Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2023 | Aug. 04, 2023 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Jun. 30, 2023 | |
Document Transition Report | false | |
Entity Registrant Name | Legacy Housing Corporation | |
Entity File Number | 001-38761 | |
Entity Incorporation, State or Country Code | TX | |
Entity Tax Identification Number | 20-2897516 | |
Entity Address, Address Line One | 1600 Airport Freeway | |
Entity Address, Address Line Two | #100 | |
Entity Address, City or Town | Bedford | |
Entity Address, State or Province | TX | |
Entity Address, Postal Zip Code | 76022 | |
City Area Code | 817 | |
Local Phone Number | 799-4900 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | true | |
Entity Ex Transition Period | false | |
Entity Shell Company | false | |
Title of 12(b) Security | Common Stock ($0.001 par value) | |
Trading Symbol | LEGH | |
Security Exchange Name | NASDAQ | |
Entity Common Stock, Shares Outstanding | 24,391,596 | |
Entity Central Index Key | 0001436208 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2023 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false |
CONDENSED BALANCE SHEETS
CONDENSED BALANCE SHEETS - USD ($) $ in Thousands | Jun. 30, 2023 | Dec. 31, 2022 |
Current assets: | ||
Cash and cash equivalents | $ 1,531 | $ 2,818 |
Held to maturity securities | 8,412 | |
Accounts receivable, net | 5,514 | 4,873 |
Current portion of contracts - dealer financed | 23,589 | 29,441 |
Current portion of consumer loans receivable | 7,144 | 6,801 |
Current portion of notes receivable from mobile home parks ("MHP") | 12,499 | 9,670 |
Current portion of other notes receivable | 4,446 | 8,927 |
Inventories | 33,735 | 32,075 |
Prepaid expenses and other current assets | 4,238 | 4,064 |
Total current assets | 92,696 | 107,081 |
Contracts - dealer financed, net | 8,528 | 595 |
Consumer loans receivable, net | 138,866 | 132,208 |
Notes receivable from MHP, net | 153,643 | 133,072 |
Other notes receivable, net | 22,294 | 13,795 |
Inventories | 7,091 | 6,987 |
Other assets - leased mobile homes | 7,916 | 8,824 |
ROU assets - operating leases | 2,073 | 2,663 |
Other assets | 1,560 | 1,482 |
Property, plant and equipment, net | 31,112 | 30,106 |
Total assets | 465,779 | 436,813 |
Current liabilities: | ||
Accounts payable | 3,972 | 4,549 |
Accrued liabilities | 15,579 | 16,895 |
Customer deposits | 8,274 | 9,715 |
Escrow liability | 10,022 | 9,653 |
Operating lease obligations | 561 | 650 |
Lines of credit | 4,685 | |
Total current liabilities | 43,093 | 41,462 |
Longterm liabilities: | ||
Operating lease obligations, less current portion | 1,615 | 2,121 |
Lines of credit | 2,545 | |
Deferred income taxes, net | 2,862 | 3,065 |
Dealer incentive liability | 5,020 | 5,516 |
Total liabilities | 52,590 | 54,709 |
Commitments and contingencies (Note 14) | ||
Stockholders' equity: | ||
Preferred stock, $.001 par value, 10,000,000 shares authorized: no shares issued or outstanding | ||
Common stock, $.001 par value, 90,000,000 shares authorized; 24,836,862 and 24,814,695 issued and 24,391,797 and 24,369,630 outstanding at June 30, 2023 and December 31, 2022, respectively | 30 | 30 |
Treasury stock at cost, 445,065 shares at June 30, 2023 and December 31, 2022 | (4,477) | (4,477) |
Additional paid-in-capital | 181,042 | 180,555 |
Retained earnings | 236,594 | 205,996 |
Total stockholders' equity | 413,189 | 382,104 |
Total liabilities and stockholders' equity | $ 465,779 | $ 436,813 |
CONDENSED BALANCE SHEETS (Paren
CONDENSED BALANCE SHEETS (Parenthetical) - $ / shares | Jun. 30, 2023 | Dec. 31, 2022 |
CONDENSED BALANCE SHEETS | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 90,000,000 | 90,000,000 |
Common stock, shares issued | 24,836,862 | 24,814,695 |
Common stock, shares outstanding | 24,391,797 | 24,369,630 |
Treasury stock, shares | 445,065 | 445,065 |
CONDENSED STATEMENTS OF INCOME
CONDENSED STATEMENTS OF INCOME - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
Net revenue: | ||||
Product sales | $ 42,316 | $ 55,098 | $ 85,497 | $ 106,885 |
Consumer and MHP loans interest | 8,488 | 7,497 | 16,193 | 14,262 |
Other | 1,832 | 1,616 | 3,803 | 2,992 |
Total net revenue | 52,636 | 64,211 | 105,493 | 124,139 |
Operating expenses: | ||||
Cost of product sales | 29,709 | 37,411 | 58,670 | 71,138 |
Selling, general and administrative expenses | 5,527 | 5,901 | 10,938 | 13,560 |
Dealer incentive | (100) | 439 | 32 | 713 |
Income from operations | 17,500 | 20,460 | 35,853 | 38,728 |
Other income (expense): | ||||
Nonoperating interest income | 626 | 783 | 1,321 | 1,635 |
Miscellaneous, net | 159 | 17 | 912 | 603 |
Interest expense | (195) | (183) | (285) | (239) |
Total other | 590 | 617 | 1,948 | 1,999 |
Income before income tax expense | 18,090 | 21,077 | 37,801 | 40,727 |
Income tax expense | (3,070) | (3,816) | (6,505) | (7,375) |
Net income | $ 15,020 | $ 17,261 | $ 31,296 | $ 33,352 |
Weighted average shares outstanding: | ||||
Basic | 24,380,894 | 24,406,020 | 24,377,803 | 24,355,412 |
Diluted | 25,101,937 | 24,922,125 | 25,085,158 | 24,773,345 |
Net income per share: | ||||
Basic | $ 0.62 | $ 0.71 | $ 1.28 | $ 1.37 |
Diluted | $ 0.60 | $ 0.69 | $ 1.25 | $ 1.35 |
CONDENSED STATEMENTS OF CASH FL
CONDENSED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2023 | Jun. 30, 2022 | |
Operating activities: | ||
Net income | $ 31,296 | $ 33,352 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization expense | 849 | 880 |
Amortization of deferred revenue | (573) | (727) |
Amortization of treasury note discount | (76) | |
Amortization of lines of credit cost | 36 | |
Provision for accounts and notes receivable | 86 | 29 |
Provision for inventory | 45 | (117) |
Gain from sale of leased property | (507) | |
Amortization of operating lease right of use asset | (26) | |
Gain on disposal of treasury note | (12) | |
Share-based payment expense | 387 | 4,313 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (695) | (684) |
Consumer loans activity, net | (7,000) | (5,205) |
Notes receivable MHP activity, net | (23,339) | (19,169) |
Dealer inventory loan activity, net | (2,386) | (6,937) |
Inventories | (1,810) | (7,122) |
Prepaid expenses and other current assets | (288) | 146 |
Other assets | (10) | (4,265) |
Accounts payable and accrued liabilities | (1,894) | (3,939) |
Right of use activity, net | 20 | |
Customer deposits | (1,441) | 4,185 |
Escrow liability | 370 | 666 |
Dealer incentive liability | (496) | 638 |
Net cash used in operating activities | (7,464) | (3,956) |
Investing activities: | ||
Purchases of property, plant and equipment | (1,537) | (1,506) |
Proceeds from sale of leased property | 1,108 | |
Sale of investments - treasury notes | 8,500 | |
Issuance of notes receivable | (5,250) | (2,423) |
Notes receivable collections | 946 | 13,731 |
Collections from purchased loans | 170 | 270 |
Net cash provided by investing activities | 3,937 | 10,072 |
Financing activities: | ||
Proceeds from exercise of stock options | 100 | |
Proceeds from other liabilities | 2,525 | |
Proceeds from lines of credit | 42,242 | 62,863 |
Payments on lines of credit | (40,102) | (58,279) |
Net cash provided by financing activities | 2,240 | 7,109 |
Net (decrease) increase in cash and cash equivalents | (1,287) | 13,225 |
Cash and cash equivalents at beginning of period | 2,818 | 1,042 |
Cash and cash equivalents at end of period | 1,531 | 14,267 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 209 | 204 |
Cash paid for taxes | $ 10,395 | $ 9,601 |
CONDENSED STATEMENTS OF CHANGES
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) $ in Thousands | Common Stock Cumulative Effect, Period of Adoption, Adjusted Balance | Common Stock | Treasury stock Cumulative Effect, Period of Adoption, Adjusted Balance | Treasury stock | Additional paid-in-capital Cumulative Effect, Period of Adoption, Adjusted Balance | Additional paid-in-capital | Retained earnings Cumulative effect, period of adoption, adjustment | Retained earnings Cumulative Effect, Period of Adoption, Adjusted Balance | Retained earnings | Cumulative effect, period of adoption, adjustment | Cumulative Effect, Period of Adoption, Adjusted Balance | Total |
Beginning Balance at Dec. 31, 2021 | $ 25 | $ (4,477) | $ 175,623 | $ 138,223 | $ 309,394 | |||||||
Beginning Balance (in shares) at Dec. 31, 2021 | 24,654,621 | |||||||||||
Share based compensation expense and stock units vested | $ 4 | 4,003 | 4,007 | |||||||||
Share based compensation expense and stock units vested (in shares) | 158,571 | |||||||||||
Net income | 16,092 | 16,092 | ||||||||||
Ending Balance at Mar. 31, 2022 | $ 29 | (4,477) | 179,626 | 154,315 | 329,493 | |||||||
