CAVCO INDUSTRIES, INC.
Forward-Looking Statements
Statements in this Report on Form 10-Q include "forward-looking statements,"
within the meaning of Section 27A of the Securities Act of 1933, Section 21E of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
Private Securities Litigation Reform Act of 1995. Forward-looking statements are
often characterized by the use of words such as "believes," "estimates,"
"expects," "projects," "may," "will," "intends," "plans," or "anticipates," or
by discussions of strategy, plans or intentions. Forward-looking statements are
typically included, for example, in discussions regarding the manufactured
housing and site-built housing industries; our financial performance and
operating results; the expected effect of certain risks and uncertainties on our
business, financial condition and results of operations; economic conditions and
consumer confidence; operational and legal risks; how the Company may be
affected by the novel coronavirus COVID-19 ("COVID-19") pandemic; governmental
regulations and legal proceedings; the availability of favorable consumer and
wholesale manufactured home financing; market interest rates and Company
investments and the ultimate outcome of our commitments and contingencies.
Forward-looking statements contained in this Report on Form 10-Q speak only as
of the date of this report or, in the case of any document incorporated by
reference, the date of that document. We do not intend to publicly update or
revise any forward-looking statement contained in this Report on Form 10-Q or in
any document incorporated herein by reference to reflect changed assumptions,
the occurrence of unanticipated events or changes to future operating results
over time.
Forward-looking statements involve risks, uncertainties and other factors that
may cause our actual results, performance or achievements to be materially
different from those expressed or implied by such forward-looking statements,
many of which are beyond our control. To the extent that our assumptions and
expectations differ from actual results, our ability to meet such
forward-looking statements, including the ability to generate positive cash flow
from operations, may be significantly hindered. Factors that could affect our
results and cause them to materially differ from those contained in the
forward-looking statements include, without limitation, those discussed in Risk
Factors in Part I, Item 1A of our 2020 Annual Report on Form 10-K ("Form 10-K").
Introduction
The following should be read in conjunction with Cavco Industries, Inc. and its
subsidiaries' (collectively, "we," "us," "our," the "Company" or "Cavco")
Consolidated Financial Statements and the related Notes that appear in Item 1 of
this Report. References to "Note" or "Notes" pertain to the Notes to our
Consolidated Financial Statements.
Company Overview
Headquartered in Phoenix, Arizona , we design and produce factory-built housing
products primarily distributed through a network of independent and
Company-owned retailers, planned community operators and residential developers.
We are one of the largest producers of manufactured homes in the United States ,
based on reported wholesale shipments, marketed under a variety of brand names
including Cavco, Fleetwood, Palm Harbor , Fairmont, Friendship, Chariot Eagle and
Destiny. We are also one of the leading producers of park model RVs, vacation
cabins and systems-built commercial structures, as well as modular homes built
primarily under the Nationwide Homes brand. Our finance subsidiary, CountryPlace
Acceptance Corp. ("CountryPlace"), is an approved Federal National Mortgage
Association and Federal Home Loan Mortgage Corporation seller/servicer and a
Government National Mortgage Association ("Ginnie Mae") mortgage-backed
securities issuer that offers conforming mortgages, non-conforming mortgages and
home-only loans to purchasers of factory-built homes. Our insurance subsidiary,
Standard Casualty Co. , provides property and casualty insurance to owners of
manufactured homes.
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We operate 20 homebuilding production lines located in Millersburg and Woodburn,
Oregon ; Nampa, Idaho ; Riverside, California ; Phoenix and Goodyear, Arizona ;
Austin , Fort Worth , Seguin and Waco, Texas ; Montevideo, Minnesota ; Nappanee,
Indiana ; Lafayette, Tennessee ; Martinsville and Rocky Mount, Virginia ; Douglas
and Moultrie, Georgia ; and Ocala and Plant City, Florida . The majority of the
homes produced are sold to, and distributed by, independently owned and
controlled retail operations located throughout the United States and Canada . In
addition, our homes are sold through 40 Company-owned U.S. retail locations.
