UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 3, 2021

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to

Commission File Number 000-08822

CAVCO INDUSTRIES INC.

(Exact name of registrant as specified in its charter)

Delaware			56-2405642
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
3636 North Central Ave, Ste 1200
	Phoenix	Arizona	85012
(Address of principal executive offices, including zip code)

(602) 256-6263

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $0.01	CVCO	The Nasdaq Stock Market LLC
		(Nasdaq Global Select Market)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	☒	Accelerated Filer	☐
Non-accelerated Filer	☐	Smaller Reporting Company	☐
Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No ☒

As of July 30, 2021, 9,187,030 shares of the registrant's Common Stock, $.01 par value, were outstanding.

CAVCO INDUSTRIES, INC.

FORM 10-Q

July 3, 2021

TABLE OF CONTENTS

	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of July 3, 2021 (unaudited) and April 3, 2021	1
Consolidated Statements of Comprehensive Income (unaudited) for the three months ended July 3, 2021 and June 27, 2020	2
Consolidated Statements of Cash Flows (unaudited) for the three months ended July 3, 2021 and June 27, 2020	3
Notes to Consolidated Financial Statements	4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3. Quantitative and Qualitative Disclosures About Market Risk	24
Item 4. Controls and Procedures	25
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	26
Item 1A. Risk Factors	26
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 5. Other Information	26
Item 6. Exhibits	27
SIGNATURES	28

PART 1. FINANCIAL INFORMATION

Item 1. Financial Statements

CAVCO INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per share amounts)

	July 3, 2021		April 3, 2021
ASSETS	(Unaudited)
Current assets
Cash and cash equivalents	$	329,753	$	322,279
Restricted cash, current	16,728		16,693
Accounts receivable, net	51,054		47,396
Short-term investments	19,749		19,496
Current portion of consumer loans receivable, net	32,429		37,690
Current portion of commercial loans receivable, net	16,500		14,568
Current portion of commercial loans receivable from affiliates, net	2,113		4,664
Inventories	150,917		131,234
Prepaid expenses and other current assets	48,621		57,779
Total current assets	667,864		651,799
Restricted cash	335		335
Investments	38,192		35,010
Consumer loans receivable, net	35,095		37,108
Commercial loans receivable, net	21,245		20,281
Commercial loans receivable from affiliates, net	4,730		4,801
Property, plant and equipment, net	97,981		96,794
Goodwill	75,090		75,090
Other intangibles, net	14,190		14,363
Operating lease right-of-use assets	16,150		16,252
Total assets	$	970,872	$	951,833
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	30,175	$	32,120
Accrued expenses and other current liabilities	210,190		203,133
Current portion of secured financings and other	1,822		1,851
Total current liabilities	242,187		237,104
Operating lease liabilities	13,085		13,361
Secured financings and other	9,927		10,335
Deferred income taxes	6,606		7,393
Stockholders' equity
Preferred stock, $0.01 par value; 1,000,000 shares authorized; No shares issued or outstanding	—		—
Common stock, $0.01 par value; 40,000,000 shares authorized; Issued 9,245,721 and 9,241,256 shares, respectively	92		92
Treasury stock, at cost; 67,901 and 6,600 shares, respectively	(14,283)		(1,441)
Additional paid-in capital	255,071		253,835
Retained earnings	458,103		431,057
Accumulated other comprehensive income	84		97
Total stockholders' equity	699,067		683,640
Total liabilities and stockholders' equity	$	970,872	$	951,833

See accompanying Notes to Consolidated Financial Statements

1

CAVCO INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands, except per share amounts)

(Unaudited)

	Three Months Ended
	July 3, 2021		June 27, 2020
Net revenue	$	330,422	$	254,801
Cost of sales	256,409		199,478
Gross profit	74,013		55,323
Selling, general and administrative expenses	40,832		35,323
Income from operations	33,181		20,000
Interest expense	(164)		(196)
Other income, net	2,461		1,876
Income before income taxes	35,478		21,680
Income tax expense	(8,432)		(5,006)
Net income	$	27,046	$	16,674
Comprehensive income
Net income	$	27,046	$	16,674
Reclassification adjustment for securities sold	1		26
Applicable income taxes	—		(5)
Net change in unrealized position of investments held	(18)		59
Applicable income taxes	4		(12)
	$	27,033	$	16,742
Net income per share
Basic	$	2.94	$	1.82
Diluted	$	2.92	$	1.80
Weighted average shares outstanding
Basic	9,198,229		9,174,182
Diluted	9,276,529		9,264,661

