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What changed in CAVCO INDUSTRIES, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of CAVCO INDUSTRIES, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+274 added−293 removedSource: 10-K (2022-05-31) vs 10-K (2021-05-28)

Top changes in CAVCO INDUSTRIES, INC.'s 2023 10-K

274 paragraphs added · 293 removed · 195 edited across 4 sections

Item 1. Business

Business — how the company describes what it does

90 edited+29 added−28 removed75 unchanged
Biggest changeThis increased order volume is the result of more well-qualified home buyers making purchase decisions, supported by reduced home loan interest rates. The increase in orders outpaced production and raised our home order backlog at April 3, 2021 to approximately $603 million in wholesale sales values, up $479 million from $124 million one year earlier.
Biggest changeThe increase in orders outpaced production and raised our home order backlog at April 2, 2022 to approximately $1.1 billion in wholesale sales values, up $511 million from $603 million one year earlier. The year over year increase includes $264 million attributable to our acquisition of Commodore. Distributors may cancel orders prior to production without penalty.
We have developed engineering systems that, through the use of computer-aided technology, permit customization of homes and assist with product development and enhancement. We work with a variety of partners to meet the expanding range of housing needs, including a home buyer's private land, planned neighborhoods, recreational or resort properties and workforce accommodations for agriculture and industry.
We have developed engineering systems that, through the use of computer-aided technology, permit customization of homes and assist with product development and enhancement. We work with a variety of partners to meet the expanding range of housing needs, including home buyer's private land, planned neighborhoods, recreational or resort properties and workforce accommodations for agriculture and industry.
("Standard Casualty"), provides property and casualty insurance primarily to owners of manufactured homes. The terms "Cavco," "us," "we," "our," the "Company," and any other similar terms refer to Cavco Industries, Inc. and its consolidated subsidiaries, unless otherwise indicated in this Annual Report on Form 10-K ("Annual Report").
Our insurance subsidiary, Standard Casualty Company ("Standard Casualty"), provides property and casualty insurance primarily to owners of manufactured homes. The terms "Cavco," "us," "we," "our," the "Company," and any other similar terms refer to Cavco Industries, Inc. and its consolidated subsidiaries, unless otherwise indicated in this Annual Report on Form 10-K ("Annual Report").
We offer conforming and non-conforming mortgages and home-only loans to purchasers of numerous brands of factory-built homes sold by Company-owned retail stores including certain independent distributors, builders, communities and developers.
We offer conforming and non-conforming mortgages and home-only loans to purchasers of numerous brands of factory-built homes sold by Company-owned retail stores and certain independent distributors, builders, communities and developers.
There are three basic types of consumer financing in the factory-built housing industry: conforming mortgage loans which comply with the requirements of FHA, VA, USDA or GSE loans; non-conforming mortgages for purchasers of the home and the land on which the home is placed; and personal property loans (often referred to as home-only or chattel loans) for consumers where the home is the sole collateral for the loan (generally HUD code homes).
There are three basic types of consumer financing in the factory-built housing industry: conforming mortgage loans which comply with the requirements of FHA, VA, USDA or GSEs; non-conforming mortgages for purchasers of the home and the land on which the home is placed; and personal property loans (often referred to as home-only or chattel loans) for consumers where the home is the sole collateral for the loan (generally HUD code homes).
However, we are subject to adverse effects from excessive policy claims that may occur during periods of inclement weather, including seasonal spring storms or fall hurricane activity in Texas where most of our policies are underwritten. Where applicable, losses from catastrophic events are somewhat limited by reinsurance contracts in place as part of our loss mitigation structure.
However, we are subject to adverse effects from excessive policy claims that may occur during periods of inclement weather, including seasonal spring storms or fall hurricane activity in Texas where most of our policies are underwritten. Losses from catastrophic events are limited by reinsurance contracts in place as part of our loss mitigation structure.
Through fiscal year 2021, monthly collections of principal and interest from borro wers have exceeded scheduled principal and interest payments owed to investors; however, mandatory extended forbearance under the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act") and certain other regulations related to COVID-19 could negatively impact cash obligations in the future.
Through fiscal year 2022, monthly collections of principal and interest from borro wers have exceeded scheduled principal and interest payments owed to investors; however, mandatory extended forbearance under the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act") and certain other regulations related to COVID-19 could negatively impact cash obligations in the future.
We also offer a variety of structural and decorative customizations to meet the home buyer's specifications. With manufacturing facilities strategically positioned across the nation, we utilize local market research to design homes to meet the demands of our customers. We have the ability to react and modify floor plans and designs to consumers' specific needs.
We also offer a variety of structural, decorative and energy efficient customizations to meet the home buyer's specifications. With manufacturing facilities strategically positioned across the nation, we utilize local market research to design homes to meet the demands of our customers. We have the ability to react and modify floor plans and designs to consumers' specific needs.
These competitors include national, regional and local banks, mortgage banks and independent finance companies such as: 21st Mortgage Corporation, an affiliate of Clayton Homes, Inc. and Berkshire Hathaway, Inc.; Triad Financial Services, Inc.; and Cascade Financial Services. Certain of these competitors are larger than CountryPlace and have access to substantially more capital and cost efficiencies.
These competitors include national, regional and local banks, mortgage banks and independent finance companies such as: 21st Mortgage Corporation, an affiliate of Clayton Homes, Inc. and Berkshire Hathaway, Inc.; Triad Financial Services, Inc.; and Cascade Financial Services. Certain of these competitors are larger than CountryPlace and have access to substantially more capital.
Available Information The Company's periodic and current reports, proxy statements, as well as any amendments to such filings, are made available free of charge through our Internet site, www.cavco.com , as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission (the "SEC") pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). 15 Table of Contents
Available Information The Company's periodic and current reports, proxy statements, as well as any amendments to such filings, are made available free of charge through our web site, www.cavco.com , as soon as reasonably practicable after they are electronically filed with, or furnished to, the Securities and Exchange Commission (the "SEC") pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). 14 Table of Contents
Each of our manufacturing facilities serve multiple distributors and a number of one-time purchasers. Because homes are produced to fill existing wholesale orders, our factories generally do not carry finished goods inventories, except for homes awaiting delivery.
Each of our manufacturing facilities serves multiple distributors and a number of one-time purchasers. Because homes are produced to fill existing wholesale orders, our factories generally do not carry finished goods inventories, except for homes awaiting delivery.
While it's not possible to determine the magnitude of these changes, some prospective home buyers may be deterred from completing a manufactured home purchase as a result of appraised values. The Dodd-Frank Act also required integrating disclosures provided by lenders to borrowers under TILA and RESPA. The final rule became effective October 3, 2015.
While it's not possible to determine the magnitude of these changes, some prospective home buyers may be deterred from completing a manufactured home purchase as a result of the disclosure of the appraised value. The Dodd-Frank Act also required integrating disclosures provided by lenders to borrowers under TILA and RESPA. The final rule became effective October 3, 2015.
As a result, some prospective buyers of manufactured homes may be unable to secure financing necessary to complete manufactured home purchases. The Dodd-Frank Act amended provisions of TILA to require rules for appraisals on principal residences securing higher-priced mortgage loans ("HPML"). Certain loans secured by manufactured homes, primarily home-only loans, could be considered HPMLs.
As a result, some prospective buyers of manufactured homes may be unable to secure financing necessary to complete manufactured home purchases. 11 Table of Contents The Dodd-Frank Act amended provisions of TILA to require rules for appraisals on principal residences securing higher-priced mortgage loans ("HPML"). Certain loans secured by manufactured homes, primarily home-only loans, could be considered HPMLs.
In December 2020, the Bureau issued a "QM Final Rule" which amended Regulation Z by replacing the original, debt ratio-based Qualified Mortgage definition with a limit based on loan pricing, among other changes to the definition.
In December 2020, the Bureau issued a QM Final Rule which amended Regulation Z by replacing the original debt ratio-based QM definition with a limit based on loan pricing, among other changes to the definition.
Home-only loans originated are either sold outright, grouped and sold as a pool of loans, or held for investment. Insurance . Standard Casualty, located in Texas, specializes in homeowner property and casualty insurance products for the manufactured housing industry and holds insurance licenses in multiple states, primarily serving the Texas, Arizona, New Mexico and Nevada markets.
Home-only loans and non-conforming mortgages originated are either sold outright, grouped and sold as a pool of loans, or held for investment. Insurance . Standard Casualty, located in Texas, specializes in homeowner property and casualty insurance products for the manufactured housing industry and holds insurance licenses in multiple states, primarily serving the Texas, Arizona, New Mexico and Nevada markets.
By offering a full range of homes from entry-level models to large custom homes and with the ability to engineer designs in-house, we can accommodate a wide spectrum of customer requests. We regularly introduce new floor plans and options to appeal to changing trends in different regions of the country.
By offering a full range of homes from entry-level models to large custom homes and with the ability to engineer designs in-house, we can accommodate a wide spectrum of customer requests. 3 Table of Contents We regularly introduce new floor plans and options to appeal to changing trends in different regions of the country.
Nonstructural components of a cosmetic nature are warranted for 120 days, except in specific cases where state laws require longer warranty terms. The warranty does not extend to installation and setup of the home, as the distributor is generally responsible for these activities.
Nonstructural components of a cosmetic nature are generally warranted for 120 days from the date of delivery, except in specific cases where state laws require longer warranty terms. The warranty does not extend to installation and setup of the home, as the distributor is generally responsible for these activities.
Our park model RVs are not subject to HUD regulations, but we believe that our park model RVs are in substantial compliance with the standards of the American National Standards Institute. Transporting manufactured homes on highways is subject to regulation by various federal, state and local authorities.
Our park model RVs are not subject to HUD regulations, but we believe that our park model RVs are in substantial compliance with the standards of the American National Standards Institute. 9 Table of Contents Transporting manufactured homes on highways is subject to regulation by various federal, state and local authorities.
CountryPlace remains competitive in breadth of loan product offerings, interest rates, customer service and loan servicing capabilities. The market for homeowners' insurance is highly competitive as well.
CountryPlace remains competitive in breadth of loan product offerings, interest rates, customer service and loan servicing capabilities. The market for homeowners' insurance is highly competitive.
Standard Casualty remains competitive in price, breadth of product offerings, product features, customer service, claim handling and use of technology. 9 Table of Contents Government Regulation Our manufactured homes are subject to a number of federal, state and local laws, codes and regulations.
Standard Casualty remains competitive in price, breadth of product offerings, product features, customer service, claim handling and use of technology. Government Regulation Our manufactured homes are subject to a number of federal, state and local laws, codes and regulations.
Among other issues, Qualified Mortgages with interest rates and other costs outside the limits are deemed "rebuttable" by borrowers and expose the lender and its assignees (including investors in loans, pools of loans, and instruments secured by loans or loan pools) to possible litigation and penalties.
Among other issues, QMs with interest rates and other costs outside the limits are deemed "rebuttable" by borrowers and expose the lender and its assignees (including investors in loans, pools of loans and instruments secured by loans or loan pools) to possible litigation and penalties.
The interim final rule also prohibits certain communications methods and content, and places limits on debt collectors' attempts to communicate with consumers who are obligated to repay debt, attorneys representing them or related parties. 13 Table of Contents Standard Casualty's insurance operations are regulated by the state insurance departments where it underwrites its policies.
The interim final rule also prohibits certain communications methods and content and places limits on debt collectors' attempts to communicate with consumers who are obligated to repay debt, attorneys representing them or related parties. Standard Casualty's insurance operations are regulated by the state insurance departments where it underwrites its policies.
We are also working to more extensively use online recruiting tools, update our recruitment brochures and improve the appearance and appeal of our manufacturing facilities to improve the recruitment and retention of qualified production employees and reduce annualized turnover rates.
We are also working to more extensively use online recruiting tools, update our recruitment brochures, enhance our training programs and improve the appearance and appeal of our manufacturing facilities to improve the recruitment and retention of qualified production employees and reduce annualized turnover rates.
The original Qualified Mortgage rule also defined a temporary category of Qualified Mortgages, commonly known as the GSE Patch, which includes mortgages that are eligible to be purchased or guaranteed by either of the GSEs while operating under the federal conservatorship. Under the original Qualified Mortgage rule, the GSE Patch was set to expire on July 1, 2021.
The original QM rule also defined a temporary category of QMs, commonly known as the GSE Patch, which includes mortgages that are eligible to be purchased or guaranteed by either of the GSEs while operating under the federal conservatorship. Under the original QM rule, the GSE Patch was set to expire on July 1, 2021.
We believe that growing our investment and participation in home-only lending may provide additional sales growth opportunities for our factory-built housing operations and reduce our exposure to the actions of independent lenders. 7 Table of Contents We also work with industry trade associations to encourage favorable legislative and GSE action to address the mortgage financing needs of buyers of affordable homes.
We believe that growing our investment and participation in home-only lending may provide additional sales growth opportunities for our factory-built housing operations and reduce our exposure to the actions of independent lenders. We also work independently and with industry trade associations to encourage favorable legislative and GSE action to address the financing needs of buyers of affordable homes.
It is difficult to predict the future impacts of the COVID-19 pandemic on housing demand, employee availability, our supply chain or the Company's performance and operations. We continue to focus on developing production growth opportunities by working to improve our production capabilities and processes and adjusting product offerings.
It is difficult to predict the future of housing demand, employee availability, our supply chain or the Company's performance and operations. We continue to focus on developing production growth opportunities by working to improve our production capabilities and processes and adjusting product offerings.
A number of states require manufactured home producers and distributors to post bonds to ensure the satisfaction of consumer warranty claims. 10 Table of Contents A variety of laws affect the financing of the homes we manufacture.
A number of states require manufactured home producers and distributors to post bonds to ensure the satisfaction of consumer warranty claims. A variety of laws affect the financing of the homes we manufacture.
These rules defined standards for origination of "Qualified Mortgages," established specific requirements for lenders to prove borrowers' ability to repay loans and outlined the conditions under which Qualified Mortgages are subject to safe harbor limitations on liability to borrowers. The rules also establish interest rates and other cost parameters for determining which Qualified Mortgages fall under safe harbor protection.
These rules defined standards for origination of a Qualified Mortgage ("QM"), established specific requirements for lenders to prove borrowers' ability to repay loans and outlined the conditions under which QMs are subject to safe harbor limitations on liability to borrowers. The rules also establish interest rates and other cost parameters for determining which QMs fall under safe harbor protection.
