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. Certain prior period amounts have been reclassified to conform to current period classification. We have evaluated subsequent events after the balance sheet date through the date of the filing of this report with the SEC, and there were no 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 2020 Annual Report on Form 10-K for the year ended March 28, 2020 filed with the SEC on May 27, 2020 ("Form 10-K").
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and the accompanying Notes to the Consolidated Financial Statements ("Notes"). The uncertainty created by the novel coronavirus COVID-19 ("COVID-19") 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 3, 2021 and will include 53 weeks.
We operate principally in two segments: (1) factory-built housing, which includes wholesale and retail systems-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 20 homebuilding production lines located throughout the United States, which are sold to a network of independent distributors, community owners and developers and through our 40 Company-owned retail stores. The financial services segment is comprised of a finance subsidiary, CountryPlace Acceptance Corp. ("CountryPlace"), and an insurance subsidiary, Standard Casualty Co. ("Standard Casualty"). CountryPlace is an approved Federal National Mortgage Association and Federal Home Loan Mortgage Corporation seller/servicer and a Government National Mortgage Association ("GNMA") mortgage-backed securities issuer that offers conforming mortgages, non-conforming mortgages and home-only loans to purchasers of factory-built homes. Standard Casualty provides property and casualty insurance primarily to owners of manufactured homes.
Recently Issued or Adopted Accounting Standards.
On March 29, 2020, we adopted the Financial Accounting Standards Board's ("FASB") Accounting Standards Update ("ASU") 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). ASU 2016-13 changes the impairment model for most financial assets and certain other instruments and requires a forward-looking impairment model based on expected losses rather than incurred losses. We adopted the standard by recognizing the cumulative effect of initially applying the new credit loss standard as an adjustment to the opening balance of Retained earnings. The comparative information has not been restated and continues to be reported under the accounting standard in effect for the applicable prior periods. The cumulative effect of the changes made to our consolidated balance sheet at March 29, 2020 for the adoption of ASU 2016-13 was $733,000, net of taxes. The application of ASU 2016-13 increased our allowance for loan losses by $435,000 for commercial loans receivable and $528,000 for non-acquired consumer loans receivable. It had an insignificant impact to our allowance for credit losses for Accounts receivable, net.
ASU 2016-13 was adopted using the prospective transition approach for acquired consumer loans receivable assets that were previously accounted for under FASB Accounting Standards Codification ("ASC") 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality ("ASC 310-30"). We determined that $1.7 million of the existing purchase discount for acquired consumer loans was related to credit factors and was reclassified to the allowance for loan loss upon adoption. The remaining discount on the acquired consumer loans was determined to be related to non-credit factors and will be accreted into interest income over the life of the loans.
For a description of other 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 26, 2020
|
|
December 28, 2019
|
|
December 26,
2020
|
|
December 28,
2019
|
Factory-built housing
|
|
|
|
|
|
|
|
U.S. Housing and Urban Development code homes
|
$
|
222,684
|
|
|
$
|
208,966
|
|
|
$
|
609,853
|
|
|
$
|
619,001
|
|
Modular homes
|
26,059
|
|
|
24,508
|
|
|
67,325
|
|
|
63,327
|
|
Park model RVs
|
8,296
|
|
|
10,219
|
|
|
31,045
|
|
|
34,831
|
|
Other
|
13,783
|
|
|
13,413
|
|
|
41,656
|
|
|
41,405
|
|
Net revenue from factory-built housing
|
270,822
|
|
|
257,106
|
|
|
749,879
|
|
|
758,564
|
|
Financial services
|
|
|
|
|
|
|
|
Insurance agency commissions received from third-party insurance companies
|
840
|
|
|
783
|
|
|
2,387
|
|
|
2,212
|
|
Other
|
17,110
|
|
|
15,833
|
|
|
49,283
|
|
|
45,663
|
|
Net revenue from financial services
|
17,950
|
|
|
16,616
|
|
|
51,670
|
|
|
47,875
|
|
Total Net revenue
|
$
|
288,772
|
|
|
$
|
273,722
|
|
|
$
|
801,549
|
|
|
$
|
806,439
|
|
3. Restricted Cash
Restricted cash consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
December 26,
2020
|
|
March 28,
2020
|
Cash related to CountryPlace customer payments to be remitted to third parties
|
$
|
11,889
|
|
|
$
|
12,740
|
|
Other restricted cash
|
1,248
|
|
|
1,041
|
|
|
$
|
13,137
|
|
|
$
|
13,781
|
|
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):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 26,
2020
|
|
March 28,
2020
|
|
December 28,
2019
|
|
March 30,
2019
|
Cash and cash equivalents
|
$
|
327,487
|
|
|
$
|
241,826
|
|
|
$
|
216,882
|
|
|
$
|
187,370
|
|
Restricted cash, current
|
12,802
|
|
|
13,446
|
|
|
13,026
|
|
|
12,148
|
|
Restricted cash
|
335
|
|
|
335
|
|
|
350
|
|
|
351
|
|
Cash, cash equivalents and restricted cash per statement of cash flows
|
$
|
340,624
|
|
|
$
|
255,607
|
|
|
$
|
230,258
|
|
|
$
|
199,869
|
|
4. Investments
Investments consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
December 26,
2020
|
|
March 28,
2020
|
Available-for-sale debt securities
|
$
|
16,673
|
|
|
$
|
14,774
|
|
Marketable equity securities
|
13,987
|
|
|
9,829
|
|
Non-marketable equity investments
|
21,791
|
|
|
21,536
|
|
|
52,451
|
|
|
46,139
|
|
Less current portion
|
(16,966)
|
|
|
(14,582)
|
|
|
$
|
35,485
|
|
|
$
|
31,557
|
|
Investments in marketable equity securities consist of investments in the common stock of industrial and other companies.
As of December 26, 2020 and March 28, 2020, non-marketable equity investments included contributions of $15.0 million to equity-method investments in community-based initiatives that buy and sell our homes and provide home-only financing to residents of certain manufactured home communities. Other non-marketable equity investments included investments in other distribution operations.
