NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited Consolidated Financial Statements of Cavco Industries, Inc. and its subsidiaries (collectively, "we," "us," "our," the "Company" or "Cavco") have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") for Quarterly Reports on Form 10-Q and Article 10 of SEC Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP") have been condensed or omitted pursuant to such rules and regulations.
In the opinion of management, these financial statements include all adjustments, including normal recurring adjustments, that are necessary to fairly state the results for the periods presented. We have evaluated subsequent events after the balance sheet date through the date of the filing of this report with the SEC, and there were no disclosable subsequent events. These Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the Notes to the Consolidated Financial Statements included in our 2021 Annual Report on Form 10-K for the year ended April 3, 2021, filed with the SEC ("Form 10-K").
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and the accompanying Notes. The uncertainty created by the novel coronavirus COVID-19 pandemic has made such estimates more difficult and subjective. Due to that and other uncertainties, actual results could differ from those estimates. The Consolidated Statements of Comprehensive Income and Consolidated Statements of Cash Flows for the interim periods are not necessarily indicative of the results or cash flows for the full year. The Company operates on a 52-53 week fiscal year ending on the Saturday nearest to March 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 2, 2022 and will include 52 weeks.
We operate in two segments: (1) factory-built housing, which includes wholesale and retail factory-built housing operations, and (2) financial services, which includes manufactured housing consumer finance and insurance. We design and build a wide variety of affordable manufactured homes, modular homes and park model RVs through 26 homebuilding production lines located throughout the United States, which are sold to a network of independent distributors, community owners and developers and through our 46 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 and Federal Home Loan Mortgage Corporation seller/servicer and a Government National Mortgage Association ("GNMA") mortgage-backed securities issuer that offers conforming mortgages, non-conforming mortgages and home-only loans to purchasers of factory-built homes. Standard Casualty provides property and casualty insurance primarily to owners of manufactured homes.
On September 24, 2021, we acquired the business and certain assets and liabilities of The Commodore Corporation ("Commodore"), including its six manufacturing facilities and two wholly-owned retail locations. The results of operations are included in our Consolidated Financial Statements from the date of acquisition. See Note 21.
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.
Redeemable Noncontrolling Interest. In fiscal year 2017, we purchased a 50% interest in Craftsman Homes, LLC and Craftsman Homes Development, LLC (collectively known as “Craftsman" or the "Entities") from a third-party ("Seller"). Craftsman is a manufactured home street retailer in Nevada with four locations selling Company and other manufacturer branded homes. They also provide general construction to setup the home property and assist with multi-home developments and multi-family dwellings.
On July 4, 2021, we entered into an agreement (the "Craftsman Purchase Agreement") with the Seller to obtain the remaining 50% ownership in Craftsman, owned by the Seller, to be purchased over time. As provided in the Craftsman Purchase Agreement, 20% of the equity of Craftsman owned by the Seller was obtained as of July 4, 2021 by us for cash and, as a result, we obtained a controlling ownership interest. We accounted for this transaction as a business combination to be achieved in stages (see Note 21) and consolidated the entities while recognizing a noncontrolling interest for the remaining Seller ownership as discussed below.
The Craftsman Purchase Agreement calls for an additional 20% of the equity of Craftsman owned by the Seller to be purchased on December 31, 2023 by us for cash. As mandatory redemption of this ownership interest is required, $2.5 million for the fair value of this portion of the noncontrolling interest is recorded in the long-term liabilities section of the Consolidated Balance Sheet under the Secured financings and other caption. In each reporting period hereafter, until purchased by the Company, the mandatorily redeemable noncontrolling interest is adjusted to its current redemption value, based on a predetermined formula. Adjustments in the redemption value to the mandatorily redeemable noncontrolling interest are recorded to Interest expense.
After December 31, 2023, the Seller has the right to require Cavco to purchase all of Seller's remaining 10% ownership (“Put Right”) for an amount specified in the Agreement that is designed to approximate fair value. Likewise, Cavco has the right to require Seller to sell their remaining 10% ownership (“Call Right”) based on the same timing as described above for the Put Right. The purchase price to be payable by the Company for the purchase of Seller's remaining ownership pursuant to the exercise of the Put Right or the Call Right will be settled in cash. As redemption of this remaining ownership is not a current obligation, $1.2 million for the initial fair value of this portion of the noncontrolling interest is classified as a temporary equity mezzanine item between liabilities and stockholders' equity in the Consolidated Balance Sheet under the Redeemable noncontrolling interest caption. The amount of income attributable to this noncontrolling interest is included in the Consolidated Statements of Comprehensive Income on the face of the Consolidated Statements of Comprehensive Income.
2. Revenue from Contracts with Customers
The following table summarizes customer contract revenues disaggregated by reportable segment and source (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
October 2, 2021
|
|
September 26, 2020
|
|
October 2,
2021
|
|
September 26,
2020
|
Factory-built housing
|
|
|
|
|
|
|
|
U.S. Housing and Urban Development code homes
|
$
|
285,947
|
|
|
$
|
197,723
|
|
|
$
|
548,337
|
|
|
$
|
387,169
|
|
Modular homes
|
31,386
|
|
|
20,483
|
|
|
58,003
|
|
|
41,266
|
|
Park model RVs
|
9,728
|
|
|
9,027
|
|
|
19,399
|
|
|
22,749
|
|
Other
|
15,033
|
|
|
13,734
|
|
|
28,638
|
|
|
27,873
|
|
|
342,094
|
|
|
240,967
|
|
|
654,377
|
|
|
479,057
|
|
Financial services
|
|
|
|
|
|
|
|
Insurance agency commissions received from third-party insurance companies
|
850
|
|
|
777
|
|
|
1,723
|
|
|
1,547
|
|
Other
|
16,599
|
|
|
16,232
|
|
|
33,865
|
|
|
32,173
|
|
|
17,449
|
|
|
17,009
|
|
|
35,588
|
|
|
33,720
|
|
|
$
|
359,543
|
|
|
$
|
257,976
|
|
|
$
|
689,965
|
|
|
$
|
512,777
|
|
3. Restricted Cash
Restricted cash consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2,
2021
|
|
April 3,
2021
|
Cash related to CountryPlace customer payments to be remitted to third parties
|
$
|
18,820
|
|
|
$
|
16,049
|
|
Other restricted cash
|
1,365
|
|
|
979
|
|
|
20,185
|
|
|
17,028
|
|
Less current portion
|
(19,850)
|
|
|
(16,693)
|
|
|
$
|
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 on the Consolidated Statements of Cash Flows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2,
2021
|
|
September 26,
2020
|
Cash and cash equivalents
|
$
|
224,291
|
|
|
$
|
312,243
|
|
Restricted cash
|
20,185
|
|
|
17,026
|
|
|
$
|
244,476
|
|
|
$
|
329,269
|
|
4. Investments
Investments consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2,
2021
|
|
April 3,
2021
|
Available-for-sale debt securities
|
$
|
18,179
|
|
|
$
|
14,946
|
|
Marketable equity securities
|
16,566
|
|
|
17,600
|
|
Non-marketable equity investments
|
19,772
|
|
|
21,960
|
|
|
54,517
|
|
|
54,506
|
|
Less current portion
|
(18,867)
|
|
|
(19,496)
|
|
|
$
|
35,650
|
|
|
$
|
35,010
|
|
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.
