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; and except for the events set forth in Note 23, there were no subsequent events requiring disclosure. These Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the Notes to the Consolidated Financial Statements included in 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 and accompanying notes. Due to uncertainties, actual results could differ from the estimates and assumptions used in preparation of the Consolidated Financial Statements. The Consolidated Statements of Comprehensive Income and Consolidated Statements of Cash Flows for the interim periods are not necessarily indicative of the results or cash flows for the full year. The Company operates on a 52-53 week fiscal year ending on the Saturday nearest to March 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 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 27 homebuilding production lines located throughout the United States, which are sold to a network of independent distributors, community operators and residential developers and through our 42 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 ("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.
During fiscal 2022, we acquired 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"). 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, and also participates in commercial lending operations 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.
2. Revenue from Contracts with Customers
The following table summarizes customer contract revenues disaggregated by reportable segment and source (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| December 31, 2022 | | January 1, 2022 | | December 31, 2022 | | January 1, 2022 |
Factory-built housing | | | | | | | |
U.S. Housing and Urban Development code homes | $ | 398,859 | | | $ | 357,453 | | | $ | 1,402,805 | | | $ | 905,790 | |
Modular homes | 36,498 | | | 30,451 | | | 108,072 | | | 88,454 | |
Park model RVs | 20,102 | | | 10,709 | | | 44,359 | | | 30,108 | |
Other | 25,734 | | | 14,977 | | | 58,156 | | | 43,615 | |
| 481,193 | | | 413,590 | | | 1,613,392 | | | 1,067,967 | |
Financial services | | | | | | | |
Insurance agency commissions received from third-party insurance companies | 887 | | | 1,304 | | | 3,313 | | | 3,027 | |
All other sources | 18,523 | | | 16,820 | | | 49,628 | | | 50,685 | |
| 19,410 | | | 18,124 | | | 52,941 | | | 53,712 | |
| $ | 500,603 | | | $ | 431,714 | | | $ | 1,666,333 | | | $ | 1,121,679 | |
3. Restricted Cash
Restricted cash consisted of the following (in thousands):
| | | | | | | | | | | |
| December 31, 2022 | | April 2, 2022 |
Cash related to CountryPlace customer payments to be remitted to third parties | $ | 9,309 | | | $ | 13,857 | |
Other restricted cash | 937 | | | 1,327 | |
| 10,246 | | | 15,184 | |
Current portion | (9,911) | | | (14,849) | |
| $ | 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):
| | | | | | | | | | | |
| December 31, 2022 | | January 1, 2022 |
Cash and cash equivalents | $ | 376,148 | | | $ | 267,265 | |
Restricted cash | 10,246 | | | 15,877 | |
| $ | 386,394 | | | $ | 283,142 | |
4. Investments
Investments consisted of the following (in thousands):
| | | | | | | | | | | |
| December 31, 2022 | | April 2, 2022 |
Available-for-sale debt securities | $ | 19,036 | | | $ | 17,760 | |
Marketable equity securities | 14,103 | | | 16,780 | |
Non-marketable equity investments | 5,290 | | | 20,479 | |
| 38,429 | | | 55,019 | |
Less short-term investments | (16,607) | | | (20,086) | |
| $ | 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 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):
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 | | April 2, 2022 |
| Amortized Cost | | Fair Value | | Amortized Cost | | Fair Value |
Residential mortgage-backed securities | $ | 2,670 | | | $ | 2,572 | | | $ | 1,668 | | | $ | 1,613 | |
State and political subdivision debt securities | 6,542 | | | 6,228 | | | 10,100 | | | 9,906 | |
Corporate debt securities | 10,765 | | | 10,236 | | | 6,502 | | | 6,241 | |
| $ | 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). Actual maturities may differ from contractual maturities as borrowers may have the right to call or prepay obligations, with or without penalties.
