15,004			9,125		Charged to costs and expenses	12,036		10,883		40,663		28,002
Payments and deductions	Payments and deductions		(12,452)			(7,813)		Payments and deductions	(11,931)		(10,394)		(35,967)		(26,728)
Balance at end of period	Balance at end of period		$	28,802		$	19,344	Balance at end of period	$	30,946	$	26,234	$	30,946	$	26,234

~~12.~~13. Other Liabilities

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


		July 2, 2022		April 2, 2022			December 31, 2022		April 2, 2022
Finance lease payables	Finance lease payables	$	6,298	$	6,316	Finance lease payables	$	6,261	$	6,316
Other secured financing	Other secured financing	2,791		2,933		Other secured financing	2,450		2,933
Mandatorily redeemable noncontrolling interest	Mandatorily redeemable noncontrolling interest	2,371		2,371		Mandatorily redeemable noncontrolling interest	2,318		2,371
		11,460		11,620			11,029		11,620
Less current portion included in Accrued expenses and other current liabilities	Less current portion included in Accrued expenses and other current liabilities	(765)		(784)		Less current portion included in Accrued expenses and other current liabilities	(3,131)		(784)
		$	10,695	$	10,836		$	7,898	$	10,836

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~~13.~~14. Debt

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

Loans under the Revolving Credit Facility will bear interest at a rate equal to (i) the Secured Overnight Financing Rate, plus a credit spread adjustment of 0.10% (as adjusted, "Term SOFR"), plus the "applicable rate" or (ii) the "base rate" (defined as the highest of (a) the Bank of America prime rate, (b) the Federal Funds rate plus 0.50%, and (c) Term SOFR plus 1.00%) plus the "applicable rate." The applicable rate will be determined in accordance with a pricing grid based on the Company's Consolidated Total Leverage Ratio (as defined in the Credit Agreement) ranging from 1.125% to 1.350% per annum for Term SOFR rate loans and from 0.125% to 0.350% per annum for base rate loans. In addition, the Company will pay a commitment fee on the unused portion of the Revolving Credit Facility of 0.15% per annum.

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

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

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

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

15. Reinsurance and Insurance Loss Reserves

Certain of Standard Casualty's premiums and benefits are assumed from and ceded to other insurance companies under various reinsurance agreements. We remain obligated for amounts ceded in the event that the reinsurers do not meet their obligations.

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

Three Months Ended
July 2, 2022 July 3, 2021
Written Earned Written Earned
Direct premiums $ 7,728 $ 7,050 $ 6,839 $ 5,996
Assumed premiums—nonaffiliated 9,028 7,957 8,574 7,378
Ceded premiums—nonaffiliated (4,229) (4,229) (3,647) (3,647)

$ 12,527 $ 10,778 $ 11,766 $ 9,727


	Three Months Ended
	December 31, 2022				January 1, 2022
	Written		Earned		Written		Earned
Direct premiums	$	7,454	$	7,529	$	6,380	$	6,557
Assumed premiums—nonaffiliated	7,709		8,358		7,023		7,822
Ceded premiums—nonaffiliated	(4,413)		(4,413)		(3,866)		(3,866)
	$	10,750	$	11,474	$	9,537	$	10,513

	Nine Months Ended
	December 31, 2022				January 1, 2022
	Written		Earned		Written		Earned
Direct premiums	$	22,350	$	21,917	$	19,529	$	18,876
Assumed premiums—nonaffiliated	25,555		24,526		23,837		22,830
Ceded premiums—nonaffiliated	(13,056)		(13,056)		(11,227)		(11,227)
	$	34,849	$	33,387	$	32,139	$	30,479

Typical insurance policies written or assumed have a maximum coverage of $300,000 per claim, of which we cede $125,000 of the risk of loss per reinsurance. Therefore, our risk of loss is limited to $175,000 per claim on typical policies, subject to the reinsurers meeting their obligations. After this limit, amounts are recoverable through reinsurance for catastrophic losses in excess of $2 million per occurrence, up to a maximum of $70 million in the aggregate for that occurrence.

Standard Casualty establishes reserves for claims and claims expense on reported and incurred but not reported ("IBNR") claims of non-reinsured losses. Reserves for claims are included in the Accrued expenses and other current liabilities line item on the Consolidated Balance Sheets and claims expenses are recorded in Cost of sales on the Consolidated Statements of Comprehensive Income. The following details the activity in the reserve for the three and nine months ended ~~July 2,~~December 31, 2022 and ~~July 3, 2021~~January 1, 2022 (in thousands):


		Three Months Ended			Three Months Ended						Nine Months Ended
			July 2, 2022			July 3, 2021			December 31, 2022		January 1, 2022		December 31, 2022		January 1, 2022
Balance at beginning of period	Balance at beginning of period		$	8,149		$	7,451	Balance at beginning of period	$	7,790	$	7,350	$	8,149	$	7,451
Net incurred losses during the year			8,777			7,975
Net claim payments during the year			(8,352)			(7,078)
Net incurred losses during the period								Net incurred losses during the period	8,464		5,046		25,050		20,303
Net claim payments during the period								Net claim payments during the period	(7,163)		(4,916)		(24,108)		(20,274)
Balance at end of period	Balance at end of period		$	8,574		$	8,348	Balance at end of period	$	9,091	$	7,480	$	9,091	$	7,480

~~14.~~16. Income Taxes

For the three and nine months ended December 31, 2022, Income tax (expense) benefit included $2.4 million and $5.1 million, respectively, of estimated tax credits related to the manufacture and sale of energy efficient homes. This credit was initially established under the Federal Energy Policy Act of 2005 and most recently extended in the Consolidated Appropriations Act, 2021. The three and nine months ended January 1, 2022 included $34.4 million of such credits, which included catch up credits for homes sold between 2018 through 2021, and resulted in a net Income tax benefit of $20.7 million and $0.9 million, respectively.

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17. Commitments and Contingencies

Repurchase Contingencies. We are contingently liable under terms of repurchase agreements with financial institutions providing inventory financing to independent distributors of 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 maximum amount for which the Company was liable under such agreements approximated ~~$167.2~~$193.5 million and $141.0 million at ~~July 2,~~December 31, 2022 and April 2, 2022, respectively, without reduction for the resale value of the homes. We had a reserve for repurchase commitments of ~~$4.4~~$4.9 million at ~~July 2,~~December 31, 2022 and $3.6 million at April 2, 2022, and there were no repurchases during either period.

Construction-Period Mortgages. We fund construction-period mortgages through periodic advances during home construction. At the time of initial funding, we commit to fully fund the loan contract in accordance with a predetermined schedule. The total loan contract amount, less cumulative advances, represents an off-balance sheet contingent commitment to fund future advances.