The amortized cost and fair value of our investments in available-for-sale debt securities, by security type are shown in the table below (in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2, 2021
|
|
April 3, 2021
|
|
Amortized
Cost
|
|
Fair
Value
|
|
Amortized Cost
|
|
Fair
Value
|
Residential mortgage-backed securities
|
$
|
2,352
|
|
|
$
|
2,365
|
|
|
$
|
2,787
|
|
|
$
|
2,804
|
|
State and political subdivision debt securities
|
7,942
|
|
|
8,023
|
|
|
7,239
|
|
|
7,345
|
|
Corporate debt securities
|
7,795
|
|
|
7,791
|
|
|
4,797
|
|
|
4,797
|
|
|
$
|
18,089
|
|
|
$
|
18,179
|
|
|
$
|
14,823
|
|
|
$
|
14,946
|
|
The amortized cost and fair value of our investments in available-for-sale debt securities, by contractual maturity, are shown in the table below (in thousands). Expected maturities differ from contractual maturities as borrowers may have the right to call or prepay obligations, with or without penalties.
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2, 2021
|
|
Amortized
Cost
|
|
Fair
Value
|
Due in less than one year
|
$
|
1,611
|
|
|
$
|
1,618
|
|
Due after one year through five years
|
11,807
|
|
|
11,792
|
|
Due after five years through ten years
|
1,268
|
|
|
1,321
|
|
Due after ten years
|
1,051
|
|
|
1,083
|
|
Mortgage-backed securities
|
2,352
|
|
|
2,365
|
|
|
$
|
18,089
|
|
|
$
|
18,179
|
|
There were no gross gains or losses realized on the sale of available-for-sale debt securities during the three and six months ended October 2, 2021. For the three and six months ended September 26, 2020, there were no gross gains realized on the sale of available-for-sale debt securities and gross losses realized were $5,000.
Net investment gains and losses on marketable equity securities were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
October 2,
2021
|
|
September 26,
2020
|
|
October 2,
2021
|
|
September 26,
2020
|
Marketable equity securities
|
|
|
|
|
|
|
|
Net gain recognized during the period
|
$
|
243
|
|
|
$
|
1,251
|
|
|
$
|
1,939
|
|
|
$
|
3,281
|
|
Less: Net (gains) losses recognized on securities sold during the period
|
(143)
|
|
|
27
|
|
|
(279)
|
|
|
(6)
|
|
Unrealized gains recognized during the period on securities still held
|
$
|
100
|
|
|
$
|
1,278
|
|
|
$
|
1,660
|
|
|
$
|
3,275
|
|
5. Inventories
Inventories consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2,
2021
|
|
April 3,
2021
|
Raw materials
|
$
|
78,810
|
|
|
$
|
54,336
|
|
Work in process
|
27,983
|
|
|
19,149
|
|
Finished goods
|
83,601
|
|
|
57,749
|
|
|
$
|
190,394
|
|
|
$
|
131,234
|
|
6. Consumer Loans Receivable
The following table summarizes consumer loans receivable (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2,
2021
|
|
April 3,
2021
|
Loans held for investment, previously securitized
|
$
|
28,631
|
|
|
$
|
31,949
|
|
Loans held for investment
|
16,207
|
|
|
18,690
|
|
Loans held for sale
|
10,253
|
|
|
15,587
|
|
Construction advances
|
7,485
|
|
|
13,801
|
|
|
62,576
|
|
|
80,027
|
|
Deferred financing fees and other, net
|
(1,178)
|
|
|
(2,041)
|
|
Allowance for loan losses
|
(2,799)
|
|
|
(3,188)
|
|
|
58,599
|
|
|
74,798
|
|
Less current portion
|
(26,475)
|
|
|
(37,690)
|
|
|
$
|
32,124
|
|
|
$
|
37,108
|
|
The following table represents changes in the estimated allowance for loan losses, including related additions and deductions to the allowance for loan losses (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
October 2,
2021
|
|
September 26,
2020
|
|
October 2,
2021
|
|
September 26,
2020
|
Allowance for loan losses at beginning of period
|
$
|
2,918
|
|
|
$
|
4,012
|
|
|
$
|
3,188
|
|
|
$
|
1,767
|
|
Impact of adoption of Financial Accounting Standards Board's Accounting Standards Update 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13")
|
—
|
|
|
—
|
|
|
—
|
|
|
2,276
|
|
Change in estimated loan losses, net
|
210
|
|
|
(94)
|
|
|
(57)
|
|
|
67
|
|
Charge-offs
|
(329)
|
|
|
(8)
|
|
|
(332)
|
|
|
(200)
|
|
Allowance for loan losses at end of period
|
$
|
2,799
|
|
|
$
|
3,910
|
|
|
$
|
2,799
|
|
|
$
|
3,910
|
|
The consumer loans held for investment had the following characteristics:
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2,
2021
|
|
April 3,
2021
|
Weighted average contractual interest rate
|
8.2
|
%
|
|
8.3
|
%
|
Weighted average effective interest rate
|
8.8
|
%
|
|
9.3
|
%
|
Weighted average months to maturity
|
157
|
|
162
|
The following table is a consolidated summary of the delinquency status of the outstanding amortized cost of consumer loans receivable (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2,
2021
|
|
April 3,
2021
|
Current
|
$
|
59,602
|
|
|
$
|
76,378
|
|
31 to 60 days
|
110
|
|
|
508
|
|
61 to 90 days
|
2,502
|
|
|
21
|
|
91+ days
|
362
|
|
|
3,120
|
|
|
$
|
62,576
|
|
|
$
|
80,027
|
|
The following tables disaggregate gross consumer loans receivable by credit quality indicator and fiscal year of origination (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2, 2021
|
|
2022
|
|
2021
|
|
2020
|
|
2019
|
|
2018
|
|
Prior
|
|
Total
|
Prime- FICO score 680 and greater
|
$
|
6,664
|
|
|
$
|
5,077
|
|
|
$
|
2,776
|
|
|
$
|
1,408
|
|
|
$
|
765
|
|
|
$
|
22,669
|
|
|
$
|
39,359
|
|