The following tables summarize our available-for-sale debt securities, gross unrealized gains and losses and fair value, aggregated by investment category (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 26, 2020
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
Residential mortgage-backed securities
|
$
|
5,209
|
|
|
$
|
45
|
|
|
$
|
(17)
|
|
|
$
|
5,237
|
|
State and political subdivision debt securities
|
6,156
|
|
|
151
|
|
|
(1)
|
|
|
6,306
|
|
Corporate debt securities
|
5,117
|
|
|
15
|
|
|
(2)
|
|
|
5,130
|
|
|
$
|
16,482
|
|
|
$
|
211
|
|
|
$
|
(20)
|
|
|
$
|
16,673
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 28, 2020
|
|
Amortized
Cost
|
|
Gross
Unrealized
Gains
|
|
Gross
Unrealized
Losses
|
|
Fair
Value
|
Residential mortgage-backed securities
|
$
|
5,400
|
|
|
$
|
69
|
|
|
$
|
(26)
|
|
|
$
|
5,443
|
|
State and political subdivision debt securities
|
4,239
|
|
|
134
|
|
|
(3)
|
|
|
4,370
|
|
Corporate debt securities
|
5,021
|
|
|
5
|
|
|
(65)
|
|
|
4,961
|
|
|
|
|
|
|
|
|
|
|
$
|
14,660
|
|
|
$
|
208
|
|
|
$
|
(94)
|
|
|
$
|
14,774
|
|
The following tables show gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities had been in a continuous unrealized loss position (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 26, 2020
|
|
Less than 12 Months
|
|
12 Months or Longer
|
|
Total
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
Residential mortgage-backed securities
|
$
|
342
|
|
|
$
|
(9)
|
|
|
$
|
460
|
|
|
$
|
(8)
|
|
|
$
|
802
|
|
|
$
|
(17)
|
|
State and political subdivision debt securities
|
321
|
|
|
(1)
|
|
|
—
|
|
|
—
|
|
|
321
|
|
|
(1)
|
|
Corporate debt securities
|
805
|
|
|
(2)
|
|
|
—
|
|
|
—
|
|
|
805
|
|
|
(2)
|
|
|
$
|
1,468
|
|
|
$
|
(12)
|
|
|
$
|
460
|
|
|
$
|
(8)
|
|
|
$
|
1,928
|
|
|
$
|
(20)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 28, 2020
|
|
Less than 12 Months
|
|
12 Months or Longer
|
|
Total
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
|
Fair
Value
|
|
Unrealized
Losses
|
Residential mortgage-backed securities
|
$
|
133
|
|
|
$
|
—
|
|
|
$
|
1,779
|
|
|
$
|
(26)
|
|
|
$
|
1,912
|
|
|
$
|
(26)
|
|
State and political subdivision debt securities
|
601
|
|
|
(2)
|
|
|
101
|
|
|
(1)
|
|
|
702
|
|
|
(3)
|
|
Corporate debt securities
|
3,747
|
|
|
(65)
|
|
|
—
|
|
|
—
|
|
|
3,747
|
|
|
(65)
|
|
|
$
|
4,481
|
|
|
$
|
(67)
|
|
|
$
|
1,880
|
|
|
$
|
(27)
|
|
|
$
|
6,361
|
|
|
$
|
(94)
|
|
We are not aware of any changes to the securities or issuers that would indicate the losses above are indicative of credit impairment as of December 26, 2020. Further, we do not intend to sell the investments, and it is more likely than not that we will not be required to sell the investments, before recovery of their amortized cost.
The amortized cost and fair value of our investments in available-for-sale debt securities, by contractual maturity, are shown in the table below (in thousands). Expected maturities differ from contractual maturities as borrowers may have the right to call or prepay obligations, with or without penalties.
|
|
|
|
|
|
|
|
|
|
|
|
|
December 26, 2020
|
|
Amortized
Cost
|
|
Fair
Value
|
Due in less than one year
|
$
|
601
|
|
|
$
|
603
|
|
Due after one year through five years
|
8,335
|
|
|
8,375
|
|
Due after five years through ten years
|
1,025
|
|
|
1,097
|
|
Due after ten years
|
1,312
|
|
|
1,361
|
|
Mortgage-backed securities
|
5,209
|
|
|
5,237
|
|
|
$
|
16,482
|
|
|
$
|
16,673
|
|
We recognize investment gains and losses on available-for-sale debt securities when we sell or otherwise dispose of securities using the specific identification method. For the three and nine months ended December 26, 2020, there were no gross gains realized on the sale of available-for-sale debt securities and gross losses realized were $1,000 and $6,000, respectively. There were no gross gains or losses realized on the sale of available-for-sale debt securities during the three and nine months ended December 28, 2019.
We recognize unrealized gains and losses on marketable equity securities from changes in market prices during the period as a component of earnings in the Consolidated Statements of Comprehensive Income. Net investment gains and losses on marketable equity securities were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
December 26,
2020
|
|
December 28,
2019
|
|
December 26,
2020
|
|
December 28,
2019
|
Marketable equity securities:
|
|
|
|
|
|
|
|
Net gains on securities held
|
$
|
1,857
|
|
|
$
|
764
|
|
|
$
|
5,132
|
|
|
$
|
2,066
|
|
Net gains on securities sold
|
151
|
|
|
13
|
|
|
157
|
|
|
11
|
|
|
$
|
2,008
|
|
|
$
|
777
|
|
|
$
|
5,289
|
|
|
$
|
2,077
|
|
5. Inventories
Inventories consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
December 26,
2020
|
|
March 28,
2020
|
Raw materials
|
$
|
45,821
|
|
|
$
|
35,691
|
|
Work in process
|
16,223
|
|
|
13,953
|
|
Finished goods
|
48,580
|
|
|
63,891
|
|
|
$
|
110,624
|
|
|
$
|
113,535
|
|
6. Consumer Loans Receivable
The following table summarizes consumer loans receivable (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
December 26,
2020
|
|
March 28,
2020
|
Loans held for investment (at Acquisition Date, defined below)
|
$
|
33,726
|
|
|
$
|
37,779
|
|
Loans held for investment (originated after Acquisition Date)
|
17,873
|
|
|
20,140
|
|
Loans held for sale
|
22,014
|
|
|
14,671
|
|
Construction advances
|
13,923
|
|
|
13,400
|
|
|
87,536
|
|
|
85,990
|
|
Deferred financing fees and other, net
|
(2,525)
|
|
|
(1,919)
|
|
Allowance for loan losses
|
(3,419)
|
|
|
(1,767)
|
|
|
81,592
|
|
|
82,304
|
|
Less current portion
|
(42,091)
|
|
|
(32,376)
|
|
|
$
|
39,501
|
|
|
$
|
49,928
|
|
The Company acquired consumer loans receivable as part of the acquisition of Palm Harbor Homes, Inc. in April 2011 ("Acquisition Date"). The allowance for loan losses reflects our judgment of the probable loss exposure on loans held for investment. On March 29, 2020 we adopted ASU 2016-13 using the prospective transition approach for acquired consumer loans receivable assets that were previously accounted for under ASC 310-30. We determined that $1.7 million of the existing purchase discount for such consumer loans was related to credit factors and was reclassified to the allowance for loan losses upon adoption. The remaining discount on the acquired consumer loans was determined to be related to non-credit factors and will be accreted into interest income over the life of the loans.