~~Table of Contents~~

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


		July 2, 2022		April 2, 2022			December 31, 2022		April 2, 2022
Construction loan contract amount	Construction loan contract amount	$	5,447	$	9,330	Construction loan contract amount	$	3,251	$	9,330
Cumulative advances	Cumulative advances	(1,908)		(3,547)		Cumulative advances	(757)		(3,547)
		$	3,539	$	5,783		$	2,494	$	5,783

Representations and Warranties of Mortgages Sold. We sell loans to Government-Sponsored Enterprises ("GSEs") and whole-loan ~~purchasers and finance certain loans with long-term credit facilities secured by the respective loans.~~purchasers. In connection with these activities, we provide ~~to GSEs and whole-loan purchasers and lenders~~ representations and warranties related to the loans sold or financed. Upon a breach of a representation, we may be required to repurchase the loan or to indemnify a party for incurred losses. We maintain a reserve for these contingent repurchase and indemnification obligations. This reserve of ~~$1.0 million~~$819,000 as of ~~July 2,~~December 31, 2022 and $866,000 as of April 2, 2022, included in Accrued expenses and other current liabilities on the Consolidated Balance Sheets, reflects management's estimate of probable loss. There were no claim requests that resulted in the repurchase of a loan during the ~~three~~nine months ended ~~July 2,~~December 31, 2022.

Interest Rate Lock Commitments. In originating loans for sale, we issue interest rate lock commitments ("IRLCs") to prospective borrowers. These IRLCs bind us to fund the approved loan at the specified rate regardless of whether interest rates or market prices for similar loans have changed between the commitment date and the closing date. As of ~~July 2,~~December 31, 2022, we had outstanding IRLCs with a notional amount of ~~$49.9 million~~$41.0 million. For the three months ended December 31, 2022, we recognized gains of $12,000 on outstanding IRLCs. There were no gains or losses on outstanding IRLCs for the three months ended January 1, 2022. For the nine months ended December 31, 2022 and January 1, 2022, we recognized ~~a gain~~gains of ~~$40,000 in the fiscal 2023 first quarter~~$43,000 and a ~~gain of~~ ~~$47,000~~ ~~in the fiscal 2022~~ ~~first quarter.~~$42,000, respectively.

Forward Sales Commitments. We manage the risk profiles of a portion of the outstanding IRLCs and mortgage loans held for sale by entering into forward sales of mortgage-backed securities ~~("MBS")~~ and whole loan sale commitments (collectively "Commitments"). As of ~~July 2,~~December 31, 2022, we had ~~$10.2~~$3.9 million in outstanding ~~Commitments and~~Commitments. We recognized a non-cash ~~loss~~losses of ~~$262,000 in~~$197,000 and $61,000 during the ~~fiscal~~ ~~2023 first quarter~~three months ended December 31, 2022 and ~~a non-cash loss~~January 1, 2022, respectively. During the nine months ended December 31, 2022 and January 1, 2022, we recognized losses of $282,000 and $329,000, respectively.

~~$347,000 in the fiscal 2022~~ Table of Contents

~~first quarter.~~

Legal Matters. On September 2, 2021, the SEC filed a civil complaint in the United States District Court, District of Arizona, naming the Company along with the Company's former Chairman, President & Chief Executive Officer ("CEO") and the Company's former Chief Financial Officer, alleging violations of the antifraud and internal accounting control provisions of the Securities Exchange Act of 1934 based on trading in the shares of another company directed by the former CEO that resulted in an unrealized gain of approximately $260,000. In the prior year, the Company recorded an accrual relating to this loss contingency. The Company has reached a settlement in principle with the SEC staff regarding the pending litigation. The settlement is subject to SEC approval that is expected within the next 60 days. A related notice has been filed with the Court in that action. We do not believe that the settlement will have a material impact on our results of operations or financial position.

We are party to certain ~~other~~ lawsuits in the ordinary course of business. Based on management's present knowledge of the facts and (in certain cases) advice of outside counsel, management does not believe that loss contingencies arising from pending matters are likely to have a material adverse effect on our consolidated financial position, liquidity or results of operations after taking into account any existing reserves, which reserves are included in Accrued expenses and other current liabilities on the Consolidated Balance Sheets. However, future events or circumstances that may currently be unknown to management will determine whether the resolution of pending or threatened litigation or claims will ultimately have a material effect on our consolidated financial position, liquidity or results of operations in any future reporting periods.

~~Table of Contents~~

~~15.~~18. Stockholders' Equity and Redeemable Noncontrolling Interest

The following table represents changes in stockholders' equity attributable to Cavco's stockholders and redeemable noncontrolling interest during the ~~three~~nine months ended ~~July 2,~~December 31, 2022 (dollars in thousands):


		Equity Attributable to Cavco Stockholders																										Equity Attributable to Cavco Stockholders
					Treasury Stock				Additional paid-in capital		Retained earnings					Accumulated other comprehensive loss			Total					Redeemable Noncontrolling Interest												Treasury stock			Additional paid-in capital		Retained earnings			Accumulated other comprehensive loss			Total					Redeemable noncontrolling interest
		Common Stock													Common Stock
		Shares	Amount												Shares							Amount
Balance, April 2, 2022	Balance, April 2, 2022	9,292,278	$	93			$	(61,040)					$	263,049							$	628,756				$	(403)			$	830,455			$	825			Balance, April 2, 2022		9,292,278		$	93		$	(61,040)		$	263,049	$	628,756			$	(403)	$	830,455		$	825
Net income	Net income	—	—				—						—					59,602					—						59,602				92	Net income			—			—		—			—			59,602		—				59,602				92
Other comprehensive loss, net	Other comprehensive loss, net	—	—		—				—		—					(112)			(112)						—		Other comprehensive loss, net		—				—				—			—		—			(112)			(112)					—
Issuance of common stock under stock incentive plans		5,957	—		—				(848)		—					—			(848)					—
Issuance of common stock under stock incentive plans, net																										Issuance of common stock under stock incentive plans, net		5,957				—				—			(848)		—			—			(848)					—
Stock-based compensation	Stock-based compensation	—	—		—				1,425		—					—			1,425					—		Stock-based compensation		—				—				—			1,425		—			—			1,425					—
Common stock repurchases	Common stock repurchases	—	—		(38,960)				—		—					—			(38,960)					—		Common stock repurchases		—				—				(38,960)			—		—			—			(38,960)					—
Distributions	Distributions	—	—		—				—		—					—			—					(240)		Distributions		—				—				—			—		—			—			—					(240)
Balance, July 2, 2022	Balance, July 2, 2022	9,298,235	$	93	$	(100,000)			$	263,626	$	688,358				$	(515)		$	851,562				$	677	Balance, July 2, 2022		9,298,235				$	93			$	(100,000)		$	263,626	$	688,358		$	(515)		$	851,562				$	677
Net income																										Net income		—				—				—			—		74,116			—			74,116					82
Other comprehensive loss, net																										Other comprehensive loss, net		—				—				—			—		—			(303)			(303)					—
Issuance of common stock under stock incentive plans, net																										Issuance of common stock under stock incentive plans, net		15,917				—				—			1,457		—			—			1,457					—
Stock-based compensation																										Stock-based compensation		—				—				—			2,100		—			—			2,100					—
Distributions																										Distributions		—				—				—			—		—			—			—					(240)
Subsequent valuation adjustment																										Subsequent valuation adjustment		—				—				—			—		—			—			—					407
Balance, October 1, 2022																										Balance, October 1, 2022		9,314,152				$	93			$	(100,000)		$	267,183	$	762,474		$	(818)		$	928,932				$	926
Net income																										Net income		—				—				—			—		59,524			—			59,524					65
Other comprehensive income, net																										Other comprehensive income, net		—				—				—			—		—			74			74					—
Issuance of common stock under stock incentive plans, net																										Issuance of common stock under stock incentive plans, net		5,548				—				—			(90)		—			—			(90)					—
Stock-based compensation																										Stock-based compensation		—				—				—			1,330		—			—			1,330					—
Common stock repurchases																										Common stock repurchases		—				—				(34,270)			—		—			—			(34,270)					—
Distributions																										Distributions		—				—				—			—		—			—			—					(120)
Subsequent valuation adjustment																										Subsequent valuation adjustment		—				—				—			—		—			—			—					61
Balance, December 31, 2022																										Balance, December 31, 2022		9,319,700				$	93			$	(134,270)		$	268,423	$	821,998		$	(744)		$	955,500				$	932