Near Prime- FICO score 620-679
|
2,247
|
|
|
3,445
|
|
|
2,175
|
|
|
1,856
|
|
|
1,354
|
|
|
9,978
|
|
|
21,055
|
|
Sub-Prime- FICO score less than 620
|
—
|
|
|
21
|
|
|
53
|
|
|
—
|
|
|
—
|
|
|
1,547
|
|
|
1,621
|
|
No FICO score
|
—
|
|
|
149
|
|
|
19
|
|
|
27
|
|
|
—
|
|
|
346
|
|
|
541
|
|
|
$
|
8,911
|
|
|
$
|
8,692
|
|
|
$
|
5,023
|
|
|
$
|
3,291
|
|
|
$
|
2,119
|
|
|
$
|
34,540
|
|
|
$
|
62,576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 3, 2021
|
|
2021
|
|
2020
|
|
2019
|
|
2018
|
|
2017
|
|
Prior
|
|
Total
|
Prime- FICO score 680 and greater
|
$
|
18,250
|
|
|
$
|
3,575
|
|
|
$
|
1,718
|
|
|
$
|
971
|
|
|
$
|
1,959
|
|
|
$
|
23,375
|
|
|
$
|
49,848
|
|
Near Prime- FICO score 620-679
|
10,227
|
|
|
2,744
|
|
|
1,794
|
|
|
1,364
|
|
|
500
|
|
|
10,401
|
|
|
27,030
|
|
Sub-Prime- FICO score less than 620
|
348
|
|
|
53
|
|
|
—
|
|
|
—
|
|
|
84
|
|
|
1,579
|
|
|
2,064
|
|
No FICO score
|
576
|
|
|
—
|
|
|
28
|
|
|
—
|
|
|
—
|
|
|
481
|
|
|
1,085
|
|
|
$
|
29,401
|
|
|
$
|
6,372
|
|
|
$
|
3,540
|
|
|
$
|
2,335
|
|
|
$
|
2,543
|
|
|
$
|
35,836
|
|
|
$
|
80,027
|
|
As of October 2, 2021, 36% of the outstanding principal balance of the consumer loans receivable portfolio was concentrated in Texas and 18% was concentrated in Florida. As of April 3, 2021, 35% of the outstanding principal balance of the consumer loans receivable portfolio was concentrated in Texas and 20% was concentrated in Florida. Other than Texas and Florida, no state had concentrations in excess of 10% of the principal balance of the consumer loans receivable as of October 2, 2021 or April 3, 2021.
Repossessed homes totaled approximately $893,000 and $518,000 as of October 2, 2021 and April 3, 2021, respectively, and are included in Prepaid expenses and other current assets in the Consolidated Balance Sheets. Foreclosure or similar proceedings in progress totaled approximately $927,000 and $1.1 million as of October 2, 2021 and April 3, 2021, respectively.
7. Commercial Loans Receivable
The commercial loans receivable balance consists of direct financing arrangements for the home product needs of our independent distributors, community owners and developers and amounts loaned by us under participation financing programs.
Commercial loans receivable, net consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2,
2021
|
|
April 3,
2021
|
Loans receivable
|
$
|
73,006
|
|
|
$
|
45,377
|
|
Allowance for loan losses
|
(826)
|
|
|
(816)
|
|
Deferred financing fees, net
|
(247)
|
|
|
(247)
|
|
|
71,933
|
|
|
44,314
|
|
Less current portion of commercial loans receivable (including from affiliates), net
|
(31,601)
|
|
|
(19,232)
|
|
|
$
|
40,332
|
|
|
$
|
25,082
|
|
The commercial loans receivable balance had the following characteristics:
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2,
2021
|
|
April 3,
2021
|
Weighted average contractual interest rate
|
6.3
|
%
|
|
6.4
|
%
|
Weighted average months outstanding
|
10
|
|
11
|
The following table represents changes in the estimated allowance for loan losses, including related additions and deductions to the allowance for loan losses (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
October 2,
2021
|
|
September 26,
2020
|
|
October 2,
2021
|
|
September 26,
2020
|
Balance at beginning of period
|
$
|
785
|
|
|
$
|
828
|
|
|
$
|
816
|
|
|
$
|
393
|
|
Impact of adoption of ASU 2016-13
|
—
|
|
|
—
|
|
|
—
|
|
|
435
|
|
Change in estimated loan losses, net
|
41
|
|
|
(39)
|
|
|
10
|
|
|
(39)
|
|
Balance at end of period
|
$
|
826
|
|
|
$
|
789
|
|
|
$
|
826
|
|
|
$
|
789
|
|
As of October 2, 2021 and April 3, 2021, there were no commercial loans considered watch list or nonperforming. The following table disaggregates our commercial loans receivable by fiscal year of origination (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2, 2021
|
|
|
|
|
|
|
2022
|
|
2021
|
|
2020
|
|
2019
|
|
2018
|
|
Prior
|
|
Total
|
|
|
|
|
Performing
|
|
$
|
25,069
|
|
|
$
|
35,259
|
|
|
$
|
7,338
|
|
|
$
|
2,669
|
|
|
$
|
1,379
|
|
|
$
|
1,292
|
|
|
$
|
73,006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 3, 2021
|
|
|
|
|
|
|
2021
|
|
2020
|
|
2019
|
|
2018
|
|
2017
|
|
Prior
|
|
Total
|
|
|
|
|
Performing
|
|
$
|
30,627
|
|
|
$
|
8,677
|
|
|
$
|
3,206
|
|
|
$
|
1,864
|
|
|
$
|
1,003
|
|
|
$
|
—
|
|
|
$
|
45,377
|
|
|
|
|
|
At October 2, 2021, there were no commercial loans 90 days or more past due that were still accruing interest and we were not aware of any potential problem loans that would have a material effect on the commercial loans receivable balance.
As of October 2, 2021, 34% of our outstanding commercial loans receivable principal balance was concentrated in Pennsylvania. As of April 3, 2021, 13% of our outstanding commercial loans receivable principal balance was concentrated in Arizona. No other state had concentrations in excess of 10% of the principal balance of the consumer loans receivable as of October 2, 2021 or April 3, 2021.
We had concentrations with one independent third-party and its affiliates that equaled 12% and 18% of the net commercial loans receivable principal balance outstanding, all of which was secured, as of October 2, 2021 and April 3, 2021.