See accompanying Notes to Consolidated Financial Statements

2

CAVCO INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(Unaudited)

	Three Months Ended
	July 3, 2021		June 27, 2020
OPERATING ACTIVITIES
Net income	$	27,046	$	16,674
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	1,576		1,613
Provision for credit losses	(239)		(884)
Deferred income taxes	(783)		406
Stock-based compensation expense	1,100		945
Non-cash interest income, net	(394)		(2,186)
Gain (loss) on sale or retirement of property, plant and equipment, net	(35)		289
Gain on investments and sale of loans, net	(5,579)		(4,982)
Changes in operating assets and liabilities
Accounts receivable	(3,659)		4,629
Consumer loans receivable originated	(42,706)		(47,356)
Proceeds from sales of consumer loans	49,631		39,271
Principal payments received on consumer loans receivable	3,929		3,261
Inventories	(19,683)		7,139
Prepaid expenses and other current assets	2,801		7,128
Commercial loans receivable	(243)		2,556
Accounts payable and accrued expenses and other current liabilities	11,513		7,189
Net cash provided by operating activities	24,275		35,692
INVESTING ACTIVITIES
Purchases of property, plant and equipment	(2,593)		(1,856)
Proceeds from sale of property, plant and equipment	38		5
Purchases of investments	(4,429)		(1,160)
Proceeds from sale of investments	3,368		3,116
Net cash (used in) provided by investing activities	(3,616)		105
FINANCING ACTIVITIES
Proceeds from (payments for) exercise of stock options	136		(533)
Proceeds from secured financings and other	—		64
Payments on secured financings and other	(444)		(453)
Payments for common stock repurchases	(12,842)		—
Net cash used in financing activities	(13,150)		(922)
Net increase in cash, cash equivalents and restricted cash	7,509		34,875
Cash, cash equivalents and restricted cash at beginning of the fiscal year	339,307		255,607
Cash, cash equivalents and restricted cash at end of the period	$	346,816	$	290,482
Supplemental disclosures of cash flow information
Cash paid for income taxes	$	4,774	$	2,536
Cash paid for interest	$	100	$	127
Supplemental disclosures of noncash activity
Change in GNMA loans eligible for repurchase	$	(6,607)	$	1,242
Right-of-use assets recognized and operating lease obligations incurred	$	708	$	5,559

See accompanying Notes to Consolidated Financial Statements

3

CAVCO INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The accompanying unaudited Consolidated Financial Statements of Cavco Industries, Inc. and its subsidiaries (collectively, "we," "us," "our," the "Company" or "Cavco") have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") for Quarterly Reports on Form 10-Q and Article 10 of SEC Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP") have been condensed or omitted pursuant to such rules and regulations.

In the opinion of management, these financial statements include all adjustments, including normal recurring adjustments, that are necessary to fairly state the results for the periods presented. We have evaluated subsequent events after the balance sheet date through the date of the filing of this report with the SEC; and except for the events set forth in Note 20 of the Notes to Consolidated Financial Statements ("Notes") of the Company's Quarterly Report on Form 10-Q for the period ended July 3, 2021, there were no subsequent events requiring disclosure. These Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and the Notes to the Consolidated Financial Statements included in our 2021 Annual Report on Form 10-K for the year ended April 3, 2021, filed with the SEC ("Form 10-K").

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and the accompanying Notes. The uncertainty created by the novel coronavirus COVID-19 pandemic ("COVID-19") has made such estimates more difficult and subjective. Due to that and other uncertainties, actual results could differ from those estimates. The Consolidated Statements of Comprehensive Income and Consolidated Statements of Cash Flows for the interim periods are not necessarily indicative of the results or cash flows for the full year. The Company operates on a 52-53 week fiscal year ending on the Saturday nearest to March 31st of each year. Each fiscal quarter consists of 13 weeks, with an occasional fourth quarter extending to 14 weeks, if necessary, for the fiscal year to end on the Saturday nearest to March 31st. The current fiscal year will end on April 2, 2022 and will include 52 weeks.