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 26,
2020
|
|
December 28,
2019
|
|
December 26,
2020
|
|
December 28,
2019
|
Allowance for loan losses at beginning of period
|
$
|
3,910
|
|
|
$
|
415
|
|
|
$
|
1,767
|
|
|
$
|
415
|
|
Impact of adoption of ASU 2016-13
|
—
|
|
|
—
|
|
|
2,276
|
|
|
—
|
|
Change in estimated loan losses, net
|
(491)
|
|
|
16
|
|
|
(424)
|
|
|
16
|
|
Charge-offs
|
—
|
|
|
—
|
|
|
(200)
|
|
|
—
|
|
Recoveries
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Allowance for loan losses at end of period
|
$
|
3,419
|
|
|
$
|
431
|
|
|
$
|
3,419
|
|
|
$
|
431
|
|
The consumer loans held for investment had the following characteristics:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 26,
2020
|
|
March 28,
2020
|
Weighted average contractual interest rate
|
8.4
|
%
|
|
8.4
|
%
|
Weighted average effective interest rate
|
9.5
|
%
|
|
9.3
|
%
|
Weighted average months to maturity
|
159
|
|
164
|
The following table is a consolidated summary of the delinquency status of the outstanding amortized cost of consumer loans receivable (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
December 26,
2020
|
|
March 28,
2020
|
Current
|
$
|
84,200
|
|
|
$
|
83,861
|
|
31 to 60 days
|
834
|
|
|
547
|
|
61 to 90 days
|
178
|
|
|
307
|
|
91+ days
|
2,324
|
|
|
1,275
|
|
|
$
|
87,536
|
|
|
$
|
85,990
|
|
The following table disaggregates CountryPlace's gross consumer loans receivable by credit quality indicator and fiscal year of origination (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 26, 2020
|
|
|
|
2021
|
|
2020
|
|
2019
|
|
2018
|
|
2017
|
|
Prior
|
|
Total
|
|
March 28,
2020
|
Prime- FICO score 680 and greater
|
$
|
21,087
|
|
|
$
|
4,191
|
|
|
$
|
1,832
|
|
|
$
|
996
|
|
|
$
|
1,761
|
|
|
$
|
24,582
|
|
|
$
|
54,449
|
|
|
$
|
55,513
|
|
Near Prime- FICO score 620-679
|
11,502
|
|
|
4,074
|
|
|
1,809
|
|
|
1,141
|
|
|
614
|
|
|
10,875
|
|
|
30,015
|
|
|
27,767
|
|
Sub-Prime- FICO score less than 620
|
426
|
|
|
54
|
|
|
—
|
|
|
—
|
|
|
85
|
|
|
1,786
|
|
|
2,351
|
|
|
2,142
|
|
No FICO score
|
151
|
|
|
—
|
|
|
28
|
|
|
—
|
|
|
—
|
|
|
542
|
|
|
721
|
|
|
568
|
|
|
$
|
33,166
|
|
|
$
|
8,319
|
|
|
$
|
3,669
|
|
|
$
|
2,137
|
|
|
$
|
2,460
|
|
|
$
|
37,785
|
|
|
$
|
87,536
|
|
|
$
|
85,990
|
|
Loan contracts secured by geographically concentrated collateral could experience higher rates of delinquencies, default and foreclosure losses than loan contracts secured by collateral that is more geographically dispersed. As of December 26, 2020, 37% of the outstanding principal balance of consumer loans receivable portfolio was concentrated in Texas and 20% was concentrated in Florida. As of March 28, 2020, 36% of the outstanding principal balance of the consumer loans receivable portfolio was concentrated in Texas and 16% 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 December 26, 2020 or March 28, 2020.
Collateral for repossessed loans is acquired through foreclosure or similar proceedings and is recorded at the estimated fair value of the home less the costs to sell. At repossession, the fair value of the collateral is determined based on the historical recovery rates of previously charged-off loans; the loan is charged off and the loss is recorded to the allowance for loan losses. Repossessed homes totaled approximately $162,000 and $1.5 million as of December 26, 2020 and March 28, 2020, respectively, and are included in Prepaid expenses and other current assets in the Consolidated Balance Sheets. Foreclosure or similar proceedings in progress totaled approximately $606,000 and $560,000 as of December 26, 2020 and March 28, 2020, respectively.
7. Commercial Loans Receivable
The commercial loans receivable balance consists of two classes: (i) direct financing arrangements for the home product needs of our independent distributors, community owners and developers; and (ii) amounts loaned by us under participation financing programs.
Under the terms of the direct programs, we provide funds for financed home purchases by distributors, community owners and developers. The notes are secured by the homes as collateral and, in some instances, other security. Other terms of direct arrangements vary, depending on the needs of the borrower and the opportunity for the Company.
Under the terms of the participation programs, we provide loans to independent floor plan lenders that then lend to distributors to finance their inventory purchases. The participation commercial loans receivables are unsecured general obligations of the independent floor plan lenders.
Commercial loans receivable, net consisted of the following, by class of financing notes receivable (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
December 26,
2020
|
|
March 28,
2020
|
Direct loans receivable
|
$
|
40,653
|
|
|
$
|
47,058
|
|
Participation loans receivable
|
105
|
|
|
144
|
|
Allowance for loan losses
|
(765)
|
|
|
(393)
|
|
Deferred financing fees, net
|
(247)
|
|
|
(244)
|
|
|
39,746
|
|
|
46,565
|
|
Less current portion of commercial loans receivable (including from affiliates), net
|
(19,012)
|
|
|
(15,423)
|
|
|
$
|
20,734
|
|
|
$
|
31,142
|
|
The commercial loans receivable balance had the following characteristics:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 26,
2020
|
|
March 28,
2020
|
Weighted average contractual interest rate
|
6.1
|
%
|
|
5.7
|
%
|
Weighted average months to maturity
|
11
|
|
10
|
The risk of loss is spread over numerous borrowers. Borrower activity is monitored on a regular basis and contractual arrangements are in place to provide adequate loss mitigation in the event of a default. Historically, we have been able to sell repossessed homes, thereby mitigating loss exposure. If a default occurs and collateral is lost, we are exposed to loss of the full value of the home loan. We evaluate the potential for loss from the commercial loan programs based on the borrower's risk rating, overall financial stability, historical experience and estimates of other economic factors. We have included considerations related to the COVID-19 pandemic when assessing our risk of loan loss and setting reserve amounts for the commercial finance portfolio as of December 26, 2020.