Additionally, demand patterns for park model RVs, cabins and homes used primarily for retirement or seasonal living partially offset general housing seasonality. CountryPlace realizes no seasonal impacts from its mortgage servicing operations.
Additionally, demand patterns for park model RVs, cabins and homes used primarily for retirement or seasonal living partially offset general housing seasonality. 13 Table of Contents CountryPlace realizes no seasonal impacts from its mortgage servicing operations.
According to data reported by the Manufactured Housing Institute, approximatel y 94,000 H UD code manufactured homes were shipped during calendar year 2020, compared to the 95,000 shipped during calendar year 2019 and 97,000 shipments in 2018.
According to data reported by the Manufactured Housing Institute, approximatel y 106,000 H UD code manufactured homes were shipped during calendar year 2021, compared to the 94,000 shipped during calendar year 2020 and 95,000 shipments in 2019.
Under the original Qualified Mortgage rule, the ratio of the consumer’s total monthly debt to total monthly income could not exceed 43% for a loan to be considered a Qualified Mortgage.
Under the original QM rule, the ratio of the consumer's total monthly debt to total monthly income could not exceed 43% for a loan to be considered a QM.
("CountryPlace"), is an approved Federal National Mortgage Association ("FNMA" or "Fannie Mae") and Federal Home Loan Mortgage Corporation ("FHLMC" or "Freddie Mac") seller/servicer, and a Government National Mortgage Association ("GNMA" or "Ginnie Mae") mortgage-backed securities issuer that offers conforming mortgages, non-conforming mortgages and home-only loans to purchasers of factory-built homes. Our insurance subsidiary, Standard Casualty Co.
("CountryPlace"), is an approved Federal National Mortgage Association ("FNMA" or "Fannie Mae") and Federal Home Loan Mortgage Corporation ("FHLMC" or "Freddie Mac") seller/servicer, and a Government National Mortgage Association ("GNMA" or "Ginnie Mae") mortgage-backed securities issuer that offers conforming mortgages, non-conforming mortgages and home-only loans to purchasers of factory-built homes.
According to statistics published by the Institute for Building Technology and Safety and the United States Department of Commerce, Bureau of the Census, for the 2020 calendar year, manufactured housing wholesale shipments of homes constructed in accordance with the HUD code accounted for an estimated 10.3% of all new single-family homes sold.
According to statistics published by the Institute for Building Technology and Safety and the United States Department of Commerce, Bureau of the Census, for the 2021 calendar year, manufactured housing wholesale shipments of homes constructed in accordance with the HUD code accounted for an estimated 12.2% of all new single-family homes sold.
We strive to balance the production levels and workforce size with the demand for our product offerings to maximize efficiencies. Maintaining an appropriately sized and well-trained workforce is key to increasing production to meet increased demand, and we face a major challenge in overcoming labor-related difficulties in the COVID-19 environment.
We strive to balance the production levels and workforce size with the demand for our product offerings to maximize efficiencies. Maintaining an appropriately sized and well-trained workforce is key to increasing production to meet increased demand, and we face a major challenge in overcoming hiring difficulties in the current environment.
No independent distributor accounted for 10% or more of factory-built housing revenue during any fiscal year within the three-year period ended April 3, 2021. We continually seek to increase wholesale shipments by growing sales at existing independent distributors and by identifying new independent distributors to sell our homes.
No independent distributor accounted for 10% or more of factory-built housing revenue during any fiscal year within the three-year period ended April 2, 2022. 5 Table of Contents We continually seek to increase wholesale shipments by growing sales at existing independent distributors and by identifying new independent distributors to sell our homes.
On April 19, 2021, the CFPB issued an interim final rule, effective November 30, 2021, amending Regulation F to require debt collectors to provide written notice to certain consumers of their protections under the CDC's eviction moratorium order of March 29, 2021.
On April 19, 2021, the CFPB issued an interim final rule, effective November 30, 2021, amending Regulation F to require debt collectors to provide written notice to certain consumers of their protections under the Center for Disease Control and Prevention's eviction moratorium order of March 29, 2021.
Demand for our core new home products typically peaks each spring and summer before declining in the winter, consistent with the overall housing industry, although this pattern has become distorted during the COVID-19 pandemic, as discussed elsewhere in this Annual Report. Diversification among our product lines and operations has partially offset the extent of any seasonal fluctuations.
Demand for our core new home products typically peaks each spring and summer before declining in the winter, consistent with the overall housing industry, although this pattern became distorted during the COVID-19 pandemic. Diversification among our product lines and operations has partially offset the impact of any seasonal fluctuations.
Most loans for the purchase of manufactured homes have been written at rates and fees that would not appear to be considered High Cost Mortgages under the new rule.
Based on our experience, we believe that most loans for the purchase of manufactured homes have been written at rates and fees that would not appear to be considered High Cost Mortgages under the new rule.
Human Capital Resources Our workforce is made up of approximately 4,700 skilled full-time team members. We believe that an engaged, productive workforce is critically important to creating shareholder value. To that end, we are committed to providing opportunities for professional growth and advancement based on performance, qualification, demonstrated skill and achievement.
Human Capital Resources Our workforce is made up of approximately 6,300 skilled full-time team members. We believe that an engaged, productive workforce is critically important to creating shareholder value. To that end, we are committed to providing a safe workplace and opportunities for professional growth and advancement based on performance, qualification, demonstrated skill and achievement at a fair wage.
The remaining 39% were in 35 other states and Canada. As is common in the industry, our independent distributors typically sell homes produced by other manufacturers in addition to those we produce. Some independent distributors operate multiple sales outlets.
As is common in the industry, our independent distributors typically sell homes produced by other manufacturers in addition to those we produce. Some independent distributors operate multiple sales outlets.
We operate 20 homebuilding production lines in Millersburg and Woodburn, Oregon; Nampa, Idaho; Riverside, California; Phoenix and Goodyear, Arizona; Austin, Fort Worth, Seguin and Waco, Texas; Montevideo, Minnesota; Nappanee, Indiana; Lafayette, Tennessee; Martinsville and Rocky Mount, Virginia; Douglas and Moultrie, Georgia; and Ocala and Plant City, Florida.
We operate 26 homebuilding production lines in Millersburg and Woodburn, Oregon; Riverside, California; Nampa, Idaho; Phoenix and Goodyear, Arizona; Austin, Fort Worth, Seguin and Waco, Texas; Montevideo, Minnesota; Dorchester, Wisconsin; Nappanee and Goshen, Indiana; Lafayette, Tennessee; Douglas and Moultrie, Georgia; Shippenville and Emlenton, Pennsylvania; Martinsville and Rocky Mount, Virginia; Cherryville, North Carolina; and Ocala and Plant City, Florida.
We are one of the largest producers of manufactured homes in the United States, based on reported wholesale shipments, marketed under a variety of brand names including Cavco, Fleetwood, Palm Harbor, Fairmont, Friendship, Chariot Eagle and Destiny.
We are one of the largest producers of manufactured homes in the United States, based on reported wholesale shipments. Our products are marketed under a variety of brand names including Cavco, Fleetwood, Palm Harbor, Nationwide, Fairmont, Friendship, Chariot Eagle, Destiny, Commodore, Colony, Pennwest, R-Anell, Manorwood and MidCountry.
We produce residential homes in a variety of floor plans. Most of these homes are single-story and generally range in size from approximately 500 to 3,300 square feet, but may be larger in the case of multi-level modular homes. In fiscal years 2021 and 2020, we sold 14,214 and 15,100 factory-built homes, respectively.
We produce residential homes in a variety of floor plans. Most of these homes are single-story and generally range in size from approximately 500 to 3,300 square feet, but may be larger in the case of multi-level modular homes.
We employ a concerted effort to identify niche market opportunities where our diverse product lines and custom building capabilities provide us with a competitive advantage. We are focused on building quality, energy efficient homes for the modern home buyer. Our green building initiatives involve the creation of an energy efficient envelope, including higher utilization of renewable materials.
We employ a concerted effort to identify niche market opportunities where our diverse product lines and custom building capabilities provide us with a competitive advantage. We are focused on building quality, energy efficient homes for the modern home buyer.
We are also a leading producer of park model RVs, vacation cabins and factory-built commercial structures, as well as modular homes built primarily under the Nationwide Homes brand. Our finance subsidiary, CountryPlace Acceptance Corp.
We are also a leading producer of park model RVs, vacation cabins and factory-built commercial structures. Our finance subsidiary, CountryPlace Acceptance Corp.
The primary demographics for our products are entry-level and move-up buyers and persons age 55 and older. We also market to special niches such as subdivision developers and vacation home buyers. We focus on developing and maintaining the resources necessary to meet our customer's desire for varied and unique specifications in an efficient factory production environment.
We also market to special niches such as subdivision developers and second home or vacation home buyers. We focus on developing and maintaining the resources necessary to meet our customer's desire for varied and unique specifications in an efficient factory production environment.
The CFPB issued a final rule, effective October 1, 2022, which expands the definition of a "General Qualified Mortgage" and gives lenders more leeway to determine a borrower's likelihood of repayment.
The CFPB issued a final rule, effective June 30, 2021, with mandatory compliance as of October 1, 2022, which expands the definition of a General QM and gives lenders more leeway to determine a borrower's likelihood of repayment.
Certain of our wholesale factory-built housing sales to independent distributors are purchased through wholesale floor plan financing arrangements. Under a typical floor plan financing arrangement, an independent financial institution specializing in this line of business provides the distributor with a loan for the purchase price of the home and maintains a security interest in the home as collateral.
Under a typical floor plan financing arrangement, an independent financial institution specializing in this line of business provides the distributor with a loan for the purchase price of the home and maintains a security interest in the home as collateral.
Fluctuations in the cost of materials and labor may affect gross margins from home sales to the extent that costs cannot be efficiently matched to the home sales price. From time to time and to varying degrees, we may experience shortages in the availability of materials and/or labor in the markets served.
Fluctuations in the cost of materials and labor may affect gross margins from home sales to the extent that costs cannot be efficiently matched to the home sales price.
With the elimination of certain provisions of the SAFE Act, manufactured housing distributors can now assist home buyers with securing financing for the purchase of homes; however, they may not assist in negotiating the financing terms. This has facilitated access to financing and makes the overall home buying experience smoother for the consumer.
With the elimination of certain provisions of the SAFE Act, manufactured housing distributors can now assist home buyers with securing financing for the purchase of homes; however, they may not assist in negotiating the financing terms.
During the year, we launched a number of internal programs and campaigns to enhance the culture and capability of our workforce. Driven by our aspiration to make a difference by focusing on excellence, we are executing on a strategy that is designed to elevate and drive the recruiting, retention and experience of our team members.
We also have a number of internal programs and campaigns to enhance the culture and capability of our workforce. Driven by our aspiration to make a difference by focusing on excellence, we are executing our SPARK initiative, which is designed to improve the onboarding experience of our team members and drive retention.
Certain CFPB mortgage finance rules required under the Dodd-Frank Act, and modified by the Dodd-Frank Reform Act, apply to consumer credit transactions secured by a dwelling, which include real property mortgages and home-only loans secured by manufactured homes.
This has facilitated access to financing and makes the overall home buying experience smoother for the consumer. 10 Table of Contents Certain CFPB mortgage finance rules required under the Dodd-Frank Act, and modified by the Dodd-Frank Reform Act, apply to consumer credit transactions secured by a dwelling, which include real property mortgages and home-only loans secured by manufactured homes.
Under the QM Final Rule, the GSE Patch will expire upon the earlier of October 1, 2022, or the date the applicable GSE exits federal conservatorship. 11 Table of Contents While many manufactured homes are currently financed with agency-conforming mortgages in which the ability to repay is verified, and interest rates and other costs are within the safe harbor limits established under the CFPB mortgage finance rules, certain loans to finance the purchase of manufactured homes, especially home-only loans and non-conforming mortgages, may fall outside the safe harbor limits.
While many manufactured homes are currently financed with agency-conforming mortgages in which the ability to repay is verified, and interest rates and other costs are within the safe harbor limits established under the CFPB mortgage finance rules, certain loans to finance the purchase of manufactured homes, especially home-only loans and non-conforming mortgages, may fall outside the safe harbor limits.
Each sales center usually employs a manager and one to five salespersons, who are compensated through a combination of salary and commission.
Each sales center usually employs a manager and one to five salespersons, who are compensated through a combination of salary and commission. We internally finance home inventories at Company-owned retail stores.
In December 2017, Fannie Mae and Freddie Mac released their final Underserved Markets Plans that describe, with specificity, the actions they would take over a three-year period to fulfill the "Duty to Serve" obligation. These plans became effective on January 1, 2018.
In April 2022, Fannie Mae and Freddie Mac released their Underserved Markets Plans for 2022-2024 that describe, with specificity, the actions they would take over the three-year period to fulfill the "Duty to Serve" obligation.
The Dodd-Frank Reform Act revises portions of the Dodd-Frank Act, reduces the regulatory burden on smaller financial institutions, including eliminating certain provisions of the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (the "SAFE Act"), and protects consumer access to credit.
On May 24, 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act (the "Dodd-Frank Reform Act") was signed into law. The Dodd-Frank Reform Act revises portions of the Dodd-Frank Act, reduces the regulatory burden on smaller financial institutions, including eliminating certain provisions of the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (the "SAFE Act").
In addition to accepting and processing new applications for home loans and insurance policies, the financial services operations continue to assist customers in need by servicing existing loans and insurance policies while complying with state and federal regulations regarding loan forbearance, home foreclosures and policy cancellations.
W e continue to assist customers in need by servicing existing loans and insurance policies and complying with state and federal regulations regarding loan forbearance, home foreclosures and policy cancellations.
Young adults born from 1976 to 1995, often referred to as Gen Y or Millennials, represent a large segment of the population who are generally first-time home buyers attracted by the affordability, diversity and location flexibility of factory-built homes. The age 55 and older category is reported to be the fastest growing segment of the U.S. population.
According to World Bank, the U.S. adult population is estimated to expand by approximately 9.1 million between 2022 and 2027. Young adults born from 1976 to 1995, often referred to as Gen Y or Millennials, represent a large segment of the population who are generally first-time home buyers attracted by the affordability, product diversity and location flexibility of factory-built homes.