We operate in two segments: (1) factory-built housing, which includes wholesale and retail factory-built housing operations, and (2) financial services, which includes manufactured housing consumer finance and insurance. We design and build a wide variety of affordable manufactured homes, modular homes and park model RVs through 20 homebuilding production lines located throughout the United States, which are sold to a network of independent distributors, community owners and developers and through our 40 Company-owned retail stores. The financial services segment is comprised of a finance subsidiary, CountryPlace Acceptance Corp. ("CountryPlace"), and an insurance subsidiary, Standard Casualty Company ("Standard Casualty"). CountryPlace is an approved Federal National Mortgage Association and Federal Home Loan Mortgage Corporation seller/servicer and a Government National Mortgage Association ("GNMA") mortgage-backed securities issuer that offers conforming mortgages, non-conforming mortgages and home-only loans to purchasers of factory-built homes. Standard Casualty provides property and casualty insurance primarily to owners of manufactured homes.

For a description of significant accounting policies we used in the preparation of our Consolidated Financial Statements, please refer to Note 1 of the Notes to Consolidated Financial Statements included in the Form 10-K.

4

2. Revenue from Contracts with Customers

The following table summarizes customer contract revenues disaggregated by reportable segment and source (in thousands):

	Three Months Ended
	July 3, 2021		June 27, 2020
Factory-built housing
U.S. Housing and Urban Development code homes	$	262,390	$	189,446
Modular homes	26,617		20,783
Park model RVs	9,671		13,722
Other	13,605		14,139
	312,283		238,090
Financial services
Insurance agency commissions received from third-party insurance companies	873		770
Other	17,266		15,941
	18,139		16,711
	$	330,422	$	254,801

3. Restricted Cash

Restricted cash consisted of the following (in thousands):

	July 3, 2021		April 3, 2021
Cash related to CountryPlace customer payments to be remitted to third parties	$	15,928	$	16,049
Other restricted cash	1,135		979
	17,063		17,028
Less current portion	(16,728)		(16,693)
	$	335	$	335

Corresponding amounts for customer payments to be remitted to third parties are recorded in Accounts payable.

The following table provides a reconciliation of Cash and cash equivalents and Restricted cash reported within the Consolidated Balance Sheets to the combined amounts shown on the Consolidated Statements of Cash Flows (in thousands):

	July 3, 2021		April 3, 2021
Cash and cash equivalents	$	329,753	$	322,279
Restricted cash	17,063		17,028
	$	346,816	$	339,307

5

4. Investments

Investments consisted of the following (in thousands):

	July 3, 2021		April 3, 2021
Available-for-sale debt securities	$	17,962	$	14,946
Marketable equity securities	17,550		17,600
Non-marketable equity investments	22,429		21,960
	57,941		54,506
Less current portion	(19,749)		(19,496)
	$	38,192	$	35,010

Investments in marketable equity securities consist of investments in the common stock of industrial and other companies.

As of July 3, 2021 and April 3, 2021, non-marketable equity investments included contributions of $15.0 million to equity-method investments in community-based initiatives that buy and sell our homes and provide home-only financing to residents of certain manufactured home communities. Other non-marketable equity investments included investments in other distribution operations.

The following tables summarize our available-for-sale debt securities, gross unrealized gains and losses and fair value, aggregated by investment category (in thousands):

	July 3, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Residential mortgage-backed securities	$	2,609	$	26	$	(11)	$	2,624
State and political subdivision debt securities	8,265		109		(19)		8,355
Corporate debt securities	6,982		12		(11)		6,983
	$	17,856	$	147	$	(41)	$	17,962

	April 3, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Residential mortgage-backed securities	$	2,787	$	30	$	(13)	$	2,804
State and political subdivision debt securities	7,239		125		(19)		7,345
Corporate debt securities	4,797		11		(11)		4,797
	$	14,823	$	166	$	(43)	$	14,946

We are not aware of any changes to the securities or issuers that would indicate the losses above are indicative of credit impairment as of July 3, 2021. Further, we do not intend to sell the investments, and it is more likely than not that we will not be required to sell the investments, before recovery of their amortized cost.