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

Initial value of noncontrolling interest upon transaction																															Initial value of noncontrolling interest upon transaction	—			—			—			—			—			—				—								1,235
Net income																															Net income	—			—			—			—			37,610			—				37,610								73
Other comprehensive loss, net																															Other comprehensive loss, net	—			—			—			—			—			(13)				(13)								—
Issuance of common stock under stock incentive plans, net																															Issuance of common stock under stock incentive plans, net	29,295			1			—			2,728			—			—				2,729								—
Stock-based compensation																															Stock-based compensation	—			—			—			1,317			—			—				1,317								—
Common stock repurchases																															Common stock repurchases	—			—			(7,594)			—			—			—				(7,594)								—
Distributions																															Distributions	—			—			—			—			—			—				—								(180)
Balance, October 2, 2021																															Balance, October 2, 2021	9,275,016			$	93		$	(21,877)		$	259,116		$	495,713		$	71			$	733,116							$	1,128
Net income																															Net income	—			—			—			—			79,419			—				79,419								196
Other comprehensive loss, net																															Other comprehensive loss, net	—			—			—			—			—			(113)				(113)								—
Issuance of common stock under stock incentive plans, net																															Issuance of common stock under stock incentive plans, net	14,592			—			—			1,437			—			—				1,437								—
Stock-based compensation																															Stock-based compensation	—			—			—			1,043			—			—				1,043								—
Common stock repurchases																															Common stock repurchases	—			—			(8,690)			—			—			—				(8,690)								—
Distributions																															Distributions	—			—			—			—			—			—				—								(120)
Balance, January 1, 2022																															Balance, January 1, 2022	9,289,608			$	93		$	(30,567)		$	261,596		$	575,132		$	(42)			$	806,212							$	1,204

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~~16.~~19. 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
July 2,
2022 July 3,
2021
Net income attributable to Cavco common stockholders $ 59,602 $ 27,046
Weighted average shares outstanding
Basic 8,918,280 9,198,229
Effect of dilutive securities 70,649 78,300
Diluted 8,988,929 9,276,529
Net income per share attributable to Cavco common stockholders
Basic $ 6.68 $ 2.94
Diluted $ 6.63 $ 2.92
Anti-dilutive common stock equivalents excluded 1,617 8,366


	Three Months Ended				Nine Months Ended
	December 31, 2022		January 1, 2022		December 31, 2022		January 1, 2022
Net income attributable to Cavco common stockholders	$	59,524	$	79,419	$	193,242	$	144,075
Weighted average shares outstanding
Basic	8,870,565		9,174,224		8,897,405		9,187,828
Effect of dilutive securities	65,510		96,214		71,699		83,027
Diluted	8,936,075		9,270,438		8,969,104		9,270,855
Net income per share attributable to Cavco common stockholders
Basic	$	6.71	$	8.66	$	21.72	$	15.68
Diluted	$	6.66	$	8.57	$	21.55	$	15.54

Anti-dilutive common stock equivalents excluded	930		1,640		776		2,449

~~17.~~20. Fair Value Measurements

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


		July 2, 2022				April 2, 2022					December 31, 2022				April 2, 2022
		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	$	17,278	$	17,278	$	17,760	$	17,760	Available-for-sale debt securities	$	19,036	$	19,036	$	17,760	$	17,760
Marketable equity securities	Marketable equity securities	14,583		14,583		16,780		16,780		Marketable equity securities	14,103		14,103		16,780		16,780
Non-marketable equity investments	Non-marketable equity investments	20,818		20,818		20,479		20,479		Non-marketable equity investments	5,290		5,290		20,479		20,479
Consumer loans receivable	Consumer loans receivable	49,587		52,208		49,884		53,354		Consumer loans receivable	40,666		47,039		49,884		53,354

Commercial loans receivable	Commercial loans receivable	72,318		69,509		68,566		65,942		Commercial loans receivable	77,973		73,343		68,566		65,942
Other secured financing	Other secured financing	(2,791)		(2,781)		(2,933)		(3,119)		Other secured financing	(2,450)		(2,357)		(2,933)		(3,119)

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

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


		July 2, 2022			April 2, 2022				December 31, 2022			April 2, 2022
Number of loans serviced with MSRs	Number of loans serviced with MSRs	4,216			4,346			Number of loans serviced with MSRs	4,101			4,346
Weighted average servicing fee (basis points)	Weighted average servicing fee (basis points)	34.70			34.76			Weighted average servicing fee (basis points)	34.72			34.76
Capitalized servicing multiple	Capitalized servicing multiple	101.5		%	85.07		%	Capitalized servicing multiple	114.0		%	85.07		%
Capitalized servicing rate (basis points)	Capitalized servicing rate (basis points)	35.22			29.57			Capitalized servicing rate (basis points)	39.57			29.57
Serviced portfolio with MSRs (in thousands)	Serviced portfolio with MSRs (in thousands)	$	543,871		$	560,178		Serviced portfolio with MSRs (in thousands)	$	526,535		$	560,178
MSRs (in thousands)	MSRs (in thousands)	$	1,915		$	1,656		MSRs (in thousands)	$	2,083		$	1,656

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~~18.~~21. Related Party Transactions

WeIn addition to our Company-owned stores, we have non-marketable equity investments in other ~~distribution operations outside of Company-owned retail stores.~~manufactured housing distributors. In the ordinary course of business, we sell homes and lend to certain of these ~~operations~~distributors through our commercial lending programs. For the three and nine months ended ~~July 2,~~December 31, 2022, ~~and July 3, 2021,~~ the total amount of sales to related parties was ~~$17.2~~$18.7 million and ~~$14.8~~$56.0 million, respectively. For the three and nine months ended January 1, 2022, the total amount of sales to related parties was $15.8 million and $44.6 million, respectively. As of ~~July 2,~~December 31, 2022, receivables from related parties included ~~$5.3~~$6.3 million of accounts receivable and ~~$1.8~~$3.3 million of commercial loans outstanding. As of April 2, 2022, receivables from related parties included $3.3 million of accounts receivable and $2.6 million of commercial loans outstanding.

~~19. Acquisitions~~

On July 4, 2021, we obtained an additional 20% ownership interest in Craftsman Homes, LLC and Craftsman Homes Development, LLC (“the Entities”) which gave us a controlling interest. Accordingly, we now consolidate the Entities and the results of operations have been included in the accompanying Consolidated Financial Statements since the date of acquisition.