In April 2020 , the Company shut down production and closed its Lexington,
Mississippi manufacturing facility, finalizing production in June 2020 . However,
we remain available to serve wholesale customers previously served by the
Lexington facility from our other production lines in the southeast. The
production facility has been placed on the market for sale.
Company and Industry Outlook
According to data reported by the Manufactured Housing Institute , industry home
shipments decreased 1.3% for the first 11 months of calendar year 2020 compared
to the same period in the prior year. The industry offers solutions to the
affordable housing crisis and these shipment numbers have not represented
demand; instead, they represent the industry's ability to produce in the current
environment. The average price per square foot for a manufactured home is lower
than a site-built home. Also, based on the relatively low cost associated with
manufactured home ownership, our products have traditionally competed with
rental housing's monthly payment affordability.
The two largest manufactured housing consumer demographics, young adults and
those who are age 55 and older, are both growing. 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 may be limited in their ability to qualify for a new home loan by their
particular employment status and down payment capability. Consumer confidence,
as an indicator of retirement security, is especially important among
manufactured home buyers interested in our products for seasonal or retirement
living.
We seek out niche market opportunities where our diverse product lines and
custom building capabilities provide a competitive advantage. Our green building
initiatives involve the creation of an energy efficient envelope and higher
utilization of renewable materials. These homes provide environmentally-friendly
maintenance requirements, typically lower utility costs and sustainability.
We maintain a conservative cost structure in an effort to build added value into
our homes and we work diligently to maintain a solid financial position. Our
balance sheet strength, including the position in cash and cash equivalents,
helps avoid liquidity problems and enables us to act effectively as market
opportunities or challenges present themselves.
We continue to make certain commercial loan programs available to members of our
wholesale distribution chain. Under direct commercial loan arrangements, we
provide funds for financed home purchases by distributors, community owners and
developers. In addition, we provide loans to independent floor plan lenders that
then lend to distributors to finance their inventory purchases (see Note 7 to
the Consolidated Financial Statements). Our involvement in commercial loans
helps to increase the availability of manufactured home financing to
distributors, community owners and developers and provides additional
opportunity for product exposure to potential home buyers. While these
initiatives support our ongoing efforts to expand product distribution, they do
expose us to risks associated with the creditworthiness of this customer base
and our inventory financing partners. We have included considerations related to
the COVID-19 pandemic when assessing the risks of loan loss and setting reserve
amounts for the commercial finance portfolio.
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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.
We work directly with other industry participants to develop secondary market
opportunities for manufactured home-only loan portfolios and expand lending
availability in the industry. Additionally, we continue to invest in
community-based lending initiatives that provide home-only financing to new
residents of certain manufactured home communities. Our mortgage subsidiary also
develops and invests in home-only lending programs to grow sales of homes
through traditional distribution points. We believe that growing our investment
and participation in home-only lending may provide additional sales growth
opportunities for our financial services segment, as well as provide a means
that could lead to increased home sales for our factory-built housing
operations.
COVID-19 Impact and Strategy
In March 2020 , the World Health Organization declared COVID-19 a global
pandemic. As our business was considered essential, we continued to operate
substantially all of our homebuilding and retail sales facilities while working
to follow COVID-19 health guidelines. We have worked to minimize exposure and
transmission risks by implementing enhanced facility cleaning, social distancing
and related protocols while continuing to serve our customers. Operational
efficiencies declined due to managing higher and largely unpredictable factory
employee absenteeism, hiring challenges and building material supply shortages.
Accordingly, our total average plant capacity utilization rate was approximately
75% during the third fiscal quarter of 2021, which has improved from
approximately 65% during the second fiscal quarter of 2021, but is lower than
pre-pandemic levels of more than 80%.
Sales order activity remained exceptionally strong during the third fiscal
quarter of 2021 to the point where home sales order rates were nearly 65% higher
than the comparable prior year quarter. Increased order volume is the result of
a higher number of well-qualified home buyers making purchase decisions,
supported by reduced home loan interest rates. Increased orders outpaced the
challenging production environment during the quarter, raising order backlogs
310% to $472 million at December 26, 2020 , compared to $115 million at
December 28, 2019 and $321 million at September 26, 2020 . The backlog of home
orders excludes orders that have been paused or canceled at the request of the
customer. 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.