6

The amortized cost and fair value of our investments in available-for-sale debt securities, by contractual maturity, are shown in the table below (in thousands). Expected maturities differ from contractual maturities as borrowers may have the right to call or prepay obligations, with or without penalties.

	July 3, 2021
	Amortized Cost		Fair Value
Due in less than one year	$	1,518	$	1,519
Due after one year through five years	11,033		11,028
Due after five years through ten years	1,391		1,450
Due after ten years	1,305		1,341
Mortgage-backed securities	2,609		2,624
	$	17,856	$	17,962

There were no gross gains or losses realized on the sale of available-for-sale debt securities during the three months ended July 3, 2021 or June 27, 2020.

Net investment gains and losses on marketable equity securities were as follows (in thousands):

	Three Months Ended
	July 3, 2021		June 27, 2020
Marketable equity securities
Net gain recognized during the period	$	1,696	$	2,030
Less: Net gains recognized on securities sold during the period	(136)		(33)
Unrealized gains recognized during the period on securities still held	$	1,560	$	1,997

5. Inventories

Inventories consisted of the following (in thousands):

	July 3, 2021		April 3, 2021
Raw materials	$	69,123	$	54,336
Work in process	20,426		19,149
Finished goods	61,368		57,749
	$	150,917	$	131,234

7

6. Consumer Loans Receivable

The following table summarizes consumer loans receivable (in thousands):

	July 3, 2021		April 3, 2021
Loans held for investment, previously securitized	$	30,384	$	31,949
Loans held for investment	17,565		18,690
Loans held for sale	13,542		15,587
Construction advances	10,479		13,801
	71,970		80,027
Deferred financing fees and other, net	(1,528)		(2,041)
Allowance for loan losses	(2,918)		(3,188)
	67,524		74,798
Less current portion	(32,429)		(37,690)
	$	35,095	$	37,108

The following table represents changes in the estimated allowance for loan losses, including related additions and deductions to the allowance for loan losses (in thousands):

	Three Months Ended
	July 3, 2021		June 27, 2020
Allowance for loan losses at beginning of period	$	3,188	$	1,767
Impact of adoption of Financial Accounting Standards Board's Accounting Standards Update 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13")	—		2,276
Change in estimated loan losses, net	(267)		161
Charge-offs	(3)		(192)
Allowance for loan losses at end of period	$	2,918	$	4,012

The consumer loans held for investment had the following characteristics:

	July 3, 2021		April 3, 2021
Weighted average contractual interest rate	8.2	%	8.3	%
Weighted average effective interest rate	8.8	%	9.3	%
Weighted average months to maturity	160		162

The following table is a consolidated summary of the delinquency status of the outstanding amortized cost of consumer loans receivable (in thousands):

	July 3, 2021		April 3, 2021
Current	$	68,258	$	76,378
31 to 60 days	192		508
61 to 90 days	3,112		21
91+ days	408		3,120
	$	71,970	$	80,027

8

The following tables disaggregate gross consumer loans receivable by credit quality indicator and fiscal year of origination (in thousands):

	July 3, 2021
	2022		2021		2020		2019		2018		Prior		Total
Prime- FICO score 680 and greater	$	5,068	$	10,500	$	2,970	$	1,578	$	770	$	24,028	$	44,914
Near Prime- FICO score 620-679	2,312		6,528		2,159		1,676		1,360		10,353		24,388
Sub-Prime- FICO score less than 620	—		260		53		—		—		1,605		1,918
No FICO score	150		149		—		27		—		424		750
	$	7,530	$	17,437	$	5,182	$	3,281	$	2,130	$	36,410	$	71,970

	April 3, 2021
	2021		2020		2019		2018		2017		Prior		Total
Prime- FICO score 680 and greater	$	18,250	$	3,575	$	1,718	$	971	$	1,959	$	23,375	$	49,848
Near Prime- FICO score 620-679	10,227		2,744		1,794		1,364		500		10,401		27,030
Sub-Prime- FICO score less than 620	348		53		—		—		84		1,579		2,064
No FICO score	576		—		28		—		—		481		1,085
	$	29,401	$	6,372	$	3,540	$	2,335	$	2,543	$	35,836	$	80,027

As of July 3, 2021 and April 3, 2021, 35% of the outstanding principal balance of the consumer loans receivable portfolio was concentrated in Texas and 20% was concentrated in Florida. Other than Texas and Florida, no state had concentrations in excess of 10% of the principal balance of the consumer loans receivable as of July 3, 2021 or April 3, 2021.