On September 24, 2021, we purchased certain manufactured housing assets and assumed certain liabilities of Commodore, including its six manufacturing facilities and two wholly-owned retail locations. In addition to manufacturing, Commodore also participates in commercial lending operations with its dealers. The transaction was accounted for as a business combination and the results of operations have been included in the accompanying Consolidated Financial Statements since the date of acquisition.

~~Pro Forma Impact of Acquisitions (unaudited). The following table presents supplemental pro forma information as if the acquisitions occurred on April 4, 2021 (in thousands, except per share data):~~

~~Three Months Ended~~

July 3,
2021

~~Net revenue~~

~~411,752~~

~~Net income attributable to Cavco common stockholders~~

~~28,022~~

~~Diluted net income per share~~

~~3.02~~

~~20.~~22. Business Segment Information

We operate principally in 2two segments: (1) factory-built housing, which includes wholesale and retail factory-built housing operations, and (2) financial services, which includes manufactured housing consumer finance and insurance. The following table provides selected financial data by segment (in thousands):


		Three Months Ended			Three Months Ended						Nine Months Ended
			July 2, 2022			July 3, 2021			December 31, 2022		January 1, 2022		December 31, 2022		January 1, 2022
Net revenue	Net revenue							Net revenue
Factory-built housing	Factory-built housing		$	572,597		$	312,283	Factory-built housing	$	481,193	$	413,590	$	1,613,392	$	1,067,967
Financial services	Financial services		15,741			18,139		Financial services	19,410		18,124		52,941		53,712
			$	588,338		$	330,422		$	500,603	$	431,714	$	1,666,333	$	1,121,679

Income (loss) before income taxes
Income before income taxes								Income before income taxes
Factory-built housing	Factory-built housing		$	79,772		$	33,559	Factory-built housing	$	71,813	$	52,905	$	241,959	$	133,357
Financial services	Financial services		(462)			1,919		Financial services	4,268		6,030		6,243		10,077
			$	79,310		$	35,478		$	76,081	$	58,935	$	248,202	$	143,434


	December 31, 2022		April 2, 2022
Total assets:
Factory-built housing	$	1,072,652	$	929,535
Financial services	191,822		225,437
	$	1,264,474	$	1,154,972

23. Subsequent Event

As announced on January 3, 2023 in a current report on Form 8-K, we completed the acquisition of Solitaire Inc. and other related entities (collectively "Solitaire Homes"), including their four manufacturing facilities and twenty-two retail locations. The addition of Solitaire Homes to our existing manufacturing and retail system strengthens our position in the Southwest and expands our manufacturing capabilities into Mexico.

The purchase price totaled $93 million, before certain customary adjustments, and was funded with cash on hand. The allocation of the purchase price is still preliminary as of the date of this report and will be finalized upon completion of the analysis of the fair values of the acquired assets, liabilities assumed and intangible assets. We expect to finalize these amounts as soon as possible but no later than one year from the acquisition date. Accordingly, supplemental pro-forma information is not available and is therefore omitted.

~~Table of Contents~~

July 2,
2022 April 2,
2022
Total assets:
Factory-built housing $ 962,704 $ 929,535
Financial services 221,096 225,437
$ 1,183,800 $ 1,154,972

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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 ("Report") 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 (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,~~include, for example, in discussions regarding the manufactured housing and site-built housing industries; our financial performance and operating results; our liquidity and financial resources; our outlook with respect to Cavco Industries, Inc. and its subsidiaries (collectively, "we," "us," "our," the ~~Company~~"Company" or "Cavco") and the manufactured housing business in general; the expected effect of certain risks and uncertainties on our business, financial condition and results of operations; economic conditions, including concerns of a possible recession, and consumer confidence; ~~increasing~~trends in interest ~~rates;~~rates and inflation; potential acquisitions, strategic investments and other expansions; the sufficiency of our liquidity; operational and legal risks; how we may be affected by ~~the COVID-19 pandemic ("COVID-19") or~~ any ~~other~~ pandemic or outbreak; ~~labor shortages and~~geopolitical conditions (including the ~~pricing~~continuing Russia-Ukraine conflict); the cost and availability of labor and raw materials; governmental regulations and legal proceedings; the availability of favorable consumer and wholesale manufactured home financing; and the ultimate outcome of our commitments and contingencies. Forward-looking statements contained in this Report ~~on Form 10-Q ("Report")~~ speak only as of the date of this ~~report~~Report or, in the case of any document incorporated by reference, the date of that document. We do not intend to publicly update or revise any forward-looking statement contained in this Report 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, except as required by law.

Forward-looking statements involve risks, uncertainties and other factors that may cause 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 our assumptions and expectations differ from actual results, 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 our results and cause them to materially differ from those contained in the forward-looking statements include, without limitation, those discussed under Risk Factors in Part I, Item 1A of our 2022 Annual Report on Form 10-K filed with the Securities and Exchange Commission ~~("Form~~(the "Form 10-K").

Introduction

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

Company Overview

Headquartered in Phoenix, Arizona, we design and produce factory-built housing products primarily distributed through a network of independent and Company-owned retailers, planned community operators and residential developers. We are one of the largest producers of manufactured homes in the United States, based on reported wholesale shipments. Our products are marketed under a variety of brand names including Cavco, Fleetwood, Palm Harbor, Nationwide, Fairmont, Friendship, Chariot Eagle, Destiny, Commodore, Colony, Pennwest, R-Anell, Manorwood, MidCountry and ~~MidCountry.~~Solitaire. We are also a leading producer of park model RVs, vacation cabins and factory-built commercial structures. 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. Our insurance subsidiary, Standard Casualty Company ("Standard Casualty"), provides property and casualty insurance to owners of manufactured homes.

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We operate 2631 homebuilding production lines in Millersburg and Woodburn, Oregon; Riverside, California; Nampa, Idaho; Phoenix, Glendale and Goodyear, Arizona; Deming, New Mexico; Duncan, Oklahoma; Austin, Fort Worth, Seguin and Waco, Texas; Montevideo, Minnesota; Dorchester, Wisconsin; Nappanee and Goshen, Indiana; Lafayette, Tennessee; Douglas and Moultrie, Georgia; Shippenville and Emlenton, Pennsylvania; Martinsville and Rocky Mount, Virginia; Cherryville and Hamlet, North Carolina; ~~and~~ Ocala and Plant City, ~~Florida.~~Florida; and two in Ojinaga, Mexico. 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, our homes are sold through 4564 Company-owned U.S. retail ~~locations.~~locations, including the 22 retail locations acquired with Solitaire Homes.

~~Included in the above figures are two recent acquisitions. On July 4, 2021,~~During fiscal 2022, we ~~purchased~~acquired an additional 20% ownership in Craftsman Homes, LLC and Craftsman Homes Development, LLC (collectively known as "Craftsman") ~~in addition to our existing 50% ownership, making~~, which gave us a 70% majority controlling ~~owner.~~interest. Craftsman is a manufactured home retailer with four locations in Nevada selling Company and other manufacturer branded homes. ~~They~~We also provide general construction to setup the customer's property and assist with multi-home developments and multi-family dwellings. The transaction was accounted for as a business combination achieved in stages and the results of operations have been included in the accompanying Consolidated Financial Statements since the date of the acquisition of the additional 20% interest, with a reduction for the earnings attributable to the noncontrolling shareholder.