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 26,
2020
|
|
December 28,
2019
|
|
December 26,
2020
|
|
December 28,
2019
|
Balance at beginning of period
|
$
|
789
|
|
|
$
|
163
|
|
|
$
|
393
|
|
|
$
|
180
|
|
Impact of adoption of ASU 2016-13
|
—
|
|
|
—
|
|
|
435
|
|
|
—
|
|
Change in estimated loan losses, net
|
(24)
|
|
|
(1)
|
|
|
(63)
|
|
|
(18)
|
|
Loans charged off, net of recoveries
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Balance at end of period
|
$
|
765
|
|
|
$
|
162
|
|
|
$
|
765
|
|
|
$
|
162
|
|
The following table disaggregates our commercial loans receivable by credit quality indicator and fiscal year of origination (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 26, 2020
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
2019
|
|
2018
|
|
2017
|
|
Total
|
|
March 28,
2020
|
|
|
|
|
Risk profile based on payment activity:
|
|
|
|
|
Performing
|
|
$
|
22,708
|
|
|
$
|
10,394
|
|
|
$
|
3,954
|
|
|
$
|
2,180
|
|
|
$
|
1,522
|
|
|
$
|
40,758
|
|
|
$
|
47,016
|
|
|
|
|
|
Watch list
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
186
|
|
|
|
|
|
Nonperforming
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
$
|
22,708
|
|
|
$
|
10,394
|
|
|
$
|
3,954
|
|
|
$
|
2,180
|
|
|
$
|
1,522
|
|
|
$
|
40,758
|
|
|
$
|
47,202
|
|
|
|
|
|
At December 26, 2020, 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 26, 2020, 10.0% of our outstanding commercial loans receivable principal balance was concentrated in Arizona. As of March 28, 2020, 11.0% of the outstanding commercial loans receivable principal balance was concentrated in California. No other state had concentrations in excess of 10% of the principal balance of the consumer loans receivable as of December 26, 2020 or March 28, 2020.
We had concentrations with one independent third-party and its affiliates that equaled 16.8% and 21.0% of the net commercial loans receivable principal balance outstanding, all of which was secured, as of December 26, 2020 and March 28, 2020, respectively. The risks created by these concentrations have been considered in the determination of the adequacy of the allowance for loan losses.
8. Property, Plant and Equipment, net
Property, plant and equipment, net, consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
December 26,
2020
|
|
March 28,
2020
|
Property, plant and equipment, at cost:
|
|
|
|
Land
|
$
|
26,862
|
|
|
$
|
26,827
|
|
Buildings and improvements
|
54,710
|
|
|
52,011
|
|
Machinery and equipment
|
33,163
|
|
|
30,984
|
|
|
114,735
|
|
|
109,822
|
|
Accumulated depreciation
|
(36,242)
|
|
|
(32,632)
|
|
|
$
|
78,493
|
|
|
$
|
77,190
|
|
Depreciation expense was $1.4 million for each of the three month periods ended December 26, 2020 and December 28, 2019. Depreciation expense for the nine months ended December 26, 2020 and December 28, 2019 was $4.2 million and $3.8 million, respectively.
Included in the amounts above are certain assets under finance leases. See Note 9 of the Notes to the Consolidated Financial Statements included in the Form 10-K for additional information.
9. Leases
We lease certain production and retail locations, office space and equipment. During the period ended December 26, 2020, we executed various lease renewals, including a five-year extension at one of our active manufacturing facilities, which increased the right of use asset and lease liability.
The present value of minimum payments for future fiscal years under non-cancelable leases as of December 26, 2020 was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Leases
|
|
Finance Leases
|
|
Total
|
Remainder of 2021
|
$
|
1,051
|
|
|
$
|
19
|
|
|
$
|
1,070
|
|
2022
|
4,182
|
|
|
73
|
|
|
4,255
|
|
2023
|
3,854
|
|
|
73
|
|
|
3,927
|
|
2024
|
3,503
|
|
|
73
|
|
|
3,576
|
|
2025
|
2,706
|
|
|
73
|
|
|
2,779
|
|
2026
|
2,799
|
|
|
49
|
|
|
2,848
|
|
Thereafter
|
2,206
|
|
|
—
|
|
|
2,206
|
|
|
20,301
|
|
|
360
|
|
|
20,661
|
|
Less amount representing interest
|
(2,392)
|
|
|
(41)
|
|
|
(2,433)
|
|
|
17,909
|
|
|
319
|
|
|
18,228
|
|
Less current portion
|
(4,082)
|
|
|
(71)
|
|
|
(4,153)
|
|
|
$
|
13,827
|
|
|
$
|
248
|
|
|
$
|
14,075
|
|
10. Goodwill and Other Intangibles
Goodwill and other intangibles, net, consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 26, 2020
|
|
March 28, 2020
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
Indefinite-lived:
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
$
|
75,090
|
|
|
$
|
—
|
|
|
$
|
75,090
|
|
|
$
|
75,090
|
|
|
$
|
—
|
|
|
$
|
75,090
|
|
Trademarks and trade names
|
8,900
|
|
|
—
|
|
|
8,900
|
|
|
8,900
|
|
|
—
|
|
|
8,900
|
|
State insurance licenses
|
1,100
|
|
|
—
|
|
|
1,100
|
|
|
1,100
|
|
|
—
|
|
|
1,100
|
|
|
85,090
|
|
|
—
|
|
|
85,090
|
|
|
85,090
|
|
|
—
|
|
|
85,090
|
|
Finite-lived:
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
11,300
|
|
|
(6,938)
|
|
|
4,362
|
|
|
11,300
|
|
|
(6,463)
|
|
|
4,837
|
|
Other
|
1,424
|
|
|
(1,236)
|
|
|
188
|
|
|
1,424
|
|
|
(1,151)
|
|
|
273
|
|
|
$
|
97,814
|
|
|
$
|
(8,174)
|
|
|
$
|
89,640
|
|
|
$
|
97,814
|
|
|
$
|
(7,614)
|
|
|
$
|
90,200
|
|
Amortization expense recognized on intangible assets was $186,000 and $188,000 for the three months ended December 26, 2020 and December 28, 2019, respectively. Amortization expense recognized on intangible assets was $560,000 and $419,000 for the nine months ended December 26, 2020 and December 28, 2019, respectively.
11. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
December 26,
2020
|
|
March 28,
2020
|
Customer deposits
|
$
|
34,373
|
|
|
$
|
22,055
|
|
Salaries, wages and benefits
|
32,338
|
|
|
25,885
|
|
Company repurchase options on certain loans sold
|
29,104
|
|
|
7,444
|
|
Unearned insurance premiums
|
21,223
|
|
|
20,614
|
|
Estimated warranties
|
17,996
|
|
|
18,678
|
|
Accrued volume rebates
|
12,063
|
|
|
9,801
|
|
Accrued self-insurance
|
5,661
|
|
|
5,112
|
|
Insurance loss reserves
|
5,351
|
|
|
5,582
|
|
Operating lease liabilities
|
4,082
|
|
|
4,170
|
|
Reserve for repurchase commitments
|
2,281
|
|
|
2,679
|
|
Accrued taxes
|
2,212
|
|
|
1,908
|
|
Other
|
19,342
|
|
|
16,002
|
|
|
$
|
186,026
|
|
|
$
|
139,930
|
|
12. Warranties
Activity in the liability for estimated warranties was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
December 26,
2020
|
|
December 28,
2019
|
|
December 26,
2020
|
|
December 28,
2019
|
Balance at beginning of period
|
$
|
17,805
|
|
|
$
|
18,563
|
|
|
$
|
18,678
|
|
|
$
|
17,069
|
|
|
|
|
|
|
|
|
|
Purchase accounting additions
|
—
|
|
|
—
|
|
|
—
|
|
|
1,192
|
|
Charged to costs and expenses
|
7,724
|
|
|
7,269
|
|
|
20,303
|
|
|
21,855
|
|
Payments and deductions
|
(7,533)
|
|
|
(7,873)
|
|
|
(20,985)
|
|
|
(22,157)
|
|
Balance at end of period
|
$
|
17,996
|
|
|
$
|
17,959
|
|
|
$
|
17,996
|
|
|
$
|
17,959
|
|
13. Debt and Finance Lease Obligations
Debt and finance lease obligations primarily consist of secured credit facilities at our finance subsidiary and lease obligations for which it is expected that we will obtain ownership of the leased assets at the end of their lease term. The following table summarizes debt and finance lease obligations (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
December 26,
2020
|
|
March 28,
2020
|
Secured credit facilities
|
$
|
8,825
|
|
|
$
|
10,474
|
|
Other secured financings
|
3,843
|
|
|
4,113
|
|
Finance lease obligations
|
319
|
|
|
366
|
|
|
12,987
|
|
|
14,953
|
|
Less current portion
|
(2,140)
|
|
|
(2,248)
|
|
|
$
|
10,847
|
|
|
$
|
12,705
|
|
CountryPlace entered into secured credit facilities with independent third-party banks with draw periods from one to fifteen months and maturity dates of ten years after the expiration of the draw periods, which have now expired. The proceeds were used to originate and hold consumer home-only loans secured by manufactured homes, which are pledged as collateral to the facilities. Upon completion of the draw down periods, the facilities were converted into an amortizing loan based on a 20-year amortization period with a balloon payment due upon maturity. The maximum advance for loans under this program was 80% of the outstanding collateral principal balance, with the Company providing the remaining funds. The outstanding balance of the converted loans was $8.8 million as of December 26, 2020 and $10.5 million as of March 28, 2020, with a weighted average interest rate of 4.91%.
See Note 9 of the Notes to the Consolidated Financial Statements included in the Form 10-K for further discussion of the finance lease obligations.
14. Reinsurance
Standard Casualty is primarily a specialty writer of manufactured home physical damage insurance. Certain of Standard Casualty's premiums and benefits are assumed from and ceded to other insurance companies under various reinsurance agreements. Standard Casualty remains obligated for amounts ceded in the event that the reinsurers do not meet their obligations. Substantially all of Standard Casualty's assumed reinsurance is with one entity.
The effects of reinsurance on premiums written and earned were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
December 26, 2020
|
|
December 28, 2019
|
|
Written
|
|
Earned
|
|
Written
|
|
Earned
|
Direct premiums
|
$
|
5,420
|
|
|
$
|
5,429
|
|
|
$
|
4,654
|
|
|
$
|
4,756
|
|
Assumed premiums—nonaffiliated
|
6,541
|
|
|
7,195
|
|
|
5,918
|
|
|
6,676
|
|
Ceded premiums—nonaffiliated
|
(3,146)
|
|
|
(3,146)
|
|
|
(3,071)
|
|
|
(3,071)
|
|
|
$
|
8,815
|
|
|
$
|
9,478
|
|
|
$
|
7,501
|
|
|
$
|
8,361
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
December 26, 2020
|
|
December 28, 2019
|
|
Written
|
|
Earned
|
|
Written
|
|
Earned
|
Direct premiums
|
$
|
16,100
|
|
|
$
|
15,759
|
|
|
$
|
13,866
|
|
|
$
|
13,979
|
|
Assumed premiums—nonaffiliated
|
21,787
|
|
|
21,028
|
|
|
20,191
|
|
|
19,703
|
|
Ceded premiums—nonaffiliated
|
(9,201)
|
|
|
(9,201)
|
|
|
(9,087)
|
|
|
(9,087)
|
|
|
$
|
28,686
|
|
|
$
|
27,586
|
|
|
$
|
24,970
|
|
|
$
|
24,595
|
|
Typical insurance policies written or assumed by Standard Casualty have a maximum coverage of $300,000 per claim, of which Standard Casualty cedes $150,000 of the risk of loss per reinsurance. Therefore, Standard Casualty's 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 by Standard Casualty through reinsurance for catastrophic losses in excess of $2 million per occurrence, up to a maximum of $55 million in the aggregate.
15. Commitments and Contingencies
Repurchase Contingencies. The Company is contingently liable under terms of repurchase agreements with financial institutions providing inventory financing for independent distributors of its 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 $70.8 million and $79.3 million at December 26, 2020 and March 28, 2020, respectively, without a reduction for the resale value of the homes. We apply ASC 460, Guarantees, and ASC 450-20, Loss Contingencies, to account for the repurchase commitment liability. We had a reserve for repurchase commitments of $2.3 million and $2.7 million at December 26, 2020 and March 28, 2020, respectively.
Letter of Credit. To secure certain reinsurance contracts, Standard Casualty maintained an irrevocable letter of credit of $11.0 million to provide assurance that Standard Casualty would fulfill its reinsurance obligations. The letter of credit was released on July 11, 2020.
Construction-Period Mortgages. CountryPlace funds construction-period mortgages through periodic advances during home construction. At the time of initial funding, CountryPlace commits to fully fund the loan contract in accordance with a predetermined schedule. Subsequent advances are contingent upon the performance of contractual obligations by the seller of the home and the borrower. Cumulative advances on construction-period mortgages are carried on the Consolidated Balance Sheets at the amount advanced less a valuation allowance and are included in Consumer loans receivable, net. The total loan contract amount, less cumulative advances, represents an off-balance sheet contingent commitment of CountryPlace to fund future advances.
Loan contracts with off-balance sheet commitments are summarized below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
December 26,
2020
|
|
March 28,
2020
|
Construction loan contract amount
|
$
|
41,763
|
|
|
$
|
31,136
|
|
Cumulative advances
|
(13,923)
|
|
|
(13,400)
|
|
|
$
|
27,840
|
|
|
$
|
17,736
|
|
Representations and Warranties of Mortgages Sold. CountryPlace sells loans to Government-Sponsored Enterprises ("GSEs") and whole-loan purchasers and finances certain loans with long-term credit facilities secured by the respective loans. In connection with these activities, CountryPlace provides to the GSEs and whole-loan purchasers and lenders representations and warranties related to the loans sold or financed. Upon a breach of a representation, CountryPlace may be required to repurchase the loan or to indemnify a party for incurred losses. During the nine months ended December 26, 2020, the Company executed indemnification agreements to cover 20% of the losses experienced over the next two years related to five loans that were impacted by COVID-19. We maintain a reserve for these contingent repurchase and indemnification obligations. This reserve of $1.3 million as of December 26, 2020 and $1.0 million as of March 28, 2020, included in Accrued expenses and other current liabilities, 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 26, 2020.