Repossessed homes totaled approximately $493,000 and $518,000 as of July 3, 2021 and April 3, 2021, respectively, and are included in Prepaid expenses and other current assets in the Consolidated Balance Sheets. Foreclosure or similar proceedings in progress totaled approximately $1.0 million and $1.1 million as of July 3, 2021 and April 3, 2021, respectively.

7. Commercial Loans Receivable

The commercial loans receivable balance consists of direct financing arrangements for the home product needs of our independent distributors, community owners and developers and amounts loaned by us under participation financing programs.

Commercial loans receivable, net consisted of the following (in thousands):

	July 3, 2021		April 3, 2021
Loans receivable	$	45,620	$	45,377
Allowance for loan losses	(785)		(816)
Deferred financing fees, net	(247)		(247)
	44,588		44,314
Less current portion of commercial loans receivable (including from affiliates), net	(18,613)		(19,232)
	$	25,975	$	25,082

9

The commercial loans receivable balance had the following characteristics:

	July 3, 2021		April 3, 2021
Weighted average contractual interest rate	6.0	%	6.4	%
Weighted average months to maturity	10		11

The following table represents changes in the estimated allowance for loan losses, including related additions and deductions to the allowance for loan losses (in thousands):

	Three Months Ended
	July 3, 2021		June 27, 2020
Balance at beginning of period	$	816	$	393
Impact of adoption of ASU 2016-13	—		435
Change in estimated loan losses, net	(31)		—
Balance at end of period	$	785	$	828

As of July 3, 2021 and April 3, 2021, there were no commercial loans considered watch list or nonperforming. The following table disaggregates our commercial loans receivable by fiscal year of origination (in thousands):

	July 3, 2021
	2022		2021		2020		2019		2018		Prior		Total
Performing	$	15,150	$	19,119	$	5,973	$	2,689	$	1,743	$	946	$	45,620

	April 3, 2021
	2021		2020		2019		2018		2017		Prior		Total
Performing	$	30,627	$	8,677	$	3,206	$	1,864	$	1,003	$	—	$	45,377

At July 3, 2021, there were no commercial loans 90 days or more past due that were still accruing interest and we were not aware of any potential problem loans that would have a material effect on the commercial loans receivable balance.

As of July 3, 2021, 14% of our outstanding commercial loans receivable principal balance was concentrated in Arizona and 13% was concentrated in California. As of April 3, 2021, 13% of our outstanding commercial loans receivable principal balance was concentrated in Arizona. No other state had concentrations in excess of 10% of the principal balance of the consumer loans receivable as of July 3, 2021 or April 3, 2021.

We had concentrations with one independent third-party and its affiliates that equaled 18% of the net commercial loans receivable principal balance outstanding, all of which was secured, as of July 3, 2021 and April 3, 2021.

10

8. Property, Plant and Equipment, net

Property, plant and equipment, net, consisted of the following (in thousands):

	July 3, 2021		April 3, 2021
Property, plant and equipment, at cost
Land	$	28,314	$	28,314
Buildings and improvements	73,415		71,827
Machinery and equipment	35,075		34,146
	136,804		134,287
Accumulated depreciation	(38,823)		(37,493)
	$	97,981	$	96,794

Depreciation expense was $1.4 million for each of the three month periods ended July 3, 2021 and June 27, 2020.