8. Property, Plant and Equipment, net
Property, plant and equipment, net, consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2,
2021
|
|
April 3,
2021
|
Property, plant and equipment, at cost
|
|
|
|
Land
|
$
|
42,407
|
|
|
$
|
28,314
|
|
Buildings and improvements
|
108,577
|
|
|
71,827
|
|
Machinery and equipment
|
45,628
|
|
|
34,146
|
|
|
196,612
|
|
|
134,287
|
|
Accumulated depreciation
|
(40,215)
|
|
|
(37,493)
|
|
|
$
|
156,397
|
|
|
$
|
96,794
|
|
Depreciation expense was $1.4 million for each of the three month periods ending October 2, 2021 and September 26, 2020. Depreciation expense for the six months ended October 2, 2021 and September 26, 2020 was $2.9 million and $2.8 million, respectively. Included in the balances above are certain assets under finance leases. See Note 9 for further information.
9. Leases
We lease certain production and retail locations, office space and equipment. During the period ended October 2, 2021, we executed various lease renewals and acquired certain assets under finance leases.
The following table provides information about the financial statement classification of our lease balances reported within the Consolidated Balance Sheets as of October 2, 2021 and April 3, 2021 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classification
|
|
October 2,
2021
|
|
April 3,
2021
|
ROU assets
|
|
|
|
|
|
Operating lease assets
|
Operating lease right-of-use assets
|
|
$
|
16,706
|
|
|
$
|
16,252
|
|
Finance lease assets
|
Property, plant and equipment, net (1)
|
|
8,352
|
|
|
986
|
|
Total lease assets
|
|
|
$
|
25,058
|
|
|
$
|
17,238
|
|
|
|
|
|
|
|
Lease Liabilities
|
|
|
|
|
|
Current:
|
|
|
|
|
|
Operating lease liabilities
|
Accrued expenses and other current liabilities
|
|
$
|
4,783
|
|
|
$
|
4,184
|
|
Finance lease liabilities
|
Current portion of secured credit facilities and other
|
|
401
|
|
|
71
|
|
Non-current:
|
|
|
|
|
|
Operating lease liabilities
|
Operating lease liabilities
|
|
13,240
|
|
|
13,361
|
|
Finance lease liabilities
|
Secured credit facilities and other
|
|
5,923
|
|
|
233
|
|
Total lease liabilities
|
|
|
$
|
24,347
|
|
|
$
|
17,849
|
|
(1) Recorded net of accumulated amortization of $149,000 and $143,000 as of October 2, 2021 and April 3, 2021, respectively.
The present value of minimum payments for future fiscal years under non-cancelable leases as of October 2, 2021 was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Leases
|
|
Finance Leases
|
|
Total
|
Remainder of 2022
|
$
|
2,449
|
|
|
$
|
206
|
|
|
$
|
2,655
|
|
2023
|
4,667
|
|
|
411
|
|
|
5,078
|
|
2024
|
4,121
|
|
|
411
|
|
|
4,532
|
|
2025
|
3,103
|
|
|
411
|
|
|
3,514
|
|
2026
|
3,127
|
|
|
387
|
|
|
3,514
|
|
2027
|
1,087
|
|
|
338
|
|
|
1,425
|
|
Thereafter
|
1,439
|
|
|
10,415
|
|
|
11,854
|
|
|
19,993
|
|
|
12,579
|
|
|
32,572
|
|
Less amount representing interest
|
(1,970)
|
|
|
(6,255)
|
|
|
(8,225)
|
|
|
18,023
|
|
|
6,324
|
|
|
24,347
|
|
Less current portion
|
(4,783)
|
|
|
(401)
|
|
|
(5,184)
|
|
|
$
|
13,240
|
|
|
$
|
5,923
|
|
|
$
|
19,163
|
|
The following table provides information about the weighted average remaining lease terms and weighted average discount rates as of October 2, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining Lease Term (Years)
|
|
Discount Rate
|
Operating leases
|
4.9
|
|
4.5
|
%
|
Finance leases
|
34.9
|
|
4.5
|
%
|
10. Goodwill and Other Intangibles
Goodwill and other intangibles, net, consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2, 2021
|
|
April 3, 2021
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
Indefinite-lived
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
$
|
106,487
|
|
|
$
|
—
|
|
|
$
|
106,487
|
|
|
$
|
75,090
|
|
|
$
|
—
|
|
|
$
|
75,090
|
|
Trademarks and trade names
|
15,680
|
|
|
—
|
|
|
15,680
|
|
|
8,900
|
|
|
—
|
|
|
8,900
|
|
State insurance licenses
|
1,100
|
|
|
—
|
|
|
1,100
|
|
|
1,100
|
|
|
—
|
|
|
1,100
|
|
|
123,267
|
|
|
—
|
|
|
123,267
|
|
|
85,090
|
|
|
—
|
|
|
85,090
|
|
Finite-lived
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
25,400
|
|
|
(7,413)
|
|
|
17,987
|
|
|
11,300
|
|
|
(7,097)
|
|
|
4,203
|
|
Other
|
1,924
|
|
|
(1,287)
|
|
|
637
|
|
|
1,424
|
|
|
(1,264)
|
|
|
160
|
|
|
$
|
150,591
|
|
|
$
|
(8,700)
|
|
|
$
|
141,891
|
|
|
$
|
97,814
|
|
|
$
|
(8,361)
|
|
|
$
|
89,453
|
|
Changes in the carrying amount of Goodwill were as follows for the six months ended October 2, 2021 (in thousands). See Note 21 for further information.
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
75,090
|
|
Goodwill recognized on Craftsman acquisition
|
|
3,933
|
|
Goodwill recognized on Commodore acquisition
|
|
27,464
|
|
Balance at end of period
|
|
$
|
106,487
|
|
Amortization expense recognized on intangible assets was $166,000 and $187,000 for the three months ended October 2, 2021 and September 26, 2020, respectively. Amortization expense recognized on intangible assets was $339,000 and $374,000 for the six months ended October 2, 2021 and September 26, 2020, respectively.
