10q10k10q10k.net

What changed in CAVCO INDUSTRIES, INC.'s 10-K — 2023 vs 2024

vs

Paragraph-level year-over-year comparison of CAVCO INDUSTRIES, INC.'s 2023 and 2024 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 2024 report.

+243 added−246 removedSource: 10-K (2024-05-24) vs 10-K (2022-05-31)

Top changes in CAVCO INDUSTRIES, INC.'s 2024 10-K

243 paragraphs added · 246 removed · 167 edited across 4 sections

Item 1. Business

Business — how the company describes what it does

75 edited+36 added−22 removed97 unchanged
Biggest changeAvailable 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
Biggest changeAvailable Information The Company's periodic and current reports, proxy statements, as well as any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), are made available free of charge through our website, www.cavcoindustries.com, as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. 15 Table of Contents
Customers most often custom order a home to be built at one of our manufacturing facilities, or they may purchase a home from the inventory of homes maintained at retail locations, including a model home. Model homes may be displayed in a residential setting with sidewalks and landscaping.
Customers most often custom order a home to be built at one of our manufacturing facilities, or they may purchase a home from the inventory of homes maintained at retail locations, including model homes. Model homes may be displayed in a residential setting with sidewalks and landscaping.
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).
There are three basic types of consumer financing in the factory-built housing industry: conforming mortgage loans that 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).
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.
Business Strategies Our operations are generally managed on a decentralized basis with oversight from the home office. This decentralization enables our operators 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.
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 are one of the largest producers of manufactured homes in the United States, based on reported wholesale shipments. Our products are marketed under a variety of brand names including Cavco, Fleetwood, Palm Harbor, Nationwide, Fairmont, Friendship, Chariot Eagle, Destiny, Commodore, Colony, Pennwest, R-Anell, Manorwood, MidCountry and Solitaire.
This group is similarly interested in the value proposition; however, they are also motivated by the energy efficiency and low maintenance requirements of factory-built homes and by the lifestyle offered by planned communities that are specifically designed for homeowners that fall into this age group.
This group is similarly interested in the value proposition; however, they are also motivated by the energy efficiency and low maintenance requirements of factory-built homes and by the lifestyle offered by planned communities that are specifically designed for homeowners who fall into this age group.
Borrowers with these federally backed mortgage loans who are experiencing hardship due to the COVID-19 pandemic may request forbearance for 6 months, regardless of delinquency status. Forbearance may be extended for an additional 6 months at the borrower's request, and they may request up to two additional three-month extensions, for a maximum of 18 months of total forbearance .
Borrowers with these federally backed mortgage loans who are experiencing hardship due to the COVID-19 pandemic may request forbearance for six months, regardless of delinquency status. Forbearance may be extended for an additional six months at the borrower's request, and they may request up to two additional three-month extensions, for a maximum of 18 months of total forbearance .
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.
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 aged 55 and older.
In addition to writing direct policies, we assume and cede reinsurance in the ordinary course of business. In Texas, policies are written through one affiliated managing general agent, whic h produces a ll premiums, and through local agents, most of which are manufactured home distributors.
In addition to writing direct policies, we assume and cede reinsurance in the ordinary course of business. In Texas, policies are written through one affiliated managing general agent, whic h produces a ll premiums, and through local agents, most of whom are manufactured home distributors.
Commercial buildings are constructed in the same facilities in which the residential homes are built using similar assembly line processes and techniques. These commercial projects are generally engineered to the purchaser's specifications. The buildings are transported to the customer's site in the same manner as residential homes and are often set by crane and finished at the site.
Commercial buildings are constructed in the same facilities that the residential homes are built using similar assembly line processes and techniques. These commercial projects are generally engineered to the purchaser's specifications. The buildings are transported to the customer's site in the same manner as residential homes and are often set by crane and finished at the site.
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.
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. 6 Table of Contents 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.
The efficiency of the assembly-line process and the benefits of constructing homes in a controlled factory environment enables us to produce quality homes in less time and at a lower cost per square foot than building homes on individual sites.
The efficiency of the assembly-line process and the benefits of constructing homes in a controlled factory environment enable us to produce quality homes in less time and at a lower cost per square foot than building homes on individual sites.
Non-depository financial institutions are subject to Regulation C if they originate at least 25 covered closed-end mortgage loans or at least 100 covered open-end lines of credit in each of the two preceding calendar years.
Non-depository financial institutions are subject to Regulation C if they originate at least 100 covered closed-end mortgage loans or at least 200 covered open-end lines of credit in each of the two preceding calendar years.
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.
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.
Home-only loans have languished for several years while these changes were meant to broaden home-only financing availability for prospective homeowners. We are aware of only a small number of loans currently being securitized under the Ginnie Mae program. On March 27, 2020, the CARES Act was signed into law.
Home-only loans have languished for several years while these changes were meant to broaden home-only financing availability for prospective homeowners. We are aware of only a small number of loans currently being securitized under the Ginnie Mae program. 11 Table of Contents On March 27, 2020, the CARES Act was signed into law.
The FHA allowed for an extension of the foreclosure-related eviction moratorium for foreclosed borrowers through September 30, 2021. When the eviction moratorium for federally backed loans ended, mortgage servicers could only proceed with foreclosures if borrowers had abandoned their properties or had not responded to mortgage servicers' efforts to assist with loss mitigation options.
The FHA allowed for an extension of the foreclosure-related eviction moratorium for foreclosed borrowers through September 30, 2021. When the eviction moratorium for federally backed loans ended, mortgage servicers could only proceed with foreclosures if borrowers had abandoned their properties or had not responded to mortgage servicers' efforts to assist with loss mitigation opti ons.
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.
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 80 to 250 employees each. Most homes are constructed in one or more floor sections or modules on a permanently affixed steel or wood support chassis.
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.
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.
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.
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 implemented our SPARK initiative, which is designed to improve the onboarding experience of our team members and drive retention.
Our loan contracts are secured by factory-built homes located in 26 states, with the largest concentrations in Texas, Florida, New Mexico, Oklahoma and Alabama (see Note 6 to the Consolidated Financial Statements for additional geographic concentration information).
Our loan contracts are secured by factory-built homes located in 27 states, with the largest concentrations in Texas, Florida, New Mexico and Oklahoma (see Note 6 to the Consolidated Financial Statements for additional geographic concentration information).
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.
Standard Casualty remains competitive in price, breadth of product offerings, product features, customer service, claim handling and use of technology. 8 Table of Contents Government Regulation Our manufactured homes are subject to a number of federal, state and local laws, codes and regulations.
The CFPB issued a final rule amending Regulation C, which became effective on January 1, 2018. Regulation C generally applies to consumer-purpose, closed-end loans and open-end lines of credit that are secured by a dwelling.
The CFPB issued a final rule amending Regulation C, which became effective on January 1, 2018. Modifications to the rule became effective July 1, 2020. Regulation C generally applies to consumer-purpose, closed-end loans and open-end lines of credit that are secured by a dwelling.
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.
A number of states require manufactured home producers and distributors to post bonds to ensure the satisfaction of consumer warranty claims. 9 Table of Contents A variety of laws affect the financing of the homes we manufacture.
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.
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.