Ending Balance (in shares) at Mar. 31, 2022 | 24,813,192 | |||||||||||
Beginning Balance at Dec. 31, 2021 | $ 25 | (4,477) | 175,623 | 138,223 | 309,394 | |||||||
Beginning Balance (in shares) at Dec. 31, 2021 | 24,654,621 | |||||||||||
Net income | 33,352 | |||||||||||
Ending Balance at Jun. 30, 2022 | $ 29 | (4,477) | 179,932 | 171,576 | 347,060 | |||||||
Ending Balance (in shares) at Jun. 30, 2022 | 24,813,192 | |||||||||||
Beginning Balance at Mar. 31, 2022 | $ 29 | (4,477) | 179,626 | 154,315 | 329,493 | |||||||
Beginning Balance (in shares) at Mar. 31, 2022 | 24,813,192 | |||||||||||
Share based compensation expense and stock units vested | 306 | 306 | ||||||||||
Net income | 17,261 | 17,261 | ||||||||||
Ending Balance at Jun. 30, 2022 | $ 29 | (4,477) | 179,932 | 171,576 | 347,060 | |||||||
Ending Balance (in shares) at Jun. 30, 2022 | 24,813,192 | |||||||||||
Beginning Balance at Dec. 31, 2022 | $ 30 | $ 30 | $ (4,477) | (4,477) | $ 180,555 | 180,555 | $ (698) | $ 205,298 | 205,996 | $ (698) | $ 381,406 | $ 382,104 |
Beginning Balance (in shares) at Dec. 31, 2022 | 24,814,695 | 24,814,695 | 24,814,695 | |||||||||
Share based compensation expense and stock units vested | 191 | $ 191 | ||||||||||
Share based compensation expense and stock units vested (in shares) | 8,571 | |||||||||||
Net income | 16,276 | 16,276 | ||||||||||
Ending Balance at Mar. 31, 2023 | $ 30 | (4,477) | 180,746 | 221,574 | 397,873 | |||||||
Ending Balance (in shares) at Mar. 31, 2023 | 24,823,266 | |||||||||||
Beginning Balance at Dec. 31, 2022 | $ 30 | $ 30 | $ (4,477) | (4,477) | $ 180,555 | 180,555 | $ (698) | $ 205,298 | 205,996 | $ (698) | $ 381,406 | $ 382,104 |
Beginning Balance (in shares) at Dec. 31, 2022 | 24,814,695 | 24,814,695 | 24,814,695 | |||||||||
Net income | $ 31,296 | |||||||||||
Ending Balance at Jun. 30, 2023 | $ 30 | (4,477) | 181,042 | 236,594 | $ 413,189 | |||||||
Ending Balance (in shares) at Jun. 30, 2023 | 24,836,862 | 24,836,862 | ||||||||||
Beginning Balance at Mar. 31, 2023 | $ 30 | (4,477) | 180,746 | 221,574 | $ 397,873 | |||||||
Beginning Balance (in shares) at Mar. 31, 2023 | 24,823,266 | |||||||||||
Share based compensation expense and stock units vested | 196 | 196 | ||||||||||
Share based compensation expense and stock units vested (in shares) | 7,350 | |||||||||||
Proceeds from exercise of stock options | 100 | 100 | ||||||||||
Proceeds from exercise of stock options (in shares) | 6,246 | |||||||||||
Net income | 15,020 | 15,020 | ||||||||||
Ending Balance at Jun. 30, 2023 | $ 30 | $ (4,477) | $ 181,042 | $ 236,594 | $ 413,189 | |||||||
Ending Balance (in shares) at Jun. 30, 2023 | 24,836,862 | 24,836,862 |
NATURE OF OPERATIONS
NATURE OF OPERATIONS | 6 Months Ended |
Jun. 30, 2023 | |
NATURE OF OPERATIONS | |
NATURE OF OPERATIONS | 1. NATURE OF OPERATIONS Legacy Housing Corporation (referred herein as ”Legacy”, “we”, “our”, “us”, or the “Company”) was formed on January 1, 2018 as a Delaware corporation through a corporate conversion of Legacy Housing, Ltd. (the “Partnership”), a Texas limited partnership formed in May 2005. Effective December 31, 2019, the Company reincorporated from a Delaware corporation to a Texas corporation. The Company is headquartered in Bedford, Texas. The Company (1) manufactures and provides for the transport of mobile homes, (2) provides wholesale financing to dealers and mobile home parks, (3) provides retail financing to consumers and (4) is involved in financing and developing new manufactured home communities. The Company manufactures its mobile homes at plants located in Fort Worth, Texas, Commerce, Texas and Eatonton, Georgia. The Company relies on a network of dealers to market and sell its mobile homes. The Company also sells homes directly to dealers and mobile home parks. Basis of Presentation The accompanying unaudited interim condensed financial statements as of June 30, 2023 and for the three and six months ended June 30, 2023 and 2022, respectively, have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC") as required by Regulation S-X, Rule 8-03. In the opinion of management, the unaudited interim financial statements have been prepared on the same basis as the audited annual financial statements, and include all adjustments, consisting only of normal recurring adjustments, necessary for the fair statement of the Company's financial position for the periods presented. The results for the three and six months ended June 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023, or any other period. The accompanying balance sheet as of December 31, 2022 was derived from audited financial statements included in the Company's annual report on Form 10-K for the year ended December 31, 2022 (the “Form 10-K”), filed on March 15, 2023. The accompanying financial statements do not include all of the information and footnotes required by GAAP for annual financial statements. Accordingly, they should be read in conjunction with the audited financial statements and notes thereto included in the Form 10-K. Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period financial statements. These reclassifications had no effect on the previously reported net income. Use of Estimates The preparation of our financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of income and expenses during the reporting period. Material estimates that are susceptible to significant change in the near term primarily relate to the determination of accounts receivable, loans to mobile home parks, consumer loans, other notes receivable, inventory obsolescence, income taxes, fair value of financial instruments and contingent liabilities. Actual results could differ from these estimates. Revenue Recognition Product sales considered sales of homes to the independent dealer. Retail Store Sales are homes sold through Company-owned retail locations. Consignment Sales and Retail Sales may be financed by the Company, by a third party, or paid in cash. Revenue from product sales is recognized when the performance obligation under the terms of a contract with our customer is satisfied, which typically occurs upon delivery and transfer of title to the home, as this depicts when control of the promised good is transferred to our customers. For inventory financed sales, the independent dealer enters into a financing arrangement with the Company and is required to make monthly interest payments and an annual curtailment payment for the first two years. After three years, they are required to payoff any remaining principle balance. Interest income is separately recorded in the statement of income. For other financed sales by the Company, the individual customer enters into a sales and financing contract and is required to make a down payment. These financed sales contain a significant financing component and any interest income is separately recorded in the statement of income. Revenue is measured as the amount of consideration expected to be received in exchange for transferring the homes to the customers. Sales and other similar taxes collected concurrently with revenue-producing activities are excluded from revenue. The Company made an accounting policy election to account for any shipping and handling costs that occur after the transfer of control as a fulfillment cost that is accrued when control is transferred. Warranty obligations associated with the sale of a unit are assurance-type warranties for a period of twelve months that are a guarantee of the home’s intended functionality and, therefore, do not represent a distinct performance obligation within the context of the contract. The Company has elected to use the practical expedient to expense the incremental costs of obtaining a contract if the amortization period of the asset that the Company would have otherwise recognized is one year or less. Contract costs, which include commissions incurred related to the sale of homes, are expensed at the point-in-time when the related revenue is recognized. Warranty costs and contract costs are included in selling, general and administrative expenses in the statements of income. Warranty costs were $764 and $1,392 for the three and six months ended June 30, 2023, respectively, and $538 and $1,108 for the three and six months ended June 30, 2022, respectively. For the three months ended June 30, 2023 and 2022, mobile home park (“MHP”) sales to an independent third party and it’s affiliates accounted for $3,886 or 9.6% and $2,495 or 4.5% of our product sales, respectively, and sales to another independent third party and it’s affiliates accounted for $480 or 1.2% and $3,296 or 6.0% of our product sales, respectively. For the six