Expected amortization for future fiscal years is as follows (in thousands):
|
|
|
|
|
|
Remainder of fiscal year
|
$
|
1,985
|
|
2023
|
3,291
|
|
2024
|
1,749
|
|
2025
|
1,686
|
|
2026
|
1,666
|
|
2027
|
1,577
|
|
Thereafter
|
6,670
|
|
11. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2,
2021
|
|
April 3,
2021
|
Customer deposits
|
$
|
49,219
|
|
|
$
|
41,835
|
|
Salaries, wages and benefits
|
44,161
|
|
|
37,737
|
|
Estimated warranties
|
25,745
|
|
|
18,032
|
|
Unearned insurance premiums
|
24,498
|
|
|
22,643
|
|
Accrued volume rebates
|
22,008
|
|
|
12,132
|
|
Company repurchase options on certain loans sold
|
17,151
|
|
|
25,938
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
54,680
|
|
|
44,816
|
|
|
$
|
237,462
|
|
|
$
|
203,133
|
|
12. Warranties
Activity in the liability for estimated warranties was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
October 2,
2021
|
|
September 26,
2020
|
|
October 2,
2021
|
|
September 26,
2020
|
Balance at beginning of period
|
$
|
19,344
|
|
|
$
|
18,538
|
|
|
$
|
18,032
|
|
|
$
|
18,678
|
|
Purchase accounting additions
|
6,928
|
|
|
—
|
|
|
6,928
|
|
|
—
|
|
Charged to costs and expenses
|
7,994
|
|
|
6,232
|
|
|
17,119
|
|
|
12,579
|
|
Payments and deductions
|
(8,521)
|
|
|
(6,965)
|
|
|
(16,334)
|
|
|
(13,452)
|
|
Balance at end of period
|
$
|
25,745
|
|
|
$
|
17,805
|
|
|
$
|
25,745
|
|
|
$
|
17,805
|
|
13. Debt, Finance Lease and Mandatorily Redeemable Noncontrolling Interest Obligations
The following table summarizes debt, finance lease and mandatorily redeemable noncontrolling interest obligations (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2,
2021
|
|
April 3,
2021
|
Secured term loan
|
$
|
7,718
|
|
|
$
|
8,210
|
|
Finance lease obligations
|
6,324
|
|
|
304
|
|
Other secured financings
|
3,052
|
|
|
3,672
|
|
Mandatorily redeemable noncontrolling interest
|
2,471
|
|
|
—
|
|
|
19,565
|
|
|
12,186
|
|
Less current portion
|
(2,260)
|
|
|
(1,851)
|
|
|
$
|
17,305
|
|
|
$
|
10,335
|
|
We entered into secured credit facilities with independent third-party banks to originate and hold consumer home-only loans secured by manufactured homes, which were pledged as collateral to the facilities. Those facilities have since been converted into an amortizing loan with maturity dates starting in 2028 and payments based on a 20 or 25-year amortization period, resulting in a balloon payment due upon maturity. The outstanding balance of the converted loans was $7.7 million as of October 2, 2021 and $8.2 million as of April 3, 2021 with a weighted average interest rate of 4.91%.
14. Reinsurance and Insurance Loss Reserves
Certain of Standard Casualty's premiums and benefits are assumed from and ceded to other insurance companies under various reinsurance agreements. We remain obligated for amounts ceded in the event that the reinsurers do not meet their obligations.
The effects of reinsurance on premiums written and earned were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
October 2, 2021
|
|
September 26, 2020
|
|
Written
|
|
Earned
|
|
Written
|
|
Earned
|
Direct premiums
|
$
|
6,310
|
|
|
$
|
6,323
|
|
|
$
|
4,915
|
|
|
$
|
5,145
|
|
Assumed premiums—nonaffiliated
|
8,240
|
|
|
7,630
|
|
|
7,593
|
|
|
7,043
|
|
Ceded premiums—nonaffiliated
|
(3,714)
|
|
|
(3,714)
|
|
|
(2,853)
|
|
|
(2,853)
|
|
|
$
|
10,836
|
|
|
$
|
10,239
|
|
|
$
|
9,655
|
|
|
$
|
9,335
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
October 2, 2021
|
|
September 26, 2020
|
|
Written
|
|
Earned
|
|
Written
|
|
Earned
|
Direct premiums
|
$
|
13,149
|
|
|
$
|
12,319
|
|
|
$
|
10,680
|
|
|
$
|
10,330
|
|
Assumed premiums—nonaffiliated
|
16,814
|
|
|
15,008
|
|
|
15,246
|
|
|
13,833
|
|
Ceded premiums—nonaffiliated
|
(7,361)
|
|
|
(7,361)
|
|
|
(6,055)
|
|
|
(6,055)
|
|
|
$
|
22,602
|
|
|
$
|
19,966
|
|
|
$
|
19,871
|
|
|
$
|
18,108
|
|
Typical insurance policies written or assumed have a maximum coverage of $300,000 per claim, of which we cede $150,000 of the risk of loss per reinsurance. Therefore, our risk of loss is limited to $150,000 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 $55 million in the aggregate for that occurrence.
Standard Casualty establishes reserves for claims and claims expense on reported and unreported claims of non-reinsured losses. The following details the activity in the reserve for the six months ended October 2, 2021 and September 26, 2020 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
October 2,
2021
|
|
September 26,
2020
|
|
October 2,
2021
|
|
September 26,
2020
|
Balance at beginning of period
|
$
|
8,348
|
|
|
$
|
6,730
|
|
|
$
|
7,451
|
|
|
$
|
5,582
|
|
Net incurred losses during the year
|
7,282
|
|
|
7,477
|
|
|
15,257
|
|
|
13,460
|
|
Net claim payments during the year
|
(8,280)
|
|
|
(7,320)
|
|
|
(15,358)
|
|
|
(12,155)
|
|
Balance at end of period
|
$
|
7,350
|
|
|
$
|
6,887
|
|
|
$
|
7,350
|
|
|
$
|
6,887
|
|
15. 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 we were liable under such agreements approximated $95.7 million and $74.2 million at October 2, 2021 and April 3, 2021, respectively, without reduction for the resale value of the homes that are repurchased. We had a reserve for repurchase commitments of $2.7 million at October 2, 2021 and $2.3 million at April 3, 2021.
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.
Loan contracts with off-balance sheet commitments are summarized below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2,
2021
|
|
April 3,
2021
|
Construction loan contract amount
|
$
|
22,466
|
|
|
$
|
37,628
|
|
Cumulative advances
|
(7,485)
|
|
|
(13,801)
|
|
|
$
|
14,981
|
|
|
$
|
23,827
|
|
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. 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 $1.2 million as of October 2, 2021 and April 3, 2021, included in Accrued expenses and other current liabilities, reflects management's estimate of probable loss. There were no claim requests that resulted in the execution of an indemnification agreement or in the repurchase of a loan during the six months ended October 2, 2021.