In addition, we have started a program called Homes for Our Own. This program generally involves education and financial assistance for employees aspiring to own their own home. We strive to help employees understand the home buying process, from getting financially ready to buy and maintain a home to how the actual process works.
As mentioned above, we have started a program called Homes for Our Own. This program generally involves education and financial assistance for employees aspiring to own their own home. We strive to help employees understand the home buying process, from getting financially ready to buy and maintain a home to how the actual process works.
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.
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 2023 calendar year, manufactured housing wholesale shipments of homes constructed in accordance with the HUD code accounted for an estimated 11.8% of all new single-family homes sold.
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. The plans do not include purchases of home-only loans during the three-year timeframe.
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 significant ongoing purchases of home-only loans during the three-year timeframe.
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.
As with prior plans, the most recent 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.
In addition to writing direct policies, Standard Casualty assumes and cedes reinsurance in the ordinary course of business (see Note 14 to the Consolidated Financial Statements). 2 Table of Contents See Note 23 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.
In addition to writing direct policies, Standard Casualty assumes and cedes reinsurance in the ordinary course of business (see Note 15 to the Consolidated Financial Statements). See Note 24 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.
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.
Expansion of the secondary market for home-only loans through GSE participation could support further demand for housing as lending options would likely become more affordable to home buyers. Commercial Financing. Certain of our wholesale factory-built housing sales to independent distributors are purchased through wholesale floor plan financing arrangements.
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.
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. See further details in the "Government Regulation" section below.
The proposed requirements establish a minimum level of tangible net worth that distinguishes between Ginnie Mae and Fannie Mae and Freddie Mac loan servicing, and include a fixed base capital requirement as well as an incremental charge that reflects the volume and risk of a seller/servicer's servicing portfolio.
The requirements establish a minimum level of tangible net worth and liquidity that distinguishes between loans serviced for Ginnie Mae and the GSEs and include a fixed base capital requirement as well as an incremental charge that reflects the volume and risk of a seller/servicer's servicing portfolio.
On January 31, 2020, Federal Housing Finance Agency ("FHFA") initially released its "Servicer Eligibility 2.0" proposed enhancements to the requirements for public input, and on February 24, 2022, FHFA issued a revised proposal for public input.
On January 31, 2020, Federal Housing Finance Agency ("FHFA") initially released its "Servicer Eligibility 2.0" proposed enhancements to the requirements for public input.
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 operate a total of 31 homebuilding production lines in Millersburg and Woodburn, Oregon; Riverside, California; Nampa, Idaho; Phoenix, Glendale and Goodyear, Arizona; Deming, New Mexico; Duncan, Oklahoma; Austin, Fort Worth, Seguin and Waco, Texas; Ojinaga, Mexico (2); Montevideo, Minnesota; Dorchester, Wisconsin; Nappanee and Goshen, Indiana; Lafayette, Tennessee; Douglas and Moultrie, Georgia; Shippenville (two lines) and Emlenton, Pennsylvania; Martinsville and Rocky Mount, Virginia; Crouse and Hamlet, North Carolina; and Ocala and Plant City, Florida.
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.
We also market and sell to manufactured housing community owners, subdivision developers and second home or vacation home buyers. 2 Table of Contents 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.
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.
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.
In most cases, we receive a deposit or a commitment from the distributor's lender for each home ordered. We then manufacture the home and ship it at the distributor's expense. Payment is due from the lender upon shipment of the product.
Independent distributors frequently finance a portion of their home purchases through wholesale floor plan financing arrangements. In most cases, we receive a deposit or a commitment from the distributor's lender for each home ordered. We then manufacture the home and ship it at the distributor's expense. Payment is due from the lender upon shipment of the product.
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.
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.
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.
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 United States and in Mexico, we utilize local market research to design homes to meet the demands of our customers.
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.
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.
We continue to monitor and react to inflation in these materials by maintaining a focus on our product pricing in response to higher materials costs, but such product pricing increases may lag behind the escalation of such costs. 4 Table of Contents From time to time and to varying degrees, we may experience shortages in the availability of materials and/or labor in the markets served.
We continue to monitor and react to inflation in these materials by maintaining a focus on our product pricing in response to higher materials costs, but such product pricing increases may lag behind the escalation of such costs.
The GSEs require that seller/servicers such as CountryPlace maintain minimum levels of capital and liquidity to be eligible to service single-family mortgage loans guaranteed or owned by the GSEs. The current eligibility requirements became effective on December 31, 2015.
Fannie Mae, Freddie Mac and Ginnie Mae each require that lenders such as CountryPlace maintain minimum levels of capital and liquidity to be eligible to sell or service single-family mortgage loans purchased by the GSEs or included in mortgage-backed securities guaranteed by Ginnie Mae. The current eligibility requirements became effective on December 31, 2015.
Most loans originated by us are sold to investors, and we provide various loan servicing functions for non-affiliated entities under contract. The loan contracts are fixed and step rate and have monthly scheduled payments of principal and interest. The scheduled payments for each contract would, if made on their respective due dates, result in a full amortization of the contract.
Most loans originated by us are sold to investors, and we provide various loan servicing functions for non-affiliated entities under contract. 5 Table of Contents The loan contracts are fixed and step rate and have monthly scheduled payments of principal and interest.
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.
The interim final rule also prohibits certain communication 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.
We sold 16,697, 14,214 and 15,100 factory-built homes in fiscal years 2022, 2021 and 2020, respectively, through Company-owned and independent distribution channels. As of April 2, 2022, there were a total of 45 Company-owned retail stores, located in Oregon, Arizona, Nevada, New Mexico, Texas, Indiana, Oklahoma, Florida and New York. Thirty-one of the Company-owned retail stores are located in Texas.
We sold 16,928, 19,376 and 16,697 factory-built homes in fiscal years 2024, 2023 and 2022, respectively, through Company-owned and independent distribution channels. As of March 30, 2024, there were a total of 79 Company-owned retail stores, located in Oregon, Arizona, Nevada, New Mexico, Texas, Indiana, Oklahoma, Florida and New York. Forty-seven of the Company-owned retail stores are located in Texas.
On February 18, 2022, President Biden extended the national emergency declaration for the COVID-19 pandemic beyond March 1, 2022. 12 Table of Contents The Treasury Department issued guidance regarding the Homeowner Assistance Fund ("HAF"), which was established under section 3206 of the American Rescue Plan Act of 2021.
On May 11, 2023, the national emergency declaration for the COVID-19 pandemic ended. The Treasury Department issued guidance regarding the Homeowner Assistance Fund ("HAF"), which was established under section 3206 of the American Rescue Plan Act of 2021.
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.
According to data reported by the Manufactured Housing Institute, approximatel y 89,000 H UD code manufactured homes were shipped during calendar year 2023, compared to the 113,000 shipped during calendar year 2022 and 106,000 shipments in 2021. 7 Table of Contents Home Buyer Demographics.
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.
As of March 30, 2024, we had a network of independent distributors, of whom 10% were in North Carolina, 9% in Arizona, 6% in each of Florida and Texas, 5% each in California, New York and South Carolina, based on the quantity of wholesale shipments during fiscal year 2024. The remaining 54% were in 41 other states and Canada.
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.
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. According to World Bank, the U.S. adult population is estimated to expand by approximately 8.0 million between 2024 and 2029.
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.
We have the ability to react and modify floor plans and designs to consumers' specific needs. 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.
Once a factory-built home is built at our facilities, it is then generally transported by independent trucking companies either to a retail sales center, planned community, housing development, work site or the home buyer's site.