Interest Rate Lock Commitments. In originating loans for sale, CountryPlace issues interest rate lock commitments ("IRLCs") to prospective borrowers. These IRLCs represent an agreement to extend credit to a loan applicant, whereby the interest rate on the loan is set prior to loan closing or sale. These IRLCs bind CountryPlace 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 26, 2020, CountryPlace had outstanding IRLCs with a notional amount of $24.5 million, which are recorded at fair value in accordance with ASC 815, Derivatives and Hedging. During the three months ended December 26, 2020 and December 28, 2019, we recognized gains of $57,000 and losses of $5,000, respectively, on outstanding IRLCs. During the nine months ended December 26, 2020 and December 28, 2019, we recognized losses of $87,000 and $8,000, respectively, on outstanding IRLCs.
Forward Sales Commitments. CountryPlace manages the risk profiles of a portion of its outstanding IRLCs and mortgage loans held for sale by entering into forward sales of mortgage-backed securities ("MBS") and whole loan sale commitments. As of December 26, 2020, CountryPlace had $68.9 million in outstanding notional forward sales of MBSs and forward sales commitments. Commitments for forward sales of whole loans are typically in an amount proportionate with the amount of IRLCs expected to close in particular time frames, assuming no change in mortgage interest rates, for the respective loan products intended for whole loan sale.
The estimated fair values of forward sales of MBS and whole loan sale commitments are based on quoted market values and are recorded within Prepaid expenses and other current assets in the Consolidated Balance Sheets. During the three months ended December 26, 2020 and December 28, 2019, we recognized losses of $318,000 and gains of $79,000, respectively, on forward sales of MBS and whole loan sale commitments. During the nine months ended December 26, 2020 and December 28, 2019, we recognized gains of $816,000 and $163,000,respectively, on forward sales of MBS and whole loan sale commitments.
Legal Matters. Since 2018, the Company has been cooperating with an investigation by the enforcement staff of the SEC's Los Angeles Regional Office regarding securities trading in personal and Company accounts directed by the Company's former Chief Executive Officer, Joseph Stegmayer. The Audit Committee of the Board of Directors conducted an internal investigation led by independent legal counsel and other advisers and, following the completion of its work in early 2019, the Audit Committee shared the results of its work with the Company's auditors, listing exchange and the SEC staff. We have also made documents and personnel available to the SEC staff and we intend to continue cooperating with its investigation. We have been exploring the possibility of a settlement with the SEC staff but, at this time, we are unable to assess the probability of that outcome or reasonably estimate the amount of a potential loss, if any.
Joseph D. Robles v. Cavco Industries, Inc. ("Robles"), was filed in the Superior Court for the State of California, Riverside on June 25, 2019 and Malik Griffin v. Fleetwood Homes, Inc. ("Griffin"), was filed in the Superior Court for the State of California, San Bernardino on September 19, 2019, each seeking recovery on behalf of a putative class of current and former hourly employees for certain alleged wage-and-hour violations including, among other things: (i) alleged failure to comply with certain wage statement formatting requirements; (ii) alleged failure to compensate employees for straight-time and overtime hours worked; and (iii) alleged failure to provide employees with all requisite work breaks. On November 24, 2020, Robles dismissed his separate action in the Riverside County Superior Court and Griffin filed an amended complaint adding Robles as a named plaintiff to the action in the San Bernardino County Superior Court. A joint mediation occurred on January 27, 2021 where the Parties failed to reach a settlement or resolution to the matter
The Company is party to certain other lawsuits in the ordinary course of business. Based on management's present knowledge of the facts and (in certain cases) advice of outside counsel, management does not believe that loss contingencies arising from pending matters are likely to have a material adverse effect on our consolidated financial position, liquidity or results of operations after taking into account any existing reserves included in Accrued expenses and other current liabilities in the Consolidated Balance Sheets. However, future events or circumstances that may currently be unknown to management will determine whether the resolution of pending or threatened litigation or claims will ultimately have a material effect on our consolidated financial position, liquidity or results of operations in any future reporting periods.
16. Stockholders' Equity
The following table represents changes in stockholders' equity for each quarterly period during the nine months ended December 26, 2020 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
Retained earnings
|
|
Accumulated other comprehensive income
|
|
Total
|
|
Common Stock
|
|
|
|
|
|
Shares
|
|
Amount
|
|
|
|
|
Balance, March 28, 2020
|
9,173,242
|
|
|
$
|
92
|
|
|
$
|
252,260
|
|
|
$
|
355,144
|
|
|
$
|
90
|
|
|
$
|
607,586
|
|
Cumulative effect of implementing ASU 2016-13, net
|
—
|
|
|
—
|
|
|
—
|
|
|
(733)
|
|
|
—
|
|
|
(733)
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
16,674
|
|
|
—
|
|
|
16,674
|
|
Issuance of common stock under stock incentive plans
|
3,822
|
|
|
—
|
|
|
(533)
|
|
|
—
|
|
|
—
|
|
|
(533)
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
945
|
|
|
—
|
|
|
—
|
|
|
945
|
|
Other comprehensive income, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
68
|
|
|
68
|
|
Balance, June 27, 2020
|
9,177,064
|
|
|
$
|
92
|
|
|
$
|
252,672
|
|
|
$
|
371,085
|
|
|
$
|
158
|
|
|
$
|
624,007
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
15,049
|
|
|
—
|
|
|
15,049
|
|
Issuance of common stock under stock incentive plans
|
11,098
|
|
|
—
|
|
|
522
|
|
|
—
|
|
|
—
|
|
|
522
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
1,103
|
|
|
—
|
|
|
—
|
|
|
1,103
|
|
Other comprehensive income, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
7
|
|
Balance, September 26, 2020
|
9,188,162
|
|
|
$
|
92
|
|
|
$
|
254,297
|
|
|
$
|
386,134
|
|
|
$
|
165