months ended June 30, 2023 and 2022, MHP sales to an independent third party and it’s affiliates accounted for $9,534 or 11.8% and $4,471 or 4.2% of our product sales, respectively, and sales to another independent third party and it’s affiliates accounted for $2,449 or 3.0% and $6,194 or 5.8% of our product sales, respectively. No other customer accounted for more than 5.0% of our product sales. For the three months ended June 30, 2023 and 2022, product sales included $3,949 and $3,253 of costs relating to subcontracted production for commercial sales, reimbursed dealer expenses for consignment sales, and certain other similar costs incurred for retail store and commercial sales. subcontracted production for commercial sales, reimbursed dealer expenses for consignment sales, and certain other similar costs incurred for retail store and commercial sales Other revenue recognized when the deposit is forfeited by the customer. Revenue for service fees and miscellaneous income is recognized when the performance obligation is satisfied. Disaggregation of Revenue Three months ended Six months ended June 30, June 30, 2023 2022 2023 2022 Product sales: Direct sales $ 3,752 $ 11,745 $ 11,178 $ 22,608 Commercial sales 15,893 14,305 31,458 28,364 Inventory finance sales 15,675 20,247 29,290 40,287 Retail store sales 4,282 5,657 8,248 9,816 Other (1) 2,714 3,144 5,323 5,810 Total product sales 42,316 55,098 85,497 106,885 Consumer and MHP loans interest: Interest - consumer installment notes 4,825 4,701 9,482 9,158 Interest - MHP notes 3,663 2,796 6,711 5,104 Total consumer and MHP loans interest 8,488 7,497 16,193 14,262 Other (2) 1,832 1,616 3,803 2,992 Total net revenue $ 52,636 $ 64,211 $ 105,493 $ 124,139 (1) Other product sales revenue from ancillary products and services including parts, freight and other services (2) Other revenue includes dealer finance charges, contract forfeitures, lease income and other miscellaneous income Share-Based Compensation The Company accounts for share-based compensation in accordance with the provisions of Accounting Standards Codification (“ASC”) 718, Compensation—Stock Compensation The fair value of each option grant with only service-based conditions is estimated using the Black-Scholes pricing model. The fair value of each restricted stock unit (the ”RSU”) with only service-based conditions is calculated based on the closing price of the Company’s common stock on the grant date. The fair value of each RSU with market based conditions is estimated using the Monte-Carlo Simulation valuation model. The fair value of stock option awards on the date of grant is estimated using the Black-Scholes option pricing model, which requires the Company to make certain predictive assumptions. The risk-free interest rate is based on the implied yield of U.S. Treasury zero-coupon securities that correspond to the expected life of the award. The volatility is based on the Company’s historical volatility calculated monthly over the most recent five year period prior to the applicable grant date. Management concluded that this group is more characteristic of the Company’s business than a broad industry index. The expected life of awards granted represents the period of time that the awards are expected to be outstanding based on the “simplified” method, which can be utilized by companies that cannot reasonably estimate the expected life of options based on its historical award exercise experience. The Company does not expect to pay dividends on its common stock. The fair value of RSU awards with market based conditions on the date of grant is estimated using the Monte-Carlo Simulation valuation model, and the Company uses the following methods to determine its underlying assumptions: expected volatilities are based on the Company’s historic stock price volatility; the expected term of the awards is based on the performance measurement period; the risk-free interest rate is based on the U.S. Treasury bond yield issued with similar life terms to the expected life of the grant. Accounts Receivable Included in accounts receivable “net” are receivables from direct sales of mobile homes, sales of parts and supplies to customers, consignment fees and interest. Accounts receivable “dealer financed” are receivables for interest, fees and curtailments owed by dealers under their inventory finance agreements. Accounts receivables “net” are generally due within 30 days and are stated at amounts due from customers net of an allowance for doubtful accounts. Accounts receivables “dealer financed” are due upon receipt and are stated at amounts due from customers net of an allowance for doubtful accounts. Accounts outstanding longer than the contractual payment terms are considered past due. The Company determines the allowance by considering several factors, including the aging of the past due balance, the customer’s payment history, and the Company’s previous loss history. The Company establishes an allowance for doubtful accounts for amounts that are deemed to be uncollectible. On June 30, 2023 and December 31, 2022, the allowance for doubtful accounts totaled $333 and $279, respectively. Leased Property The Company offers mobile home park operators the opportunity to lease mobile homes for rent in lieu of purchasing the homes for cash or under a longer-term financing agreement. In this arrangement title to the mobile homes remains with the Company. The standard lease agreement is typically for 96 months or 120 months. Under the lease agreement, the lessee (mobile home park operator) uses the mobile homes as personal property to be rented at the lessee's mobile home park. The lessee makes monthly, periodic lease payments to the Company over the term of the lease. The lessee is responsible for maintaining the homes during the term of the lease. The lessee is also responsible for repairing any damage caused by force majeure events. At the end of the lease term or in the event of default, the lessee is required to deliver the homes to the Company with all improvements and in substantially the same condition as existed at the commencement of the lease. The lessee may terminate the lease on 30 days written notice and pay a lease termination fee equal to 10% of the remaining lease payments or six months’ rent, whichever is greater. The lessee has an option to purchase the homes at the end of the lease term for fair market value based on an agreed determination of fair market value by both parties using comparable sales, recent appraisal, or National Automobile Dealers Association official guidance. The lessee must provide the Company with 30 days written notice prior to expiration of the lease of intent to purchase the property for fair market value. The lease also includes a renewal option whereby the lessee has the option to extend the lease for an additional 48 months (the extended term) at the same terms and conditions as the original lease. The lessee must notify the Company of the intent to exercise this renewal option not less than six months prior to expiration of the lease term. The leased mobile homes are included in other assets on the Company’s balance sheet, capitalized at manufactured cost and depreciated over a 15 year useful life. Homes returned to the Company upon expiration of the lease or in the event of default will be sold by the Company through its standard sales and distribution channels. Depreciation expense for the leased property was $157 and $180 for the three months ended June 30, 2023 and 2022, respectively, and $317 and $340 for the six months ended June 30, 2023 and 2022, respectively. Future minimum lease income under all operating leases for each of the next five years at June 30, 2023, are as follows: 2023 $ 912 2024 1,825 2025 1,825 2026 1,825 2027 1,653 Thereafter 2,264 Total $ 10,304 Recent Accounting Pronouncements The Company has elected to use longer phase-in periods for the adoption of new or revised financial accounting standards under the JOBS Act as an emerging growth company. In June 2016, the FASB issued ASU 2016-13 Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments From time to time, new accounting pronouncements are issued by the FASB and other regulatory bodies that are adopted by the Company as of the specified effective dates. Unless otherwise discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company’s financial statements upon adoption. |
CONSUMER LOANS
CONSUMER LOANS | 6 Months Ended |
Jun. 30, 2023 | |
CONSUMER LOANS | |