We also build homes designed to use alternative energy sources, such as solar. 3 Table of Contents Once a factory-built home is built at our facilities, it is then generally transported by independent trucking companies or our Company-owned trucks either to a retail sales center, planned community, housing development, work site or the home buyer's site.
Additionally, we continue to invest in community-based lending initiatives that provide home-only financing to residents of certain manufactured home communities. We also develop and invest in home-only lending programs to grow sales of homes through traditional distribution points.
We also develop and invest in home-only lending programs to grow sales of homes through traditional distribution points.
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.
A large segment of the population who are generally first-time home buyers, those born between 1976 to 1995 often referred to as Gen Y or Millennials, is attracted by the affordability, product 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.
We provide comprehensive sales and product training, either physically or virtually, to independent retail sales associates, including providing opportunities to visit our manufacturing facilities to discuss and view new product designs as they are developed. These training seminars facilitate the sale of our homes by increasing the skill and knowledge of the retail sales consultants.
We continually seek to increase wholesale shipments by growing sales at existing independent distributors and by identifying new independent distributors to sell our homes. We provide comprehensive sales and product training, either physically or virtually, to independent retail sales associates, including providing opportunities to visit our manufacturing facilities to discuss and view new product designs as they are developed.
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.
Nonetheless, some lenders originating loans for sale to the GSEs elected to no longer originate General QM loans with debt-to-income ratios in excess of 43% or GSE Patch QM loans for borrower applications received on or after July 1, 2021. 10 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.
In addition, we display our products at trade shows and support our distributors through the distribution of floor plan literature, brochures, decor selection displays, point of sale promotional material and internet-based marketing assistance. Independent distributors frequently finance a portion of their home purchases through wholesale floor plan financing arrangements.
These training seminars facilitate the sale of our homes by increasing the skill and knowledge of the retail sales consultants. In addition, we display our products at trade shows and support our distributors through the distribution of floor plan literature, brochures, decor selection displays, point of sale promotional material and Internet-based marketing assistance.
Our green building initiatives involve the creation of an energy efficient envelope, including higher utilization of renewable materials and provide lower utility costs. We also build homes designed to use alternative energy sources, such as solar.
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 and provide lower utility costs.
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.
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. Additionally, we continue to invest in community-based lending initiatives that provide home-only financing to residents of certain manufactured home communities.
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 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.
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.
The scheduled payments for each contract would, if made on their respective due dates, result in a full amortization of the contract. 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.
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.
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.
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. No independent distributor accounted for 10% or more of factory-built housing revenue during any fiscal year within the three-year period ended March 30, 2024.
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 2008Fannie Mae and Freddie Mac periodically update their Underserved Markets Plans that describe, with specificity, the actions they would take over the applicable plan period to fulfill the "Duty to Serve" obligation.
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.
Through fiscal year 2024, monthly collections of principal and interest from borrowers have exceeded scheduled principal and interest payments owed to investors; however, any future regulatory mandates requiring extended forbearance could negatively impact future cash obligations.
These shortages may also result in extended order backlogs, delays in the delivery of homes and reduced gross margins from home sales. Housing demand remains strong as qualified individuals continue pursuing affordable home-ownership.
These shortages may also result in extended order backlogs, delays in the delivery of homes and reduced gross margins from home sales. It is difficult to predict the future of housing demand, employee availability, our supply chain or the Company's performance and operations.
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.
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. 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.
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").
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 for the fiscal year ended March 30, 2024 ("Annual Report"). We construct homes using an assembly-line process in which each module or floor section is completed in stages.
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.
To that end, we are committed to providing a safe workplace and opportunities for professional growth and advancement based on performance, qualification, demonstrated skills and achievement at a fair wage.
The maximum amount of contingent obligations under such repurchase agreements was approximately $141.0 million and $74.2 million as of April 2, 2022 and April 3, 2021, respectively. The increase is the result of higher home sales price, increased units under these programs and the addition of Commodore.
The maximum amount of contingent obligations under such repurchase agreements was approximately $120.5 million and $177.9 million as of March 30, 2024 and April 1, 2023, respectively. The decrease is the result of lower home sales prices and a decreased number of units under these programs.
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.
Eligible state agencies participating in HAF are responsible for the selection and qualification of borrowers to receive HAF funds.
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.
We distribute our homes through a large network of independent distribution points in 48 states and Canada and 79 Company-owned U.S. retail stores, of which 47 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.
After production of a particular home has commenced, the order becomes non-cancelable and the distributor is obligated to take delivery of the home. Accordingly, until production of a particular home has commenced, we do not consider order backlog to be firm orders.
Accordingly, until production of a particular home has commenced, we do not consider order backlog to be firm orders. We con tinue to focus on balancing the production levels and workforce size with the demand for our product offerings to maximize efficiencies. 4 Table of Contents Distribution .
The 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.
Our home order backlog at March 30, 2024 was approximately $191 million in wholesale sales values, down $53 million from $244 million one year earlier. Distributors may cancel orders prior to production without penalty. After production of a particular home has commenced, the order becomes non-cancelable and the distributor is obligated to take delivery of the home.
This segment has a high representation of persons age 55 and older, as well as young single persons and young married couples. The low cost of a fully-equipped manufactured home compared to a site-built alternative is attractive to these consumers.
The low cost of a fully equipped manufactured home compared to a site-built alternative is attractive to these consumers. 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.
However, the CFPB extended the mandatory compliance date of the new General QM rule beyond July 1, 2021. Nonetheless, some lenders originating loans for sale to the GSEs elected to no longer originate general QM loans with debt-to-income ratios in excess of 43% or GSE Patch QM loans for borrower applications received on or after July 1, 2021.
However, the CFPB extended the mandatory compliance date of the new General QM rule beyond July 1, 2021.
Removed
We construct homes using an assembly-line process in which each module or floor section is completed in stages. This assembly-line process is designed to be flexible in order to accommodate customer requested customizations.
Added
Our insurance subsidiary, Standard Casualty Company ("Standard Casualty"), provides property and casualty insurance primarily to owners of manufactured homes.
Removed
On September 24, 2021, we purchased certain manufactured housing assets and assumed certain liabilities of The Commodore Corporation ("Commodore"), including its six manufacturing facilities and two wholly-owned retail locations. The addition of Commodore expanded our geographic reach into the Northeast U.S. and enhanced our presence in the Midwest and Mid-Atlantic markets.
Added
This assembly-line process is designed to be flexible in order to accommodate customer requested customizations. Our operations include a total of 31 homebuilding production lines, 29 located throughout the United States and two production lines in Mexico.
Removed
It also expanded our reach to modular home customers, as their home production is generally split between manufactured and modular housing. Implementation of best practices of the Company and Commodore are expected to create efficiency improvements across our operations.