~~On September 24, 2021, we~~ purchased certain manufactured housing assets and assumed certain liabilities of The Commodore Corporation ("Commodore")~~, including its~~. Commodore added six manufacturing facilities and two wholly-owned retail ~~locations. In addition to manufacturing, Commodore~~locations, and also participates in commercial lending operations with its dealers.

On January 3, 2023, subsequent to the end of the third fiscal quarter of 2023, we completed the acquisition of Solitaire Homes, including its four manufacturing facilities, twenty-two retail locations and its dedicated transportation operations. The ~~transaction was accounted for as a business combination~~addition of Solitaire Homes to our existing manufacturing and ~~the results of operations have been included~~retail system strengthens our position in the ~~accompanying Consolidated Financial Statements since the date of acquisition.~~Southwest and expands our manufacturing capabilities into Mexico.

Company and Industry Outlook

According to data reported by the Manufactured Housing Institute, industry home shipments ~~increased 13.4% for the first 5 months~~through November 2022 were 106,454, an increase of ~~calendar year 2022~~8.9% compared to 97,745 shipments in the same period last year.

The industry offers solutions to the affordable housing crisis and these shipment numbers reflect the industry's ability to produce in the current environment. The average price per square foot for a manufactured home is usually lower than a site-built home. Also, based on the comparatively 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 those who are age 55 and older, are both growing. "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 periods of low employment rates and underemployment. Consumer confidence is especially important among manufactured home buyers interested in our products for seasonal or retirement living.

We employ a concerted effort to identify niche market opportunities where our diverse product lines and custom building capabilities provide us with a competitive advantage. We are focused on building quality, energy efficient homes for the modern home buyer. Our green building initiatives involve the creation of an energy efficient envelope ~~including~~resulting in lower utility costs, as well as the higher utilization of renewable materials ~~and provide lower utility costs.~~in our manufacturing process. We also build homes designed to use alternative energy sources, such as solar.

We maintain a conservative cost structure in an effort to build added value into our homes and we work diligently to 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 act effectively as market opportunities or challenges present themselves.

~~Table of Contents~~

We continue to make certain commercial loan programs available to members of our wholesale distribution chain. Under direct commercial loan arrangements, we provide funds for financed home purchases by distributors, community ~~owners~~operators and residential developers (see Note 7 to the Consolidated Financial Statements). Our involvement in commercial ~~loans~~lending helps to increase the availability of manufactured home financing to distributors, community ~~owners~~operators and residential developers and provides additional opportunities for product exposure to potential home buyers. While these initiatives support our ongoing efforts to expand product distribution, they also expose us to risks associated with the creditworthiness of this customer base and our inventory financing partners.

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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. We work independently and with other industry participants to develop secondary market opportunities for manufactured home-only loan and non-conforming mortgage portfolios and expand lending availability in the industry. Additionally, we continue to invest in community-based lending initiatives that provide home-only financing to residents of certain manufactured home communities. We also develop and invest in home-only lending programs to grow sales of homes through traditional distribution points. We believe that growing our investment and participation in home-only lending may provide additional sales growth opportunities for our factory-built housing operations and reduce our exposure to the actions of independent lenders.

~~Home order rates have moderated from the extreme highs we saw during the summer of 2020 to the summer of 2021. However, our backlogs at July 2, 2022 were~~ ~~$1.0 billion, consistent with the sequential prior quarter of~~ ~~$1.1 billion~~ ~~and~~ ~~up $206 million, or 26.3%,~~ ~~compared to~~ ~~$792 million~~ ~~at July 3, 2021. The year over year increase includes $231 million attributable to Commodore.~~ ~~Backlogs exclude home orders that have been paused or canceled at the request of the customer.~~

Key housing building materials include wood, wood products, steel, gypsum wallboard, windows, doors fiberglass insulation, carpet, vinyl, fasteners, plumbing materials, aluminum, appliances and electrical items. Fluctuations in the cost of materials and labor may affect gross margins from home sales to the extent that costs cannot be efficiently matched to the home sales price. Pricing and availability of certain raw materials have ~~recently~~ been volatile due to a number of factors in the current environment. We continue to monitor and react to inflation in these materials by maintaining a focus on our product pricing in response to higher materials costs, but such product pricing increases may lag behind the escalation of such costs. From time to time and to varying degrees, we may experience shortages in the availability of materials and/or labor in the markets served. Availability of these inputs has not caused significant production halts in the current period, but we have experienced periodic shutdowns in other periods and shortages of primary building materials have caused production inefficiencies as we have needed to change processes in response to the delay in materials. These shortages may also result in extended order backlogs, delays in the delivery of homes and reduced gross margins from home sales.

Our backlog at December 31, 2022 was $427 million compared to $651 million last quarter, a decrease of $224 million or 34.4%, and down $678 million, or 61.4%, compared to $1.1 billion at January 1, 2022. This was largely due to lower home order rates net of cancellations. Order rates are down from the extreme highs we saw during the summer of 2020 to the summer of 2021.

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.~~meeting demand. 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 are also working to more extensively use web-based 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. ~~We believe our ability to recruit the workforce we need to help meet the overall need for affordable housing continues to improve.~~

~~Table of Contents~~

In the financial services segment, we continue to assist customers in need by servicing existing loans and 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 principal and interest in a timely manner. For certain loans serviced for Ginnie Mae and Freddie Mac, 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. Monthly collections of principal and interest from borrowers have exceeded scheduled principal and interest payments owed to investors; however, mandatory extended forbearance under the Coronavirus Aid, Relief and Economic Security Act and certain other regulations related to COVID-19 could negatively impact cash obligations in the future.

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Results of Operations

Net Revenue


		Three Months Ended									Three Months Ended
($ in thousands, except revenue per home sold)	($ in thousands, except revenue per home sold)	July 2, 2022		July 3, 2021		Change				($ in thousands, except revenue per home sold)	December 31, 2022		January 1, 2022		Change
Factory-built housing	Factory-built housing	$	572,597	$	312,283	$	260,314	83.4	%	Factory-built housing	$	481,193	$	413,590	$	67,603	16.3	%
Financial services	Financial services	15,741		18,139		(2,398)		(13.2)	%	Financial services	19,410		18,124		1,286		7.1	%
		$	588,338	$	330,422	$	257,916	78.1	%		$	500,603	$	431,714	$	68,889	16.0	%
Factory-built homes sold										Factory-built homes sold
by Company-owned retail sales centers										by Company-owned retail sales centers	748		658		90		13.7	%
to independent retailers, builders, communities and developers										to independent retailers, builders, communities and developers	3,694		3,766		(72)		(1.9)	%
											4,442		4,424		18		0.4	%
Net factory-built housing revenue per home sold										Net factory-built housing revenue per home sold	$	108,328	$	93,488	$	14,840	15.9	%