CONSUMER LOANS | 2. CONSUMER LOANS Consumer loans result from financing transactions entered into with retail consumers of mobile homes sold through independent retailers and company-owned retail locations. Consumer loans receivable generally consist of the sales price and any additional financing fees, less the buyer’s down payment. Interest income is recognized monthly per the terms of the financing agreements. The average contractual interest rate per loan was approximately 13.3% and 13.4% as of June 30, 2023 and December 31, 2022, respectively. Consumer loans receivable have maturities that range from 2 to 30 years. Loan applications go through an underwriting process that considers credit history to evaluate the credit risk of the consumer. Interest rates on approved loans are determined based on consumer credit score, payment ability and down payment amount. The Company uses payment history to monitor the credit quality of the consumer loans on an ongoing basis. The Company may also receive escrow payments for property taxes and insurance included in its consumer loan collections. The liabilities associated with these escrow collections totaled $10,022 and $9,653 as of June 30, 2023 and December 31, 2022, respectively, and are included in escrow liability in the condensed balance sheets. Allowance for Loan Losses—Consumer Loans Receivable The allowance for loan losses reflects management’s estimate of losses inherent in the consumer loans that may be uncollectible based upon review and evaluation of the consumer loan portfolio as of the date of the balance sheet. An allowance for loan losses is determined after giving consideration to, among other things, the loan characteristics, including the financial condition of borrowers, the value and liquidity of collateral, delinquency and historical loss experience. The allowance for loan losses is comprised of two components: the general reserve and specific reserves. The Company’s calculation of the general reserve considers the historical loss rate for the last three years, adjusted for the estimated loss discovery period and any qualitative factors both internal and external to the Company. Specific reserves are determined based on probable losses on specific classified impaired loans. The Company’s policy is to place a loan on nonaccrual status when there is a clear indication that the borrower’s cash flow may not be sufficient to meet payments as they become due, which is normally when either principal or interest is past due and remains unpaid for more than 90 days. Management implemented this policy based on an analysis of historical data, current performance of loans and the likelihood of recovery once principal or interest payments became delinquent and were aged more than 90 days. Payments received on nonaccrual loans are accounted for on a cash basis, first to interest and then to principal, as long as the remaining book balance of the asset is deemed to be collectible. The accrual of interest resumes when the past due principal or interest payments are brought within 90 days of being current. Impaired loans are those loans where it is probable the Company will be unable to collect all amounts due under the terms of the loan agreement, including scheduled principal and interest payments. Impaired loans, or portions thereof, are charged off when deemed uncollectible. A loan is generally deemed impaired if it is more than 90 days past due on principal or interest, is in bankruptcy proceedings, or is in the process of repossession. A specific reserve is created for impaired loans based on the fair value of the underlying collateral, less estimated selling costs. The Company uses various factors to determine the value of the underlying collateral for impaired loans. These factors are: (1) the length of time the unit was unsold after construction; (2) the amount of time the house was occupied; (3) the cooperation level of the borrowers, i.e., loans requiring legal action or extensive field collection efforts; (4) units located on private property as opposed to a manufactured home park; (5) the length of time the borrower has lived in the house without making payments; (6) location, size, and market conditions; and (7) the experience and expertise of the particular dealer assisting in collection efforts. Collateral for repossessed loans is acquired through foreclosure or similar proceedings and is recorded at the estimated fair value of the home, less the costs to sell. At repossession, the fair value of the collateral is computed based on the historical recovery rates of previously charged off loans; the loan is charged off and the loss is charged to the allowance for loan losses. At each reporting period, the fair value of the collateral is adjusted to the lower of the amount recorded at repossession or the estimated sales price less estimated costs to sell, based on current information. Repossessed homes totaled $1,204 and $795 as of June 30, 2023 and December 31, 2022, respectively, and are included in other assets in the condensed balance sheets. Consumer loans receivable, net of allowance for loan losses and deferred financing fees, consists of the following: As of June 30, As of December 31, 2023 2022 Consumer loans receivable $ 149,368 $ 142,340 Loan discount and deferred financing fees (2,491) (2,501) Allowance for loan losses (867) (830) Consumer loans receivable, net $ 146,010 $ 139,009 The following table presents a detail of the activity in the allowance for loan losses: Three months ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Allowance for loan losses, beginning of period $ 816 $ 724 $ 830 $ 884 Provision for loan losses 7 55 (63) (257) Charge offs (recoveries) 44 (16) 100 136 Allowance for loan losses $ 867 $ 763 $ 867 $ 763 The following table presents loan loss and impairment detail for the consumer loans receivable portfolio: As of June 30, As of December 31, 2023 2022 Total consumer loans $ 149,368 $ 142,340 Allowance for loan losses $ 867 $ 830 Impaired loans individually evaluated for impairment $ 1,666 $ 1,610 Specific reserve against impaired loans $ 699 $ 612 Other loans collectively evaluated for allowance $ 147,702 $ 140,730 General allowance for loan losses $ 168 $ 218 As of June 30, 2023 and December 31, 2022, the total principal outstanding for consumer loans on nonaccrual status was $1,666 and $1,610, respectively. A detailed aging of consumer loans receivable that are past due as of June 30, 2023 and December 31, 2022 were as follows: As of June 30, As of December 31, 2023 % 2022 % Total consumer loans receivable $ 149,368 100.0 $ 142,340 100.0 Past due consumer loans: 31 - 60 days past due $ 1,217 0.8 $ 1,150 0.8 61 - 90 days past due 330 0.2 108 0.1 91 - 120 days past due 31 0.0 486 0.3 Greater than 120 days past due 1,635 1.1 1,255 0.9 Total past due $ 3,213 2.2 $ 2,999 2.1 |
NOTES RECEIVABLE FROM MOBILE HO
NOTES RECEIVABLE FROM MOBILE HOME PARKS | 6 Months Ended |
Jun. 30, 2023 | |
NOTES RECEIVABLE FROM MOBILE HOME PARKS | |
NOTES RECEIVABLE FROM MOBILE HOME PARKS | 3. NOTES RECEIVABLE FROM MOBILE HOME PARKS The notes receivable from mobile home parks (“MHP Notes”) relate to mobile homes sold to mobile home parks and financed through notes receivable. The MHP Notes have varying maturity dates and call for monthly principal and interest payments. The interest rate on the MHP Notes can be fixed or variable. Approximately $159 million of the MHP Notes have a fixed interest rate ranging from 6.9% to 12.25%. The remaining MHP Notes have a variable rate typically set at 4.0% above prime with a minimum of 8.0%. The average interest rate per loan was approximately 8.1% as of June 30, 2023 and December 31, 2022, with maturities that range from 1 to 10 years. The collateral underlying the MHP Notes are individual mobile homes which can be repossessed and resold. The MHP Notes are generally personally guaranteed by borrowers with substantial financial resources. The Company had concentrations of MHP Notes with three independent third-parties and their respective affiliates that equated to 16.1%, 16.5% and 28.4% of the principal balance outstanding, all of which was secured by the mobile homes, as of June 30, 2023. As of December 31, 2022, the Company had concentrations of MHP Notes with three independent third-parties and their respective affiliates that equated to 12.3%, 16.6% and 34.0% of the principal balance outstanding, all of which was secured by the mobile homes. MHP Notes are stated at amounts due from customers, net of allowance for loan losses. The Company determines the allowance by considering several factors, including the aging of the past due balance, the customer’s payment history, and the Company’s previous loss history. The Company establishes an allowance reserve composed of specific and general reserve amounts. As of June 30, 2023 and December 31, 2022, the MHP Notes balance is presented net of unamortized finance fees of $1,423 and $1,068, respectively. The finance fees are amortized over the life of the MHP Notes. There were minimal past due balances on the MHP Notes as of June 30, 2023 and December 31, 2022 and no charge offs were recorded for MHP Notes during the three and six months ended June 30, 2023 and 2022. The allowance for loan loss is $358 and $0 at June 30, 2023 and December 31, 2022, respectively. There were no impaired MHP Notes as of June 30, 2023 and December 31, 2022, and there was no repossessed homes balances as of June 30, 2023 and December 31, 2022. Collateral for repossessed loans is acquired through foreclosure or similar proceedings and is recorded at the estimated fair value of the home, less the costs to sell. |