Accordingly, until production of a particular home has commenced, we do not
consider order backlog to be firm orders.
The financial services segment has also maintained operations since the onset of
the COVID-19 pandemic, largely through the implementation of work-from-home
solutions. In addition to accepting and processing new applications for home
loans and insurance policies, the financial services operations continue to
assist customers in need and service existing loans and insurance policies while
complying with state and federal regulations regarding loan forbearance, home
foreclosures and policy cancellations. Because of these economic conditions,
loan loss reserves were increased at the end of fiscal year 2020 and continue to
be adjusted as considered appropriate.
Certain loans serviced by CountryPlace for investors expose the Company to cash
flow decreases if customers do not make contractual monthly payments of
principal and interest in a timely manner. Our primary investor, Ginnie Mae ,
permits cash obligations on loans in forbearance from COVID-19 to be offset by
other incoming cash flows from loans such as loan pre-payments. While monthly
collections of principal and interest from borrowers has normally exceeded
scheduled principal and interest payments owed to investors, this could be
negatively impacted given various state and local emergency orders in light of
COVID-19.
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It is difficult to predict the future impacts of the COVID-19 pandemic on
housing demand, employee availability, supply chain and Company performance and
operations. We continue to focus on developing order volume growth opportunities
by working to improve our production capabilities and adjusting product
offerings. We strive to balance the production levels and workforce size with
the demand for our product offerings to maximize efficiencies. We continually
review wage rates of our production employees and have established other
monetary incentive programs to ensure competitive compensation. We are also
working to more extensively use online recruiting tools, update recruitment
brochures and improve the appearance and appeal of our manufacturing facilities
in order to improve the recruitment and retention of qualified production
employees and reduce annualized turnover rates. Maintaining an appropriately
sized and well-trained workforce is key to increasing production to meet
increased demand. We face a major challenge in overcoming labor-related
difficulties in the COVID-19 environment to increase home production.
Results of Operations
Net Revenue.
Three Months Ended
($ in thousands, except revenue per home December 26, December 28,
sold) 2020 2019 Change
Net revenue:
Factory-built housing $ 270,822 $ 257,106 $ 13,716 5.3 %
Financial services 17,950 16,616 1,334 8.0 %
$ 288,772 $ 273,722 $ 15,050 5.5 %
Total homes sold 3,603 3,865 (262) (6.8) %
Net factory-built housing revenue per home
sold $ 75,166 $ 66,522 $ 8,644 13.0 %
Nine Months Ended
($ in thousands, except revenue per home December 26, December 28,
sold) 2020 2019 Change
Net revenue:
Factory-built housing $ 749,879 $ 758,564 $ (8,685) (1.1) %
Financial services 51,670 47,875 3,795 7.9 %
$ 801,549 $ 806,439 $ (4,890) (0.6) %
Total homes sold 10,379 11,453 (1,074) (9.4) %
Net factory-built housing revenue per home
sold $ 72,250 $ 66,233 $ 6,017 9.1 %
In the factory-built housing segment, the increase in Net revenue for the three
months ended December 26, 2020 was primarily due to higher home selling prices
resulting from pricing increases implemented because of rising input costs.
These gains were partially offset by lower home sales volume during the third
fiscal quarter, as production inefficiencies from challenges related to the
COVID-19 pandemic continue to limit factory delivery volume.
The decrease for the nine months ended December 26, 2020 was primarily from
lower home sales volume related to the production inefficiencies previously
discussed, partially offset by higher home selling prices compared to last year.
Note that Destiny Homes was purchased in August 2019 and Lexington Homes was
closed in June 2020 .
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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, community owners and developers
("Wholesale") and sales of homes to consumers by Company-owned retail centers
("Retail"). Wholesale sales prices are primarily comprised of the home and the
cost to ship the home from a manufacturing facility to the home-site. Retail
home prices include these items plus 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. Other factors include fluctuations in product mix, the result of home
buyer tastes and preferences as they select home types/models, as well as
optional home upgrades when purchasing the home.