| | | | | | | | | | | |
| 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 | |
Net investment gains and losses on marketable equity securities were as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| 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):
| | | | | | | | | | | |
| December 31, 2022 | | April 2, 2022 |
Raw materials | $ | 87,239 | | | $ | 95,929 | |
Work in process | 29,400 | | | 30,638 | |
Finished goods | 98,819 | | | 117,404 | |
| $ | 215,458 | | | $ | 243,971 | |
6. Consumer Loans Receivable
The following table summarizes consumer loans receivable (in thousands):
| | | | | | | | | | | |
| December 31, 2022 | | April 2, 2022 |
Loans held for investment, previously securitized | $ | 22,221 | | | $ | 26,014 | |
Loans held for investment | 14,513 | | | 14,771 | |
Loans held for sale | 5,049 | | | 8,500 | |
Construction advances | 757 | | | 3,547 | |
| 42,540 | | | 52,832 | |
Deferred financing fees and other, net | (590) | | | (833) | |
Allowance for loan losses | (1,284) | | | (2,115) | |
| 40,666 | | | 49,884 | |
Less current portion | (13,763) | | | (20,639) | |
| $ | 26,903 | | | $ | 29,245 | |
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 | | 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:
| | | | | | | | | | | |
| December 31, 2022 | | April 2, 2022 |
Weighted average contractual interest rate | 8.1 | % | | 8.3 | % |
Weighted average effective interest rate | 8.9 | % | | 9.2 | % |
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):
| | | | | | | | | | | |
| December 31, 2022 | | April 2, 2022 |
Current | $ | 40,022 | | | $ | 49,546 | |
31 to 60 days | 1,140 | | | 1,202 | |
61 to 90 days | 163 | | | 41 | |
91+ days | 1,215 | | | 2,043 | |
| $ | 42,540 | | | $ | 52,832 | |
The following tables disaggregate the principal value of consumer loans receivable by credit quality indicator and fiscal year of origination (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 |
| 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | Prior | | Total |
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 | 479 | | | 154 | | | 1,017 | | | 967 | | | 1,562 | | | 8,667 | | | 12,846 | |
Sub-Prime- FICO score less than 620 | 125 | | | — | | | 20 | | | 51 | | | — | | | 1,106 | | | 1,302 | |
No FICO score | 69 | | | — | | | — | | | — | | | 25 | | | 354 | | | 448 | |
| $ | 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 December 31, 2022 and April 2, 2022, 39% of the outstanding principal balance of the consumer loans receivable portfolio was concentrated in Texas, and 18% and 17%, respectively, were concentrated in 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 December 31, 2022 or April 2, 2022.
Repossessed homes totaled approximately $649,000 and $499,000 as of 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 $535,000 and $1.1 million as of December 31, 2022 and April 2, 2022, 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 operators and residential developers.
Commercial loans receivable (including from affiliates), net consisted of the following (in thousands):
| | | | | | | | | | | |
| December 31, 2022 | | April 2, 2022 |
Loans receivable | $ | 79,345 | | | $ | 69,693 | |
Allowance for loan losses | (1,255) | | | (1,011) | |
Deferred financing fees, net | (117) | | | (116) | |
| 77,973 | | | 68,566 | |
Less current portion | (34,197) | | | (32,644) | |
| $ | 43,776 | | | $ | 35,922 | |
The commercial loans receivable balance had the following characteristics:
| | | | | | | | | | | |
| December 31, 2022 | | April 2, 2022 |
Weighted average contractual interest rate | 6.7 | % | | 6.4 | % |
Weighted average months outstanding | 9 | | 9 |
The following table represents changes in the estimated allowance for loan losses (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| December 31, 2022 | | January 1, 2022 | | December 31, 2022 | | January 1, 2022 |
Balance at beginning of period | $ | 1,123 | | | $ | 826 | | | $ | 1,011 | | | $ | 816 | |
Change in estimated loan losses, net | 132 | | | 304 | | | 244 | | | 314 | |
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 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):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 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 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 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 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 December 31, 2022 or April 2, 2022.
As of 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.
8. Property, Plant and Equipment, net
Property, plant and equipment, net, consisted of the following (in thousands):
| | | | | | | | | | | |
| December 31, 2022 | | April 2, 2022 |
Property, plant and equipment, at cost | | | |
Land | $ | 36,193 | | | $ | 32,154 | |
Buildings and improvements | 142,420 | | | 100,775 | |
Machinery and equipment | 63,795 | | | 48,638 | |
Construction in progress | 8,713 | | | 29,281 | |
| 251,121 | | | 210,848 | |
Accumulated depreciation | (56,792) | | | (46,832) | |
| $ | 194,329 | | | $ | 164,016 | |
Depreciation expense for the three and nine months ended December 31, 2022 was $3.4 million and $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.