OTHER NOTES RECEIVABLE
OTHER NOTES RECEIVABLE | 6 Months Ended |
Jun. 30, 2023 | |
OTHER NOTES RECEIVABLE | |
OTHER NOTES RECEIVABLE | 4. OTHER NOTES RECEIVABLE Other notes receivable relate to various notes issued to mobile home park owners and dealers, which are not directly tied to the sale of mobile homes. The other notes have varying maturity dates and call for monthly principal and interest payments. The other notes are collateralized by mortgages on real estate, units being financed and used as offices, as well as vehicles, and are typically personally guaranteed by the borrowers. The interest rate on the other notes are fixed and range from 5.00% to 17.90%. The Company reserves for estimated losses on the other notes based on current economic conditions that may affect the borrower’s ability to pay, the borrower’s financial strength, and historical loss experience. There were no past due balances for other notes as of June 30, 2023 and December 31, 2022, and there were no impaired balances for other notes as of June 30, 2023 and December 31, 2022. The balance outstanding on the other notes receivable were as follows: As of June 30, As of December 31, 2023 2022 Outstanding principal balance $ 26,971 $ 22,722 Allowance for loan losses (231) — Total $ 26,740 $ 22,722 |
LEASES
LEASES | 6 Months Ended |
Jun. 30, 2023 | |
LEASES | |
LEASES | 5. LEASES The Company currently has 13 operating leases, eight of which are for the Company’s Heritage Housing and Tiny Homes retail locations, three which are subleased by the Company and two of which are for corporate and administrative offices in Bedford, TX and Norcross, GA. These leases typically have initial terms ranging from 5 to 10 years and include one or more options to renew. We determine if an arrangement is a lease at inception. Operating leases are right-of-use (“ROU”) assets and are shown as ROU assets – operating leases on our condensed balance sheet. The lease liabilities are shown as operating lease obligations and operating lease obligations, less current portion on our condensed balance sheet. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. We have elected the practical expedient to not separate lease and non-lease components. Therefore, lease payments included in the measurement of the lease liability include all fixed payments under the lease agreement. We record a ROU asset for an amount equal to the lease liability, increased for any prepaid lease costs and initial direct costs and reduced by any lease incentives. We remeasure the lease liability and ROU asset when a change to our future minimum lease payments occurs. Key assumptions and judgments included in the determination of the lease liability include the discount rate used in the present value calculation and the exercise of renewal options. Many of our leases contain renewal options. As the exercise of the renewal options is not certain at commencement of a lease, we generally do not include the option periods in the lease term when determining the lease liabilities and ROU assets. We remeasure the lease liability and ROU asset when we are reasonably certain that we will exercise a renewal option. Our leases do not provide information about the rate implicit in the lease. Therefore, we utilize an incremental borrowing rate to calculate the present value of our future lease obligations. The incremental borrowing rate represents the rate of interest we would otherwise pay on a collateralized borrowing, for an amount equal to the lease payments, over a similar term and in a similar economic environment. The remaining weighted-average lease term is 4.19 years and the weighted-average discount rate is 2.10%. We consider lease payments that cannot be predicted with reasonable certainty upon lease commencement to be variable lease payments, which are recorded as incurred each period and are excluded from our calculation of lease liabilities. There were no variable lease costs for the three and six months ended June 30, 2023 and 2022. Short-term leases, defined as those with a term of 12 months or less, are not recorded on our Condensed Balance Sheet. Our short-term lease costs were not material for the three and six months ended June 30, 2023 and 2022. As of June 30, 2023, future minimum lease payments under our operating lease liabilities were as follows: 2023 $ 305 2024 534 2025 509 2026 446 2027 297 Thereafter 113 Total lease payments $ 2,204 Less amount representing interest (28) Total lease liability $ 2,176 Less current lease liability (561) Total non-current lease liability $ 1,615 |
INVENTORIES
INVENTORIES | 6 Months Ended |
Jun. 30, 2023 | |
INVENTORIES | |
INVENTORIES | 6 Inventories consists of the following: As of June 30, As of December 31, 2023 2022 Raw materials $ 14,482 $ 17,442 Work in progress 562 592 Finished goods, net of allowance (1) 25,783 21,028 Total $ 40,827 $ 39,062 (1) Finished goods includes $7,091 and $6,987 as of June 30 , 2023 and December 31, 2022 , respectively , held for more than twelve months and classified as long-term. |
PROPERTY, PLANT AND EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT | 6 Months Ended |
Jun. 30, 2023 | |
PROPERTY, PLANT AND EQUIPMENT | |
PROPERTY, PLANT AND EQUIPMENT | 7. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consists of the following: As of June 30, As of December 31, 2023 2022 Land $ 14,953 $ 14,953 Buildings and leasehold improvements 18,297 16,949 Vehicles 1,548 1,556 Machinery and equipment 5,918 5,750 Furniture and fixtures 329 300 Total 41,045 39,508 Less accumulated depreciation (9,933) (9,402) Total property, plant and equipment $ 31,112 $ 30,106 Depreciation expense was $269 with $124 included as a component of cost of product sales for the three months ended June 30, 2023, and $286 with $127 included as a component of cost of product sales for the three months ended June 30, 2022. Depreciation expense was $540 with $249 included as a component of cost of product sales for the six months ended June 30, 2023, and $563 with $248 included as a component of cost of product sales for the six months ended June 30, 2022. |
OTHER ASSETS
OTHER ASSETS | 6 Months Ended |
Jun. 30, 2023 | |
OTHER ASSETS. | |
OTHER ASSETS | 8. OTHER ASSETS Other assets consists of the following: As of June 30, As of December 31, 2023 2022 Stadium license $ 349 $ 349 Other 7 338 Repossessed homes 1,204 795 Total $ 1,560 $ 1,482 |
DEBT SECURITIES
DEBT SECURITIES | 6 Months Ended |
Jun. 30, 2023 | |
DEBT SECURITIES | |
DEBT SECURITIES | 9 Debt Securities have been classified according to management’s intent. The Company purchased US Treasury Notes in November 2022 that were scheduled to mature in November 2023. The Debt Securities were classified as held-to-maturity and the amortized costs are $8,412 at December 31, 2022. The Debt Securities were sold prior to maturity on June 22, 2023 at a discount of 99.0% and the proceeds were used to pay down the credit line. The Company recognized a gain of $12 when the Debt Securities were sold. |
ACCRUED LIABILITIES
ACCRUED LIABILITIES | 6 Months Ended |
Jun. 30, 2023 | |
ACCRUED LIABILITIES. | |
ACCRUED LIABILITIES | 10 Accrued liabilities consist of the following: As of June 30, As of December 31, 2023 2022 Warranty reserve $ 2,829 $ 3,049 Litigation reserve 515 753 Payroll 922 1,006 Portfolio taxes and title 1,781 1,610 Property tax 643 54 Dealer rebates 1,292 1,402 Sales tax 61 61 Federal and state income taxes 3,923 6,699 Other 3,613 2,261 Total accrued liabilities $ 15,579 $ 16,895 |
DEBT
DEBT | 6 Months Ended |
Jun. 30, 2023 | |
DEBT | |