9. Goodwill and Other Intangibles

Goodwill and other intangibles, net, consisted of the following (in thousands):

	July 3, 2021						April 3, 2021
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Indefinite-lived
Goodwill	$	75,090	$	—	$	75,090	$	75,090	$	—	$	75,090
Trademarks and trade names	8,900		—		8,900		8,900		—		8,900
State insurance licenses	1,100		—		1,100		1,100		—		1,100
	85,090		—		85,090		85,090		—		85,090
Finite-lived
Customer relationships	11,300		(7,255)		4,045		11,300		(7,097)		4,203
Other	1,424		(1,279)		145		1,424		(1,264)		160
	$	97,814	$	(8,534)	$	89,280	$	97,814	$	(8,361)	$	89,453

Amortization expense recognized on intangible assets was $173,000 and $187,000 for the three months ended July 3, 2021 and June 27, 2020, respectively.

11

10. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

	July 3, 2021		April 3, 2021
Customer deposits	$	48,989	$	41,835
Salaries, wages and benefits	37,176		37,737
Unearned insurance premiums	24,125		22,643
Company repurchase options on certain loans sold	19,432		25,938
Estimated warranties	19,344		18,032
Accrued volume rebates	14,097		12,132
Other	47,027		44,816
	$	210,190	$	203,133

11. Warranties

Activity in the liability for estimated warranties was as follows (in thousands):

	Three Months Ended
	July 3, 2021		June 27, 2020
Balance at beginning of period	$	18,032	$	18,678
Charged to costs and expenses	9,125		6,347
Payments and deductions	(7,813)		(6,487)
Balance at end of period	$	19,344	$	18,538

12. Debt and Finance Lease Obligations

Debt and finance lease obligations primarily consist of secured financings at our finance subsidiary and lease obligations for which it is expected that we will obtain ownership of the leased assets at the end of the lease term. The following table summarizes debt and finance lease obligations (in thousands):

	July 3, 2021		April 3, 2021
Secured term loan	$	7,980	$	8,210
Other secured financings	3,473		3,672
Finance lease obligations	296		304
	11,749		12,186
Less current portion	(1,822)		(1,851)
	$	9,927	$	10,335

We entered into secured credit facilities with independent third-party banks to originate and hold consumer home-only loans secured by manufactured homes, which were pledged as collateral to the facilities. Those facilities have since been converted into an amortizing loan with maturity dates starting in 2028 and payments based on a 20 or 25-year amortization period, resulting in a balloon payment due upon maturity. The outstanding balance of the converted loans was $8.0 million as of July 3, 2021 and $8.2 million as of April 3, 2021 with a weighted average interest rate of 4.9%.

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13. Reinsurance and Insurance Loss Reserves

Certain of Standard Casualty's premiums and benefits are assumed from and ceded to other insurance companies under various reinsurance agreements. We remain obligated for amounts ceded in the event that the reinsurers do not meet their obligations.

The effects of reinsurance on premiums written and earned were as follows (in thousands):

	Three Months Ended
	July 3, 2021				June 27, 2020
	Written		Earned		Written		Earned
Direct premiums	$	6,839	$	5,996	$	5,765	$	5,185
Assumed premiums—nonaffiliated	8,574		7,378		7,653		6,790
Ceded premiums—nonaffiliated	(3,647)		(3,647)		(3,202)		(3,202)
	$	11,766	$	9,727	$	10,216	$	8,773

Typical insurance policies written or assumed have a maximum coverage of $300,000 per claim, of which we cede $150,000 of the risk of loss per reinsurance. Therefore, our risk of loss is limited to $150,000 per claim on typical policies, subject to the reinsurers meeting their obligations. After this limit, amounts are recoverable through reinsurance for catastrophic losses in excess of $2 million per occurrence, up to a maximum of $55 million in the aggregate for that occurrence.

Standard Casualty establishes reserves for claims and claims expense on reported and unreported claims of non-reinsured losses. The following details the activity in the reserve for the three months ended July 3, 2021 and June 27, 2020 (in thousands):

	Three Months Ended
	July 3, 2021		June 27, 2020
Balance at beginning of period	$	7,451	$	5,582
Net incurred losses during the year	7,975		5,982
Net claim payments during the year	(7,078)		(4,834)
Balance at end of period	$	8,348	$	6,730

14. Commitments and Contingencies

Repurchase Contingencies. We are contingently liable under terms of repurchase agreements with financial institutions providing inventory financing to independent distributors of our products. These arrangements, which are customary in the industry, provide for the repurchase of products sold to distributors in the event of default by the distributor.