… 53 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

46 edited+20 added−32 removed65 unchanged
Biggest changeThe 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.
Biggest changeThe Company may face risks related to the SEC Litigation, including potential shareholder litigation or potential reputational damage that the Company may suffer as a result of the litigation As disclosed in Part I, Item 3, "Legal Proceedings", on September 2, 2021, the SEC filed a civil complaint in the United States District Court, District of Arizona, naming the Company along with the Company's former Chairman, President & Chief Executive Officer ("former CEO") and the Company's former Chief Financial Officer ("former CFO"), alleging violations of the antifraud and internal accounting control provisions of the Exchange Act based on trading in the shares of another company directed by the former CEO that resulted in an unrealized gain of approximately $265,000.
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.
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. 17 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.
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.
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. 18 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.
Over time, home-only lenders have tightened the credit underwriting standards for loans to purchase manufactured homes, which has reduced lending volumes and negatively impacted our revenue. Most of the national lenders who have historically provided home-only loans have exited the manufactured housing sector of the home loan industry.
Over time, home-only lenders have tightened the credit underwriting standards for loans to purchase manufactured homes, which has reduced lending volumes and negatively impacted our revenue. Most of the national lenders that have historically provided home-only loans have exited the manufactured housing sector of the home loan industry.
In accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 350, Intangibles—Goodwill and Other ("ASC 350"), goodwill is tested annually for impairment. If goodwill becomes impaired, such impairment is charged as an expense in the period in which it occurs.
In accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 350, Intangibles—Goodwill and Other ("ASC 350"), goodwill is tested at least annually for impairment. If goodwill becomes impaired, such impairment is charged as an expense in the period in which it occurs.
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.
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 affected.
Certain provisions of the Company's organizational documents could delay or make more difficult a change in control of the Company Certain provisions of the Company's restated certificate of incorporation and restated bylaws could delay or make more difficult transactions involving a change of control, and may have the effect of entrenching the current management or possibly depressing the market price of the Company's common stock.
Certain provisions of the Company's organizational documents could delay or make more difficult a change in control of the Company Certain provisions of the Company's Restated Certificate of Incorporation, as amended, and Fourth Amended and Restated Bylaws could delay or make more difficult transactions involving a change of control and may have the effect of entrenching the current management or possibly depressing the market price of the Company's common stock.
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.
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 entered production. Distributors and home buyers may cancel orders prior to production without penalty.
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.
When we learn of practices that do not comply with applicable laws, regulations or guidelines, we move proactively to stop the non-complying practices as soon as possible.
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.
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.
Retail sales of manufactured housing could be adversely affected if remaining retail lenders curtail industry lending activities or exit the industry altogether. Changes in laws or other events that adversely affect liquidity in the secondary mortgage market could hurt the business.
Retail sales of manufactured housing could be adversely affected if remaining retail lenders curtail industry lending activities or exit the industry altogether. 22 Table of Contents Changes in laws or other events that adversely affect liquidity in the secondary mortgage market could hurt the business.
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.
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 2026 and February 2027.
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.
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 raised its benchmark rate multiple times in recent years, with further increases possible.
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.
Among other things, unfavorable changes in employment levels, job growth, consumer confidence and income, inflation, deflation, trade tariffs, foreign currency exchange rates, interest rates and adverse developments with respect to specific financial institutions or the broader financial services industry 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.
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.
For example, the Company's Restated Certificate of Incorporation, as amended, and Fourth Amended 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. 26 Table of Contents
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.
A write-off of all or part of the Company's goodwill could adversely affect its results of operations and financial condition As of March 30, 2024, 9% of our total assets consisted of goodwill, all of which is attributable to our factory-built housing segment.
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.
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, bank-specific and broader financial institution liquidity risk and the health of the general economy.
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.
Home price depreciation and elevated levels of unemployment may result in additional defaults and increase the severity of loss 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 causing the loans to become illiquid.
Business and Operational Risks The impact of local or national emergencies, including the COVID-19 pandemic, can adversely affect our financial results, condition and prospects, including such impacts from state and federal regulatory action that restricts our ability to operate our business in the ordinary course and impacts on (i) customer demand and the availability of financing for our products, (ii) our supply chain and the availability of raw materials for the manufacture of our products, (iii) the availability of labor and the health and safety of our workforce and (iv) our liquidity and access to the capital markets Severe weather conditions, natural disasters, hostilities and social unrest, terrorist activities, health epidemics or pandemics or other local or national emergencies (both ones quickly resolved and ones that endure over long periods of time) can adversely affect consumer spending and confidence levels and supply availability and costs, as well as local operations in impacted markets, all of which can affect our financial results, condition and prospects.
Business and Operational Risks The impact of local or national emergencies can adversely affect our financial results, condition and prospects, including such impacts from state and federal regulatory action that restrict our ability to operate our business in the ordinary course and impacts on (i) customer demand and the availability of financing for our products, (ii) our supply chain and the availability of raw materials for the manufacture of our products, (iii) the availability of labor and the health and safety of our workforce and (iv) our liquidity and access to the capital markets Severe weather conditions, natural disasters, hostilities and social unrest, terrorist activities, health epidemics or pandemics, concerns about the stability and solvency of financial institutions (such as liquidity concerns raised by the recent closures of Silicon Valley Bank, Signature Bank and First Republic Bank), or other local or national emergencies (both ones quickly resolved and ones that endure over long periods of time) can adversely affect consumer spending and confidence levels, the ability to obtain financing and supply availability and costs, as well as local operations in impacted markets, all of which can affect our financial results, condition and prospects.
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.
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.
Key building materials include wood and wood products, gypsum wallboard, steel, windows, appliances, insulation and other petroleum-based products. There can be no assurance that sufficient supplies of these and other raw materials will continue to be available to us.
Our results of operations can also be affected by the pricing and availability of raw materials. Key building materials include wood and wood products, gypsum wallboard, steel, windows, appliances, insulation and other petroleum-based products. There can be no assurance that sufficient supplies of these and other raw materials will continue to be available to us.
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.
The maximum amount of contingent obligations under such repurchase agreements was approximately $120.5 million as of March 30, 2024, 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.
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.
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. Shortages or increased transportation costs from rising fuel prices could have an adverse impact to our 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.
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.
The cyclical and seasonal nature of the manufactured housing industry causes the Company's revenues and operating results to fluctuate, and we expect this cyclicality and seasonality to continue in the future The manufactured housing industry is highly cyclical and seasonal and is influenced by many national and regional economic and demographic factors, including the availability of consumer financing for home buyers, the availability of wholesale financing for distributors, seasonality of demand, consumer confidence, interest rates, demographic and employment trends, income levels, housing demand, general economic conditions, including inflation and recessions, and the availability of suitable home sites.
Unfavorable changes in any of the above factors or other issues could have an adverse effect on our revenues, earnings or financial position. 23 Table of Contents The cyclical and seasonal nature of the manufactured housing industry causes the Company's revenues and operating results to fluctuate, and we expect this cyclicality and seasonality to continue in the future The manufactured housing industry is highly cyclical and seasonal and is influenced by many national and regional economic and demographic factors, including the availability of consumer financing for home buyers, the availability of wholesale financing for distributors, seasonality of demand, consumer confidence, interest rates, demographic and employment trends, income levels, housing demand, general economic conditions, including inflation and recessions, and the availability of suitable home sites.
Please refer to the section above under the heading "Business - Government Regulation" for a description of many of these laws and regulations. Our failure to comply with such laws and regulations could expose us to a wide variety of sanctions, including closing one or more manufacturing facilities.
Please refer to Part I, Item 1, "Business - Government Regulation" for a description of many of these laws and 24 Table of Contents regulations. Our failure to comply with such laws and regulations could expose us to a wide variety of sanctions, including closing one or more manufacturing facilities.
All information systems are subject to disruption, breach or failure. Potential vulnerabilities can be exploited from inadvertent or intentional actions of our employees, third-party vendors and business partners or by malicious third parties.
Potential vulnerabilities can be exploited from inadvertent or intentional actions of our employees, third-party vendors and business partners or by malicious third parties.
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.
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 those of other companies that are more geographically dispersed.
The realization of any of these factors may adversely affect our cash flow, profitability and financial condition. The Company's results of operations could be adversely affected by significant warranty and construction defect claims on factory-built housing In the ordinary course of business, we are subject to home warranty and construction defect claims.
Accordingly, ultimate results may differ materially from our estimates, which could result in losses and materially adversely affect our financial condition and results of operations. The Company's results of operations could be adversely affected by significant warranty and construction defect claims on factory-built housing In the ordinary course of business, we are subject to home warranty and construction defect claims.