											Nine Months Ended

($ in thousands, except revenue per home sold)										($ in thousands, except revenue per home sold)	December 31, 2022		January 1, 2022		Change
Factory-built housing										Factory-built housing	$	1,613,392	$	1,067,967	$	545,425	51.1	%
Financial services										Financial services	52,941		53,712		(771)		(1.4)	%
											$	1,666,333	$	1,121,679	$	544,654	48.6	%
Factory-built homes sold	Factory-built homes sold									Factory-built homes sold
by Company-owned retail sales centers	by Company-owned retail sales centers	873		723		150		20.7	%	by Company-owned retail sales centers	2,481		2,091		390		18.7	%
to independent retailers, builders, communities and developers	to independent retailers, builders, communities and developers	4,473		2,977		1,496		50.3	%	to independent retailers, builders, communities and developers	12,418		9,630		2,788		29.0	%
		5,346		3,700		1,646		44.5	%		14,899		11,721		3,178		27.1	%
Net factory-built housing revenue per home sold	Net factory-built housing revenue per home sold	$	107,108	$	84,401	$	22,707	26.9	%	Net factory-built housing revenue per home sold	$	108,289	$	91,116	$	17,173	18.8	%

In ~~the~~ factory-built housing, ~~segment, the increase in~~ Net revenue ~~was primarily~~for both the three and nine months ended December 31, 2022 increased compared to the respective periods in the prior year due to higher home sales volume and higher home selling prices. Also included in both current year periods is $3.9 million of home sales revenue from an ~~increase~~equity method joint venture. This represents revenue that was previously deferred and now recognized in the ~~average sales price and the number of units sold. The~~ ~~higher home prices were driven by product price increases. Home sales volume increased from the addition of Commodore, which provided~~ ~~$101 million in Net revenue~~ ~~for the three months ended July 2, 2022, and higher factory capacity utilization.~~third quarter upon that entity selling those homes to an unrelated third party.

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 and sales of homes to consumers by Company-owned 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 in the number of modules per home, the selection of different home types/models and optional home upgrades create changes in product mix, also causing fluctuations in this metric. The ~~table~~tables below presents the mix of modules and homes sold for the three and nine months ended ~~July 2,~~December 31, 2022 and ~~July 3, 2021:~~January 1, 2022:

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					Three Months Ended
					December 31, 2022				January 1, 2022					Change
													Modules	Homes	Modules	Homes	Modules		Homes

U.S. Housing and Urban Development ("HUD") code homes												U.S. Housing and Urban Development ("HUD") code homes	5,852	3,454	6,166	3,583	(5.1)	%	(3.6)	%
Modular homes												Modular homes	1,412	708	1,270	632	11.2	%	12.0	%
Park model RVs												Park model RVs	280	280	209	209	34.0	%	34.0	%
													7,544	4,442	7,645	4,424	(1.3)	%	0.4	%

		Three Months Ended											Nine Months Ended
		July 2, 2022		July 3, 2021			Change						December 31, 2022		January 1, 2022		Change
		Modules	Homes	Modules		Homes	Modules			Homes			Modules	Homes	Modules	Homes	Modules		Homes
HUD code homes	HUD code homes	8,515	4,854	5,652		3,276	50.7	%		48.2	%	HUD code homes	20,474	11,925	17,366	10,013	17.9	%	19.1	%
Modular homes	Modular homes	486	251	468		226	3.8	%		11.1	%	Modular homes	4,408	2,207	2,257	1,112	95.3	%	98.5	%
Park model RVs	Park model RVs	241	241	198		198	21.7	%		21.7	%	Park model RVs	767	767	596	596	28.7	%	28.7	%
		9,242	5,346	6,318		3,700	46.3	%		44.5	%		25,649	14,899	20,219	11,721	26.9	%	27.1	%

For the three months ended December 31, 2022, Financial services segment Net revenue ~~decreased~~increased 7.1% primarily due to more policies in force in the current period, partially offset by lower interest income earned on the acquired consumer loan ~~portfolios that continue~~portfolios. For the nine months ended December 31, 2022, Net revenue decreased 1.4% primarily due to ~~amortize,~~realized and unrealized losses on marketable equity securities in the insurance subsidiary's portfolio during such period, lower interest income earned on the acquired consumer loan portfolios and lower volume ofin home loan ~~sales,~~sales. These items were partially offset by more insurance policies in ~~force. For~~force in the ~~three months ended July 2, 2022 and July 3, 2021, we recognized unrealized losses on marketable equity securities~~current period compared to the prior period.

Table of ~~$1.2 million and unrealized gains of $0.4 million, respectively.~~Contents

Gross Profit


		Three Months Ended											Three Months Ended
($ in thousands)	($ in thousands)	July 2, 2022			July 3, 2021			Change				($ in thousands)	December 31, 2022			January 1, 2022			Change
Factory-built housing	Factory-built housing	$	139,586		$	66,273		$	73,313	110.6	%	Factory-built housing	$	122,923		$	104,119		$	18,804	18.1	%
Financial services	Financial services	5,138			7,740			(2,602)		(33.6)	%	Financial services	9,045			11,089			(2,044)		(18.4)	%
		$	144,724		$	74,013		$	70,711	95.5	%		$	131,968		$	115,208		$	16,760	14.5	%

Gross profit as % of Net revenue	Gross profit as % of Net revenue											Gross profit as % of Net revenue
Consolidated	Consolidated	24.6		%	22.4		%	N/A		2.2	%	Consolidated	26.4		%	26.7		%	N/A		(0.3)	%
Factory-built housing	Factory-built housing	24.4		%	21.2		%	N/A		3.2	%	Factory-built housing	25.5		%	25.2		%	N/A		0.3	%
Financial services	Financial services	32.6		%	42.7		%	N/A		(10.1)	%	Financial services	46.6		%	61.2		%	N/A		(14.6)	%

													Nine Months Ended
($ in thousands)												($ in thousands)	December 31, 2022			January 1, 2022			Change
Factory-built housing												Factory-built housing	$	412,174		$	252,691		$	159,483	63.1	%
Financial services												Financial services	22,117			26,458			(4,341)		(16.4)	%
													$	434,291		$	279,149		$	155,142	55.6	%

Gross profit as % of Net revenue												Gross profit as % of Net revenue
Consolidated												Consolidated	26.1		%	24.9		%	N/A		1.2	%
Factory-built housing												Factory-built housing	25.5		%	23.7		%	N/A		1.8	%
Financial services												Financial services	41.8		%	49.3		%	N/A		(7.5)	%

Factory-built housing ~~gross~~Gross profit and Gross profit percentage increased for the three and nine months ended ~~July 2,~~December 31, 2022 primarily due to higher average sales ~~prices, increased home sales volume~~prices.

In Financial services, Gross profit and streamlining of our HUD code product offering across our network, partially offset by higher materials costs per unit. 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 material costs.

~~For~~Gross profit percentage decreased for the three and nine months ended ~~July 2,~~December 31, 2022 ~~Financial services gross profit decreased~~ primarily due to higher insurance claims from Arizona and Texas weather related ~~claims~~events and greater unrealized losses on marketable equity securities compared to ~~unrealized gains in~~ the ~~prior year period.~~same period last year.