Our involvement in commercial loans helps to increase the availability of manufactured home financing to distributors, community owners and developers and provides additional opportunity for product exposure to potential home buyers.
Under our commercial loan arrangements, we provide funds for financed home purchases by distributors, community owners and developers (see Note 7 to the Consolidated Financial Statements). Our involvement in commercial loans helps to increase the availability of manufactured home financing to distributors, community owners and developers and provides additional opportunity for product exposure to potential home buyers.
Consumer confidence is especially important among manufactured home buyers interested in our products for seasonal or retirement living. The two largest manufactured housing consumer demographics, young adults and those who are age 55 and older, are both growing. The U.S. adult population is estimated to expand by approximately 9.2 million between 2021 and 2026.
Consumer confidence is especially important among manufactured home buyers interested in our products for seasonal or retirement living. 8 Table of Contents The two largest manufactured housing consumer demographics, young adults and those who are age 55 and older, are both growing.
Violations of Regulation C, including incomplete, inaccurate, or omitted data, are subject to administrative sanctions, including civil money penalties, and compliance can be enforced by the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the National Credit Union Administration, HUD or the CFPB. 12 Table of Contents New FHA Title I program guidelines became effective on June 1, 2010 and provide Ginnie Mae the ability to securitize manufactured home FHA Title I loans.
Violations of Regulation C, including incomplete, inaccurate or omitted data, are subject to administrative sanctions, including civil money penalties, and compliance can be enforced by the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the National Credit Union Administration, HUD or the CFPB.
Our operations include 20 homebuilding production lines located in the Northwest, Southwest, South, Southeast, Midwest and Mid-Atlantic regions and we distribute our homes through 40 Company-owned U.S. retail stores and a network of independent distribution points in 43 states and Canada. Thirty-two Company-owned retail stores are located in Texas.
Our operations include 26 homebuilding production lines located throughout the United States and we distribute our homes through 45 Company-owned U.S. retail stores and a network of independent distribution points in 48 states and Canada. Thirty-one Company-owned retail stores are located in Texas.
CountryPlace originates and services single-family, conforming and non-confirming residential mortgages and home-only loans, for itself and others. CountryPlace is authorized by the U.S. Department of Housing and Urban Development ("HUD") to directly endorse Federal Housing Administration ("FHA") Title I and Title II mortgage insurance, is an approved lender with the U.S. Department of Veteran Affairs ("VA") and the U.S.
Department of Housing and Urban Development ("HUD") to directly endorse Federal Housing Administration ("FHA") Title I and Title II mortgage insurance, is an approved lender with the U.S. Department of Veteran Affairs ("VA") and the U.S.
We also develop and invest in home-only lending programs to grow sales of homes through traditional distribution points.
Additionally, we continue to invest in community-based lending initiatives that provide home-only financing to residents of certain manufactured home communities. We also develop and invest in home-only lending programs to grow sales of homes through traditional distribution points.
Prior to 2019, annual shipments had increased each year since calendar year 2009 when 50,000 HUD code manufactured homes were shipped, the lowest level since the industry began recording statistics in 1959. 8 Table of Contents Home Buyer Demographics.
Prior to 2019, annual shipments had increased each year since calendar year 2009 when 50,000 HUD code manufactured homes were shipped, the lowest level since the industry began recording statistics in 1959. Home Buyer Demographics. We believe the sector of the housing market in which manufactured housing is most competitive includes consumers from diverse backgrounds with household incomes under $40,000.
In addition to the CARES Act, numerous state and local governments have issued temporary emergency orders recommending or mandating that mortgage servicers accommodate borrowers experiencing hardship due to the COVID-19 pandemic.
Eligible state agencies participating in HAF are responsible for the selection and qualification of borrowers to receive HAF funds. Numerous state and local governments also issued temporary emergency orders recommending or mandating that mortgage servicers accommodate borrowers experiencing hardship due to the COVID-19 pandemic.
We internally finance home inventories at Company-owned retail stores. 5 Table of Contents As of April 3, 2021, we had a network of independent distributors, of which 13% were in Arizona, 9% in Texas, 8% each in California and Florida, 7% in Oregon, 6% in Georgia and 5% each in North Carolina and Washington, based on the quantity of wholesale shipments during fiscal year 2021.
As of April 2, 2022, we had a network of independent distributors, of which 9% were in Arizona, 8% in Texas, 7% each in California, Florida and North Carolina and 6% each in Georgia and Oregon, based on the quantity of wholesale shipments during fiscal year 2022. The remaining 50% were in 41 other states and Canada.
While these initiatives support our ongoing efforts to expand product distribution, they do expose us to risks associated with the creditworthiness of this customer base and our inventory financing partners. We have included considerations related to the COVID-19 pandemic when assessing the risks of loan loss and setting reserve amounts for the commercial finance portfolio. Industry Overview General.
While these initiatives support our ongoing efforts to expand product distribution, they also expose us to risks associated with the creditworthiness of this customer base and our inventory financing partners. Industry Overview General.
We initially increased our loan loss reserves and continue to evaluate the adequacy of these reserves as economic conditions change. 6 Table of Contents Certain loans serviced for investors expose us to cash flow deficits if customers do not make contractual monthly payments of principal and interest in a timely manner.
See further details in the "Government Regulation" section below. 6 Table of Contents Certain loans serviced for investors expose us to cash flow deficits if customers do not make contractual monthly payments of principal and interest in a timely manner.
The industry is sensitive to employment levels, consumer confidence, the availability of financing and general economic conditions. "First-time" and "move-up" buyers of affordable homes are historically among the largest segments of new manufactured home purchasers. Included in this group are lower-income households that are particularly affected by periods of low employment rates and underemployment.
The markets for affordable factory-built housing are very competitive, as well as cyclical and seasonal. The industry is sensitive to employment levels, consumer confidence, the availability of financing and general economic conditions. "First-time" and "move-up" buyers of affordable homes are historically among the largest segments of new manufactured home purchasers.
The plans offered enhanced mortgage loan products for manufactured homes titled a s real property through Fannie Mae's "MH Advantage" and Freddie Mac's "ChoiceHome" programs that began in the latter part of calendar year 2018. Although some progress has been made with these programs, meaningful positive im pact in the form of increased home orders has yet to be realized.
As with prior plans, the 2022-2024 plans offer enhanced mortgage loan products for manufactured homes titled a s real property, including Fannie Mae's "MH Advantage" and Freddie Mac's "ChoiceHome" programs that began in the latter part of calendar year 2018.
Our manufacturing facilities employ from 100 to 350 employees each. Most homes are constructed in one or more floor sections or modules on a permanently affixed steel or wood support chassis.
Although manufactured homes are designed to be transportable, cost considerations result in very few being moved from their original site after installation. Factory-built Housing Segment Manufacturing Operations . Our manufacturing facilities employ between approximately 100 to 350 employees each. Most homes are constructed in one or more floor sections or modules on a permanently affixed steel or wood support chassis.
Loan contracts secured by collateral that is geographically concentrated could experience higher rates of delinquencies, default and foreclosure losses than loan contracts secured by collateral that is more geographically dispersed. Our loan contracts are secured by factory-built homes located in 26 states, with the largest concentrations in Texas, Florida, Arizona, Oklahoma and New Mexico.
Loan contracts secured by collateral that is geographically concentrated could experience higher rates of delinquencies, default and foreclosure losses than loan contracts secured by collateral that is more geographically dispersed.
Innovative engineering and design, as well as efficient production techniques, continue to position manufactured homes to meet the demand for affordable housing in rural markets and manufactured housing communities. The markets for affordable factory-built housing are very competitive, as well as cyclical and seasonal.
Persons in rural areas and those who presently live in manufactured homes also make up a significant portion of the demand for new manufactured housing. Innovative engineering and design, as well as efficient production techniques, continue to position manufactured homes to meet the demand for affordable housing in rural markets and manufactured housing communities.
We build homes of superior quality, offer innovative designs and floor plans, demonstrate exceptional value, provide the engineering and technical resources to enable custom home building and focus on responsive and efficient customer service after the sale. 3 Table of Contents We strategically expanded our factory operations and related business initiatives primarily through the acquisition of other industry participants, which has enabled us to participate in the affordable housing space on a national basis.
We build homes of superior quality, offer innovative designs and floor plans, demonstrate exceptional value, provide the engineering and technical resources to enable custom home building and focus on responsive and efficient customer service after the sale.
This decentralization enables our operators the flexibility to adapt to local market demand, be more customer focused and have the autonomy to make swift decisions, while still being held accountable for operational and financial performance. 2 Table of Contents In March 2020, the World Health Organization declared the novel coronavirus COVID-19 ("COVID-19") a global pandemic.
Business Strategies Our operations are generally managed on a decentralized basis with oversight from the home office. This decentralization enables our operators the flexibility to adapt to local market demand, be more customer focused and have the autonomy to make swift decisions, while still being held accountable for operational and financial performance.
One of our initiatives this year included refreshing our Code of Conduct, and then executing a multi-channel bi-lingual compliance training initiative so that our team members will understand our commitment to, and their responsibility for, maintaining high standards of integrity in the workplace.
We have a multi-channel bi-lingual compliance training initiative so that our team members will understand our commitment to, and their responsibility for, maintaining high standards of integrity in the workplace. The program has been rolled out through our learning management system, with each new and existing team member being provided the same training.
Expansion of the secondary market for home-only loans through GSEs could support further demand for housing as lending options would likely become more available to home buyers. On March 27, 2020, the CARES Act was signed into law.
Expansion of the secondary market for home-only loans through GSEs could support further demand for housing as lending options would likely become more available to home buyers. 7 Table of Contents Commercial Financing. Certain of our wholesale factory-built housing sales to independent distributors are purchased through wholesale floor plan financing arrangements.
See Note 22 to the Consolidated Financial Statements for financial information regarding the Company's business segments, factory-built housing and financial services, which are also discussed below. Business Strategies Our marketing efforts are focused on providing manufactured homes that are customizable and appeal to a wide range of home buyers, on a regional basis, in the markets we serve.
Our marketing efforts are focused on providing manufactured homes that are customizable and appeal to a wide range of home buyers, on a regional basis, in the markets we serve. The primary demographics for our products are entry-level and move-up buyers and persons age 55 and older.
Restrictive underwriting guidelines and higher interest rates compared to mortgages for site-built homes, a limited number of institutions lending to manufactured home buyers and limited secondary market availability for non-conforming mortgages and home-only personal property loans secured by manufactured homes continue to constrain industry growth.
Limited secondary market availability for non-conforming mortgages and home-only personal property loans secured by manufactured homes continue to constrain industry growth. We work independently and with other industry participants to develop secondary market opportunities for manufactured home-only loans and non-conforming mortgage portfolios and expand lending availability in the industry.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changePROPERTIES The following table sets forth certain information with respect to the Company's core properties: Location Date of Commencement of Operations Owned / Leased Square Feet Active manufacturing facilities: Millersburg, Oregon 1995 Owned 169,000 Woodburn, Oregon 1976 Owned 221,000 Nampa, Idaho 1957 Owned 171,000 Riverside, California 1960 Owned 107,000 Goodyear, Arizona 1993 Leased 250,000 Phoenix, Arizona 1978 Owned 79,000 Austin, Texas 1981 Owned 181,000 Fort Worth, Texas 1993 Owned 121,000 Seguin, Texas 2006 Owned 129,000 Waco, Texas 1971 Owned 132,000 Montevideo, Minnesota 1982 Owned 305,000 Nappanee, Indiana 1971 Owned 341,000 Lafayette, Tennessee 1996 Owned 149,000 Martinsville, Virginia 1969 Owned 132,000 Moultrie, Georgia 2003 Owned 230,000 Rocky Mount, Virginia 1995 Owned 137,000 Douglas, Georgia 1988 Owned 142,000 Ocala, Florida 1984 Owned 91,000 Plant City, Florida 1981 Owned 87,000 Component and supply facilities: Martinsville, Virginia 1972 Owned 192,000 Nappanee, Indiana 1971 Leased 77,000 Inactive manufacturing facilities: Glendale, Arizona Owned 118,000 Lexington, Mississippi Leased 119,800 Plant City, Florida Owned 94,000 Administrative and other locations: Phoenix, Arizona Leased 15,000 Addison, Texas Leased 24,000 New Braunfels, Texas Owned 9,000 25 Table of Contents We own the land on which manufacturing facilities are located, except for the Goodyear, Arizona plant, which is currently leased through June 30, 2026; and the Lexington, Mississippi plant, closed in April 2020, currently under lease through October 31, 2025, at which time we would take ownership of the property.
Biggest changePROPERTIES The following table sets forth certain information with respect to the Company's core properties: Location Date of Commencement of Operations Owned / Leased Square Feet Active manufacturing facilities: Millersburg, Oregon 1995 Owned 169,000 Woodburn, Oregon 1976 Owned 221,000 Riverside, California 1960 Owned 107,000 Nampa, Idaho 1957 Owned 171,000 Goodyear, Arizona 1993 Leased 250,000 Phoenix, Arizona 1978 Owned 79,000 Austin, Texas 1981 Owned 181,000 Fort Worth, Texas 1993 Owned 121,000 Seguin, Texas 2006 Owned 129,000 Waco, Texas 1971 Owned 132,000 Montevideo, Minnesota 1982 Owned 305,000 Dorchester, Wisconsin 1975 Leased 160,000 Nappanee, Indiana 1971 Owned 341,000 Goshen, Indiana 1972 Owned 163,000 Lafayette, Tennessee 1996 Owned 149,000 Moultrie, Georgia 2003 Owned 230,000 Douglas, Georgia 1988 Owned 142,000 Shippenville, Pennsylvania (1) 1972 Owned 162,000 Shippenville, Pennsylvania (2) 1988 Owned 164,000 Emlenton, Pennsylvania 2004 Owned 126,000 Martinsville, Virginia 1969 Owned 132,000 Rocky Mount, Virginia 1995 Owned 137,000 Cherryville, North Carolina 1973 Owned 254,000 Ocala, Florida 1984 Owned 91,000 Plant City, Florida 1981 Owned 87,000 Component and supply facilities: Martinsville, Virginia 1972 Owned 192,000 Nappanee, Indiana 1971 Leased 77,000 Inactive manufacturing facilities: Glendale, Arizona Owned 118,000 Hamlet, North Carolina Owned 184,000 Plant City, Florida Owned 94,000 Administrative and other locations: Phoenix, Arizona Leased 15,000 Addison, Texas Leased 24,000 Plano, Texas Leased 11,000 New Braunfels, Texas Owned 9,000 Elkhart, Indiana Leased 23,000 25 Table of Contents We own the land on which manufacturing facilities are located, except for the Goodyear, Arizona plant, which is currently leased through June 2026, with no current options to extend; and the Dorchester, Wisconsin plant, currently under lease through August 2037, with options to extend.