We may not be able to establish relationships with new independent distributors or maintain good relationships with independent distributors that sell our homes. Even if we do establish and maintain relationships with independent distributors, these distributors are not obligated to sell our homes exclusively and may choose to sell competitors' homes.
As is common in the industry, independent distributors may also sell homes produced by competing manufacturers. We may not be able to establish relationships with new independent distributors or maintain good relationships with independent distributors that sell our homes. Even if we do establish and maintain relationships with independent distributors, these distributors are not obligated to sell our homes exclusively.
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.
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 that 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.
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.
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.
We have experienced production halts from shortages of primary building materials in the past, and although we attempt to increase the sales prices of our homes in response to higher materials costs, such increases may lag behind the escalation of material costs.
We have experienced production halts from shortages of primary building materials in the past, and although we attempt to increase the sales prices of our homes in response to higher materials costs, such increases may lag behind the escalation of material costs. 16 Table of Contents Excessive health and safety incidents relating to our operations could be costly to the Company Home construction is inherently dangerous.
Information technology failures or cyber incidents could harm the Company's business We are increasingly dependent on information technology systems and infrastructure to operate our business. In the ordinary course of business, we collect, store, process and transmit significant amounts of sensitive information, including proprietary business information, personal information and other confidential information, including that of our customers, vendors and suppliers.
In the ordinary course of business, we collect, store, process and transmit significant amounts of sensitive information, including proprietary business information, personal information and other confidential information, including that of our customers, vendors and suppliers. All information systems are subject to disruption, breach or failure.
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.
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. 21 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 number of factors may adversely affect the labor force available to us and our subcontractors in one or more of our markets. This includes high employment levels, construction market conditions and government regulation, which include laws and regulations related to workers' health and safety, wage and hour practices and immigration patterns or restrictions.
This includes high employment levels, construction market conditions and government regulation, which include laws and regulations related to workers' health and safety, wage and hour practices and immigration patterns or restrictions.
General Risk Factors The loss of any of the Company's executive officers, senior leadership or business operations managers or a significant number of operating employees 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, senior leaders and business operations managers.
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. 25 Table of Contents General Risk Factors The loss of any of the Company's executive officers, senior leadership or business operations managers or a significant number of operating employees 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, senior leaders and business operations managers.
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.
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. 19 Table of Contents 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.
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.
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 In the normal course of business, we are audited by various federal, state and local authorities regarding income tax matters.
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.
Further, of the 79 Company-owned retail stores, 47 are located in Texas. 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.
In addition, the costs of maintaining adequate protection against such threats are expected to increase and could be material to our operations. In March 2019, we suffered a cyber incident and attack to our computer networks.
In addition, the costs of maintaining adequate protection against such threats are expected to increase and could be material to our operations. Failure to maintain the security of personally identifiable information could adversely affect the Company.
There can be no assurance that any of these sources will be available to us at any time or that they will be available on satisfactory terms.
There can be no assurance that any of these sources will be available to us at any time or that they will be available on satisfactory terms. Our failure to maintain effective internal control over financial reporting could harm our business and financial results Our management is responsible for maintaining effective internal control over financial reporting.
Our goodwill could be impaired if developments affecting our manufacturing operations or the markets in which we produce manufactured homes lead us to conclude that the cash flows expected to be derived from our manufacturing operations will be substantially reduced.
Our goodwill could be impaired if developments affecting our manufacturing operations or the markets in which we produce manufactured homes lead us to conclude that the cash flows expected to be derived from our manufacturing operations will be substantially reduced. 20 Table of Contents 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 2024, approximately 77% of our sales of factory-built homes were to independent distributors.
ITEM 1A. RISK FACTORS The Company's business involves a number of risks and uncertainties. You should carefully consider the following risks, together with the information provided elsewhere in this Annual Report. The items described below are not the only risks we face.
ITEM 1A. RISK FACTORS Described below are certain risks to our business and the industry in which we operate. You should carefully consider the risks described below, together with the financial information and other information contained in this Annual Report and in our other public disclosures.
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.
As each audit is conducted, adjustments, if any, are recorded in our consolidated financial statements in the period determined.
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.
We have loan contracts secured by factory-built homes located in 27 states, including Texas, Florida, New Mexico and Oklahoma. Standard Casualty also specializes in writing contracts for the manufactured housing industry, primarily serving the Texas, Arizona, New Mexico and Nevada markets.
Removed
Additional risks that are currently unknown to us or that are currently considered to be immaterial may also impair the business or adversely affect our financial condition or results of operations.
Added
If any of the following risks actually occurs, our business, financial condition, results of operations, cash flows, and prospects could be materially and adversely affected.
Removed
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.
Added
As a result, our future results could differ materially from historical results and from guidance we may provide regarding our expectations of our future financial performance, and the trading price of our common stock could decline.
Removed
Our primary suppliers are domestic, while also depending on materials originating from overseas. The ability of suppliers to fulfill orders on our behalf under pre-existing terms is dependent upon their particular circumstances, including those related to the COVID-19 pandemic.
Added
The Company's results of operations can be adversely affected by labor shortages and the pricing, availability, or transportation costs of raw materials The homebuilding industry has from time-to-time experienced labor shortages and other labor related issues. A number of factors may adversely affect the labor force available to us and our subcontractors in one or more of our markets.
Removed
The magnitude of the COVID-19 pandemic, including the extent of any continuing impact on our business, financial position, results of operations or liquidity, which could be material, cannot be reasonably estimated at this time because of the continuing fluidity of the situation.
Added
Casualty losses associated with the Company's transportation operations may be large, which could adversely impact our financial performance In the ordinary course of business, we may incur property or casualty losses during the transportation of raw materials or finished homes.
Removed
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.
Added
Although we maintain general liability insurance, estimating the number and severity of claims, as well as related judgment or settlement amounts, is inherently difficult, and claims may ultimately prove to be more severe than our estimates. This, along with legal expenses, incurred but not reported claims, and other uncertainties can cause unfavorable differences between actual costs and our reserve estimates.
Removed
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.
Added
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.
Removed
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.
Added
The realization of any of these factors may adversely affect our cash flow, profitability and financial condition. Information technology failures or cyber incidents could harm the Company's business We are increasingly dependent on information technology systems and infrastructure to operate our business.
Removed
Excessive health and safety incidents relating to our operations could be costly to the Company Home construction is inherently dangerous.
Added
We operate 29 homebuilding production lines located in the Northwest, Southwest, South, Southeast, Midwest and Mid-Atlantic regions. We have a significant presence in Texas with factories in the cities of Austin, Fort Worth, Seguin and Waco, and a facility in Presidio that serves as a shipping point for homes produced in Mexico.
Removed
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.
Added
Significant judgment is required to determine our provision for income taxes and our liabilities for federal, state, local and other taxes.
Removed
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.
Added
Shutdowns or delays at the United States/Mexico border could affect the Company's ability to ship materials to and receive finished goods from our Mexico production facilities We have two production lines in Mexico which are dependent upon receiving materials from our facility in Presidio, Texas.
Removed
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.
Added
Shutdown or delays at the United States/Mexico border could impact production at those facilities and our ability to receive the finished goods from those facilities, each of which could adversely affect our results of operations.
Removed
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.
Added
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.
Removed
Unfavorable changes in any of the above factors or other issues could have an adverse effect on our revenues, earnings or financial position.
Added
Changes in the exchange rates for Mexican Pesos could adversely affect the value of the Company's investments in Mexico and cause foreign exchange losses We have production operations in Mexico, and unfavorable changes in the exchange rate for Mexican Pesos could adversely affect the reported value of our investments and/or results of operations.
Removed
On September 2, 2021, the SEC filed a civil complaint in the United States District Court District of Arizona, naming the Company, along with Mr. Stegmayer and the Company's former Chief Financial Officer.
Added
Changes in existing regulations or violations of existing or future regulations could have a materially adverse effect on the Company's operations and profitability We are subject to regulation by the United States Department of Transportation, the EPA, the United States Department of Homeland Security and other state and federal agencies.
Removed
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.
Added
Future laws and regulations or changes to existing laws and regulations may be more stringent, require changes in our operating practices, or require us to incur significant additional costs, which could materially adversely affect our business, financial condition, and results of operations.
Removed
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.
Added
In fiscal 2022, the Company recorded an accrual relating to this loss contingency. On September 23, 2022, the United States District Court for the District of Arizona approved the settlement of the SEC action against the Company (the "SEC Settlement").
Removed
PROPERTIES 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.
Added
Without admitting or denying the findings of the consent judgment, the Company agreed to the imposition of an injunction against future violations of the antifraud and internal accounting control provisions of the Exchange Act and a monetary penalty of $1.5 million, which did not have a material impact on the Company's financial statements.