DEBT | 11 Lines of Credit Revolver 1 On March 30, 2020, the Company entered into an agreement with Capital One, N.A. for a revolving line of credit (“Revolver”). The Revolver had a maximum credit limit of $70,000 and a maturity date of March 30, 2024. On June 21, 2022, the Company received a Reservation of Rights notice from Capital One, N.A. (“Capital One”). The letter stated that the Company’s Revolver was in default. The default condition occurred due to the Company’s failure to timely file the Form 10-K and deliver certain financial statements to Capital One. On July 28, 2022, the Company entered into a Limited Waiver and First Amendment to Credit Agreement (the “Amendment”) with Capital One. The Amendment replaced the LIBOR borrowing rate with a secured overnight financing rate (“SOFR”) and waived a default arising out of a monetary judgement against the Company that exceeded the amount allowed in the Revolver. On August 24, 2022, the Company received a Notice of Default and Partial Suspension of Loan Commitments from Capital One. The notice stated that the July 28, 2022 forbearance agreement had been terminated and that Capital One was suspending $50,000 of the $70,000 loan commitment under the Revolver. As a result, the available line of credit in the Revolver has been limited to $20,000. As of June 30, 2023, the Company was in compliance with all non-financial covenants. The Revolver accrues interest at one-month SOFR plus 2.00%. The interest rates in effect as of June 30, 2023 and December 31, 2022 are 7.17% and 6.12%, respectively. Amounts available under the Revolver are subject to a formula based on eligible consumer loans and MHP Notes and are secured by all accounts receivable, consumer loans and MHP Notes. The amount of available credit under the Revolver was $15,315 and $17,400 as of June 30, 2023 and December 31, 2022, respectively. In connection with the Revolver, the Company paid certain arrangement fees and other fees of approximately $295, which were capitalized as unamortized debt issuance costs and is being amortized to interest expense over the life of the Revolver. For the three months ended June 30, 2023 and 2022, interest expense under the Revolver was $195 and $182, respectively. For the six months ended June 30, 2023 and 2022, interest expense under the Revolver was $286 and $239, respectively. The outstanding balance as of June 30, 2023 and December 31, 2022 was $4,685 and $2,545 , respectively. The Revolver requires the Company to comply with certain financial and non-financial covenants. As of On July 28, 2023, the Company |
SHARE-BASED COMPENSATION
SHARE-BASED COMPENSATION | 6 Months Ended |
Jun. 30, 2023 | |
SHARE-BASED COMPENSATION | |
SHARE-BASED COMPENSATION | 12. SHARE-BASED COMPENSATION Pursuant to the Legacy Housing Corporation 2018 Incentive Compensation Plan (the “Compensation Plan”), the Company may issue up to 10.0 million equity awards to employees, directors, consultants and nonemployee service providers in the form of stock options, stock and stock appreciation rights. Stock options may be granted with a contractual life of up to ten years. At June 30, 2023, the Company had 9.7 million shares available for grant under the Compensation Plan. In February 2019, the Company granted 120,000 restricted shares of its common stock to members of senior management. The shares were granted on February 7, 2019 and had a grant date fair value of $1,636. The shares vest at a rate of 14.3% annually, beginning on February 7, 2019, and become fully vested on February 7, 2025. During the second quarter of 2020, 42,857 of these restricted shares were forfeited due to the departure of a member of senior management. In November 2021, the Company granted 1,202 restricted shares of its common stock to the independent directors on the Company’s Board of Directors. The shares were granted on November 30, 2021 and had a grant date fair value of $30. The shares became fully vested on October 24, 2022. In January 2022, the Company granted 150,000 restricted shares of its common stock to the Executive Chairman of the Company pursuant to an amended and restated employment agreement. The shares were granted on January 6, 2022 and had a grant date fair value of $3,741. The shares became fully vested upon grant. On January 6, 2022, the Company gave contingent equity awards of 350,000 shares of the Company’s restricted stock to the Executive Chairman of the Company pursuant to an amended and restated employment agreement. An equity award of 175,000 shares will be granted if the Company’s stock price closes at $36 per share for a period of fifteen fifteen On November 15, 2022, the Company entered into a rescission and relinquishment agreement (the “Rescission Agreement”) with the Executive Chairman. The Rescission Agreement allows the Executive Chairman to rescind and relinquish the $36 Equity Awards and the $48 Equity Awards granted under the amended and restated employment agreement and allows the Company to accept such rescission and relinquishment without penalty. The effective date of the Rescission Agreement was October 1, 2022. On June 7, 2022, the Company granted 14,700 restricted shares of its common stock to the Chief Executive Officer of the Company pursuant to an employment agreement. The shares were granted on June 7, 2022 and had a grant date fair value of $235. One On June 7, 2022, the Company granted 301 restricted shares of its common stock to an independent director on the Company’s Board of Directors. The shares were granted on June 7, 2022 and had a grant date fair value of $5. The shares became fully vested on October 24, 2022. In November 2022, the Company granted 1,734 restricted shares of its common stock to the independent directors on the Company’s Board of Directors. The shares were granted on November 29, 2022 and had a grant date fair value of $30. The shares become fully vested on October 23, 2023. The following is a summary of restricted stock units (the “RSU”) activity (in thousands, except per unit data): Number of Units Weighted Average Grant Date Fair Value Per Unit Nonvested, January 1, 2023 42 $ 14.61 Granted — $ — Vested (16) $ 14.73 Canceled — $ — Nonvested, June 30, 2023 26 $ 14.54 As of June 30, 2023, approximately 26,000 RSUs remained unvested. The unrecognized compensation expense related to these RSUs at June 30, 2023 was $309 and is expected to be recognized over 1.33 years. The Company granted 34,626 incentive stock options to a member of senior management. The options were granted on August 10, 2020 at an exercise price of $14.44 per share. The options vest at a rate of 20.0% annually, beginning on August 10, 2021, and become fully vested on August 10, 2025. All options expire ten years after the date of grant. Weighted-average assumptions used in the Black-Scholes option pricing model for stock options granted were as follows: risk free interest rate of 0.24%, dividend yield of 0.00%, expected volatility of common stock of 75.0% and expected life of options of 6.5 years. During the first quarter of 2022, 27,701 of these options were forfeited due to the individual’s departure. The Company granted 55,490 incentive stock options to a member of management. The options were granted on September 23, 2021 at an exercise price of $18.02 per share. The options vest at a rate of 10.0% annually, beginning on September 23, 2022, and become fully vested on September 23, 2031. All options expire ten years after the date of grant. Weighted-average assumptions used in the Black-Scholes option pricing model for stock options granted were as follows: risk free interest rate of 1.41%, dividend yield of 0.00%, expected volatility of common stock of 75.0% and expected life of options of 7.8 years. During the fourth quarter of 2022 The Company granted 62,460 incentive stock options to the Chief Executive Officer. The options were granted on June 7, 2022 at an exercise price of $16.01 per share. The options vest at a rate of 10.0% annually, beginning on June 7, 2023, and become fully vested on June 7, 2032. All options expire ten years after the date of grant. Weighted-average assumptions used in the Black-Scholes option pricing model for stock options granted were as follows: risk free interest rate of 2.98%, dividend yield of 0.00%, expected volatility of common stock of 45.7% and expected life of options of 7.8 years. The Company granted options to purchase 900,000 shares of the Company’s stock to the Chief Executive Officer. An option to purchase 300,000 shares of the Company’s stock was granted on June 7, 2022 at an exercise price of $36.00 per share and an option to purchase 600,000 shares of the Company’s stock was granted on June 7, 2022 at an exercise price of $48.00 per share. The options vest at a rate of 10.0% annually, beginning on June 7, 2023, and become fully vested on June 7, 2032. All options expire ten