|
|
|
$
|
640,688
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
19,701
|
|
|
—
|
|
|
19,701
|
|
Issuance of common stock under stock incentive plans
|
4,075
|
|
|
—
|
|
|
480
|
|
|
—
|
|
|
—
|
|
|
480
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
887
|
|
|
—
|
|
|
—
|
|
|
887
|
|
Other comprehensive loss, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(15)
|
|
|
(15)
|
|
Balance, December 26, 2020
|
9,192,237
|
|
|
$
|
92
|
|
|
$
|
255,664
|
|
|
$
|
405,835
|
|
|
$
|
150
|
|
|
$
|
661,741
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table represents changes in stockholders' equity for each quarterly period during the nine months ended December 28, 2019 (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
Retained earnings
|
|
Accumulated other comprehensive income (loss)
|
|
Total
|
|
Common Stock
|
|
|
|
|
|
Shares
|
|
Amount
|
|
|
|
|
Balance, March 30, 2019
|
9,098,320
|
|
|
$
|
91
|
|
|
$
|
249,447
|
|
|
$
|
280,078
|
|
|
$
|
(28)
|
|
|
$
|
529,588
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
21,282
|
|
|
—
|
|
|
21,282
|
|
Issuance of common stock under stock incentive plans
|
13,304
|
|
|
—
|
|
|
(1,252)
|
|
|
—
|
|
|
—
|
|
|
(1,252)
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
630
|
|
|
—
|
|
|
—
|
|
|
630
|
|
Other comprehensive income, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
89
|
|
|
89
|
|
Balance, June 29, 2019
|
9,111,624
|
|
|
$
|
91
|
|
|
$
|
248,825
|
|
|
$
|
301,360
|
|
|
$
|
61
|
|
|
$
|
550,337
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
20,885
|
|
|
—
|
|
|
20,885
|
|
Issuance of common stock under stock incentive plans
|
15,842
|
|
|
—
|
|
|
941
|
|
|
—
|
|
|
—
|
|
|
941
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
818
|
|
|
—
|
|
|
—
|
|
|
818
|
|
Other comprehensive loss, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
23
|
|
|
23
|
|
Balance, September 28, 2019
|
9,127,466
|
|
|
$
|
91
|
|
|
$
|
250,584
|
|
|
$
|
322,245
|
|
|
$
|
84
|
|
|
$
|
573,004
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
20,898
|
|
|
—
|
|
|
20,898
|
|
Issuance of common stock under stock incentive plans
|
13,725
|
|
|
—
|
|
|
537
|
|
|
—
|
|
|
—
|
|
|
537
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
820
|
|
|
—
|
|
|
—
|
|
|
820
|
|
Other comprehensive income, net
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
Balance, December 28, 2019
|
9,141,191
|
|
|
$
|
91
|
|
|
$
|
251,941
|
|
|
$
|
343,143
|
|
|
$
|
85
|
|
|
$
|
595,260
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
Nine Months Ended
|
|
December 26,
2020
|
|
December 28,
2019
|
|
December 26,
2020
|
|
December 28,
2019
|
Net income
|
$
|
19,701
|
|
|
$
|
20,898
|
|
|
$
|
51,424
|
|
|
$
|
63,065
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
9,190,254
|
|
|
9,138,202
|
|
|
9,182,491
|
|
|
9,120,241
|
|
Effect of dilutive securities
|
105,299
|
|
|
155,739
|
|
|
102,747
|
|
|
138,962
|
|
Diluted
|
9,295,553
|
|
|
9,293,941
|
|
|
9,285,238
|
|
|
9,259,203
|
|
Net income per share:
|
|
|
|
|
|
|
|
Basic
|
$
|
2.14
|
|
|
$
|
2.29
|
|
|
$
|
5.60
|
|
|
$
|
6.91
|
|
Diluted
|
$
|
2.12
|
|
|
$
|
2.25
|
|
|
$
|
5.54
|
|
|
$
|
6.81
|
|
Anti-dilutive common stock equivalents excluded from the computation of diluted earnings per share for the three months ended December 26, 2020 and December 28, 2019 were 26,601 and 14,482, respectively. Anti-dilutive common stock equivalents excluded from the computation of diluted earnings per share for the nine months ended December 26, 2020 and December 28, 2019 were 26,357 and 29,971, respectively. In addition, outstanding restricted share awards excluded from the calculation of diluted earnings per share because the underlying performance criteria had not been met were 14,405 for the three and nine months ended December 26, 2020, and 7,305 for the three and nine months ended December 28, 2019.
18. Fair Value Measurements
The book value and estimated fair value of our financial instruments were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 26, 2020
|
|
March 28, 2020
|
|
Book
Value
|
|
Estimated
Fair Value
|
|
Book
Value
|
|
Estimated
Fair Value
|
Available-for-sale debt securities
|
$
|
16,673
|
|
|
$
|
16,673
|
|
|
$
|
14,774
|
|
|
$
|
14,774
|
|
Marketable equity securities
|
13,987
|
|
|
13,987
|
|
|
9,829
|
|
|
9,829
|
|
Non-marketable equity investments
|
21,791
|
|
|
21,791
|
|
|
21,536
|
|
|
21,536
|
|
Consumer loans receivable
|
81,592
|
|
|
96,313
|
|
|
82,304
|
|
|
97,395
|
|
Interest rate lock commitment derivatives
|
77
|
|
|
77
|
|
|
164
|
|
|
164
|
|
Forward loan sale commitment derivatives
|
(195)
|
|
|
(195)
|
|
|
(1,011)
|
|
|
(1,011)
|
|
Commercial loans receivable
|
39,746
|
|
|
38,300
|
|
|
46,565
|
|
|
46,819
|
|
Secured financings and other
|
(12,987)
|
|
|
(12,493)
|
|
|
(14,953)
|
|
|
(15,592)
|
|
|
|
|
|
|
|
|
|
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.
Assets and liabilities measured at fair value on a recurring basis are summarized below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 26, 2020
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
|
|
|
|
|
|
|
Residential mortgage-backed securities (1)
|
$
|
5,237
|
|
|
$
|
—
|
|
|
$
|
5,237
|
|
|
$
|
—
|
|
State and political subdivision debt securities (1)
|
6,306
|
|
|
—
|
|
|
6,306
|
|
|
—
|
|
Corporate debt securities (1)
|
5,130
|
|
|
—
|
|
|
5,130
|
|
|
—
|
|
Marketable equity securities (2)
|
13,987
|
|
|
13,987
|
|
|
—
|
|
|
—
|
|
Interest rate lock commitment derivatives (3)
|
77
|
|
|
—
|
|
|
—
|
|
|
77
|
|
Forward loan sale commitment derivatives (3)
|
(195)
|
|
|
—
|
|
|
—
|
|
|
(195)
|
|
Mortgage servicing rights (4)
|
831
|
|
|
—
|
|
|
—
|
|
|
831
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 28, 2020
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Residential mortgage-backed securities (1)
|
$
|
5,443
|
|
|
$
|
—
|
|
|
$
|
5,443
|
|
|
$
|
—
|
|
State and political subdivision debt securities (1)
|
4,370
|
|
|
—
|
|
|
4,370
|
|
|
—
|
|
Corporate debt securities (1)
|
4,961
|
|
|
—
|
|
|
4,961
|
|
|
—
|
|
Marketable equity securities (2)
|
9,829
|
|
|
9,829
|
|
|
—
|
|
|
—
|
|
Interest rate lock commitment derivatives (3)
|
164
|
|
|
—
|
|
|
—
|
|
|
164
|
|
Forward loan sale commitment derivatives (3)
|
(1,011)
|
|
|
—
|
|
|
—
|
|
|
(1,011)
|
|
Mortgage servicing rights (4)
|
1,225
|
|
|
—
|
|
|
—
|
|
|
1,225
|
|
(1)Unrealized gains or losses on investments are recorded in Accumulated other comprehensive income at each measurement date.