The maximum amount for which we were liable under such agreements approximated $80.9 million and $74.2 million at July 3, 2021 and April 3, 2021, respectively, without reduction for the resale value of the homes that are repurchased. We had a reserve for repurchase commitments of $2.3 million at July 3, 2021 and April 3, 2021.

Construction-Period Mortgages. We fund construction-period mortgages through periodic advances during home construction. At the time of initial funding, we commit to fully fund the loan contract in accordance with a predetermined schedule. The total loan contract amount, less cumulative advances, represents an off-balance sheet contingent commitment to fund future advances.

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Loan contracts with off-balance sheet commitments are summarized below (in thousands):

	July 3, 2021		April 3, 2021
Construction loan contract amount	$	28,204	$	37,628
Cumulative advances	(10,479)		(13,801)
	$	17,725	$	23,827

Representations and Warranties of Mortgages Sold. We sell loans to Government-Sponsored Enterprises ("GSEs") and whole-loan purchasers and finance certain loans with long-term credit facilities secured by the respective loans. In connection with these activities, we provide to GSEs and whole-loan purchasers and lenders representations and warranties related to the loans sold or financed. Upon a breach of a representation, we may be required to repurchase the loan or to indemnify a party for incurred losses. We maintain a reserve for these contingent repurchase and indemnification obligations. This reserve of $1.3 million as of July 3, 2021 and $1.2 million as of April 3, 2021, included in Accrued expenses and other current liabilities, reflects management's estimate of probable loss. There were no claim requests that resulted in the execution of an indemnification agreement or in the repurchase of a loan during the three months ended July 3, 2021.

Interest Rate Lock Commitments. In originating loans for sale, we issue interest rate lock commitments ("IRLCs") to prospective borrowers. These IRLCs bind us to fund the approved loan at the specified rate regardless of whether interest rates or market prices for similar loans have changed between the commitment date and the closing date. As of July 3, 2021, we had outstanding IRLCs with a notional amount of $32.1 million and recognized a gain of $47,000 in the 2022 first quarter and a loss of $125,000 in the 2021 first quarter.

Forward Sales Commitments. We manage the risk profiles of a portion of the outstanding IRLCs and mortgage loans held for sale by entering into forward sales of mortgage-backed securities ("MBS") and whole loan sale commitments (collectively "Commitments"). As of July 3, 2021, we had $42.9 million in outstanding Commitments and recognized a non-cash loss of $347,000 in the 2022 first quarter and gain of $1.0 million in the 2021 first quarter.

Legal Matters. Since 2018, we have been cooperating with an investigation by the enforcement staff of the SEC's Los Angeles Regional Office regarding securities trading in personal and Company accounts directed by the Company's former Chief Executive Officer, Joseph Stegmayer. As previously disclosed, in November 2020, the SEC staff issued a Wells Notice to Cavco stating that the staff intends to recommend an enforcement action against us in connection with the investigation. While we cannot predict with certainty the resolution of this matter, we do not expect it to have a material adverse effect on our Consolidated Financial Statements.

We are party to certain other lawsuits in the ordinary course of business. Based on management's present knowledge of the facts and, in certain cases, advice of outside counsel, management does not believe that loss contingencies arising from pending matters are likely to have a material adverse effect on our consolidated financial position, liquidity or results of operations after taking into account any existing reserves, which reserves are included in Accrued expenses and other current liabilities in the Consolidated Balance Sheets. However, future events or circumstances that may currently be unknown to management will determine whether the resolution of pending or threatened litigation or claims will ultimately have a material effect on our consolidated financial position, liquidity or results of operations in any future reporting periods.

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15. Stockholders' Equity

The following table represents changes in stockholders' equity during the three months ended July 3, 2021 (dollars in thousands):

				Treasury Stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive income		Total
	Common Stock
	Shares	Amount
Balance, April 3, 2021	9,241,256	$	92	$	(1,441)	$	253,835	$	431,057	$	97	$	683,640
Net income	—	—		—		—		27,046		—		27,046
Other comprehensive income, net	—	—		—		—		—		(13)		(13)
Issuance of common stock under stock incentive plans	4,465