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 October 2, 2021, we had outstanding IRLCs with a notional amount of $29.5 million. During the three months ended October 2, 2021 and September 26, 2020, we recognized losses of $5,000 and $19,000, respectively, on outstanding IRLCs. For the six months ended October 2, 2021 and September 26, 2020, we recognized gains of $42,000 and losses of $144,000, respectively.
Forward Sales Commitments. We manage the risk profiles of a portion of the outstanding IRLCs and mortgage loans held for sale by entering into forward sales of mortgage-backed securities ("MBS") and whole loan sale commitments (collectively "Commitments"). As of October 2, 2021, we had $33.5 million in outstanding Commitments. We recognized non-cash gains of $79,000 and $118,000 in the second quarter of 2022 and 2021, respectively. During the six months ended October 2, 2021 and September 26, 2020, we recognized losses of $268,000 and gains of $1.1 million, respectively.
Legal Matters. On September 2, 2021, the SEC filed a civil complaint in the United States District Court, District of Arizona, naming the Company along with the Company’s former Chairman, President & Chief Executive Officer and the Company’s former Chief Financial Officer, alleging violations of the antifraud and internal accounting control provisions of the Securities Exchange Act of 1934 based on trading in the shares of another company directed by the former CEO that resulted in an unrealized gain of approximately $260,000. In the prior year, the Company recorded an accrual relating to this loss contingency. The SEC action follows an investigation that began in 2018. The Company filed a summary judgment to dismiss on November 2, 2021. While the Company cannot predict with certainty the resolution of this matter, we do not believe that this proceeding will have a material adverse effect on the Company’s Consolidated Financial Statements.
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 in the Consolidated Balance Sheets. However, future events or circumstances 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.
16. Stockholders' Equity and Redeemable Noncontrolling Interest
The following table represents changes in stockholders' equity attributable to Cavco's stockholders and redeemable noncontrolling interest for each quarterly period during the six months ended October 2, 2021 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Attributable to Cavco Stockholders
|
|
|
|
|
|
|
|
|
Treasury Stock
|
|
Additional paid-in capital
|
|
Retained earnings
|
|
Accumulated other comprehensive income
|
|
Total
|
|
|
Redeemable Noncontrolling Interest
|
|
Common Stock
|
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
|
|
|
|
|
|
Balance, April 3, 2021
|
9,241,256
|
|
|
$
|
92
|
|
|
$
|
(1,441)
|
|
|
$
|
253,835
|
|
|
$
|
431,057
|
|
|
$
|
97
|
|
|
$
|
683,640
|
|
|
|
$
|
—
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
27,046
|
|
|
—
|
|
|
27,046
|
|
|
|
—
|
|
Other comprehensive income, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(13)
|
|
|
(13)
|
|
|
|
—
|
|
Issuance of common stock under stock incentive plans
|
4,465
|
|
|
—
|
|
|
—
|
|
|
136
|
|
|
—
|
|
|
—
|
|
|
136
|
|
|
|
—
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
1,100
|
|
|
—
|
|
|
—
|
|
|
1,100
|
|
|
|
—
|
|
Common stock repurchases
|
—
|
|
|
—
|
|
|
(12,842)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12,842)
|
|
|
|
—
|
|
Balance, July 3, 2021
|
9,245,721
|
|
|
$
|
92
|
|
|
$
|
(14,283)
|
|
|
$
|
255,071
|
|
|
$
|
458,103
|
|
|
$
|
84
|
|
|
$
|
699,067
|
|
|
|
$
|
—
|
|
Initial value of noncontrolling interest upon transaction
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
1,235
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
37,610
|
|
|
—
|
|
|
37,610
|
|
|
|
73
|
|
Other comprehensive income, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(13)
|
|
|
(13)
|
|
|
|
—
|
|
Issuance of common stock under stock incentive plans
|
29,295
|
|
|
1
|
|
|
—
|
|
|
2,728
|
|
|
—
|
|
|
—
|
|
|
2,729
|
|
|
|
—
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
1,317
|
|
|
—
|
|
|
—
|
|
|
1,317
|
|
|
|
—
|
|
Common stock repurchases
|
—
|
|
|
—
|
|
|
(7,594)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7,594)
|
|
|
|
—
|
|
Distributions
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
(180)
|
|
Balance, October 2, 2021
|
9,275,016
|
|
|
$
|
93
|
|
|
$
|
(21,877)
|
|
|
$
|
259,116
|
|
|
$
|
495,713
|
|
|
$
|
71
|
|
|
$
|
733,116
|
|
|
|
$
|
1,128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table represents changes in stockholders' equity attributable to Cavco's stockholders and redeemable noncontrolling interest for each quarterly period during the six months ended September 26, 2020 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity Attributable to Cavco Stockholders
|
|
|
|
|
|
|
|
|
Treasury Stock
|
|
Additional paid-in capital
|
|
Retained earnings
|
|
Accumulated other comprehensive income
|
|
Total
|
|
|
Redeemable Noncontrolling Interest
|
|
Common Stock
|
|
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
|
|
|
|
|
|
Balance, March 28, 2020
|
9,173,242
|
|
|
$
|
92
|
|
|
$
|
—
|
|
|
$
|
252,260
|
|
|
$
|
355,144
|
|
|
$
|
90
|
|
|
$
|
607,586
|
|
|
|
$
|
—
|
|
Cumulative effect of implementing ASU 2016-13, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(733)
|
|
|
—
|
|
|
(733)
|
|
|
|
—
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
16,674
|
|
|
—
|
|
|
16,674
|
|
|
|
—
|
|
Other comprehensive income, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
68
|
|
|
68
|
|
|
|
—
|
|
Issuance of common stock under stock incentive plans
|
3,822
|
|
|
—
|
|
|
—
|
|
|
(533)
|
|
|
—
|
|
|
—
|
|
|
(533)
|
|
|
|
—
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
945
|
|
|
—
|
|
|
—
|
|
|
945
|
|
|
|
—
|
|
Balance, June 27, 2020
|
9,177,064
|
|
|
$
|
92
|
|
|
$
|
—
|
|
|
$
|
252,672
|
|
|
$
|
371,085
|
|
|
$
|
158
|
|
|
$
|
624,007
|
|
|
|
$
|
—
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15,049
|
|
|
—
|
|
|
15,049
|
|
|
|
—
|
|
Other comprehensive income, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
7
|
|
|
|
—
|
|
Issuance of common stock under stock incentive plans
|
11,098
|
|
|
—
|
|
|
—
|
|
|
522
|
|
|
—
|
|
|
—
|
|
|
522
|
|
|
|
—
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
—
|
|
|
1,103
|
|
|
—
|
|
|
—
|
|
|
1,103
|
|
|
|
—
|
|
Balance, September 26, 2020
|
9,188,162
|
|
|
$
|
92
|
|
|
$
|
—
|
|
|
$
|
254,297
|
|
|
$
|
386,134
|
|
|
$
|
165
|
|
|
$
|
640,688
|
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share (dollars in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
October 2,
2021
|
|
September 26,
2020
|
|
October 2,
2021
|
|
September 26,
2020
|
Net income attributable to Cavco common stockholders
|
$
|
37,610
|
|
|
$
|
15,049
|
|
|
$
|
64,656
|
|
|
$
|
31,723
|
|
Weighted average shares outstanding
|
|
|
|
|
|
|
|
Basic
|
9,190,866
|
|
|
9,182,945
|
|
|
9,194,577
|
|
|
9,178,609
|
|
Effect of dilutive securities
|
82,270
|
|
|
112,464
|
|
|
79,863
|
|
|
101,471
|
|
Diluted
|
9,273,136
|
|
|
9,295,409
|
|
|
9,274,440
|
|
|
9,280,080
|
|
Net income per share attributable to Cavco common stockholders
|
|
|
|
|
|
|
|
Basic
|
$
|
4.09
|
|
|
$
|
1.64
|
|
|
$
|
7.03
|
|
|
$
|
3.46
|
|
Diluted
|
$
|
4.06
|
|
|
$
|
1.62
|
|
|
$
|
6.97
|
|
|
$
|
3.42
|
|
Anti-dilutive common stock equivalents excluded from the computation of diluted earnings per share for the three months ended October 2, 2021 and September 26, 2020 were 2,808 and 20,582, respectively. Anti-dilutive common stock equivalents excluded from the computation of diluted earnings per share for the six months ended October 2, 2021 and September 26, 2020 were 5,417 and 30,182, respectively.