ITEM 3. LEGAL PROCEEDINGS See the information under the "Legal Matters" caption in Note 16 to the Consolidated Financial Statements, which is incorporated herein by reference. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 26 Table of Contents PART II ITEM 5.
LEGAL PROCEEDINGS See the information under the "Legal Matters" caption in Note 16 to the Consolidated Financial Statements, which is incorporated herein by reference. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 26 Table of Contents PART II ITEM 5.
Due to the concentrated nature of the operations, there could be instances where these regions are negatively impacted by economic, natural or population changes that could, in turn, negatively impact our results of operations more than other companies that are more geographically dispersed. We operate 20 homebuilding production lines located in the Northwest, Southwest, South, Southeast, Midwest and Mid-Atlantic regions.
Due to the concentrated nature of the operations, there could be instances where these regions are negatively impacted by economic, natural or population changes that could, in turn, negatively impact our results of operations more than other companies that are more geographically dispersed. We operate 26 homebuilding production lines located in the Northwest, Southwest, South, Southeast, Midwest and Mid-Atlantic regions.
Loan contracts secured by collateral that is geographically concentrated could experience higher rates of delinquencies, default and foreclosure losses than loan contracts secured by collateral that is more geographically dispersed. We have loan contracts secured by factory-built homes located in 26 states, including Texas, Florida, Arizona, Oklahoma and New Mexico.
Loan contracts secured by collateral that is geographically concentrated could experience higher rates of delinquencies, default and foreclosure losses than loan contracts secured by collateral that is more geographically dispersed. We have loan contracts secured by factory-built homes located in 26 states, including Texas, Florida, New Mexico, Oklahoma and Alabama.
Although we maintain reserves for these contingent repurchase and indemnification obligations, these reserves may not be ultimately sufficient for incurred losses, which could have a material adverse effect on our operational results or financial condition. Standard Casualty specializes in homeowner property and casualty insurance products for the manufactured housing industry, primarily serving the Texas, Arizona, New Mexico and Nevada markets.
Although we maintain reserves for these contingent repurchase and indemnification obligations, these reserves may not be ultimately sufficient for incurred losses, which could have a material adverse effect on our operational results or financial condition. 17 Table of Contents Standard Casualty specializes in homeowner property and casualty insurance products for the manufactured housing industry, primarily serving the Texas, Arizona, New Mexico and Nevada markets.
The Company may face risks related to the potential outcomes of the SEC subpoenas, including potential penalties, expense, the use of significant management time and attention, potential litigation or regulatory action and potential reputational damage that the Company may suffer as a result of the matters under investigation As disclosed in Part I, Item 3, Legal Proceedings, since 2018, we have been cooperating with an investigation by the enforcement staff of the SEC regarding trading in personal and Company accounts directed by the Company's former Chief Executive Officer, Joseph Stegmayer.
The Company may face risks related to the potential outcomes of the SEC litigation, including potential penalties, expense, the use of significant management time and attention or potential reputational damage that the Company may suffer as a result of the litigation As disclosed in Part I, Item 3, Legal Proceedings, since 2018, we have been cooperating with an investigation by the enforcement staff of the SEC regarding trading in personal and Company accounts directed by the Company's former Chief Executive Officer, Joseph Stegmayer.
Home price depreciation and elevated levels of unemployment may result in additional defaults and exacerbate actual loss severities upon collateral liquidation. 17 Table of Contents Some of the loans we originate or may originate in the future may not have a liquid market, or the market may contract rapidly and the loans may become illiquid.
Home price depreciation and elevated levels of unemployment may result in additional defaults and exacerbate actual loss severities upon collateral liquidation. Some of the loans we originate or may originate in the future may not have a liquid market, or the market may contract rapidly and the loans may become illiquid.
As a result of the foregoing economic, demographic and other factors, our revenues and operating results fluctuate, and we expect them to continue to fluctuate in the future. The manufactured housing industry is highly competitive, and increased competition may result in lower revenue The manufactured housing industry is highly competitive.
As a result of the foregoing economic, demographic and other factors, our revenues and operating results fluctuate, and we expect them to continue to fluctuate in the future. 22 Table of Contents The manufactured housing industry is highly competitive, and increased competition may result in lower revenue The manufactured housing industry is highly competitive.
Depending on the duration and severity of the COVID-19 pandemic, it may also have the effect of heightening many of the other risks described below in this Item 1A or elsewhere in this Annual Report, such as: risks related to the successful completion of our growth and expansion goals; risks related to the ability of borrowers to make payments on their mortgages or loans and our ability to exercise remedies in such cases, including as a result of government restrictions on the exercise of such remedies; risks related to economic downturns, declining consumer confidence and other market forces and reduced demand for our products or buyers' ability to get financing for the purchase of our products; risks related to depressed home prices and elevated unemployment; risks related to the availability of labor and the pricing and availability of raw materials; risks related to our ability to remain in compliance with increasing levels of government regulation while maintaining economic and profitable operations; risks related to our ability to maintain adequate internal controls; and risks related to stock price fluctuations. 16 Table of Contents The Company's results of operations can be adversely affected by labor shortages and the pricing and availability of raw materials The homebuilding industry has from time to time experienced labor shortages and other labor related issues.
National emergencies like the COVID-19 pandemic may also have the effect of heightening many of the other risks described below in this Item 1A or elsewhere in this Annual Report, such as: risks related to the successful completion of our growth and expansion goals; risks related to the ability of borrowers to make payments on their mortgages or loans and our ability to exercise remedies in such cases, including as a result of government restrictions on the exercise of such remedies; risks related to economic downturns, declining consumer confidence and other market forces and reduced demand for our products or buyers' ability to get financing for the purchase of our products; risks related to depressed home prices and elevated unemployment; risks related to the availability of labor and the pricing and availability of raw materials; risks related to our ability to remain in compliance with increasing levels of government regulation while maintaining economic and profitable operations; risks related to our ability to maintain adequate internal controls; and risks related to stock price fluctuations. 15 Table of Contents The Company's results of operations can be adversely affected by labor shortages and the pricing and availability of transportation or raw materials The homebuilding industry has from time to time experienced labor shortages and other labor related issues.
If the Company is unable to establish or maintain relationships with its independent distributors who sell the Company's homes, revenue could decline During fiscal year 2021, approximately 79% of our sales of factory-built homes were to independent distributors. As is common in the industry, independent distributors may also sell homes produced by competing manufacturers.
If the Company is unable to establish or maintain relationships with its independent distributors who sell the Company's homes, revenue could decline During fiscal year 2022, approximately 83% of our sales of factory-built homes were to independent distributors. As is common in the industry, independent distributors may also sell homes produced by competing manufacturers.
We have a significant presence in Texas with factories in the cities of Austin, Ft. Worth, Seguin and Waco. Further, of the 40 Company-owned retail stores, 32 are located in Texas.
We have a significant presence in Texas with factories in the cities of Austin, Ft. Worth, Seguin and Waco. Further, of the 45 Company-owned retail stores, 31 are located in Texas.
The maximum amount of contingent obligations under such repurchase agreements was approximately $74.2 million as of April 3, 2021, before reduction for the resale value of the homes. We may be required to honor contingent repurchase obligations in the future and may incur additional expense as a consequence of these repurchase agreements.
The maximum amount of contingent obligations under such repurchase agreements was approximately $141.0 million as of April 2, 2022, before reduction for the resale value of the homes. We may be required to honor contingent repurchase obligations in the future and may incur additional expense as a consequence of these repurchase agreements.
Home Construction ETF. The comparison assumes $100 (with reinvestment of all dividends) was invested on April 2, 2016, in Cavco common stock and in each of the foregoing indices.
Home Construction ETF. The comparison assumes $100 (with reinvestment of all dividends) was invested on April 1, 2017, in Cavco common stock and in each of the foregoing indices.
A write-off of all or part of the Company's goodwill could adversely affect its results of operations and financial condition As of April 3, 2021, 8% of our total assets consisted of goodwill, all of which is attributable to factory-built housing operations.
A write-off of all or part of the Company's goodwill could adversely affect its results of operations and financial condition As of April 2, 2022, 9% of our total assets consisted of goodwill, all of which is attributable to our factory-built housing segment.
It will depend on the duration of the pandemic, its geographic spread, potential business disruptions and the overall impact on the national economy and consumer behavior.
It will depend on the duration and evolution of the pandemic, potential business disruptions and the overall impact on the national economy and consumer behavior.
Property and casualty insurance companies are subject to certain risk-based capital requirements as specified by the National Association of Insurance Commissioners. Under those requirements, the amount of capital and surplus maintained by a property and casualty insurance company is determined based on its various risk factors.
Property and casualty insurance companies are subject to certain risk-based capital requirements usually in accordance with model rules as specified by the National Association of Insurance Commissioners. Under these requirements, the amount of capital and surplus maintained by a property and casualty insurance company is determined based on its various risk factors.
As of May 21, 2021, the Company had 569 stockholders of record and approximately 15,500 beneficial holders of its common stock, based upon information in securities position listings by registered clearing agencies upon request of the Company's transfer agent. In the past two fiscal years, we have not paid any dividends on the Company's common stock.
As of May 20, 2022, the Company had 537 stockholders of record and approximately 22,450 beneficial holders of its common stock, based upon information in securities position listings by registered clearing agencies upon request of the Company's transfer agent. In the past two fiscal years, we have not paid any dividends on the Company's common stock.
Among other things, unfavorable changes in employment levels, job growth, consumer confidence and income, inflation, deflation, trade tariffs, foreign currency exchange rates and interest rates may further reduce demand for our products, which could negatively affect our business, results of operations and financial condition.
Among other things, unfavorable changes in employment levels, job growth, consumer confidence and income, inflation, deflation, trade tariffs, foreign currency exchange rates and interest rates may further reduce demand for our products or have an adverse effect on the availability of financing to our customers, which could negatively affect our business, results of operations and financial condition.
The repurchase program does not obligate us to acquire any particular amount of common stock and may be suspended or discontinued at any time. The repurchase program is funded using our available cash.
The level of repurchase activity is subject to market conditions and other investment opportunities. The repurchase program does not obligate us to acquire any particular amount of common stock and may be suspended or discontinued at any time. The repurchase program is funded using our available cash.
As it relates to the COVID-19 pandemic, our normal operations have been constrained by actions we have taken to maintain a safe working environment for our employees, including compliance with mandated social distancing and other governmental requirements. Factory capacity utilization levels have fallen accordingly, having also experienced increased employee absenteeism and pandemic impacts to our supply chain.
As it relates to the COVID-19 pandemic, our normal operations were constrained by actions we took to maintain a safe working environment for our employees, including compliance with mandated social distancing and other governmental requirements. Factory capacity utilization levels fell accordingly as the result of increased employee absenteeism and the pandemic impacts to our supply chain.
Although many of the costs and expenses we incurred related to this March 2019 incident were covered by insurance, we could in the future suffer a cyber incident that could result in material costs and losses that are not covered by insurance, which could have a material adverse effect on our results of operations and financial condition.
Although many of the costs and expenses we incurred related to this March 2019 incident were covered by insurance, we could in the future suffer a cyber incident that could result in material costs and losses that are not covered by insurance, which could have a material adverse effect on our results of operations and financial condition. 18 Table of Contents Failure to maintain the security of personally identifiable information could adversely affect the Company.
Any new federal laws or regulations that restrict or curtail their activities, or any other events or conditions that alter the roles of these organizations in the housing finance market, could affect the ability of our customers to obtain mortgage loans or could increase mortgage interest rates, fees, and credit standards, which could reduce demand for our homes and/or the loans that we originate and adversely affect our results of operations.
Any new federal laws or regulations that restrict or curtail their activities, or any other events or conditions that alter the roles of these organizations in the housing finance market, could affect the ability of our customers to obtain mortgage loans or could increase mortgage interest rates, fees and credit standards, which could reduce demand for our homes and/or the loans that we originate and adversely affect our results of operations. 21 Table of Contents Some investors are reluctant to own or participate in owning such loans because of the uncertainty of potential litigation and other costs.
An overall labor shortage or a lack of skilled or unskilled labor could cause significant increases in costs or delays in construction of homes, which could have a material adverse effect upon our revenue and results of operations. Our results of operations can also be affected by the pricing and availability of raw materials.
An overall labor shortage or a lack of skilled or unskilled labor could cause significant increases in costs or delays in construction of homes, which could have a material adverse effect upon our revenue and results of operations.
Although we maintain general liability insurance and reserves for such claims, there can be no assurance that warranty and construction defect claims will remain at current levels or that such reserves will continue to be adequate.
Although we maintain general liability insurance and reserves for such claims, there can be no assurance that warranty and construction defect claims will remain at current levels or that such reserves will continue to be adequate. Additionally, the cost of insurance has increased significantly in recent years.
The Phoenix, Arizona home office is leased through February 2026, with an option to extend for an additional three years. In Nappanee, Indiana, we also operate a supply facility whose lease expires in August 2021, with options to extend. We believe that all of these facilities are adequately maintained and suitable for the purposes for which they are used.
The Elkhart, Indiana office is leased through February 2040, with options to extend. In Nappanee, Indiana, we also operate a supply facility whose lease expires in August 2022. We believe that all of these facilities are adequately maintained and suitable for the purposes for which they are used. ITEM 3.
Although secured in commercial data centers, our computer systems, including its back-up systems, are subject to damage or interruption from power outages, computer and telecommunications failures, computer viruses, security breaches and cyber incidents, catastrophic events such as fires, tornadoes and hurricanes and human error.
Although most information is stored on servers that are secured in commercial data centers, individual systems, including back-up systems, are subject to damage or interruption from power outages, telecommunications failures, human error, computer viruses, security breaches and cyber incidents, which may infect our network infrastructure. Such systems are also vulnerable to catastrophic events such as fires, tornadoes, earthquakes and hurricanes.