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 | |
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):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 $501,000 and $1.5 million for the three and nine months ended December 31, 2022, respectively. Amortization expense recognized on intangible assets was $523,000 and $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 2023 | $ | 501 | |
2024 | 1,339 | |
2025 | 1,300 | |
2026 | 1,258 | |
2027 | 1,185 | |
2028 | 1,079 | |
Thereafter | 3,506 | |
| $ | 10,168 | |
11. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
| | | | | | | | | | | |
| December 31, 2022 | | April 2, 2022 |
Customer deposits | $ | 46,399 | | | $ | 56,318 | |
Salaries, wages and benefits | 43,365 | | | 54,172 | |
Estimated warranties | 30,946 | | | 26,250 | |
Unearned insurance premiums | 25,758 | | | 24,917 | |
Accrued volume rebates | 25,660 | | | 18,641 | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
Other | 79,507 | | | 70,790 | |
| $ | 251,635 | | | $ | 251,088 | |
12. Warranties
Activity in the liability for estimated warranties was as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| December 31, 2022 | | January 1, 2022 | | December 31, 2022 | | January 1, 2022 |
Balance at beginning of period | $ | 30,841 | | | $ | 25,745 | | | $ | 26,250 | | | $ | 18,032 | |
Purchase accounting additions | — | | | — | | | — | | | 6,928 | |
Charged to costs and expenses | 12,036 | | | 10,883 | | | 40,663 | | | 28,002 | |
Payments and deductions | (11,931) | | | (10,394) | | | (35,967) | | | (26,728) | |
Balance at end of period | $ | 30,946 | | | $ | 26,234 | | | $ | 30,946 | | | $ | 26,234 | |
13. Other Liabilities
The following table summarizes the non-current portion of our other liabilities (in thousands):
| | | | | | | | | | | |
| December 31, 2022 | | April 2, 2022 |
Finance lease payables | $ | 6,261 | | | $ | 6,316 | |
Other secured financing | 2,450 | | | 2,933 | |
Mandatorily redeemable noncontrolling interest | 2,318 | | | 2,371 | |
| 11,029 | | | 11,620 | |
Less current portion included in Accrued expenses and other current liabilities | (3,131) | | | (784) | |
| $ | 7,898 | | | $ | 10,836 | |
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.
The effects of reinsurance on premiums written and earned were as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| 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 December 31, 2022 and January 1, 2022 (in thousands): | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| December 31, 2022 | | January 1, 2022 | | December 31, 2022 | | January 1, 2022 |
Balance at beginning of period | $ | 7,790 | | | $ | 7,350 | | | $ | 8,149 | | | $ | 7,451 | |
Net incurred losses during the period | 8,464 | | | 5,046 | | | 25,050 | | | 20,303 | |
Net claim payments during the period | (7,163) | | | (4,916) | | | (24,108) | | | (20,274) | |
Balance at end of period | $ | 9,091 | | | $ | 7,480 | | | $ | 9,091 | | | $ | 7,480 | |
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.
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 $193.5 million and $141.0 million at 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 $4.9 million at 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.
Loan contracts with off-balance sheet commitments are summarized below (in thousands):
| | | | | | | | | | | |
| December 31, 2022 | | April 2, 2022 |
Construction loan contract amount | $ | 3,251 | | | $ | 9,330 | |
Cumulative advances | (757) | | | (3,547) | |
| $ | 2,494 | | | $ | 5,783 | |
Representations and Warranties of Mortgages Sold. We sell loans to Government-Sponsored Enterprises ("GSEs") and whole-loan purchasers. In connection with these activities, we provide 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 $819,000 as of 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 nine months ended 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 December 31, 2022, we had outstanding IRLCs with a notional amount of $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 gains of $43,000 and $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 and whole loan sale commitments (collectively "Commitments"). As of December 31, 2022, we had $3.9 million in outstanding Commitments. We recognized non-cash losses of $197,000 and $61,000 during the three months ended December 31, 2022 and 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.
Legal Matters. We are party to certain lawsuits in the ordinary course of business. Based on management's present knowledge of the facts and (in certain cases) advice of outside counsel, management does not believe that loss contingencies arising from pending matters are likely to have a material adverse effect on our consolidated financial position, liquidity or results of operations after taking into account any existing reserves, which reserves are included in Accrued expenses and other current liabilities on the Consolidated Balance Sheets. However, future events or circumstances that may currently be unknown to management will determine whether the resolution of pending or threatened litigation or claims will ultimately have a material effect on our consolidated financial position, liquidity or results of operations in any future reporting periods.