18. Fair Value Measurements
The book value and estimated fair value of our financial instruments were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2, 2021
|
|
April 3, 2021
|
|
Book
Value
|
|
Estimated
Fair Value
|
|
Book
Value
|
|
Estimated
Fair Value
|
Available-for-sale debt securities
|
$
|
18,179
|
|
|
$
|
18,179
|
|
|
$
|
14,946
|
|
|
$
|
14,946
|
|
Marketable equity securities
|
16,566
|
|
|
16,566
|
|
|
17,600
|
|
|
17,600
|
|
Non-marketable equity investments
|
19,772
|
|
|
19,772
|
|
|
21,960
|
|
|
21,960
|
|
Consumer loans receivable
|
58,599
|
|
|
65,641
|
|
|
74,798
|
|
|
86,209
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial loans receivable
|
71,933
|
|
|
70,363
|
|
|
44,314
|
|
|
42,379
|
|
Secured financings and other
|
(19,565)
|
|
|
(19,454)
|
|
|
(12,186)
|
|
|
(12,340)
|
|
|
|
|
|
|
|
|
|
See Note 19, Fair Value Measurements, and the Fair Value of Financial Instruments caption in Note 1, Summary of Significant Accounting Policies, in 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 initially recorded at fair value.
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2,
2021
|
|
April 3,
2021
|
Number of loans serviced with MSRs
|
4,533
|
|
|
4,647
|
|
Weighted average servicing fee (basis points)
|
34.39
|
|
|
33.57
|
|
Capitalized servicing multiple
|
73.7
|
%
|
|
45.9
|
%
|
Capitalized servicing rate (basis points)
|
25.36
|
|
|
15.42
|
|
Serviced portfolio with MSRs (in thousands)
|
$
|
586,547
|
|
|
$
|
593,939
|
|
MSRs (in thousands)
|
$
|
1,488
|
|
|
$
|
916
|
|
19. Employee Benefit Plans
As part of the Commodore acquisition, we entered into a Transition Services Agreement ("TSA") with the seller whereby we lease Commodore employees from the seller while we transition them to our payroll systems. Expenses related to the TSA totaled $1.4 million for the three and six months ended October 2, 2021.
Commodore participates in the IAM National Pension Fund, a multiemployer defined benefit plan. Participation in this plan is available to all hourly employees who are members of the participating collective bargaining unit. Once the TSA ends, we will contribute to the plan a specified amount per hour worked for each eligible employee. Benefits under this plan are based on a fixed monthly benefit rate per year of credited service. The risks of participating in this multiemployer plan differ from single-employer plans. The potential risks include, but are not limited to, the use of the Company's contributions to provide benefits to employees of other participating employers, the Company becoming obligated for other participating employers' unfunded obligations and, upon the Company's withdrawal from the plan, the Company being required to pay the plan an amount based on the underfunded status of the plan, referred to as a withdrawal liability.
20. Related Party Transactions
We have non-marketable equity investments in other distribution operations outside of Company-owned retail stores. In the ordinary course of business, we sell homes and lend to certain of these operations through our commercial lending programs. For the three and six months ended October 2, 2021, the total amount of sales to non-consolidated related parties was $14.0 million and $28.8 million, respectively. For the three and six months ended September 26, 2020, the total amount of sales to non-consolidated related parties was $10.3 million and $23.0 million, respectively. As of October 2, 2021, receivables from non-consolidated related parties included $3.9 million of accounts receivable and $3.9 million of commercial loans outstanding. As of April 3, 2021, receivables from non-consolidated related parties included $4.7 million of accounts receivable and $9.5 million of commercial loans outstanding.
21. Acquisitions
Craftsman Homes, LLC and Craftsman Development, LLC Acquisition
In fiscal year 2017, we purchased a 50% ownership interest in Craftsman for $1.3 million to expand our retail presence in Nevada. At the time of the acquisition of that ownership, we concluded that we were not considered to be the primary beneficiary and therefore did not consolidate the Entities. Since the date of acquisition, we have recorded a non-marketable equity investment for the ownership, with changes to that investment for earnings and distributions from the Entities.
On July 4, 2021, we obtained an additional 20% ownership interest in the Entities utilizing the same pre-tax income multiple as the 2017 purchase. As we now have a controlling interest, we have consolidated the Entities and remeasured the Entities' assets and liabilities to fair value, including our previous equity investment of $2.9 million in the Entities. As a result of the remeasurement, we recorded a gain of $3.3 million in Other income, net in the Consolidated Statements of Comprehensive Income.