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Selling, General and Administrative Expenses


		Three Months Ended											Three Months Ended
($ in thousands)	($ in thousands)	July 2, 2022			July 3, 2021			Change				($ in thousands)	December 31, 2022			January 1, 2022			Change
Factory-built housing	Factory-built housing	$	60,923		$	35,497		$	25,426	71.6	%	Factory-built housing	$	54,127		$	55,735		$	(1,608)	(2.9)	%
Financial services	Financial services	5,213			5,335			(122)		(2.3)	%	Financial services	4,777			4,587			190		4.1	%
		$	66,136		$	40,832		$	25,304	62.0	%		$	58,904		$	60,322		$	(1,418)	(2.4)	%
Selling, general and administrative expenses as % of Net revenue	Selling, general and administrative expenses as % of Net revenue	11.2		%	12.4		%	N/A		(1.2)	%	Selling, general and administrative expenses as % of Net revenue	11.8		%	14.0		%	N/A		(2.2)	%

													Nine Months Ended
($ in thousands)												($ in thousands)	December 31, 2022			January 1, 2022			Change
Factory-built housing												Factory-built housing	$	176,690		$	131,579		$	45,111	34.3	%
Financial services												Financial services	15,244			14,947			297		2.0	%
													$	191,934		$	146,526		$	45,408	31.0	%
Selling, general and administrative expenses as % of Net revenue												Selling, general and administrative expenses as % of Net revenue	11.5		%	13.1		%	N/A		(1.6)	%

For the three months ended ~~July 2,~~December 31, 2022, Selling, general and administrative expenses related to factory-built housing ~~increased between periods~~decreased primarily from lower legal and professional fees, partially offset by higher incentive compensation on improved earnings. For the ~~addition of Commodore,~~nine months ended December 31, 2022, Selling, general and administrative expenses increased primarily from higher legal and professional fees and higher salary and ~~incentive-based~~incentive compensation expense ~~and expenses incurred in engaging third-party consultants in relation to claiming the non-recurring energy efficient home net tax credits which were recognized in the second half of fiscal 2022.~~on improved earnings.

As a percentage of Net revenue, Selling, general and administrative expenses improved ~~120~~by 220 and 160 basis points for the three and nine months ended December 31, 2022, respectively, from better utilization of fixed costs on higher sales.

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Other Components of Net Income


		Three Months Ended											Three Months Ended
($ in thousands)	($ in thousands)	July 2, 2022			July 3, 2021			Change				($ in thousands)	December 31, 2022			January 1, 2022			Change
Interest expense	Interest expense	$	161		$	164		$	(3)	(1.8)	%	Interest expense	$	216		$	209		$	7	3.3	%
Other income, net	Other income, net	883			2,461			(1,578)		(64.1)	%	Other income, net	3,233			4,258			(1,025)		24	%
Income tax expense		19,616			8,432			11,184		132.6	%
Income tax (expense) benefit												Income tax (expense) benefit	(16,492)			20,680			(37,172)		179.7	%
Effective tax rate	Effective tax rate	24.7		%	23.8		%	N/A		0.9	%	Effective tax rate	21.7		%	(35.1)		%	N/A		N/M

													Nine Months Ended
($ in thousands)												($ in thousands)	December 31, 2022			January 1, 2022			Change
Interest expense												Interest expense	$	610		$	576		$	34	5.9	%
Other income, net												Other income, net	6,455			11,387			(4,932)		43.3	%
Income tax (expense) benefit												Income tax (expense) benefit	(54,721)			910			(55,631)		6,113.3	%
Effective tax rate												Effective tax rate	22.0		%	(0.6)		%	N/A		N/M

Interest expense consists primarily of interest related to finance leases.

Other income, net primarily consists of realized and unrealized gains and losses on corporate investments, interest income related to commercial loan receivable balances, interest income earned on cash balances and gains and losses from the sale of property, plant and equipment. The decrease in Other income, net ~~declined from~~is primarily due to a ~~$1.1~~$3.3 million gain recognized in the second quarter of last year on the remeasurement of the assets and liabilities of Craftsman upon acquisition of a controlling interest. Additionally, for the nine months ended December 31, 2022, we recognized a $1.2 million unrealized loss on corporate marketable investments ~~and lower~~compared to a $4.0 million unrealized gain in the prior year. These items were partially offset by higher interest income earned on ~~reduced~~a larger cash ~~balances.~~balance held in high yield money market funds.

For the three and nine months ended January 1, 2022, the effective income tax rate was a benefit due to $34.4 million of energy efficient home tax credits, which included catch up credits for homes sold between 2018 through 2021. The effective tax rate for the three and nine months ended December 31, 2022 was 21.7% and 22.0%, respectively.

Liquidity and Capital Resources

We believe that cash and cash equivalents at ~~July 2,~~December 31, 2022, together with cash flow from operations, will be sufficient to fund our operations, cover our obligations and provide for growth for the next 12 months and into the foreseeable future. We maintain cash in U.S. Treasury and other money market funds, some of which are in excess of federally insured limits. 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 our liquidity and capital resources. ~~Because~~We have sufficient liquid resources including our recently implemented $50.0 million Revolving Credit Facility, of ~~our sufficient cash position, we have not historically sought external sources of liquidity, with the exception of certain credit facilities for our home-only lending programs.~~which no amounts were outstanding at December 31, 2022. Regardless, depending on our operating results and strategic opportunities, we may choose to seek additional or alternative sources of 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 us to reevaluate our long-term operating plans to make more efficient use of our existing capital resources at such time. The exact nature of any changes to 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 our control.

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

The following is a summary of the Company's cash flows for the ~~three~~nine months ended ~~July 2,~~December 31, 2022 and ~~July 3, 2021,~~January 1, 2022, respectively:


		Three Months Ended							Nine Months Ended
(in thousands)	(in thousands)	July 2, 2022		July 3, 2021		$ Change		(in thousands)	December 31, 2022		January 1, 2022		$ 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	$	259,334	$	339,307	$	(79,973)	Cash, cash equivalents and restricted cash at beginning of the fiscal year	$	259,334	$	339,307	$	(79,973)
Net cash provided by operating activities	Net cash provided by operating activities	58,240		24,275		33,965		Net cash provided by operating activities	230,119		125,967		104,152
Net cash used in investing activities	Net cash used in investing activities	(24,399)		(3,616)		(20,783)		Net cash used in investing activities	(29,199)		(147,842)		118,643
Net cash used in financing activities	Net cash used in financing activities	(40,213)		(13,150)		(27,063)		Net cash used in financing activities	(73,860)		(34,290)		(39,570)
Cash, cash equivalents and restricted cash at end of the period	Cash, cash equivalents and restricted cash at end of the period	$	252,962	$	346,816	$	(93,854)	Cash, cash equivalents and restricted cash at end of the period	$	386,394	$	283,142	$	103,252

Net cash provided by operating activities increased primarily from higher net income adjusted for non-cash items. This increase was partially offset by increased lending in our Financial Services segment, as well as under our commercial loan ~~programs~~.programs. Consumer loan originations increased ~~$4.8~~$12.7 million to ~~$47.5~~$135.6 million for the ~~three~~nine months ended ~~July 2,~~December 31, 2022 from ~~$42.7~~$122.9 million for the ~~three~~nine months ended ~~July 3, 2021.~~January 1, 2022, which was partially offset by increased proceeds of $3.6 million from sales of consumer loans.