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 nine months ended December 31, 2022 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Equity Attributable to Cavco Stockholders | | | |
| | | | | Treasury stock | | Additional paid-in capital | | Retained earnings | | Accumulated other comprehensive loss | | Total | | | Redeemable noncontrolling interest |
| Common Stock | | | | | | | |
| Shares | | Amount | | | | | | | |
Balance, April 2, 2022 | 9,292,278 | | | $ | 93 | | | $ | (61,040) | | | $ | 263,049 | | | $ | 628,756 | | | $ | (403) | | | $ | 830,455 | | | | $ | 825 | |
Net income | — | | | — | | | — | | | — | | | 59,602 | | | — | | | 59,602 | | | | 92 | |
Other comprehensive loss, net | — | | | — | | | — | | | — | | | — | | | (112) | | | (112) | | | | — | |
Issuance of common stock under stock incentive plans, net | 5,957 | | | — | | | — | | | (848) | | | — | | | — | | | (848) | | | | — | |
Stock-based compensation | — | | | — | | | — | | | 1,425 | | | — | | | — | | | 1,425 | | | | — | |
Common stock repurchases | — | | | — | | | (38,960) | | | — | | | — | | | — | | | (38,960) | | | | — | |
Distributions | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | (240) | |
Balance, July 2, 2022 | 9,298,235 | | | $ | 93 | | | $ | (100,000) | | | $ | 263,626 | | | $ | 688,358 | | | $ | (515) | | | $ | 851,562 | | | | $ | 677 | |
Net income | — | | | — | | | — | | | — | | | 74,116 | | | — | | | 74,116 | | | | 82 | |
Other comprehensive loss, net | — | | | — | | | — | | | — | | | — | | | (303) | | | (303) | | | | — | |
Issuance of common stock under stock incentive plans, net | 15,917 | | | — | | | — | | | 1,457 | | | — | | | — | | | 1,457 | | | | — | |
Stock-based compensation | — | | | — | | | — | | | 2,100 | | | — | | | — | | | 2,100 | | | | — | |
Distributions | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | (240) | |
Subsequent valuation adjustment | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | 407 | |
Balance, October 1, 2022 | 9,314,152 | | | $ | 93 | | | $ | (100,000) | | | $ | 267,183 | | | $ | 762,474 | | | $ | (818) | | | $ | 928,932 | | | | $ | 926 | |
Net income | — | | | — | | | — | | | — | | | 59,524 | | | — | | | 59,524 | | | | 65 | |
Other comprehensive income, net | — | | | — | | | — | | | — | | | — | | | 74 | | | 74 | | | | — | |
Issuance of common stock under stock incentive plans, net | 5,548 | | | — | | | — | | | (90) | | | — | | | — | | | (90) | | | | — | |
Stock-based compensation | — | | | — | | | — | | | 1,330 | | | — | | | — | | | 1,330 | | | | — | |
Common stock repurchases | — | | | — | | | (34,270) | | | — | | | — | | | — | | | (34,270) | | | | — | |
Distributions | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | (120) | |
Subsequent valuation adjustment | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | 61 | |
Balance, December 31, 2022 | 9,319,700 | | | $ | 93 | | | $ | (134,270) | | | $ | 268,423 | | | $ | 821,998 | | | $ | (744) | | | $ | 955,500 | | | | $ | 932 | |
| | | | | | | | | | | | | | | | |
The following table represents changes in stockholders' equity attributable to Cavco's stockholders and redeemable noncontrolling interest during the nine months ended January 1, 2022 (dollars in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Equity Attributable to Cavco Stockholders | | | | | | |
| | | | | Treasury stock | | Additional paid-in capital | | Retained earnings | | Accumulated other comprehensive income (loss) | | Total | | | Redeemable noncontrolling interest | | | |
| Common Stock | | | | | | | | | |
| Shares | | Amount | | | | | | | | | |
Balance, April 3, 2021 | 9,241,256 | | | $ | 92 | | | $ | (1,441) | | | $ | 253,835 | | | $ | 431,057 | | | $ | 97 | | | $ | 683,640 | | | | $ | — | | | | |
Net income | — | | | — | | | — | | | — | | | 27,046 | | | — | | | 27,046 | | | | — | | | | |
Other comprehensive loss, net | — | | | — | | | — | | | — | | | — | | | (13) | | | (13) | | | | — | | | | |