As discussed above, changes to the proportion of home sales among the
distribution channels between reporting periods impact the overall net revenue
per home sold. For the three and nine months ended December 26, 2020 , we sold
2,835 and 8,096 homes Wholesale, respectively, and 768 and 2,283 homes Retail,
respectively. For the three and nine months ended December 28, 2019 , we sold
3,158 and 9,222 homes Wholesale, respectively, and 707 and 2,231 homes Retail,
respectively.
Financial services segment revenue increased primarily due to unrealized gains
on marketable equity securities in the insurance subsidiary's portfolio, which
were $1.0 million and $2.7 million for the three and nine months ended December
26, 2020 , respectively, compared to $0.3 million and $0.6 million in unrealized
gains in the comparable prior year periods, respectively. In addition, higher
volume in home loan sales and more insurance policies in force in the current
year compared to the prior year were positive contributors. These overall
increases were partially offset by lower interest income earned on the acquired
consumer loan portfolios that continue to amortize.
Gross Profit.
Three Months Ended
December 26, December 28,
($ in thousands) 2020 2019 Change
Gross profit:
Factory-built housing $ 47,031 $ 48,793 $ (1,762) (3.6) %
Financial services 12,207 11,062 1,145 10.4 %
$ 59,238 $ 59,855 $ (617) (1.0) %
Gross profit as % of Net revenue:
Consolidated 20.5 % 21.9 % N/A (1.4) %
Factory-built housing 17.4 % 19.0 % N/A (1.6) %
Financial services 68.0 % 66.6 % N/A 1.4 %
Nine Months Ended
December 26, December 28,
($ in thousands) 2020 2019 Change
Gross profit:
Factory-built housing $ 140,178 $ 149,567 $ (9,389) (6.3) %
Financial services 27,924 29,053 (1,129) (3.9) %
$ 168,102 $ 178,620 $ (10,518) (5.9) %
Gross profit as % of Net revenue:
Consolidated 21.0 % 22.1 % N/A (1.1) % Factory-built housing 18.7 % 19.7 % N/A (1.0) % Financial services 54.0 % 60.7 % N/A (6.7) %
Factory-built housing Gross profit as a percentage of Net revenue decreased for
the three and nine months ended
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In the financial services segment, Gross profit as a percentage of Net revenue
increased for the three months ended December 26, 2020 due to lower
weather-related claims volume and higher unrealized gains on marketable equity
securities. However, for the nine months ended December 26, 2020 , Gross profit
as a percentage of Net revenue decreased as a result of higher weather-related
claims volume at our insurance subsidiary and lower interest income earned on
the acquired consumer loan portfolios that continue to amortize.
Selling, General and Administrative Expenses.
Three Months Ended
December 26, December 28,
($ in thousands) 2020 2019 Change
Selling, general and administrative expenses:
Factory-built housing $ 30,575 $ 32,017 $ (1,442) (4.5) %
Financial services 4,839 4,827 12 0.2 %
$ 35,414 $ 36,844 $ (1,430) (3.9) %
Selling, general and administrative expenses as
% of Net revenue: 12.3 % 13.5 % N/A (1.2) %
Nine Months Ended
December 26, December 28,
($ in thousands) 2020 2019 Change
Selling, general and administrative expenses:
Factory-built housing $ 92,037 $ 94,348 $ (2,311) (2.4) %
Financial services 14,153 13,843 310 2.2 %
$ 106,190 $ 108,191 $ (2,001) (1.8) %
Selling, general and administrative expenses as
% of Net revenue: 13.2 % 13.4 % N/A (0.2) %
Selling, general and administrative expenses related to factory-built housing
decreased between periods primarily from a reduction in legal expenses and the
amortization of the additional director and officer ("D&O") insurance premium,
partially offset by increased corporate-related expenses. During the three
months ended December 26, 2020 , we incurred $0.7 million in expenses related to
the SEC inquiry, but also received a $0.4 million insurance recovery of prior
expenses, resulting in a net expense of $0.3 million during the period compared
to $0.9 million in expense in the third quarter of fiscal year 2020. For the
nine months ended December 26, 2020 , we recorded a net expense of $0.1 million
for SEC inquiry related expenses compared to $2.5 million in expense in the
comparable prior year period.