… 18 more changes not shown on this page.

Item 7. Management's Discussion & Analysis

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

39 edited+16 added−24 removed24 unchanged
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 $4.2 million of amortization of additional Director & Officer insurance premiums in the prior year that did not repeat.
Biggest changeSelling, general and administrative expenses consisted of the following for fiscal years 2024 and 2023, respectively: Year Ended ($ in thousands) March 30, 2024 April 1, 2023 Change Selling, general and administrative expenses: Factory-built housing $ 226,267 $ 237,898 $ (11,631) (4.9) % Financial services 21,653 20,425 1,228 6.0 % $ 247,920 $ 258,323 $ (10,403) (4.0) % Selling, general and administrative expenses as % of Net revenue: 13.8 % 12.1 % N/A 1.7 % Selling, general and administrative expenses related to factory-built housing decreased primarily due to $19.5 million in lower wages, benefits and incentive compensation expense on declined earnings; $7.3 million from lower expenses incurred in engaging third-party consultants in relation to the non-recurring energy efficient home tax credits; and $2.1 million from lower legal expenses related to the SEC investigation, partially offset by the full year of Solitaire operations, which was acquired in the prior year's fourth quarter, which increased Selling, general and administrative expenses by $19.1 million. 36 Table of Contents Interest Income.
Actual results may differ from these estimates under different assumptions or conditions. See "Forward-Looking Statements" above. We believe the following accounting policies are critical to Company operating results or may affect significant judgments and estimates used in the preparation of the Consolidated Financial Statements and should be read in conjunction with the Notes to the Consolidated Financial Statements. Warranties.
Actual results may differ from these estimates under different assumptions or conditions. See "Forward-Looking Statements" above. We believe the following accounting policies are critical to the Company's operating results or may affect significant judgments and estimates used in the preparation of the Consolidated Financial Statements and should be read in conjunction with the Notes to the Consolidated Financial Statements. Warranties.
We work independently and with other industry participants to develop secondary market opportunities for manufactured home-only loan and non-conforming mortgage portfolios and expand lending availability in the industry. Additionally, we continue to invest in community-based lending initiatives that provide home-only financing to residents of certain manufactured home communities.
We 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. Additionally, we continue to invest in community-based lending initiatives that provide home-only financing to residents of certain manufactured home communities.
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.
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 2022-2024 timeframe.
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.
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.
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.
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; changes in interest rates; potential acquisitions, strategic investments and other expansions; operational and legal risks; how we may be affected by a pandemic or other infectious 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.
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 result in higher borrowing costs for home-only loans and continue to constrain industry growth.
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
Recent Accounting Pronouncements See Note 1 to the Consolidated Financial Statements for a discussion of recently issued and adopted accounting pronouncements.
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.
At March 30, 2024, 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.
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.
In addition, we also have contingent commitments at March 30, 2024 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 17 to the Consolidated Financial Statements.
Product prices are also periodically adjusted for the cost and availability of raw materials included in, and labor used to produce, each home. For these reasons, we have experienced, and expect to continue to experience, volatility in overall net factory-built housing revenue per home sold.
These selections vary regularly based on consumer interests, local housing preferences and economic circumstances. Product prices are also periodically adjusted for the cost and availability of raw materials included in, and labor used to produce, each home. For these reasons, we have experienced, and expect to continue to experience, volatility in overall net factory-built housing revenue per home sold.
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.
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, which are the primary subjective inputs in estimating the reserve.
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.
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.
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.
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 Annual Report. References to "Note" or "Notes" pertain to the Notes to the Consolidated Financial Statements.
Treasury and other money market funds, some of which are in excess of federally insured limits. We expect to continue to evaluate potential acquisitions of, or strategic investments in, businesses that are complementary to the Company, as well as other expansion opportunities. Such transactions may require the use of cash and have other impacts on our liquidity and capital resources.
We maintain cash in U.S. Treasury and other money market funds, some of which are in excess of federally insured limits, but we have not experienced any losses with regards to such excesses. We expect to continue to evaluate potential acquisitions of, or strategic investments in, businesses that are complementary to the Company, as well as other expansion opportunities.
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.
Income tax expense was $41.3 million, resulting in an effective tax rate of 20.7%, for the fiscal year ended March 30, 2024, compared to income tax expense of $65.9 million and an effective rate of 21.5% for the fiscal year ended April 1, 2023.
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.
Through fiscal year 2024, monthly collections of principal and interest from borrowers have exceeded scheduled principal and interest payments owed to investors; however, any future regulatory mandates requiring extended forbearance could negatively impact future cash obligations.
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.
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.
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.
Net cash used in financing activities for the year ended March 30, 2024 and April 1, 2023 was primarily related to common stock repurchases, partially offset by net proceeds received from the exercise of stock options. Obligations and Commitments We enter into commercial loan agreements with distributors, communities and developers under which the Company provides funds for financing homes.
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.
Our h omes are constructed in one or more floor sections ("modules") which are then installed on the customer's site. 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 .
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.
Consumer loan originations decreased $87.2 million to $90.8 million during the year ended March 30, 2024, from $178.0 million during the year ended April 1, 2023. Proceeds from the sale of consumer loans provided $91.5 million in cash, compared to $186.0 million in the previous year, a net decrease of $94.5 million.
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.
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").
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.
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. 33 Table of Contents In the financial services segment, we continue to assist customers in need by servicing existing loans and insurance policies and complying with state and federal regulations regarding loan forbearance, home foreclosures and policy cancellations.
As a result, the assets owned by our insurance subsidiary are generally not available to satisfy the claims of Cavco or its legal subsidiaries.
As a result, the assets owned by our insurance subsidiary are generally not available to satisfy the claims of Cavco or its 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.
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.
In the financial services segment, Gross profit decreased primarily due to higher weather-related claims and market fluctuations of the marketable equity securities in the insurance subsidiary's portfolio. Selling, General and Administrative Expenses.