Issuance of common stock under stock incentive plans, net | 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 loss, net | — | | | — | | | — | | | — | | | — | | | (13) | | | (13) | | | | — | | | | |
Issuance of common stock under stock incentive plans, net | 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 | | | | |
Net income | — | | | — | | | — | | | — | | | 79,419 | | | — | | | 79,419 | | | | 196 | | | | |
Other comprehensive loss, net | — | | | — | | | — | | | — | | | — | | | (113) | | | (113) | | | | — | | | | |
Issuance of common stock under stock incentive plans, net | 14,592 | | | — | | | — | | | 1,437 | | | — | | | — | | | 1,437 | | | | — | | | | |
Stock-based compensation | — | | | — | | | — | | | 1,043 | | | — | | | — | | | 1,043 | | | | — | | | | |
Common stock repurchases | — | | | — | | | (8,690) | | | — | | | — | | | — | | | (8,690) | | | | — | | | | |
Distributions | — | | | — | | | — | | | — | | | — | | | — | | | — | | | | (120) | | | | |
Balance, January 1, 2022 | 9,289,608 | | | $ | 93 | | | $ | (30,567) | | | $ | 261,596 | | | $ | 575,132 | | | $ | (42) | | | $ | 806,212 | | | | $ | 1,204 | | | | |
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 | | 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 | |
20. Fair Value Measurements
The book value and estimated fair value of our financial instruments were as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2022 | | April 2, 2022 |
| Book Value | | Estimated Fair Value | | Book Value | | Estimated Fair Value |
Available-for-sale debt securities | $ | 19,036 | | | $ | 19,036 | | | $ | 17,760 | | | $ | 17,760 | |
Marketable equity securities | 14,103 | | | 14,103 | | | 16,780 | | | 16,780 | |
Non-marketable equity investments | 5,290 | | | 5,290 | | | 20,479 | | | 20,479 | |
Consumer loans receivable | 40,666 | | | 47,039 | | | 49,884 | | | 53,354 | |
Commercial loans receivable | 77,973 | | | 73,343 | | | 68,566 | | | 65,942 | |
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. | | | | | | | | | | | |
| December 31, 2022 | | April 2, 2022 |
Number of loans serviced with MSRs | 4,101 | | | 4,346 | |
Weighted average servicing fee (basis points) | 34.72 | | | 34.76 | |
Capitalized servicing multiple | 114.0 | % | | 85.07 | % |
Capitalized servicing rate (basis points) | 39.57 | | | 29.57 | |
Serviced portfolio with MSRs (in thousands) | $ | 526,535 | | | $ | 560,178 | |
MSRs (in thousands) | $ | 2,083 | | | $ | 1,656 | |
21. Related Party Transactions
In addition to our Company-owned stores, we have non-marketable equity investments in other manufactured housing distributors. In the ordinary course of business, we sell homes and lend to certain of these distributors through our commercial lending programs. For the three and nine months ended December 31, 2022, the total amount of sales to related parties was $18.7 million and $56.0 million, respectively. 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 December 31, 2022, receivables from related parties included $6.3 million of accounts receivable and $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.
22. Business Segment Information
We operate principally in two segments: (1) factory-built housing, which includes wholesale and retail factory-built housing operations, and (2) financial services, which includes manufactured housing consumer finance and insurance. The following table provides selected financial data by segment (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| December 31, 2022 | | January 1, 2022 | | December 31, 2022 | | January 1, 2022 |
Net revenue | | | | | | | |
Factory-built housing | $ | 481,193 | | | $ | 413,590 | | | $ | 1,613,392 | | | $ | 1,067,967 | |
Financial services | 19,410 | | | 18,124 | | | 52,941 | | | 53,712 | |
| $ | 500,603 | | | $ | 431,714 | | | $ | 1,666,333 | | | $ | 1,121,679 | |
| | | | | | | |
Income before income taxes | | | | | | | |
Factory-built housing | $ | 71,813 | | | $ | 52,905 | | | $ | 241,959 | | | $ | 133,357 | |
Financial services | 4,268 | | | 6,030 | | | 6,243 | | | 10,077 | |
| $ | 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.