years after the date of grant. Weighted-average assumptions used in the Black-Scholes option pricing model for stock options granted were as follows: risk free interest rate of 2.98%, dividend yield of 0.00%, expected volatility of common stock of 45.7% and expected life of options of 7.8 years. The Company granted 62,460 incentive stock options to the Chief Financial Officer. The options were granted on June 7, 2022 at an exercise price of $16.01 per share. The options vest at a rate of 10.0% annually, beginning on June 7, 2023, and become fully vested on June 7, 2032. All options expire ten years after the date of grant. Weighted-average assumptions used in the Black-Scholes option pricing model for stock options granted were as follows: risk free interest rate of 2.98%, dividend yield of 0.00%, expected volatility of common stock of 45.7% and expected life of options of 7.8 years. The Company granted 22,104 incentive stock options to a member of management. The options were granted on June 22, 2023 at an exercise price of $22.62 per share. The options vest at a rate of 20.0% annually, beginning on June 22, 2023, and become fully vested on June 22, 2028. All options expire five years after the date of grant. Weighted-average assumptions used in the Black-Scholes option pricing model for stock options granted were as follows: risk free interest rate of 4.03%, dividend yield of 0.00%, expected volatility of common stock of 85.0% and expected life of options of 4.0 years. The following is a summary of option activity (number of units in thousands): Number of Units Weighted Average Exercise Price Per Unit Weighted Average Grant Date Fair Value Per Unit Weighted Average Remaining Contractual Life Aggregate Intrinsic Value Outstanding, January 1, 2022 83 $ 16.83 $ 12.27 9.36 Granted 1,025 $ 40.59 $ 4.99 9.94 Exercised — $ — $ — — Forfeited (28) $ 14.44 $ 8.67 — Outstanding, June 30, 2022 1,080 $ 39.43 $ 5.46 9.91 $ — Exercisable, June 30, 2022 — $ — $ — — $ — Outstanding, January 1, 2023 1,025 $ 40.59 $ 4.99 9.44 Granted 22 $ 22.62 $ 14.39 4.98 Exercised (6) $ 16.01 $ 8.57 8.95 Forfeited — $ — $ — — Outstanding, June 30, 2023 1,041 $ 40.21 $ 5.19 8.86 $ — Exercisable, June 30, 2023 6 $ 16.01 $ 8.57 8.95 $ 45 As of June 30, 2023, approximately 1,041,000 options remained nonvested. Unrecognized compensation expense related to these options at June 30, 2023 was $4,888 and is expected to be recognized over 8.86 years. |
INCOME TAXES
INCOME TAXES | 6 Months Ended |
Jun. 30, 2023 | |
INCOME TAXES | |
INCOME TAXES | 13. INCOME TAXES The provision for income tax expense for the three months ended June 30, 2023 and 2022 was $3,070 and $3,816, respectively and $6,505 and $7,375 for the six months ended June 30, 2023 and 2022, respectively. The effective tax rate for the three and six months ended June 30, 2023 was 17.0% and 17.2%, respectively. These rate differ from the federal statutory rate of 21% primarily due to a federal tax credit for energy efficient construction, partially offset by state income taxes. The effective tax rate for the three and six months ended June 30, 2022 was 18.1% and differs from the federal statutory rate of 21% primarily due to a federal tax credit for energy efficient construction, partially offset by state income taxes. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Jun. 30, 2023 | |
COMMITMENTS AND CONTINGENCIES | |
COMMITMENTS AND CONTINGENCIES | 14. COMMITMENTS AND CONTINGENCIES As of January 1, 2020, the Company instituted a self-insured health benefits plan with a stop-loss policy, which provides medical benefits to employees electing coverage under the plan. The Company reserves estimated costs for incurred but not reported medical claims and claim development. This reserve is based on historical experience and other assumptions, some of which are subjective. The Company will adjust its self-insured medical benefits reserve based on actual experience, estimated costs and changes to assumptions. As of June 30, 2023 and December 31, 2022, the Company had accrued a $219 and $149 liability for incurred but not reported claims, respectively. These accrued amounts are included in accrued liabilities on the condensed balance sheets. The Company is contingently liable under the terms of repurchase agreements with financial institutions that provide inventory financing for independent retailers that sell the Company’s products. These arrangements, which are customary in the industry, provide for the repurchase of products sold to retailers in the event of default by the retailer. The Company’s obligation under these repurchase agreements ceases upon the purchase of the home by the retail customer. The maximum amount for which the Company was liable under such agreements totaled $6,740 and $8,925 at June 30, 2023 and December 31, 2022, respectively, without reduction for the resale value of the homes. The Company considers its obligations on current contracts to be insignificant and accordingly has not recorded any reserve for repurchase commitment as of June 30, 2023 and December 31, 2022. Leases. 10-year 3-year 11-year Legal Matters The Company is party to certain legal proceedings that arise in the ordinary course and are incidental to its business. Certain of the claims pending against the Company in these proceedings allege, among other things, breach of contract and warranty, product liability and personal injury. The Company has determined that it is probable that it has some liability related to some of these claims. The Company has included legal reserves of $515 and $753 as of June 30, 2023 and December 31, 2022, respectively, in accrued liabilities on the accompanying condensed balance sheets. Although litigation is inherently uncertain, based on past experience and the information currently available, management does not believe that pending or threatened litigation will have a material adverse effect on the Company’s financial position, liquidity or results of operations. However, future events or circumstances currently unknown to management will determine whether the resolution of pending or threatened litigation or claims will ultimately have a material effect on the Company’s financial position, liquidity or results of operations in any future reporting periods. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 6 Months Ended |
Jun. 30, 2023 | |
FAIR VALUE MEASUREMENTS | |
FAIR VALUE MEASUREMENTS | 15. FAIR VALUE MEASUREMENTS The Company accounts for its investments and derivative instruments in accordance with ASC 820-10, Fair Value Measurement, Fair Value Measurement Level I Quoted prices are available in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level II Significant observable inputs other than quoted prices in active markets for which inputs to the valuation methodology include: (1) Quoted prices for similar assets or liabilities in active markets; (2) Quoted prices for identical or similar assets or liabilities in inactive markets; (3) Inputs other than quoted prices that are observable; and (4) Inputs that are derived principally from or corroborated by observable market data by correlation or other means. If the asset or liability has a specified (contractual) term, the Level II input must be observable for substantially the full term of the asset or liability. Level III Significant unobservable inputs that reflect an entity’s own assumptions that market participants would use in pricing the assets or liabilities. The asset or liability fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Fair Value of Financial Instruments The Company’s financial instruments consist primarily of cash and cash equivalents, investments in US Treasury Notes, accounts receivable, consumer loans, MHP Notes, other notes, accounts payable, lines of credit, notes payable, and the dealer portion of consumer loans. The carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable approximate their respective fair values because of the short-term maturities or expected settlement dates of these instruments. This is considered a Level I valuation technique. The investment in US Treasury Notes has quoted prices available in active markets that the Company can access at measurement dates. The US Treasury Notes were sold by the Company on June 22, 2023. The Company determined that the fair value of the investment in US Treasury Notes was approximately $8,409 compared to the book value of $8,412 as of December 31, 2022. This was considered a Level I valuation technique. The lines of credit, notes payable, part of the MHP Notes and part of the other notes receivables have variable interest rates that reflect market rates and their fair value approximates their carrying value. This is considered a Level II valuation technique. The Company also assessed the fair value of the consumer loans receivable, the fixed rate MHP Notes and the portion of other note receivables with fixed rates based on the discounted value of the remaining principal and interest cash flows. The Company determined that the fair value of the consumer loan portfolio was approximately $145,700 compared to the book value of $146,010 as of June 30, 2023, and a fair value of approximately $138,800 compared to the book value of $139,009 as of December 31, 2022. The Company determined that the fair value of the fixed rate MHP Notes was approximately $157,100 compared to the book value of $159,241 as of June 30, 2023, and a fair value of approximately $128,400 compared to the book value of $129,966 as of December 31, 2022. The Company determined that the fair value of the fixed rate other notes was approximately $26,100 compared to the book value of $26,740 as of June 30, 2023, and a fair value of approximately $21,600 compared to the book value of $22,722 as of December 31, 2022. This is a Level II valuation technique. |