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.
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 2023 Annual Report on Form 10-K for a discussion of changes in liquidity between fiscal years 2023 and 2022.
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.
Fiscal Year 2023 Compared to Fiscal Year 2022 See Part II, Item 7, "Management's Discussion and Analy sis of Financial Condition and Results of Operations - Results of Operations" in the Company's 2023 Annual Report on Form 10-K. 37 Table of Contents Liquidity and Capital Resources We believe that cash and cash equivalents at March 30, 2024, 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.
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.
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.
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.
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, which include installation, utility connections, site improvements, landscaping and other additional services.
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.
Other income, net primaril y consists of realized and unrealized gains and losses on corporate investments, gains and losses from the sale of property, plant and equip ment and partnership income from our unconsolidated joint ventures. For fisca l years 2024 and 2023, Other income, net was $0.8 million and $0.4 million , respectively.
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.
The lower effective tax rate in fiscal year 2024 is primarily related to $4.2 million in tax credits related to the sale of energy efficient homes and Energy Star credits available under the Internal Revenue Code §45L and $2.4 million related to the research and development, solar, and work opportunity tax credits.
Accordingly, until the production of a particular unit has commenced, we do not consider our backlog to be firm orders. We strive to manage our production levels, capacity and workforce size based upon current market demand.
After production of a particular home has commenced, the order becomes non-cancelable and the distributor is obligated to take delivery of the home. Accordingly, until production of a particular home has commenced, we do not consider order backlog to be firm orders.
At the end of the period, inflation was the highest in the U.S. in over 30 years. Our ability to maintain certain levels of gross margin can be adversely impacted by sudden increases in specific costs, such as the increases in material and labor.
Additionally, the overall state income tax rate is based on income apportionment by state, which is estimated using prior year results, along with expected current year impacts. Other Matters Impact of Inflation. Our ability to maintain certain levels of gross margin can be adversely impacted by sudden increases in specific costs, such as the increases in material and labor.
Gross profit consisted of the following for fiscal years 2022 and 2021, respectively: Year Ended ($ 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 $181.3 million from higher material costs.
Gross profit consisted of the following for fiscal years 2024 and 2023, respectively: Year Ended ($ in thousands) March 30, 2024 April 1, 2023 Change Gross profit: Factory-built housing $ 398,919 $ 523,529 $ (124,610) (23.8) % Financial services 27,983 31,403 (3,420) (10.9) % $ 426,902 $ 554,932 $ (128,030) (23.1) % Gross profit as % of Net revenue: Consolidated 23.8 % 25.9 % N/A (2.1) % Factory-built housing 23.2 % 25.3 % N/A (2.1) % Financial services 35.8 % 42.9 % N/A (7.1) % In the factory-built housing segment, Gross profit decreased from the lower home sales prices and fewer units sold, partially offset by lower input costs.
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.
Net cash used in investing activities for the year ended April 1, 2023 was primarily for the acquisition of Solitaire Homes and purchases of property, plant and equipment including opening manufacturing facilities in Glendale, Arizona and Hamlet, North Carolina.
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 con tinue to focus on balancing the production levels and workforce size with the demand for our product offerings to maximize efficiencies. We continue to make certain commercial loan programs available to members of our wholesale distribution chain.
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.
Regardless, depending on our operating results and strategic opportunities, we may choose to seek additional or alternative sources of financing in the future. There can be no assurance that such financing would be available on satisfactory terms, if at all.
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 $39.4 million.
Net revenue consisted of the following for fiscal years 2024 and 2023, respectively: Year Ended ($ in thousands, except revenue per home sold) March 30, 2024 April 1, 2023 Change Net revenue: Factory-built housing $ 1,716,607 $ 2,069,450 $ (352,843) (17.1) % Financial services 78,185 73,263 4,922 6.7 % $ 1,794,792 $ 2,142,713 $ (347,921) (16.2) % Total homes sold 16,928 19,376 (2,448) (12.6) % Net factory-built housing revenue per home sold $ 101,406 $ 106,805 $ (5,399) (5.1) % In the factory-built housing segment, the decrease in Net revenue was primarily due to lower sales volume and selling prices, $372.1 million and $80.5 million, respectively, partially offset by the addition of Solitaire Homes which contributed $128.1 million in fiscal year 2024 compared to $28.3 million for one quarter of post acquisition activity in the prior fiscal year.
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.
Interest expense was $1.6 million in fiscal year 2024 and $0.9 million in fiscal year 2023 and consists primarily of interest related to finance leases and floor plan financing at our Craftsman retail location. Other Income, net .
Removed
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.
Added
Company Outlook It is difficult to predict the future of housing demand, employee availability, our supply chain or the Company's performance and operations. Our home order backlog at March 30, 2024 was approximately $191 million in wholesale sales values, down $53 million from $244 million one year earlier. Distributors may cancel orders prior to production without penalty.
Removed
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.
Added
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.
Removed
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.
Added
Purchasing reinsurance contracts mitigates the frequency and/or severity of losses incurred on insurance policies issued, such as in the case of a catastrophe that generates a large number of serious claims on multiple policies at the same time.
Removed
We continually review the wage rates of our production employees and have established other monetary incentive and benefit programs, with a goal of providing competitive compensation.
Added
Under these agreements, we may be required to repurchase and reestablish the reinsurance contracts for the remainder of the year to the extent that they have been utilized. See Note 15 to the Consolidated Financial Statements for additional information. 34 Table of Contents Results of Operations Fiscal Year 2024 Compared to Fiscal Year 2023 Net Revenue.
Removed
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.
Added
Changes to the proportion of home sales among our distribution channels between reporting periods impacts the overall net revenue per home sold. For fiscal 2024, we sold 13,047 homes Wholesale and 3,881 Retail versus 16,066 homes Wholesale and 3,310 homes Retail in the prior year.
Removed
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.
Added
Financia l services segment Net revenue increased 6.7% primarily due to $4.9 million from more insurance policies in force in the current year. 35 Table of Contents Gross Profit.
Removed
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.
Added
Interest income was $21.0 million in fiscal year 2024 and $10.7 million in fiscal year 2023. The increase is due to higher interest rates throughout fiscal year 2024. Interest Expense.
Removed
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.
Added
Prior year saw non-recurring retirement of property, plant and equipment with a $1.2 million loss. This was offset by $0.3 million of gains on corporate equity securities in fiscal 2024 compared to $0.8 million of gains in the prior fiscal year. Income Before Income Taxes.
Removed
These increases were partially offset by th e prior year period containing an extra week of production, given the fiscal calendar. Net factory-built housing revenue per home sold is a volatile metric dependent upon several factors.
Added
Income before income taxes consisted of the following for fiscal years 2024 and 2023, respectively: Year Ended ($ in thousands) March 30, 2024 April 1, 2023 Change Income before income taxes: Factory-built housing $ 192,815 $ 296,415 $ (103,600) (35.0) % Financial services 6,365 10,348 (3,983) (38.5) % $ 199,180 $ 306,763 $ (107,583) (35.1) % Income Tax Expense.