As the amortization of the additional D&O insurance premium has now been
completed, the three months ended December 26, 2020 contains no related expense
while the prior year period included a $2.1 million charge. For the nine months
ended December 26, 2020 , additional D&O insurance premium amortization was $4.2
million versus $6.3 million in the prior year period.
In Financial services, Selling, general and administrative expenses increased
for the three and nine months ended December 26, 2020 primarily from higher
salary and incentive-based compensation expense.
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Interest Expense.
Interest expense was $0.2 million and $0.5 million for the three months ended
December 26, 2020 and December 28, 2019 , respectively. For the nine months ended
December 26, 2020 and December 28, 2019 , Interest expense was $0.6 million and
$1.3 million , respectively. Interest expense consists primarily of debt service
on CountryPlace's financings of manufactured home-only loans and interest
related to finance leases. The decrease is primarily the result of a reduction
in securitized bond interest expense, as we exercised our right to repurchase
the 2007-1 securitized loan portfolio in August 2019 , thereby eliminating the
related interest expense. This decrease is partially offset by increases in
interest expense from secured credit facilities at CountryPlace.
Other Income, net.
Other income primarily consists of realized and unrealized gains and losses on
corporate marketable equity investments, interest income related to commercial
loans receivable balances, interest income earned on cash balances and gains and
losses from the sale of property, plant and equipment. Other income, net was
$2.2 million for each of the three month periods ended December 26, 2020 and
December 28, 2019 .
For the nine months ended December 26, 2020 and December 28, 2019 , Other income,
net was $5.8 million and $10.2 million , respectively. The decline was primarily
due to a $3.4 million net gain on the sale of idle land that was recorded in the
prior year period, as well as a reduction in interest earned in the current
periods on cash and commercial loan receivables, given the lower interest rate
environment. These declines were partially offset by increases in unrealized
gains on corporate marketable equity securities.
Income tax expense.
Income tax expense was $6.2 million and $3.8 million for the three months ended
December 26, 2020 and December 28, 2019 , respectively, for an effective income
tax rate of 23.9% and 15.5%, respectively. Income tax expense for the nine
months ended December 26, 2020 and December 28, 2019 was $15.7 million and $16.3
million , respectively, for effective income tax rates of 23.4% and 20.5%,
respectively. The lower effective tax rates for prior year periods were
primarily due to tax benefits from the exercise of stock options, which provided
a benefit of $0.5 million in the nine months ended December 26, 2020 compared to
the $1.3 million in the same period last year, and a catch up of tax credits
that were enacted as part of the 2020 Appropriations Bill. Certain of these
credits were extended as part of the 2021 Consolidated Appropriations Act that
was signed into law after quarter end on December 27, 2020 . We are currently
evaluating the impact this will have in future periods.
Liquidity and Capital Resources
We believe that cash and cash equivalents at December 26, 2020 , together with
cash flow from operations, will be sufficient to fund our operations and provide
for growth for the next 12 months and into the foreseeable future. We maintain
cash in U.S. 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. Because of our sufficient cash position, we have not historically
sought external sources of liquidity, with the exception of certain credit
facilities for home-only lending programs. However, depending on our operating
results and strategic opportunities, we may need to seek additional or
alternative sources of financing. 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. The exact
nature of any changes to the Company's plans that would be considered depends on
various factors, such as conditions in the factory-built housing industry and
general economic conditions outside of our control.
State insurance regulations restrict the amount of dividends that can be paid to
stockholders of insurance companies. As a result, the assets owned by our
insurance subsidiary are generally not available to satisfy the claims of Cavco
or its legal subsidiaries. We believe that stockholders' equity at our insurance
subsidiary remains sufficient and we do not believe that its ability to pay
ordinary dividends to Cavco will be restricted per state regulations.