Net cash used in investing activities consists of buying and selling debt and marketable equity securities in our Financial Services segment, p~~urchases~~purchases of property, plant and equipment and funding strategic growth acquisitions. ~~Greater cash~~Cash used in the current period reflects the purchase of our plant facilities in Hamlet, North ~~Carolina.~~Carolina and development of our facility in Glendale, Arizona. These expenditures were partially offset by a $12.2 million return of invested capital from one of our equity method joint ventures. Cash used in the prior period reflects the purchase of Commodore and Craftsman.

Net cash used in financing activities for the current period was primarily for the repurchase of common ~~stock~~.stock.

See Note 1417 to the Consolidated Financial Statements for a discussion of our off-balance sheet commitments, which discussion is incorporated herein by reference.

Obligations and Commitments. There were no material changes to the obligations and commitments as set forth in ~~our Annual Report on~~the Form 10-K.

Critical Accounting Estimates

~~Except as described in Note 1 to the Consolidated Financial Statements, there~~There have been no ~~other~~ significant changes to our critical accounting estimates during the ~~three~~nine months ended ~~July 2,~~December 31, 2022, as compared to those disclosed in Part II, Item 7 of ~~our~~the Form 10-K, under the heading "Critical Accounting Estimates," which provides a discussion of the critical accounting estimates that management believes affect its more significant judgments and estimates used in the preparation of the Company's Consolidated Financial Statements.

~~Other Matters~~

~~Impact of Inflation.~~ At the end of the period, inflation was the highest in the U.S. in over 30 years. Our ability to maintain certain levels of gross margin can be adversely impacted by sudden increases in specific costs, such as the increases in materials and labor. In addition, measures used by the Federal Reserve to combat inflation, such as increases in interest rates, could also have an impact on the ability of home buyers to obtain affordable financing. We can give no assurance that inflation will not affect our future profitability and financial position.

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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 its Chief Financial Officer, of the effectiveness of 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 its Chief Financial Officer concluded that, as of ~~July 2,~~December 31, 2022, its disclosure controls and procedures were effective.

(b) Changes in Internal Control ~~over~~Over Financial Reporting

There has been no change in the Company's internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the fiscal quarter ended ~~July 2,~~December 31, 2022 which has materially affected, or is 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

See the information under the "Legal Matters" caption in Note 1417 to the Consolidated Financial Statements, which is incorporated herein by reference.

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 our business, financial condition or future results. ~~The risks described in this Report and~~Except as set forth below, there have been no material changes to the risk factors disclosed in the Form ~~10-K~~10-K. These are also not the only risks facing the ~~Company. Additional~~Company; additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

The following risk factors are added as Business and Operational Risks, Industry and Economic Risks and Legal and Regulatory Risks as noted below.

Business and Operational Risks

Shutdowns or delays at the United States/Mexico border could affect the Company's ability to ship materials to and receive finished goods from our Mexico production facilities

Our production operations in Mexico are dependent upon receiving materials from facilities in Presidio, Texas, and our sales from our Mexican operations are dependent upon shipments from our Ojinaga, Mexico facility. Shutdown or delays at the United States/Mexico border could impact our production at the Mexico facilities or our ability to receive finished goods from our Mexico facilities into the Unites States following production, each of which could adversely affect our results of operations.

Casualty losses associated with the Company's transportation operations may be large, which could adversely impact our financial performance

In the ordinary course of business, we may incur property or casualty losses during the transportation of raw materials or finished homes. Although we maintain general liability insurance, estimating the number and severity of claims, as well as related judgment or settlement amounts, is inherently difficult, and claims may ultimately prove to be more severe than our estimates. This, along with legal expenses, incurred but not reported claims, and other uncertainties can cause unfavorable differences between actual costs and our reserve estimates. Accordingly, ultimate results may differ materially from our estimates, which could result in losses and materially adversely affect our financial condition and results of operations.

Industry and Economic Risks

Changes in the exchange rates for Mexican Pesos could adversely affect the value of the Company's investments in Mexico and cause foreign exchange losses

We have production operations in Mexico, and unfavorable changes in the exchange rate for Mexican Pesos could adversely affect the reported value of our investments and/or results of operations.

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Legal and Regulatory Risks

Changes in existing regulations or violations of existing or future regulations could have a materially adverse effect on the Company's operations and profitability

We are subject to regulation by the United States Department of Transportation, the United States Environmental Protection Agency, the United States Department of Homeland Security and other state and federal agencies. Future laws and regulations or changes to existing laws and regulations may be more stringent, require changes in our operating practices, or require us to incur significant additional costs, which could materially adversely affect our business, financial condition, and results of operations.

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

Issuer Purchases of Equity Securities

As announced on ~~October 29, 2020~~May 26, 2022 in a current report on Form 8-K, the Company's Board of Directors approved a $100 million stock repurchase program ~~to purchase its outstanding common stock. The program was completed during~~with the ~~first quarter of fiscal year 2023.~~same terms and conditions as the previous plan. The repurchase program ~~was~~is funded using our available cash. The following table sets forth repurchases of our common stock during the ~~current quarter:~~third quarter of fiscal year 2023:

Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of the Publicly Announced Program Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program (in thousands)
April 3, 2022 to
May 7, 2022
163,040 $ 238.96 163,040 $ —
May 8, 2022 to June 4, 2022 — — — —
June 5, 2022 to July 2, 2022 — — — —
163,040 $ 238.96 163,040 $ —

As announced on May 26, 2022 in a current report on Form 8-K, the Company's Board of Directors approved another $100 million stock repurchase program with the same terms and conditions as the previous plan. There have been no repurchases made under this program.


Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of the Publicly Announced Program	Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program (in thousands)
October 2, 2022 to November 5, 2022	—	$	—	—	$	100,000
November 6, 2022 to December 3, 2022	70,467	216.96		70,467	84,712
December 4, 2022 to December 31, 2022	81,064	234.16		81,064	65,730
	151,531			151,531

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

Exhibit No.

Exhibit

10.1

(1)

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

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)

31.1

(2)

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 Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Rule 13a-14(a)/15d-14(a)

31.2

(2)

Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 - Rule 13a-14(a)/15d-14(a)

(2)

Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(3)

Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

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104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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) Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Cavco Industries Inc. filed on November 23, 2022.

~~(1)~~(2) Filed herewith.

~~(2)~~(3) Furnished herewith.

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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	~~August 5, 2022~~February 3, 2023
William C. Boor	(Principal Executive Officer)

/s/ Allison K. Aden	Executive Vice President, Chief Financial Officer & Treasurer	~~August 5, 2022~~February 3, 2023
Allison K. Aden	(Principal Financial Officer)

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	Three Months Ended
	July 2, 2022				July 3, 2021
	Written		Earned		Written		Earned
Direct premiums	$	7,728	$	7,050	$	6,839	$	5,996
Assumed premiums—nonaffiliated	9,028		7,957		8,574		7,378
Ceded premiums—nonaffiliated	(4,229)		(4,229)		(3,647)		(3,647)
	$	12,527	$	10,778	$	11,766	$	9,727