Any proceedings commenced against us by a regulatory agency could result in administrative orders against us, the imposition of penalties and/or fines against us and/or the imposition of sanctions against certain of our current or former officers, directors and/or employees.
Any proceedings commenced against us by a regulatory agency could result in administrative orders against us, the imposition of penalties and/or fines against us and/or the imposition of sanctions against certain of our current or former officers, directors and/or employees. The investigations, litigation or remedial actions we have taken or are currently undertaking may adversely affect our business.
The remaining active sales centers and a claims office are leased under operating leases with lease terms generally ranging from monthly to five years. Company-owned retail stores generally range in sizes up to nine acres. We lease office space in Addison, Texas for CountryPlace operations and factory-built housing administrative support services, pursuant to a lease that expires in 2023.
The remaining active sales centers and a claims office are leased under operating leases with lease terms generally ranging from monthly to five years. Company-owned retail stores generally range in sizes up to nine acres.
In addition, enhanced regulatory and compliance costs could force lenders to implement new processes, procedures, controls and infrastructure required to comply with the regulations. Compliance may constrain lenders' ability to profitably price certain loans.
As a result, some prospective buyers of manufactured homes may be unable to secure the financing necessary to complete purchases. In addition, enhanced regulatory and compliance costs could force lenders to implement new processes, procedures, controls and infrastructure required to comply with the regulations. Compliance may constrain lenders' ability to profitably price certain loans.
The loss of the services of one or more executive officer could impair our ability to execute our business strategy and have a material adverse effect upon our business, financial condition and results of operations. We currently have no key person life or other insurance for our executive officers.
The loss of the services of one or more of these individuals could impair our ability to execute our business strategy and have a material adverse effect upon our business, financial condition and results of operations.
Standard Casualty also specializes in writing contracts for the manufactured housing industry, primarily serving the Texas, Arizona, New Mexico and Nevada markets. 20 Table of Contents A prolonged delay by Congress and the President to approve budgets or continuing appropriation resolutions to facilitate the operations of the federal government could delay the completion of home sales and/or cause cancellations, and thereby negatively impact the Company's deliveries and revenues Congress and the President may not timely approve budgets or appropriation legislation to facilitate the operations of the federal government.
A prolonged delay by Congress and the President to approve budgets or continuing appropriation resolutions to facilitate the operations of the federal government could delay the completion of home sales and/or cause cancellations, and thereby negatively impact the Company's deliveries and revenues Congress and the President may not timely approve budgets or appropriation legislation to facilitate the operations of the federal government.
In addition to the extraction of sensitive information, attacks could include the deployment of harmful malware, ransomware, denial of service attacks or other means, which could affect service reliability and threaten the confidentiality, integrity and availability of information. 18 Table of Contents We use enterprise-grade information technology and computer resources to carry out important operational activities and to maintain business records.
In addition to the extraction of sensitive information, attacks could include the deployment of harmful malware, ransomware, denial of service attacks or other means, which could affect service reliability and threaten the confidentiality, integrity and availability of information.
A large number of warranty and construction defect claims that exceed current levels could have a material adverse effect on our results of operations or financial condition. 19 Table of Contents The Company has contingent repurchase obligations related to wholesale financing provided to industry distributors In accordance with customary business practice in the manufactured housing industry, we have entered into repurchase agreements with various financial institutions and other credit sources who provide floor plan financing to industry distributors, which provide that we will be obligated, under certain circumstances, to repurchase homes sold to distributors in the event of a default by a distributor under floor plan financing arrangements.
However, regardless of the steps we take after we learn of improper practices, we can in some instances be subject to fines or other governmental penalties and our reputation can be injured due to the practices having taken place. 19 Table of Contents The Company has contingent repurchase obligations related to wholesale financing provided to industry distributors In accordance with customary business practice in the manufactured housing industry, we have entered into repurchase agreements with various financial institutions and other credit sources who provide floor plan financing to industry distributors, which provide that we will be obligated, under certain circumstances, to repurchase homes sold to distributors in the event of a default by a distributor under floor plan financing arrangements.
These factors could have an adverse effect on the availability of financing to our customers, causing revenues to decline. 22 Table of Contents Legal and Regulatory Risks If the manufactured housing industry is not able to secure favorable local zoning ordinances, the Company's revenue could decline and its business could be adversely affected Manufactured housing communities and individual home placements are subject to local zoning ordinances and other local regulations relating to utility service and construction of roadways.
Legal and Regulatory Risks If favorable local zoning ordinances are not adopted or if local zoning ordinances become further restricted, the Company's revenue could decline and its business could be adversely affected Manufactured housing communities and individual home placements are subject to local zoning ordinances and other local regulations relating to utility service and construction of roadways.
If the manufactured housing industry is unable to secure favorable local zoning ordinances, our revenue could decline and the business, results of operations and financial condition could be adversely affected.
If favorable local zoning ordinances are not adopted or become further restricted, our revenue could decline and the business, results of operations and financial condition could be adversely affected.
Failure to comply with such regulations, changes in these or other regulations, or the imposition of additional regulations, could affect our earnings, limit our access to capital and have a material adverse effect on the business and results of operations. 21 Table of Contents Availability of wholesale financing for industry distributors continues to be limited to a few floor plan lenders and lending limits may be reduced from time to time which can negatively affect distributor demand Manufactured housing distributors generally finance their inventory purchases with wholesale floor plan financing provided by lending institutions.
Availability of wholesale financing for industry distributors continues to be limited to a few floor plan lenders and lending limits may be reduced from time to time which can negatively affect distributor demand Manufactured housing distributors generally finance their inventory purchases with wholesale floor plan financing provided by lending institutions.
Such D&O insurance contains certain customary exclusions that may make it unavailable to the Company or its directors and officers in the event it is needed; and, in any case, the D&O insurance may not be adequate to fully protect the Company against liability for the conduct of its directors, officers or employees or the Company's indemnification obligations to its directors and officers. 23 Table of Contents General Risk Factors The loss of any of the Company's executive officers could reduce its ability to execute its business strategy and could have a material adverse effect on its business and results of operations We are dependent to a significant extent upon the efforts of our executive officers.
Such D&O insurance contains certain customary exclusions that may make it unavailable to the Company or its directors and officers in the event it is needed; and, in any case, the D&O insurance may not be adequate to fully protect the Company against liability for the conduct of its directors, officers or employees or the Company's indemnification obligations to its directors and officers.
The investigations, results of the investigations or remedial actions we have taken or may take as a result of such investigations may adversely affect our business. If we are subject to adverse findings resulting from the SEC investigation, or from our own independent investigation, we could be required to pay damages and/or penalties or have other remedies imposed on us.
If we are subject to adverse findings resulting from the SEC litigation, we could be required to pay damages and/or penalties or have other remedies imposed on us.
For example, the Company's restated certificate of incorporation and restated bylaws authorize blank series preferred stock, establish a staggered board of directors and impose certain procedural and other requirements for stockholder proposals. Volatility of stock price The price of the Company's common stock may fluctuate widely, depending upon a number of factors, many of which are beyond our control.
For example, the Company's restated certificate of incorporation and restated bylaws authorize blank series preferred stock, establish a staggered board of directors and impose certain procedural and other requirements for stockholder proposals. ITEM 1B. UNRESOLVED STAFF COMMENTS None. 24 Table of Contents ITEM 2.
CAVCO INDUSTRIES, INC. 4/2/2016 4/1/2017 3/31/2018 3/30/2019 3/28/2020 4/3/2021 Cavco Industries, Inc. $ 100 $ 125 $ 186 $ 126 $ 159 $ 249 Nasdaq Composite Index $ 100 $ 120 $ 144 $ 157 $ 153 $ 274 iShares U.S.
CAVCO INDUSTRIES, INC. 4/1/2017 3/31/2018 3/30/2019 3/28/2020 4/3/2021 4/2/2022 Cavco Industries, Inc. $ 100 $ 149 $ 101 $ 128 $ 200 $ 209 Nasdaq Composite Index $ 100 $ 119 $ 131 $ 127 $ 228 $ 241 iShares U.S.
These market forces include employment levels, employment growth, interest rates, consumer confidence, land availability and development costs, apartment and rental housing vacancy levels, inflation, deflation and the health of the general economy. Unfavorable changes in any of the above factors or other issues could have an adverse effect on our revenues, earnings or financial position.
These market forces include employment levels, employment growth, interest rates, consumer confidence, home input supply availability, land availability and development costs, suppliers impacted by global conflicts, apartment and rental housing vacancy levels, inflation, deflation and the health of the general economy.
The repurchases may be made in the open market or in privately negotiated transactions in compliance with applicable state and federal securities laws and other legal requirements. The level of repurchase activity is subject to market conditions and other investment opportunities.
Issuer Purchases of Equity Securities On October 27, 2020, the Company's Board of Directors approved a $100 million stock repurchase program that may be used to purchase its outstanding common stock. The repurchases may be made in the open market or in privately negotiated transactions in compliance with applicable state and federal securities laws and other legal requirements.
The Company may not be able to successfully integrate past or future acquisitions to attain the anticipated benefits and such acquisitions may adversely impact the Company's liquidity We have acquired industry competitors in the past and may consider additional strategic acquisitions if such opportunities arise.
If there is a downturn in the housing market, or if financing becomes less available or more expensive to obtain with higher interest rates, more distributors and homebuyers may cancel their agreements of sale with us, which would have an adverse effect on our business and results of operations. 16 Table of Contents The Company may not be able to successfully integrate past or future acquisitions to attain the anticipated benefits and such acquisitions may adversely impact the Company's liquidity We have acquired industry competitors in the past and may consider additional strategic acquisitions if such opportunities arise.
Share repurchase activity during the three months ended April 3, 2021 was as follows (in thousands, except number of shares and per share amounts): Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of the Publically Announced Program Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program December 27, 2020 to January 30, 2021 — $ — — January 31, 2020 to February 27, 2021 — — — February 28, 2021 to April 3, 2021 6,600 218.37 6,600 Total 6,600 6,600 $ 98,559 27 Table of Contents Performance Graph The following graph compares the yearly change in the cumulative total stockholder return on Cavco common stock during the five fiscal years ended April 3, 2021, with that of the Nasdaq Composite Index and the iShares U.S.
Share repurchase activity during the three months ended April 2, 2022 was as follows (in thousands, except number of shares and per share amounts): Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of the Publicly Announced Program Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program January 2, 2022 to February 5, 2022 — $ — — $ — February 6, 2022 to March 5, 2022 — — — — March 6, 2022 to April 2, 2022 115,200 264.52 115,200 38,960 115,200 115,200 Subsequent to fiscal 2022 year end, we utilized the remaining $39 million under this program.
These matters may also divert management's attention from other business concerns, which could harm the business and could result in reputational damage.
The case is currently in the discovery phase of litigation. 23 Table of Contents We are unable to predict what consequences any investigation by any regulatory agency may have on us, including significant legal and accounting expenses. These matters may also divert management's attention from other business concerns, which could harm the business and could result in reputational damage.
Removed
Some investors are reluctant to own or participate in owning such loans because of the uncertainty of potential litigation and other costs. As a result, some prospective buyers of manufactured homes may be unable to secure the financing necessary to complete purchases.
Added
As our homes are transported by independent third-party transportation companies, shortages or increased transportation costs from rising fuel prices could have an adverse impact to our operations. Our results of operations can also be affected by the pricing and availability of raw materials.
Removed
The Audit Committee of the Board conducted an internal investigation led by independent legal counsel and other advisers and, following the completion of its work in early 2019, the results of the Audit Committee's work were shared with the Company's auditors, listing exchange and the SEC staff.
Added
Excessive health and safety incidents relating to our operations could be costly to the Company Home construction is inherently dangerous.
Removed
We continue to make documents and personnel available to the SEC staff and intend to continue cooperating with its investigation. We are unable to predict what consequences any investigation by any regulatory agency may have on us, including significant legal and accounting expenses.
Added
While safety is a top priority, any failure in health and safety performance may result in additional health and workers' compensation costs or penalties for non-compliance with relevant regulatory requirements, which may result in difficulty attracting labor or a negative impact to our reputation.
Removed
The Company has incurred net losses in certain prior periods and there can be no assurance that it will generate income in the future Since becoming a stand-alone public company, we have generated net income each complete fiscal year, except for fiscal year 2010, in which we incurred net losses attributable in substantial part to the downturn affecting the manufactured housing industry.
Added
Some of the Company's manufacturing production employees are represented by unions, and failure to negotiate reasonable collective bargaining agreements may result in strikes, work stoppages or substantially higher ongoing labor costs Certain manufacturing production employees (approximately 7% of our total employees) are represented by unions and are covered by collective bargaining agreements, which expire in April 2023 and February 2024.
Removed
The likelihood that we will generate net income in the future must be considered in light of the difficulties facing the manufactured housing industry as a whole, economic conditions, the competitive environment in which we operate and the other risks and uncertainties discussed in this section of the Annual Report.
Added
Wages, health and welfare benefits, work rules and other issues have historically been negotiated in a reasonable amount of time and have previously not resulted in any extended work stoppages.
Removed
These factors include: the perceived prospects of the business and the manufactured housing industry as a whole; differences between our actual financial and operating results and those expected by investors and analysts; changes in analysts' recommendations or projections; changes affecting the availability of financing in the wholesale and consumer lending markets; actions or announcements by competitors; changes in the regulatory environment in which we operate; significant sales of shares by a principal stockholder; actions taken by stockholders that may be contrary to Board of Director recommendations; and changes in general economic or market conditions.
Added
However, if we are unable to negotiate acceptable new agreements, it could result in worker strikes, loss of business, disruption of operations and increased operating costs as a result of higher wages or benefits paid to union members, which would have an adverse effect on our business and results of operations.
Removed
In addition, stock markets generally experience significant price and volume volatility from time to time, which may adversely affect the market price of the Company's common stock for reasons unrelated to our performance. ITEM 1B. UNRESOLVED STAFF COMMENTS None. 24 Table of Contents ITEM 2.
Added
Increases in the rate of cancellations of home sales orders could have an adverse effect on the Company's business Our backlog reflects home sales orders with our distributors and home buyers for homes that have not yet been delivered. Distributors and home buyers may cancel orders prior to production without penalty.
Removed
Issuer Purchases of Equity Securities On October 27, 2020, the Company’s Board of Directors approved a $100 million stock repurchase program that may be used to purchase its outstanding common stock. This program, which was announced on Form 8-K filed October 29, 2020, replaces a previously standing $10 million authorization, which is now canceled.