Removed
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.
Added
Such transactions may require the use of cash and have other impacts on our liquidity and capital resources. We have sufficient liquid resources including our $50.0 million revolving credit facility (the "Revolving Credit Facility"), of which no amounts were outstanding at March 30, 2024.
Removed
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.
Added
The Credit Agreement includes the following financial covenants: (i) as of the end of any fiscal quarter, the Consolidated Total Leverage Ratio (as defined in the Credit Agreement) cannot exceed 3.25 to 1.00 and (ii) a requirement to maintain Consolidated EBITDA (as defined in the Credit Agreement) for any period of four fiscal quarters of at least $75 million.
Removed
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 $2.6 million in lower unrealized gains on marketable equity securities in the insurance subsidiary's portfolio. Gross Profit.
Added
The Credit Agreement also contains customary representations and warranties, and affirmative and negative covenants. The Company anticipates compliance with its debt covenants and projects its level of cash availability to be in excess of cash needed to operate the business for the next year.
Removed
Selling, general and administrative expenses related to financial services increased primarily from higher salary expenses from continued growth and increased wages and benefits costs. As a percentage of Net revenue, Selling, general and administrative expenses improved 90 basis points from better utilization of fixed costs on higher sales. Interest Expense.
Added
The following is a summary of the Company's cash flows for fiscal years 2024 and 2023, respectively: Year Ended ($ in thousands) March 30, 2024 April 1, 2023 $ Change Cash, cash equivalents and restricted cash at beginning of the fiscal year $ 283,490 $ 259,334 $ 24,156 Net cash provided by operating activities 224,682 255,693 (31,011) Net cash used in investing activities (31,709) (129,341) 97,632 Net cash used in financing activities (107,710) (102,196) (5,514) Cash, cash equivalents and restricted cash at end of the fiscal year $ 368,753 $ 283,490 $ 85,263 Net cash provided by operating activities decreased primarily from lower Net income adjusted for non-cash items during the period, partially offset by greater collections on commercial loans.
Removed
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 .
Added
Commercial loan originations decreased $20.8 million to $111.2 million during the year ended March 30, 2024, from $132.1 million during the year ended April 1, 2023.
Removed
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%.
Added
Proceeds from the collection on commercial loans provided $117.3 million in cash, compared to $98.2 million in the previous year, a net increase of $19.1 million. 38 Table of Contents Net cash used in investing activities for the year ended March 30, 2024 was primarily used for purchases of property, plant and equipment and acquisition of Kentucky Dream Homes during the year.
Removed
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 $3.2 million lower unrealized gains on corporate equity investments in the current year. 33 Table of Contents Income Before Income Taxes.
Added
We expect that a 5% increase in average costs would increase our reserve proportionally. 39 Table of Contents Income Taxes and Deferred Tax Assets and Liabilities.
Removed
Income before income taxes consisted of the following for fiscal years 2022 and 2021, respectively: Year Ended ($ 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.
Removed
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
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.
Removed
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.
Removed
Additionally, the overall state income tax rate is based on income apportionment by state, which is estimated using prior year results, along with expected current year impacts. Goodwill and Other Intangibles. We evaluate the fair value of reporting units and when we record an impairment loss on goodwill.
Removed
During the fourth quarter of fiscal year 2022 we conducted our annual goodwill impairment test and no impairment charges were recorded. The estimated fair values of our two reporting units exceeded their carrying values at the date of their most recent estimated fair value determination.
Removed
However, estimated fair values would need to decrease by over 450% for there to be indicators of impairment. The fair value evaluation of intangible assets acquired includes the use of acceptable valuation approaches utilizing unobservable inputs, which may lead to a high level of uncertainty.
Removed
These Level 3 inputs relate to forecasts of future cash flows, pre-tax income and revenue growth rates, as well as the selection of royalty and discount rates. The analysis depends upon a number of judgments, estimates and assumptions. Accordingly, such testing is subject to uncertainties, which could cause fair value to fluctuate. Other Matters Impact of Inflation.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+4 added−1 removed6 unchanged
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.
Biggest changeWe are exposed to market risk related to the accessibility and terms of long-term financing of our consumer loans. While 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.
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 IRLCs is held constant, a 1% (100 basis points) increase in average interest rates would decrease the fair value of the obligations by approximately $0.1 million.
Assuming the level of these instruments as of April 2, 2022 is held constant, a 1% (100 basis points) unfavorable change in average interest rates would adversely impact the fair value of these instruments, as follows: ($ 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.
Assuming the level of these instruments as of March 30, 2024 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 $ 1,122 Commercial loans receivable 566 Other secured financing 71 40 Table of Contents In originating loans for sale, we issue IRLCs to prospective borrowers and third-party originators.
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 .
As of March 30, 2024, we had outstanding IRLCs with a notional amount of $39.0 million recorded at fair value in accordance with FASB ASC 815, Derivatives and Hedging.
We manage exposure to these market risks through our regular operating and financing activities. The Company's operations are interest rate sensitive. As overall manufactured housing demand can be adversely affected by increases in interest rates, a significant increase in wholesale or mortgage interest rates may negatively affect the ability of distributors and home buyers to secure financing.
The Company's operations are interest rate sensitive. As overall manufactured housing demand can be adversely affected by increases in interest rates, a significant increase in wholesale or mortgage interest rates may negatively affect the ability of distributors and home buyers to secure financing. Higher interest rates could unfavorably impact revenues, gross margins and net earnings.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk is the risk of loss arising from adverse changes in market prices and interest rates. We may from time to time be exposed to interest rate risk inherent in our financial instruments, but we are not currently subject to foreign currency or commodity price risk.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk is the risk of loss arising from adverse changes in market prices and interest rates. We may from time to time be exposed to interest rate risk inherent in our financial instruments. We manage exposure to these market risks through our regular operating and financing activities.
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.
Accordingly, we have not securitized 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. For fixed and step rate instruments, changes in interest rates do not change future earnings and cash flows.
Removed
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.
Added
However, changes in interest rates could affect the fair value of these instruments.
Added
We have certain assets and liabilities for a production facility located in Ojinaga, Mexico, which imports raw materials and components and exports finished homes to our retail locations in the United States.
Added
This facility incurs expenses denominated in the Mexican Peso ("MXN") primarily for the payment of wages for employees, accounts payable arising from selling, general and administrative expenses, purchases of property plant and equipment and taxes imposed by foreign tax jurisdictions.
Added
Fluctuations in the exchange rate between the MXN and the US Dollar could have a material impact on our results of operations. A 10% change in exchange rates as of March 30, 2024 could have resulted in a revaluation loss of approximately $0.3 million.

Other CVCO 10-K year-over-year comparisons