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The following is a summary of cash flows for the nine months ended December 26,
2020 and December 28, 2019 , respectively:
Nine Months Ended
December 26, December 28,
(in thousands) 2020 2019 $ Change
Cash, cash equivalents and restricted cash at
beginning of the fiscal year $ 255,607 $ 199,869 $ 55,738
Net cash provided by operating activities 91,566 68,320 23,246
Net cash used in investing activities (5,098) (18,873) 13,775
Net cash used in financing activities (1,451) (19,058) 17,607
Cash, cash equivalents and restricted cash at end
of the period $ 340,624 $
230,258
Net cash provided by operating activities increased during the nine months endedDecember 26, 2020 compared to the nine months endedDecember 28, 2019 primarily due to more customer deposits received as a result of higher order rates, higher collections on commercial loans receivables and the timing of payments on Accounts payable and Accrued expenses and other current liabilities. Consumer loan originations increased by$2.5 million to$124.1 million for the nine months endedDecember 26, 2020 from$121.6 million for the nine months endedDecember 28, 2019 . Proceeds from sales of consumer loans provided$122.6 million in cash compared to$117.1 million in the previous year. We have entered into commercial loan arrangements with certain distributors of our products under which we provide funds for Wholesale purchases. In addition, we have entered into direct commercial loan arrangements with distributors, community owners and developers under which we provide funds for financing homes. We have also invested in community-based lending initiatives that provide home-only financing to new residents of certain manufactured home communities. For additional information regarding our commercial loans receivable, see Note 7 to the Consolidated Financial Statements. Further, we have invested in and developed home-only loan pools and lending programs to attract third party financier interest in order to grow sales of new homes through traditional distribution points. Investing activities consist of buying and selling debt and marketable equity securities in our Financial Services segment, purchases of property, plant and equipment and funding strategic growth acquisitions. Net cash for investing activities in the prior year was primarily used to fund the acquisition ofDestiny Homes . Financing activities used$17.6 million less cash during the period compared to the same period last year as we repurchased the 2007-1 securitized loan portfolio inAugust 2019 . CountryPlace entered into secured credit facilities with independent third-party banks. The proceeds were used to facilitate the origination of consumer home-only loans to be held for investment, secured by the manufactured homes which were subsequently pledged as collateral to the facilities. Upon completion of the draw down periods, these facilities were converted into an amortizing loan based on a 20-year amortization period with a balloon payment due upon maturity. As ofDecember 26, 2020 , the outstanding balance of the converted loans was$8.8 million with a weighted average interest rate of 4.91%. Contractual Commitments and Contingencies. There were no material changes to the contractual obligations as set forth in our Annual Report on Form 10-K. 31 -------------------------------------------------------------------------------- Table of Contents Critical Accounting Policies OnMarch 29, 2020 , we adopted Accounting Standards Update 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which changes the impairment model for most financial assets and certain other instruments. We adopted the standard by recognizing the cumulative effect of initially applying the new credit loss standard as an adjustment to the opening balance of Retained earnings. Refer to Note 1 to the Consolidated Financial Statements for additional discussion. There have been no other significant changes to our critical accounting policies during the nine months endedDecember 26, 2020 , as compared to those disclosed in Part II, Item 7 of our Form 10-K, under the heading "Critical Accounting Policies," which provides a discussion of the critical accounting policies that management believes affect its more significant judgments and estimates used in the preparation of the Company's Consolidated Financial Statements. Recent Accounting Pronouncements See Note 1 to the Consolidated Financial Statements for a discussion of recently issued and adopted accounting pronouncements. Other Matters Related Party Transactions. See Note 19 to the Consolidated Financial Statements for a discussion of our related party transactions. Off Balance Sheet Arrangements See Note 15 to the Consolidated Financial Statements for a discussion of our off-balance sheet commitments, which discussion is incorporated herein by reference. Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes from the quantitative and qualitative disclosures about market risk previously disclosed in the Form 10-K. Item 4. Controls and Procedures (a) Disclosure Controls and Procedures The Company carried out an evaluation, under the supervision and with the participation of the Company's management, including its President and Chief Executive Officer and its Principal Financial Officer, of the effectiveness of its disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, the Company's President and Chief Executive Officer and its Principal Financial Officer concluded that, as ofDecember 26, 2020 , its disclosure controls and procedures were effective. (b) Changes in Internal Control over Financial Reporting There have been no changes in the Company's internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the fiscal quarter endedDecember 26, 2020 which have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. 32
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