Added
We use enterprise-grade information technology and computer resources to carry out important operational activities and to aggregate and maintain business records from a variety of systems.
Removed
Home Construction ETF $ 100 $ 119 $ 147 $ 132 $ 115 $ 263 We previously compared the cumulative total stockholder return on Cavco common stock to that of the Nasdaq US Small Cap Home Construction Index; however, it is no longer quoted. We selected the iShares U.S.
Added
In connection with our business, we collect and retain personally identifiable information (e.g., information regarding our customers, suppliers and employees), and there is an expectation that we will adequately protect that information.
Removed
Home Construction ETF as it includes the common stock of Cavco and some of our competitors.
Added
A significant theft, loss or fraudulent use of the personally identifiable information we maintain, or of our data, by cyber-criminals or others could adversely impact our reputation and could result in significant costs, fines or litigation.
Removed
The comparison below assumes $100 (with reinvestment of all dividends) was invested on March 28, 2015, in Cavco common stock and in each of the foregoing indices. 3/28/2015 3/28/2020 Cavco Industries, Inc. $ 100 $ 198 Nasdaq US Small Cap Home Construction Index $ 100 $ 81 iShares U.S. Home Construction ETF $ 100 $ 113 28 Table of Contents
Added
If we are not able to maintain current levels of coverage, or if warranty and construction defect claims exceed current levels, our results of operations or financial condition could be adversely effected.
Added
Products supplied to the Company or work done by subcontractors can expose the Company to risks that could adversely affect its business We sometimes rely on subcontractors to perform certain processes such as home setup or warranty work.
Added
In some cases, subcontractors may use improper processes or defective materials, which could result in the need for us to perform repairs on homes.
Added
In addition, although we expect all of our employees, officers and directors to comply at all times with all applicable laws, rules and regulations, there may be instances in which subcontractors or others through whom we do business engage in practices that do not comply with applicable laws, regulations or governmental guidelines.
Added
When we learn of practices that do not comply with applicable laws, regulations or guidelines, we move actively to stop the non-complying practices as soon as possible.
Added
In addition, the ability to recover losses on homes repurchased could be at risk in a declining price environment.
Added
Standard Casualty also specializes in writing contracts for the manufactured housing industry, primarily serving the Texas, Arizona, New Mexico and Nevada markets. 20 Table of Contents The Company's income tax provision and other tax liabilities may be insufficient if taxing authorities initiate and are successful in asserting tax positions that are contrary to the Company's position.
Added
In the normal course of business, we are audited by various federal, state and local authorities regarding income tax matters. Significant judgment is required to determine our provision for income taxes and our liabilities for federal, state, local and other taxes.
Added
Although we believe our approach to determining the appropriate tax treatment is supportable and in accordance with tax laws and regulations and relevant accounting literature, it is possible that the final tax authority will take a position that is materially different than ours.
Added
As each audit is conducted, adjustments, if any, are recorded in our consolidated financial statements in the period determined. Such differences could have a material adverse effect on our income tax provision or benefit, or other tax reserves, and, consequently, on our results of operations, financial position or cash flows.
Added
Failure to comply with such regulations, changes in these or other regulations, or the imposition of additional regulations, could affect our earnings, limit our access to capital and have a material adverse effect on the business and results of operations.
Added
An increase in interest rates could reduce potential buyers' ability or desire to obtain financing with which to buy homes and adversely affect the Company's business or financial results. The Federal Reserve Board has recently raised its benchmark rate, with further increases possible.
Added
Increases in interest rates could significantly increase the cost of owning a new home, which usually reduces the number of potential buyers who can afford, or are willing, to purchase homes we build. This could adversely impact demand for our homes and the ability of potential customers to obtain financing, adversely affecting our business, financial condition and operating results.
Added
Unfavorable changes in any of the above factors or other issues could have an adverse effect on our revenues, earnings or financial position.

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Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

54 edited+19 added−59 removed14 unchanged
Biggest changeSelling, general and administrative expenses consisted of the following for fiscal years 2021 and 2020, respectively: Year Ended ($ in thousands) April 3, 2021 March 28, 2020 Change Selling, general and administrative expenses: Factory-built housing $ 130,498 $ 127,174 $ 3,324 2.6 % Financial services 19,654 18,437 1,217 6.6 % $ 150,152 $ 145,611 $ 4,541 3.1 % Selling, general and administrative expenses as % of Net revenue: 13.6 % 13.7 % N/A (0.1) % Selling, general and administrative expenses related to factory-built housing increased from higher wages and incentive compensation expense on improved earnings, charges related to a new, employee-friendly paid time off policy and severance expense related to the Company's former Chief Financial Officer.
Biggest changeSelling, general and administrative expenses consisted of the following for fiscal years 2022 and 2021, respectively: Year Ended ($ in thousands) April 2, 2022 April 3, 2021 Change Selling, general and administrative expenses: Factory-built housing $ 186,278 $ 130,498 $ 55,780 42.7 % Financial services 19,975 19,654 321 1.6 % $ 206,253 $ 150,152 $ 56,101 37.4 % Selling, general and administrative expenses as % of Net revenue: 12.7 % 13.6 % N/A (0.9) % Selling, general and administrative expenses related to factory-built housing increased primarily due to $30.4 million in higher wages and benefits and incentive compensation expense on improved earnings, $19.0 million attributable to acquired entities, $6.9 million in expenses incurred in engaging third-party consultants in relation to pursuing the non-recurring energy efficient home tax credits and $2.4 million in Commodore related acquisition transaction costs, partially offset by $4.2 million of amortization of additional Director & Officer insurance premiums in the prior year that did not repeat.
There can be no assurance that such financing would be available on satisfactory terms, if at all. If this financing were not available, it could be necessary for us to reevaluate our long-term operating plans to make more efficient use of our existing capital resources.
There can be no assurance that such financing would be available on satisfactory terms, if at all. If this financing were not available, it could be necessary for us to reevaluate our long-term operating plans to make more efficient use of our existing capital resources at such time.
Other income primaril y consists of realized and unrealized gains and losses on corporate investments, interest income related to commercial loan receivable balances, interest income earned on cash balances and gains and losses from the sale of property, plant and equip ment and assets held for sale.
Other income, net primaril y consists of realized and unrealized gains and losses on corporate investments, interest income related to commercial loan receivable balances, interest income earned on cash balances and gains and losses from the sale of property, plant and equip ment and assets held for sale.
Expansion of the secondary market for home-only loans through GSEs could support further demand for housing as lending options would likely become more available to home buyers. 32 Table of Contents The insurance subsidiary is subject to adverse effects from excessive policy claims that may occur during periods of inclement weather, including seasonal spring storms or fall hurricane activity in Texas where most of its policies are underwritten.
Expansion of the secondary market for home-only loans through GSEs could support further demand for housing as lending options would likely become more available to home buyers. 30 Table of Contents The insurance subsidiary is subject to adverse effects from excessive policy claims that may occur during periods of inclement weather, including seasonal spring storms or fall hurricane activity in Texas where most of its policies are underwritten.
Where applicable, losses from catastrophic events are mitigated by reinsurance contracts in place as part of our loss mitigation structure. Results of Operations Fiscal Year 2021 Compared to Fiscal Year 2020 Net Revenue.
Where applicable, losses from catastrophic events are mitigated by reinsurance contracts in place as part of our loss mitigation structure. Results of Operations Fiscal Year 2022 Compared to Fiscal Year 2021 Net Revenue.
While these initiatives support our ongoing efforts to expand product distribution, they do expose us to risks associated with the creditworthiness of this customer base and our inventory financing partners.
While these initiatives support our ongoing efforts to expand product distribution, they also expose us to risks associated with the creditworthiness of this customer base and our inventory financing partners.
The exact nature of any changes to our plans that would be considered depends on various factors, such as conditions in the factory-built housing industry and general economic conditions outside of our control. 35 Table of Contents State insurance regulations restrict the amount of dividends that can be paid to stockholders of insurance companies.
The exact nature of any changes to our plans that would be considered depends on various factors, such as conditions in the factory-built housing industry and general economic conditions outside of our control. State insurance regulations restrict the amount of dividends that can be paid to stockholders of insurance companies.
The determination of the need for, or amount of, any valuation allowance involves significant judgment and is based upon the evaluation of both positive and negative evidence, including estimates of anticipated taxable profits in various jurisdictions with which the deferred tax assets are associated.
Income Taxes and Deferred Tax Assets and Liabilities. The determination of the need for, or amount of, any valuation allowance involves significant judgment and is based upon the evaluation of both positive and negative evidence, including estimates of anticipated taxable profits in various jurisdictions with which the deferred tax assets are associated.
Because of our sufficient cash position, we have not historically sought external sources of liquidity, with the exception of certain credit facilities for the home-only lending programs. Regardless, depending on our operating results and strategic opportunities, we may need to seek additional or alternative sources of financing.
Because of our sufficient cash position, we have not historically sought external sources of liquidity, with the exception of certain credit facilities for the home-only lending programs. Regardless, depending on our operating results and strategic opportunities, we may choose to seek additional or alternative sources of financing in the future.
We expressly disclaim any obligation to update any forward-looking statements contained in this Annual Report, whether as a result of new information, future events or otherwise. For all of these reasons, you should not place undue reliance on any such forward-looking statements included in this Annual Report.
We expressly disclaim any obligation to update any forward-looking statements contained in this Annual Report, whether as a result of new information, future events or otherwise, except as required by law. For all of these reasons, you should not place undue reliance on any such forward-looking statements included in this Annual Report.
We are also working to more extensively use on-line recruiting tools, update our recruitment brochures and improve the appearance and appeal of our manufacturing facilities to improve the recruitment and retention of qualified production employees and reduce annualized turnover rates.
We are also working to more extensively use web-based recruiting tools, update our recruitment brochures and improve the appearance and appeal of our manufacturing facilities to improve the recruitment and retention of qualified production employees and reduce annualized turnover rates.
Regardless, we believe our ability to recruit the workforce we need to help meet the overall need for affordable housing continues to improve. 31 Table of Contents We continue to make certain commercial loan programs available to members of our wholesale distribution chain.
We believe our ability to recruit the workforce we need to help meet the overall need for affordable housing continues to improve. We continue to make certain commercial loan programs available to members of our wholesale distribution chain.
We work directly with other industry participants to develop secondary market opportunities for manufactured home-only loan portfolios and expand lending availability in the industry. Additionally, we continue to invest in community-based lending initiatives that provide home-only financing to new residents of certain manufactured home communities.
We work independently and with other industry participants to develop secondary market opportunities for manufactured home-only loan and non-conforming mortgage portfolios and expand lending availability in the industry. Additionally, we continue to invest in community-based lending initiatives that provide home-only financing to residents of certain manufactured home communities.
Liquidity and Capital Resources We believe that cash and cash equivalents at April 3, 2021, together with cash flow from operations, will be sufficient to fund our operations and provide for growth for the next 12 months and into the foreseeable future. We maintain cash in U.S.
Liquidity and Capital Resources We believe that cash and cash equivalents at April 2, 2022, together with cash flow from operations, will be sufficient to fund our operations, cover our obligations and provide for growth for the next 12 months and into the foreseeable future. We maintain cash in U.S.
Interest expense was $0.7 million in fiscal year 2021 and $1.5 million in fiscal year 2020, and consists primarily of debt service on the financings of manufactured home-only loans and interest related to finance leases.
Interest expense was $0.7 million in both fiscal year 2022 and 2021, and consists primarily of debt service on the financings of manufactured home-only loans and interest related to finance leases.
Distributors may cancel orders prior to production without penalty. Accordingly, until the production of a particular unit has commenced, we do not consider our backlog to be firm orders. We strive to manage our production levels, capacity and workforce size based upon current market demand.
Accordingly, until the production of a particular unit has commenced, we do not consider our backlog to be firm orders. We strive to manage our production levels, capacity and workforce size based upon current market demand.
Forward-looking statements are typically included, for example, in discussions regarding the manufactured housing and site-built housing industries; our financial performance and operating results; the expected effect of certain risks and uncertainties on our business, financial condition and results of operations; economic conditions and consumer confidence; operational and legal risks; how we may be affected by the COVID-19 pandemic, governmental regulations and legal proceedings; the availability of favorable consumer and wholesale manufactured home financing, market interest rates and Company investments; and the ultimate outcome of our commitments and contingencies.
Forward-looking statements are typically included, for example, in discussions regarding the manufactured housing and site-built housing industries; our financial performance and operating results; our liquidity and financial resources; our outlook with respect to the Company and the manufactured housing business in general; the expected effect of certain risks and uncertainties on our business, financial condition and results of operations; economic conditions and consumer confidence; increasing interest rates; potential acquisitions, strategic investments and other expansions; operational and legal risks; how we may be affected by the COVID-19 pandemic or any other pandemic or outbreak; labor shortages and the pricing and availability of raw materials; governmental regulations and legal proceedings; the availability of favorable consumer and wholesale manufactured home financing; and the ultimate outcome of our commitments and contingencies.
During these uncertain economic times, we continue to assist customers in need by servicing existing loans and insurance policies and complying with state and federal regulations regarding loan forbearance, home foreclosures and policy cancellations.
In the financial services segment, we continue to assist customers in need by servicing existing loans and insurance policies and complying with state and federal regulations regarding loan forbearance, home foreclosures and policy cancellations.
Income tax expense was $20.3 million, resulting in an effective tax rate of 20.9% for the fiscal year ended April 3, 2021, compared to income tax expense of $17.9 million and an effective rate of 19.3% for the fiscal year ended March 28, 2020.
Income tax expense was $14.2 million, resulting in an effective tax rate of 6.7% for the fiscal year ended April 2, 2022, compared to income tax expense of $20.3 million and an effective rate of 20.9% for the fiscal year ended April 3, 2021.
We have also invested in community-based lending initiatives that provide home-only financing to new residents of certain manufactured home communities. For additional information regarding our commercial loans receivable, see Note 7 to the Consolidated Financial Statements.
In addition, we enter into commercial loan arrangements with certain distributors of our products under which the Company provides funds for wholesale purchases. We have also invested in community-based lending initiatives that provide home-only financing to new residents of certain manufactured home communities. For additional information regarding our commercial loans receivable, see Note 7 to the Consolidated Financial Statements.