(2)Unrealized gains or losses on investments are recorded in earnings at each measurement date.
(3)Gains or losses on derivatives are recorded in earnings through Cost of sales.
(4)Changes in the fair value of mortgage servicing rights are recorded in earnings through Net revenue.
No transfers between Level 1, Level 2 or Level 3 occurred during the nine months ended December 26, 2020.
Financial instruments for which fair value is disclosed but not required to be recognized in the balance sheet on a recurring basis are summarized below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 26, 2020
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Loans held for investment
|
$
|
59,167
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
59,167
|
|
Loans held for sale
|
23,223
|
|
|
—
|
|
|
—
|
|
|
23,223
|
|
Construction advances
|
13,923
|
|
|
—
|
|
|
—
|
|
|
13,923
|
|
Commercial loans receivable
|
38,300
|
|
|
—
|
|
|
—
|
|
|
38,300
|
|
Secured financings and other
|
(12,493)
|
|
|
—
|
|
|
(12,493)
|
|
|
—
|
|
Non-marketable equity investments
|
21,791
|
|
|
—
|
|
|
—
|
|
|
21,791
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 28, 2020
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Loans held for investment
|
$
|
68,503
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
68,503
|
|
Loans held for sale
|
15,492
|
|
|
—
|
|
|
—
|
|
|
15,492
|
|
Construction advances
|
13,400
|
|
|
—
|
|
|
—
|
|
|
13,400
|
|
Commercial loans receivable
|
46,819
|
|
|
—
|
|
|
—
|
|
|
46,819
|
|
Secured financings and other
|
(15,592)
|
|
|
—
|
|
|
(15,592)
|
|
|
—
|
|
Non-marketable equity investments
|
21,536
|
|
|
—
|
|
|
—
|
|
|
21,536
|
|
No impairment charges were recorded during the nine months ended December 26, 2020.
Mortgage Servicing. Mortgage Servicing Rights ("MSRs") are the rights to receive a portion of the interest coupon and fees collected from the mortgagors for performing specified mortgage servicing activities, which consist of collecting loan payments, remitting principal and interest payments to investors, managing escrow accounts, performing loss mitigation activities on behalf of investors and otherwise administering the loan servicing portfolio. MSRs are initially recorded at fair value. Changes in fair value subsequent to the initial capitalization are recorded in earnings.
|
|
|
|
|
|
|
|
|
|
|
|
|
December 26,
2020
|
|
March 28,
2020
|
Number of loans serviced with MSRs
|
4,663
|
|
|
4,688
|
|
Weighted average servicing fee (basis points)
|
31.81
|
|
|
31.12
|
|
Capitalized servicing multiple
|
44.23
|
%
|
|
67.19
|
%
|
Capitalized servicing rate (basis points)
|
14.07
|
|
|
20.91
|
|
Serviced portfolio with MSRs (in thousands)
|
$
|
590,433
|
|
|
$
|
585,777
|
|
MSRs (in thousands)
|
$
|
831
|
|
|
$
|
1,225
|
|
19. Related Party Transactions
We have non-marketable equity investments in other distribution operations outside of Company-owned retail locations. In the ordinary course of business, we sell homes and lend to certain of these operations through our commercial lending programs. For the three months ended December 26, 2020 and December 28, 2019, the total amount of sales to related parties was $11.2 million and $13.3 million, respectively. For the nine months ended December 26, 2020 and December 28, 2019, the total amount of sales to related parties was $34.2 million and $37.1 million, respectively. As of December 26, 2020, receivables from related parties included $3.9 million of accounts receivable and $7.5 million of commercial loans outstanding. As of March 28, 2020, receivables from related parties included $1.7 million of accounts receivable and $8.2 million of commercial loans outstanding.
20. Acquisition of Destiny Homes
On August 2, 2019, the Company purchased certain manufactured housing assets and assumed certain liabilities of Destiny Homes, which operates one manufacturing facility located in Moultrie, Georgia and produces and distributes manufactured and modular homes through a network of independent retailers in the Southeastern United States, further expanding our reach. We finalized the purchase price allocation and have not made any purchase accounting adjustments during fiscal year 2021.
Pro Forma Impact of Acquisition. The following table presents supplemental pro forma information as if the acquisition of Destiny Homes had occurred on March 31, 2019 (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
December 26,
2020
|
|
December 28,
2019
|
|
December 26,
2020
|
|
December 28,
2019
|
Net revenue
|
$
|
288,772
|
|
|
$
|
273,722
|
|
|
$
|
801,549
|
|
|
$
|
817,674
|
|
Net income
|
19,701
|
|
|
20,898
|
|
|
51,424
|
|
|
63,868
|
|
Diluted net income per share
|
2.12
|
|
|
2.25
|
|
|
5.54
|
|
|
6.90
|
|
21. Business Segment Information
We operate principally in two segments: (1) factory-built housing, which includes wholesale and retail systems-built housing operations and (2) financial services, which includes manufactured housing consumer finance and insurance. The following table details Net revenue and Income before income taxes by segment (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
December 26,
2020
|
|
December 28,
2019
|
|
December 26,
2020
|
|
December 28,
2019
|
Net revenue:
|
|
|
|
|
|
|
|
Factory-built housing
|
$
|
270,822
|
|
|
$
|
257,106
|
|
|
$
|
749,879
|
|
|
$
|
758,564
|
|
Financial services
|
17,950
|
|
|
16,616
|
|
|
51,670
|
|
|
47,875
|
|
|
$
|
288,772
|
|
|
$
|
273,722
|
|
|
$
|
801,549
|
|
|
$
|
806,439
|
|
|
|
|
|
|
|
|
|
Income before income taxes:
|
|
|
|
|
|
|
|
Factory-built housing
|
$
|
18,752
|
|
|
$
|
19,247
|
|
|
$
|
54,654
|
|
|
$
|
66,023
|
|
Financial services
|
7,138
|
|
|
5,485
|
|
|
12,512
|
|
|
13,326
|
|
|
$
|
25,890
|
|
|
$
|
24,732
|
|
|
$
|
67,166
|
|
|
$
|
79,349
|
|