The purchase price on July 4, 2021 for 20% ownership was $2.5 million, valuing the Entities at $12.4 million. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands). Certain estimated values are not yet finalized and are subject to change, which could be significant. The allocation of the purchase price is still preliminary due to the short duration since the acquisition date and will be finalized upon completion of the analysis of the fair values of Craftsman's assets and specified liabilities. We expect to finalize these amounts as soon as possible but no later than one year from the acquisition date.
|
|
|
|
|
|
|
July 4,
2021
|
Cash
|
$
|
6,466
|
|
Accounts receivable
|
577
|
|
Inventories
|
7,393
|
|
Property, plant and equipment
|
189
|
|
Other current assets
|
846
|
|
Intangible assets(1)
|
2,980
|
|
Total identifiable assets acquired
|
18,451
|
|
Accounts payable and accrued liabilities
|
10,028
|
|
Net identifiable assets acquired
|
8,423
|
|
Goodwill(2)
|
3,933
|
|
Net assets acquired
|
$
|
12,356
|
|
(1) Includes $3.0 million assigned to trademarks and trade names, which are considered indefinite lived intangible assets and are not subject to amortization.
(2) Attributable to the Factory-built housing segment, all of which will be deductible for income tax purposes.
We recorded a Redeemable noncontrolling interest for the remaining 30% ownership. As 20% of this is considered mandatorily redeemable per the Agreement, $2.5 million for the fair value of this portion of the noncontrolling interest is recorded in the long-term liabilities section of the Consolidated Balance Sheet under the Secured financings and other caption. As we are not currently obligated for the redemption of the remaining 10% ownership, $1.2 million for the initial fair value of this portion of the noncontrolling interest is classified as a temporary equity mezzanine item between liabilities and stockholders’ equity in the Consolidated Balance Sheet under the Redeemable noncontrolling interest caption.
Since the acquisition date, Craftsman contributed Net revenue of $4.5 million for the three and six months ended October 2, 2021. Craftsman increased consolidated Net income on the Consolidated Statements of Comprehensive Income for the three and six months ended October 2, 2021 by $243,000. Net income from the Craftsman acquisition included required purchase accounting adjustments whereby home product inventory is recorded at fair value upon acquisition.
Commodore Homes 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.
The acquisition of Commodore brings beneficial geographic addition to our footprint with strong operations in the Northeast/Midwest/Mid-Atlantic markets and provides a platform for future growth, with the potential for cost and revenue synergies.
The acquisition-date fair value of the total consideration was $156.1 million, which was paid in cash and is subject to future adjustments upon the finalization of closing financial statements. We have expensed $2.7 million in acquisition related deal costs in Selling, general and administrative expense in the Consolidated Statements of Comprehensive Income, and have not incurred debt in connection with the purchase or subsequent operations.
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the
acquisition date (in thousands). Certain estimated values are not yet finalized and are subject to change, which could be significant. The allocation of the purchase price is still preliminary due to the short duration since the acquisition date and will be finalized upon completion of the analysis of the fair values of Commodore's assets and specified liabilities. We expect to finalize these amounts as soon as possible but no later than one year from the acquisition date.
|
|
|
|
|
|
|
September 24,
2021
|
Cash
|
$
|
619
|
|
Accounts receivable
|
20,930
|
|
Commercial loans
|
30,960
|
|
Inventories
|
31,787
|
|
Property, plant and equipment(1)
|
57,606
|
|
Other current assets
|
534
|
|
Intangible assets(2)
|
18,400
|
|
Total identifiable assets acquired
|
160,836
|
|
Accounts payable and accrued liabilities
|
32,249
|
|
Net identifiable assets acquired
|
128,587
|
|
Goodwill(3)
|
27,464
|
|
Net assets acquired
|
$
|
156,051
|
|
(1) Includes assets acquired under finance leases. See Note 9 for additional information.
(2) Includes $11.8 million assigned to customer-related intangibles, subject to a useful life of 11 years amortized on a straight-line basis; $3.8 million assigned to trademarks and trade names, which are considered indefinite lived intangible assets and are not subject to amortization; $2.3 million for acquired sales order backlogs that will be amortized over the period to produce the associated backlog; and $0.5 million for a covenant not to compete from the sellers, amortized on a straight-line basis over the term of 5 years.
(3) Attributable to the Factory-built housing segment, all of which will be deductible for income tax purposes.
Since the acquisition date, Commodore contributed Net revenue of $4.4 million for the three and six months ended October 2, 2021. Commodore decreased consolidated Net income on the Consolidated Statements of Comprehensive Income for the three and six months ended October 2, 2021 by $645,000. The Net loss from the Commodore acquisition included required purchase accounting adjustments whereby home product inventory is recorded at fair value upon acquisition.
Pro Forma Impact of Acquisitions. The following table presents supplemental pro forma information as if the above acquisitions occurred on March 29, 2020 (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
October 2,
2021
|
|
September 26,
2020
|
|
October 2,
2021
|
|
September 26,
2020
|
Net revenue
|
$
|
444,303
|
|
|
$
|
327,491
|
|
|
$
|
856,054
|
|
|
$
|
635,061
|
|
Net income attributable to Cavco common stockholders
|
38,331
|
|
|
20,665
|
|
|
66,161
|
|
|
37,494
|
|
Diluted net income per share
|
4.13
|
|
|
2.22
|
|
|
7.13
|
|
|
4.04
|
|
22. Business Segment Information
We operate principally in two segments: (1) factory-built housing, which includes wholesale and retail factory-built housing operations and (2) financial services, which includes manufactured housing consumer finance and insurance. The following table provides selected financial data by segment (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
|
October 2,
2021
|
|
September 26,
2020
|
|
October 2,
2021
|
|
September 26,
2020
|
Net revenue
|
|
|
|
|
|
|
|
Factory-built housing
|
$
|
342,094
|
|
|
$
|
240,967
|
|
|
$
|
654,377
|
|
|
$
|
479,057
|
|
Financial services
|
17,449
|
|
|
17,009
|
|
|
35,588
|
|
|
33,720
|
|
|
$
|
359,543
|
|
|
$
|
257,976
|
|
|
$
|
689,965
|
|
|
$
|
512,777
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
|
|
|
|
|
Factory-built housing
|
$
|
46,893
|
|
|
$
|
17,452
|
|
|
$
|
80,452
|
|
|
$
|
35,902
|
|
Financial services
|
2,128
|
|
|
2,144
|
|
|
4,047
|
|
|
5,374
|
|
|
$
|
49,021
|
|
|
$
|
19,596
|
|
|
$
|
84,499
|
|
|
$
|
41,276
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2,
2021
|
|
April 3,
2021
|
Total assets:
|
|
|
|
Factory-built housing
|
$
|
819,879
|
|
|
$
|
711,579
|
|
Financial services
|
236,554
|
|
|
240,254
|
|
|
$
|
1,056,433
|
|
|
$
|
951,833
|
|