Net cash used in investing activities for the year ended April 3, 2021 included purchases of property, plant and equipment, primarily used for the new park model RV facility in Arizona, which is expected to be operational in December 2021.
Net cash used in investing activities for the year ended April 3, 2021 was primarily for purchases of property, plant and equipment, including the new park model RV facility in Arizona, which is expected to be operational in mid-calendar year of 2022, partially offset by net proceeds from sales of investments.
Factors used in the estimation of the warranty liability include the estimated amount of homes still under warranty including homes in distributor inventories, homes purchased by consumers still within the one-year warranty period, the timing in which work orders are completed and the historical average costs incurred to service a home. Reserve for Property Casualty Insurance Claims and Claims Expense.
Estimates include the number of homes still under warranty, including homes in distributor inventories, homes purchased by consumers still within the one-year warranty period, the timing in which work orders are completed and the historical average costs incurred to service a home.
We also develop and invest in home-only lending programs to grow sales of homes through traditional distribution points. We believe that growing our investment and participation in home-only lending may provide additional sales growth opportunities for our financial services segment, as well as provide a means that could lead to increased home sales for our factory-built housing operations.
We also develop and invest in home-only lending programs to grow sales of homes through traditional distribution points. We believe that growing our investment and participation in home-only lending may provide additional sales growth opportunities for our factory-built housing operations and reduce our exposure to the actions of independent lenders.
Fluctuations in net factory-built housing revenue per home sold are partially the result of changes in product mix, which results from home buyer tastes and preferences as they select home types/models, as well as optional home upgrades when purchasing the home. These selections vary regularly based on consumer interests, local housing preferences and economic circumstances.
Fluctuations in net factory-built housing revenue per home sold are also partially the result of changes in the number of modules per home, the selection of different home types/models and optional home upgrades, creating changes in product mix . These selections vary regularly based on consumer interests, local housing preferences and economic circumstances.
Introduction The following should be read in conjunction with the Company's Consolidated Financial Statements and the related Notes that appear in Part IV of this Report. References to "Note" or "Notes" pertain to the Notes to the Consolidated Financial Statements.
Introduction The following should be read in conjunction with the Company's Consolidated Financial Statements and the related Notes that appear in Part IV of this Report. References to "Note" or "Notes" pertain to the Notes to the Consolidated Financial Statements. Company Outlook Housing demand remains strong as qualified individuals continue pursuing affordable home-ownership.
In December 2017, Fannie Mae and Freddie Mac released their final Underserved Markets Plans that describe, with specificity, the actions they would take over a three-year period to fulfill the "Duty to Serve" obligation. These plans became effective on January 1, 2018.
In April 2022, Fannie Mae and Freddie Mac released their Underserved Markets Plans for 2022-2024 that describe, with specificity, the actions they would take over the three-year period to fulfill the "Duty to Serve" obligation.
The decrease is related to a reduction in securitized bond interest expense, as we e xercised our right to repurchase the 2007-1 securitized loan portfolio in August 2019 , thereby eliminating the related interest expense. This decrease is partially offset by increases in interest expense from the secured credit facilities. Other Income, net .
We realized a decrease in interest expense from the elimination of the securitized bond interest as we e xercised our right to repurchase the 2007-1 securitized loan portfolio in August 2019. However, this was offset by an increase in interest expense from the secured credit facilities as well as additional finance leases. Other Income, net .
Our involvement in commercial loans helps to increase the availability of manufactured home financing to distributors, community owners and developers and provides additional opportunity for product exposure to potential home buyers.
Under direct commercial loan arrangements, we provide funds for financed home purchases by distributors, community owners and developers (see Note 7 to the Consolidated Financial Statements). Our involvement in commercial loans helps to increase the availability of manufactured home financing to distributors, community owners and developers and provides additional opportunity for product exposure to potential home buyers.
The backlog of home sales orders at April 3, 2021 was $603 million in total, up $479 million from $124 million as of March 28, 2020. Backlog excludes home orders that have been paused or canceled at the request of the customer.
The backlog of home sales orders at April 2, 2022 was $1.1 billion in total, up $511 million from $603 million as of April 3, 2021. The year over year increase includes $264 million attributable to Commodore. Backlog excludes home orders that have been paused or canceled at the request of the customer.
However, mandatory extended forbearance under the CARES Act and certain other regulations related to COVID-19 could negatively impact cash obligations in the future. The lack of an efficient secondary market for manufactured home-only loans and the limited number of institutions providing such loans results in higher borrowing costs for home-only loans and continues to constrain industry growth.
The lack of an efficient secondary market for manufactured home-only loans and the limited number of institutions providing such loans results in higher borrowing costs for home-only loans and continues to constrain industry growth.
Further, we invest in and develop home-only loan pools and lending programs to attract third-party financier interest in order to grow sales of new homes through traditional distribution points.
Further, we invest in and develop home-only loan pools and lending programs to attract third-party financier interest in order to grow sales of new homes through traditional distribution points. We have contractual lease obligations for certain production and retail locations, office space and equipment with durations ranging from monthly to 20 years.
We also work with industry trade associations to encourage favorable legislative and GSE action to address the mortgage financing needs of buyers of affordable homes. Federal law requires GSEs to implement the "Duty to Serve" requirements specified in the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended by the Housing and Economic Recovery Act of 2008.
Federal law requires GSEs to implement the "Duty to Serve" requirements specified in the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended by the Housing and Economic Recovery Act of 2008.
Ginnie Mae permits cash obligations on loans in forbearance from COVID-19 to be offset by other incoming cash flows from loans such as loan pre-payments. Through fiscal year 2021, monthly collections of principal and interest from borro wers have exceeded scheduled principal and interest payments owed to investors.
Ginnie Mae permits cash obligations on loans in forbearance from COVID-19 to be offset by other incoming cash flows from loans such as loan pre-payments.
Wholesale sales prices are primarily comprised of the home and the cost to ship the home from a homebuilding facility to the home-site. Retail home prices include these items and retail markup, as well as items that are largely subject to home buyer discretion, including, but not limited to, installation, utility connections, site improvements, landscaping and additional services.
Retail home prices include these items and retail markup, as well as items that are largely subject to home buyer discretion, including, but not limited to, installation, utility connections, site improvements, landscaping and additional services. Changes to the proportion of home sales among our distribution channels between reporting periods impacts the overall net revenue per home sold.
At April 3, 2021, based on historical profits earned and forecasted taxable profits, we determined that all deferred tax assets, except for certain state net operating loss deferred tax assets, would be utilized in future periods. Goodwill and Other Intangibles. Goodwill and indefinite-lived intangibles are tested annually for impairment. The analysis depends upon a number of judgments, estimates and assumptions.
At April 2, 2022, based on historical profits earned and forecasted taxable profits, we determined that all deferred tax assets, except for certain state net operating loss deferred tax assets, would be utilized in future periods.
We can give no assurance that inflation will not affect future profitability. Recent Accounting Pronouncements See Note 1 to the Consolidated Financial Statements for a discussion of recently issued and adopted accounting pronouncements.
Recent Accounting Pronouncements See Note 1 to the Consolidated Financial Statements for a discussion of recently issued and adopted accounting pronouncements. 36 Table of Contents
Critical Accounting Estimates Our discussion and analysis of the Company's financial condition and results of operations is based upon its Consolidated Financial Statements, which have been prepared in accordance with U.S. generally accepted accounting principles.
See Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations— Liquidity and Capital Resources" in the Company's 2021 Annual Report on Form 10-K for a discussion of changes in liquidity between fiscal years 2021 and 2020. 35 Table of Contents Critical Accounting Estimates Our discussion and analysis of the Company's financial condition and results of operations is based upon its Consolidated Financial Statements, which have been prepared in accordance with U.S. generally accepted accounting principles.
Income before income taxes consisted of the following for fiscal years 2021 and 2020, respectively: Year Ended ($ in thousands) April 3, 2021 March 28, 2020 Change Income before income taxes: Factory-built housing $ 78,937 $ 78,531 $ 406 0.5 % Financial services 17,975 14,448 3,527 24.4 % $ 96,912 $ 92,979 $ 3,933 4.2 % Income Tax Expense.
Income before income taxes consisted of the following for fiscal years 2022 and 2021, respectively: Year Ended ($ in thousands) April 2, 2022 April 3, 2021 Change Income before income taxes: Factory-built housing $ 197,282 $ 78,937 $ 118,345 149.9 % Financial services 14,707 17,975 (3,268) (18.2) % $ 211,989 $ 96,912 $ 115,077 118.7 % Income Tax Expense.
The higher effective tax rate in the current year period primarily relates to higher income and lower tax benefits from stock option exercises. Fiscal Year 2020 Compared to Fiscal Year 2019 See Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 2020 Annual Report on Form 10-K.
The tax credit for energy efficient homes expired in its current form as of December 31, 2021. Fiscal Year 2021 Compared to Fiscal Year 2020 See Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the Company's 2021 Annual Report on Form 10-K.
Gross profit consisted of the following for fiscal years 2021 and 2020, respectively: Year Ended ($ in thousands) April 3, 2021 March 28, 2020 Change Gross profit: Factory-built housing $ 199,604 $ 195,244 $ 4,360 2.2 % Financial services 39,373 35,274 4,099 11.6 % $ 238,977 $ 230,518 $ 8,459 3.7 % Gross profit as % of Net revenue: Consolidated 21.6 % 21.7 % N/A (0.1) % Factory-built housing 19.2 % 19.5 % N/A (0.3) % Financial services 56.1 % 56.5 % N/A (0.4) % Factory-built housing gross profit increased $19.6 million from higher home sales prices and a shift toward more multi-section homes during the period, partially offset by $15.2 million of lower home sales volumes .
Gross profit consisted of the following for fiscal years 2022 and 2021, respectively: Year Ended ($ in thousands) April 2, 2022 April 3, 2021 Change Gross profit: Factory-built housing $ 372,250 $ 199,604 $ 172,646 86.5 % Financial services 36,499 39,373 (2,874) (7.3) % $ 408,749 $ 238,977 $ 169,772 71.0 % Gross profit as % of Net revenue: Consolidated 25.1 % 21.6 % N/A 3.5 % Factory-built housing 23.9 % 19.2 % N/A 4.7 % Financial services 51.5 % 56.1 % N/A (4.6) % In the factory-built housing segment, Gross profit increased $323.8 million from higher home sales prices and $30.1 million from more units sold, partially offset by $181.3 million from higher material costs.
As a result, the assets owned by our insurance subsidiary are generally not available to satisfy the claims of Cavco or its legal subsidiaries. We believe that stockholders' equity at the insurance subsidiary remains sufficient and do not believe that the ability to pay ordinary dividends to Cavco will be restricted per state regulations.
As a result, the assets owned by our insurance subsidiary are generally not available to satisfy the claims of Cavco or its legal subsidiaries.
For fisca l years 2021 and 2020, Other income, net was $8.8 million and $9.6 million, respectively, a decrease of $0.8 million or 8.3%.
For fisca l years 2022 and 2021, Other income, net was $10.2 million and $8.8 million, respectively, an increase of $1.4 million or 15.9%.
This decrease was primarily from a $3.4 million net gain recognized last year on the sale of idle land and lower interest income earned on cash balances, partially offset by greater unrealized gains on corporate equity investments in the current year. Income Before Income Taxes.
This increase was primarily from a $3.3 million revaluation gain recognized on the consolidation of an equity method investment and $1.2 million higher interest income on commercial loans from the addition of Commodore, partially offset by $3.2 million lower unrealized gains on corporate equity investments in the current year. 33 Table of Contents Income Before Income Taxes.
On January 5, 2021, the Federal Housing Finance Agency, the GSE regulator, announced that it had issued "Non-Objections" to modified plans which are extended through 2021. The plans offered enhanced mortgage loan products for manufactured homes titled as real property through Fannie Mae's "MH Advantage" and Freddie Mac's "ChoiceHome" programs that began in the latter part of calendar year 2018.
As with prior plans, the 2022-2024 plans offer enhanced mortgage loan products for manufactured homes titled as real property, including Fannie Mae's "MH Advantage" and Freddie Mac's "ChoiceHome" programs that began in the latter part of calendar year 2018.
As a percentage of Net revenue, Selling, general and administrative expenses slightly decreased from better utilization of fixed costs on higher sales. 34 Table of Contents Interest Expense.
Selling, general and administrative expenses related to financial services increased primarily from higher salary expenses from continued growth and increased wages and benefits costs. As a percentage of Net revenue, Selling, general and administrative expenses improved 90 basis points from better utilization of fixed costs on higher sales. Interest Expense.
These were partially offset by $1.2 million lower interest income earned on the acquired loan portfolios that continue to amortize as expected. 33 Table of Contents Gross Profit.
These increases were partially offset by $3.8 million in lower interest income earned on the acquired consumer loan portfolios that continue to amortize and $2.6 million in lower unrealized gains on marketable equity securities in the insurance subsidiary's portfolio. Gross Profit.
Although some progress has been made with these programs, meaningful positive impact in the form of increased home orders has yet to be realized. Small-scale pilot programs included in the plans for the purchase of home-only loans have not occurred. Public input into the GSE's proposed 2022-2024 Underserved Markets Plans is scheduled for summer 2021.
Although some progress has been made with these programs, meaningful positive impact in the form of increased home orders has yet to be realized. The plans do not include purchases of home-only loans during the three-year timeframe.
While it is difficult to predict the future impacts of the COVID-19 pandemic on housing demand, employee availability, supply chain and Company performance and ope rations, maintaining an appropriately sized and well-trained workforce is key to increasing production to meet increased demand, and we face challenges in overcoming labor-related difficulties in the COVID-19 environment to increase home production.
Although we continue to experience hiring challenges and other inefficiencies from building material supply disruptions, we have reduced our total open production positions needed by nearly 25% over the past year, bringing our total average plant capacity utilization rate to exceeding 80% during the fourth fiscal quarter of 2022, which is above pre-pandemic levels. 29 Table of Contents While it is difficult to predict the future of housing demand, employee availability, supply chain and Company performance and ope rations, maintaining an appropriately sized and well-trained workforce is key to increasing production to meet increased demand, and we face challenges in overcoming labor-related difficulties in the current environment to increase home production.
This was offset by a $23.8 million reduction from lower home sales volume. Net factory-built housing revenue per home sold is a volatile metric dependent upon several factors. A primary factor is the price disparity between sales of homes to independent distributors, builders, communities and developers ("Wholesale") and sales of homes to consumers by Company-owned retail stores ("Retail").
A primary factor is the price disparity between sales of homes to independent distributors, builders, communities and developers ("Wholesale") and sales of homes to consumers by Company-owned retail stores ("Retail"). Wholesale sales prices are primarily comprised of the home and the cost to ship the home from a homebuilding facility to the home-site.
This was partially offset by proceeds from the sale of property, plant and equipment. Net cash used in financing activities for the year ended April 3, 2021 was mainly used for payments of payroll taxes on the net exercises of stock options, payments on secured financings and common stock repurchases.
Net cash used in financing activities for the year ended April 2, 2022 was primarily related to common stock repurchases and the payments of the secured term loans, which have been paid in full as of January 1, 2022, partially offset by proceeds received from the exercise of stock options.
Net revenue consisted of the following for fiscal years 2021, which included an extra week in the fiscal period, and 2020, respectively: Year Ended ($ in thousands, except revenue per home sold) April 3, 2021 March 28, 2020 Change Net revenue: Factory-built housing $ 1,037,889 $ 999,340 $ 38,549 3.9 % Financial services 70,162 62,434 7,728 12.4 % $ 1,108,051 $ 1,061,774 $ 46,277 4.4 % Total homes sold 14,214 15,100 (886) (5.9) % Net factory-built housing revenue per home sold $ 73,019 $ 66,181 $ 6,838 10.3 % In the factory-built housing segment, revenues increased $62.3 million from higher home selling prices, driven by product price increases and a shift toward more multi-section homes.
Net revenue consisted of the following for fiscal years 2022 and 2021, respectively: Year Ended ($ in thousands, except revenue per home sold) April 2, 2022 April 3, 2021 Change Net revenue: Factory-built housing $ 1,556,283 $ 1,037,889 $ 518,394 49.9 % Financial services 70,875 70,162 713 1.0 % $ 1,627,158 $ 1,108,051 $ 519,107 46.8 % Total homes sold 16,697 14,214 2,483 17.5 % Net factory-built housing revenue per home sold $ 93,207 $ 73,019 $ 20,188 27.6 % In the factory-built housing segment, the increase in Net revenue was primarily due to higher legacy home selling prices, which provided $302.0 million, and higher legacy home sales volume from increased factory capacity utilization, which contributed $39.4 million.
See Part I, Item IA, "Risk Factors." We enter into commercial loan agreements with distributors, communities and developers under which the Company provides funds for financing homes. In addition, we enter into commercial loan arrangements with certain distributors of our products under which the Company provides funds for wholesale purchases.
Net cas h used in financing activities for the year ended April 3, 2021 was mainly for the payments of tax liabilities on the exercise of stock options and payments on secured financings. Obligations and Commitments We enter into commercial loan agreements with distributors, communities and developers under which the Company provides funds for financing homes.
Proceeds from the sale of consumer loans provided $167.1 million in cash, compared to $159.6 million in the previous year, a net increase of $7.5 million. With respect to consumer lending for the purchase of manufactured housing, states may classify manufactured homes for both legal and tax purposes as personal property rather than real estate.
Consumer loan originations decreased $2.6 million to $159.0 million during the year ended April 2, 2022, from $161.6 million during the year ended April 3, 2021. Proceeds from the sale of consumer loans provided $184.8 million in cash, compared to $167.1 million in the previous year, a net increase of $17.7 million.
This was partially offset by cash provided from net sales of investments and proceeds from sales of property, plant and equipment. Net cash used in investing activities in fiscal year 2020 was primarily used for purchases of property, plant and equipment, payments for the acquisition of Destiny Homes and net purchases of investments.
Net cash used in investing activities for the year ended April 2, 2022 included purchases of Commodore and Craftsman, as well as purchases of property, plant and equipment.
Removed
Company Overview Headquartered in Phoenix, Arizona, we design and produce factory-built housing products primarily distributed through a network of independent and Company-owned retailers, planned community operators and residential developers.
Added
Home order rates have moderated from the extreme highs we saw during the summer of 2020 to the summer of 2021, but still remain above pre-pandemic rates, which we considered to be strong. We maintain a backlog of orders from our network of licensed distributors, communities and developers. Distributors may cancel orders prior to production without penalty.
Removed
We are one of the largest producers of manufactured homes in the United States, based on reported wholesale shipments, marketed under a variety of brand names, including Cavco, Fleetwood, Palm Harbor, Fairmont, Friendship, Chariot Eagle and Destiny.
Added
Through fiscal year 2022, monthly collections of principal and interest from borro wers have exceeded scheduled principal and interest payments owed to investors; however, mandatory extended forbearance under the CARES Act and certain other regulations related to COVID-19 could negatively impact cash obligations in the future.
Removed
We are also one of the leading producers of park model RVs, vacation cabins and factory-built commercial structures, as well as modular homes built primarily under the Nationwide Homes brand.
Added
We also work independently and with industry trade associations to encourage favorable legislative and GSE action to address the financing needs of buyers of affordable homes.
Removed
Our finance subsidiary, CountryPlace, is an approved Fannie Mae and Freddie Mac seller/servicer and a Ginnie Mae mortgage-backed securities issuer that offers conforming mortgages, non-conforming mortgages and home-only loans to purchasers of factory-built homes. Our insurance subsidiary, Standard Casualty, provides property and casualty insurance to owners of manufactured homes.
Added
The higher home prices were primarily driven by produc t price increases, and to a lesser extent a shift toward more multi-section homes. Home sales volume also increased from the addition of Craftsman Homes, LLC and Craftsman Homes Development, LLC (together, "Craftsman") and Commodore, which provided $13.8 million and $166.7 million, respectively.
Removed
From our inception in 1965, we have traditionally served affordable housing markets in the southwestern United States principally through manufactured home production.
Added
These increases were partially offset by th e prior year period containing an extra week of production, given the fiscal calendar. Net factory-built housing revenue per home sold is a volatile metric dependent upon several factors.
Removed
During the period from 1997 to 2000, Cavco was purchased by, and became a wholly-owned subsidiary of, Centex Corporation, which operated the Company until 2003, when Cavco became a stand-alone publicly-held company traded on the Nasdaq Global Select Market under the ticker symbol CVCO. 30 Table of Contents We have strategically expanded our factory operations and related business activities primarily through the acquisition of other industry participants.
Added
For fiscal 2022, we sold 13,888 homes Wholesale and 2,809 Retail versus 11,225 homes Wholesale and 2,989 homes Retail in the prior year. Our h omes are constructed in one or more floor sections ("modules") which are then installed on the customer's site.
Removed
This has enabled us to meet the needs of the affordable housing market on a national basis.
Added
The table below presents the mix of modules and homes sold for the fiscal years 2022 and 2021, respectively : 31 Table of Contents Year Ended April 2, 2022 April 3, 2021 Change Modules Homes Modules Homes Modules Homes HUD code homes 24,497 14,136 20,948 12,339 16.9 % 14.6 % Modular homes 3,569 1,742 2,009 945 77.7 % 84.3 % Park model RVs 819 819 930 930 (11.9) % (11.9) % 28,885 16,697 23,887 14,214 20.9 % 17.5 % Financial services segment revenue increased 1.0% primarily due to $4.5 million from more insurance policies in force in the current year, $1.5 million in greater loan servicing income and $1.1 million in net higher proceeds from home loan sales.
Removed
We operate 20 homebuilding production lines located in Millersburg and Woodburn, Oregon; Nampa, Idaho; Riverside, California; Phoenix and Goodyear, Arizona; Austin, Fort Worth, Seguin and Waco, Texas; Montevideo, Minnesota; Nappanee, Indiana; Lafayette, Tennessee; Martinsville and Rocky Mount, Virginia; Douglas and Moultrie, Georgia; and Ocala and Plant City, Florida.
Added
In the financial services segment, Gross profit decreased primarily due to higher weather related claims, lower interest income earned on the acquired consumer loan portfolios and lower unrealized gains on marketable equity securities compared to the prior year period. 32 Table of Contents Selling, General and Administrative Expenses.
Removed
The majority of the homes produced are sold to, and distributed by, independently owned and controlled retail operations located throughout the United States and Canada. In addition, our homes are sold through 40 Company-owned U.S. retail locations.
Added
The lower effective tax rate in the current year period primarily relates to $35.7 million in estimated non-recurring net tax credits related to the sale of energy efficient homes between fiscal year 2018 and fiscal third quarter 2022, available under the Internal Revenue Code §45L, offset by an increase in income before income taxes.
Removed
Our manufacturing facilities are strategically positioned across the United States and utilize local market research to design homes to meet the demands of our customers. We have the ability to customize floor plans and designs to fulfill specific needs and interests.
Added
We believe that stockholders' equity at the insurance subsidiary remains sufficient and do not believe that the ability to pay ordinary dividends to Cavco will be restricted per state regulations. 34 Table of Contents The following is a summary of the Company's cash flows for fiscal years 2022 and 2021, respectively: Year Ended ($ in thousands) April 2, 2022 April 3, 2021 $ Change Cash, cash equivalents and restricted cash at beginning of the fiscal year $ 339,307 $ 255,607 $ 83,700 Net cash provided by operating activities 144,224 114,031 30,193 Net cash used in investing activities (159,102) (23,349) (135,753) Net cash used in financing activities (65,095) (6,982) (58,113) Cash, cash equivalents and restricted cash at end of the fiscal year $ 259,334 $ 339,307 $ (79,973) Net cash pro vided by operating activities increased primarily due to the increased profitability, partially offset by increased costs for operating activities, including rising costs of our raw materials and higher purchases of such materials, increased accounts receivables from timing of collections and increased sales and refunds related to the estimated net tax credits under the Internal Revenue Code §45L which have not been received.
Removed
By offering a full range of homes from entry-level models to large custom homes and with the ability to engineer designs in-house, we can accommodate virtually any customer request.
Added
Certain lease agreements include one or more options to renew, with renewal terms that can extend the lease term by one to three years or more. For additional information related to these obligations, see Note 9 to the Consolidated Financial Statements.
Removed
In addition to homes built to the federal HUD code, we also construct modular homes that conform to state and local codes, park model RVs, cabins and light commercial buildings at many of our manufacturing facilities. We seek out niche market opportunities where our diverse product lines and custom building capabilities provide a competitive advantage.
Added
In addition, we also have contingent commitments at April 2, 2022 consisting of contingent repurchase obligations, construction contingent commitments, interest rate lock commitments ("IRLCs") and forward loan sale commitments. For additional information related to these contingent obligations, see Note 16 to the Consolidated Financial Statements.
Removed
Our green building initiatives involve the creation of an energy efficient envelope and higher utilization of renewable materials. These homes provide environmentally-friendly maintenance requirements, typically lower utility costs and sustainability. We also build homes designed to use alternative energy sources, such as solar and wind.
Added
While the number of homes still under warranty and the timing in which work orders are completed are readily determinable, the average costs incurred will vary based on market prices and availability, which are the primary subjective inputs in estimating the reserve. We expect that a 5% increase in average costs would increase our reserve proportionally.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

6 edited+1 added−0 removed7 unchanged
Biggest changeAt present, independent asset-backed and mortgage-backed securitization markets are not readily available to us or other manufactured housing lenders. Accordingly, we have not continued to securitize our loan originations as a means to obtain long-term funding. We are also exposed to market risks related to the consumer and commercial loan notes receivables.
Biggest changeWhile we previously accessed the asset-backed securities market to provide term financing of home-only and non-conforming mortgage originations, at present, independent asset-backed and mortgage-backed securitization markets are not readily available to us or other manufactured housing lenders. Accordingly, we have not securitized our loan originations as a means to obtain long-term funding.
Assuming the level of IRLCs is held constant, a 1% (100 basis points) increase in average interest rates would decrease the fair value of the obligations by approximately $340,000.
Assuming the level of IRLCs is held constant, a 1% (100 basis points) increase in average interest rates would decrease the fair value of the obligations by approximately $88,000.
Assuming the level of these instruments as of April 3, 2021 is held constant, a 1% (100 basis points) unfavorable change in average interest rates would adversely impact the fair value of these instruments, as follows: ($ in thousands) Reduction in Fair Value Consumer loans receivable $ 3,317 Commercial loans receivable 344 Securitized financings 462 40 Table of Contents In originating loans for sale, we issue interest rate lock commitments ("IRLCs") to prospective borrowers and third-party originators.
Assuming the level of these instruments as of April 2, 2022 is held constant, a 1% (100 basis points) unfavorable change in average interest rates would adversely impact the fair value of these instruments, as follows: ($ in thousands) Reduction in Fair Value Consumer loans receivable $ 2,592 Commercial loans receivable 421 Securitized financings 883 In originating loans for sale, we issue IRLCs to prospective borrowers and third-party originators.
Higher interest rates could unfavorably impact revenues, gross margins and net earnings. We are exposed to market risk related to the accessibility and terms of long-term financing of our consumer loans. In the past, we have accessed the asset-backed securities market to provide term financing of home-only and non-conforming mortgage originations.
Higher interest rates could unfavorably impact revenues, gross margins and net earnings. We are exposed to market risk related to the accessibility and terms of long-term financing of our consumer loans.
For fixed and step rate instruments, changes in interest rates do not change future earnings and cash flows. However, changes in interest rates could affect the fair value of these instruments.
We are also exposed to market risks related to the consumer and commercial loan notes receivables. For fixed and step rate instruments, changes in interest rates do not change future earnings and cash flows. However, changes in interest rates could affect the fair value of these instruments.
As of April 3, 2021, we had outstanding IRLCs with a notional amount of $37.7 million recorded at fair value in accordance with FASB ASC 815, Derivatives and Hedging . The estimated fair values of IRLCs are based on quoted market values and are recorded in other assets in the Consolidated Balance Sheets.
As of April 2, 2022, we had outstanding IRLCs with a notional amount of $51.7 million recorded at fair value in accordance with FASB ASC 815, Derivatives and Hedging .
Added
The estimated fair values of IRLCs are based on quoted market values and are recorded in Prepaid expenses and other current assets, for net favorable positions, or Accrued expenses and other current liabilities, for net unfavorable positions, in the Consolidated Balance Sheets.

Other CVCO 10-K year-over-year comparisons