EARNINGS PER SHARE
EARNINGS PER SHARE | 6 Months Ended |
Jun. 30, 2023 | |
EARNINGS PER SHARE | |
EARNINGS PER SHARE | 16. EARNINGS PER SHARE Basic earnings per common share (“EPS”) is computed based on the weighted-average number of common shares outstanding during each reporting period. Diluted EPS is based on the weighted-average number of common shares outstanding plus the number of additional shares that would have been outstanding had the dilutive common shares been issued. The following table reconciles the numerators and denominators used in the computations of both basic and diluted EPS. Three months ended Six months ended June 30, June 30, 2023 2022 2023 2022 Numerator: Net income (in 000's) $ 15,020 $ 17,261 $ 31,296 $ 33,352 Denominator: Basic weighted-average common shares outstanding 24,380,894 24,406,020 24,377,803 24,355,412 Effect of dilutive securities: Restricted stock grants 10,446 254,403 8,311 266,358 Stock options 710,597 261,702 699,044 151,575 Diluted weighted-average common shares outstanding 25,101,937 24,922,125 25,085,158 24,773,345 Earnings per share attributable to Legacy Housing Corporation Basic $ 0.62 $ 0.71 $ 1.28 $ 1.37 Diluted $ 0.60 $ 0.69 $ 1.25 $ 1.35 |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 6 Months Ended |
Jun. 30, 2023 | |
RELATED PARTY TRANSACTIONS | |
RELATED PARTY TRANSACTIONS | 17. RELATED PARTY TRANSACTIONS Bell Mobile Homes, a retailer owned by one of the Company’s significant owners, purchases manufactured homes from the Company. Accounts receivable balances due from Bell Mobile Homes were $0 as of June 30, 2023 and December 31, 2022. Accounts payable balances due to Bell Mobile Homes for maintenance and related services were $222 and $132 as of June 30, 2023 and December 31, 2022, respectively. Home sales to Bell Mobile Homes were $1,507 and $1,223 for the three months ended June 30, 2023 and 2022, respectively, and $1,987 and $1,855 for the six months ended June 30, 2023 and 2022, respectively. Shipley Bros., Ltd. (“Shipley Bros.”), a retailer owned by one of the Company’s significant shareholders, purchases manufactured homes from the Company. Home sales to Shipley Bros. were $252 and $1,018 for the three months ended June 30, 2023 and 2022, respectively, and $622 and $1,711 for the six months ended June 30, 2023 and 2022, respectively. Accounts receivable balances due from Shipley Bros. were $0 as of June 30, 2023 and December 31, 2022. There were no accounts payable balances due to Shipley Bros. as of June 30, 2023 and December 31, 2022. At June 30, 2023, the Company had a payable of $5 to a principal shareholder. This amount is included in the Company’s accounts payable balance as of June 30, 2023. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 6 Months Ended |
Jun. 30, 2023 | |
SUBSEQUENT EVENTS | |
SUBSEQUENT EVENTS | 18. SUBSEQUENT EVENTS On July 28, 2023, the Company entered into a new Credit Agreement (the “New Revolving Credit Agreement”), by and among the Company as borrower, the financial institutions from time to time party thereto, as lenders, and Prosperity Bank as administrative agent. The New Revolving Credit Agreement provides for a four-year senior secured revolving credit facility with an initial commitment of $50,000,000 and an additional $25,000,000 commitment under an accordion feature. The New Revolving Credit Agreement is secured by the Company’s consumer loans receivables and all escrow accounts associated with the consumer loans receivables. At the Company's option, borrowings will bear interest at a per annum rate equal to, (i) Term Secured Overnight Financing Rate (“SOFR”) plus an applicable margin of 2.5% or 2.75% based upon the Company's average quarterly borrowings under the New Revolving Credit Agreement or (ii) a base rate plus an applicable margin of 2.5% or 2.75% based upon the Company's average quarterly borrowings under the New Revolving Credit Agreement. On July 28, 2023, upon entry into the New Revolving Credit Agreement described above, the Capital One, N.A. revolving credit agreement was repaid in full, and all commitments thereunder were terminated. |
NATURE OF OPERATIONS (Policies)
NATURE OF OPERATIONS (Policies) | 6 Months Ended |
Jun. 30, 2023 | |
NATURE OF OPERATIONS | |
Basis of Presentation | Basis of Presentation The accompanying unaudited interim condensed financial statements as of June 30, 2023 and for the three and six months ended June 30, 2023 and 2022, respectively, have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission ("SEC") as required by Regulation S-X, Rule 8-03. In the opinion of management, the unaudited interim financial statements have been prepared on the same basis as the audited annual financial statements, and include all adjustments, consisting only of normal recurring adjustments, necessary for the fair statement of the Company's financial position for the periods presented. The results for the three and six months ended June 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023, or any other period. The accompanying balance sheet as of December 31, 2022 was derived from audited financial statements included in the Company's annual report on Form 10-K for the year ended December 31, 2022 (the “Form 10-K”), filed on March 15, 2023. The accompanying financial statements do not include all of the information and footnotes required by GAAP for annual financial statements. Accordingly, they should be read in conjunction with the audited financial statements and notes thereto included in the Form 10-K. Certain amounts in the prior period financial statements have been reclassified to conform to the presentation of the current period financial statements. These reclassifications had no effect on the previously reported net income. |
Use of Estimates | Use of Estimates The preparation of our financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of income and expenses during the reporting period. Material estimates that are susceptible to significant change in the near term primarily relate to the determination of accounts receivable, loans to mobile home parks, consumer loans, other notes receivable, inventory obsolescence, income taxes, fair value of financial instruments and contingent liabilities. Actual results could differ from these estimates. |
Revenue Recognition | Revenue Recognition Product sales considered sales of homes to the independent dealer. Retail Store Sales are homes sold through Company-owned retail locations. Consignment Sales and Retail Sales may be financed by the Company, by a third party, or paid in cash. Revenue from product sales is recognized when the performance obligation under the terms of a contract with our customer is satisfied, which typically occurs upon delivery and transfer of title to the home, as this depicts when control of the promised good is transferred to our customers. For inventory financed sales, the independent dealer enters into a financing arrangement with the Company and is required to make monthly interest payments and an annual curtailment payment for the first two years. After three years, they are required to payoff any remaining principle balance. Interest income is separately recorded in the statement of income. For other financed sales by the Company, the individual customer enters into a sales and financing contract and is required to make a down payment. These financed sales contain a significant financing component and any interest income is separately recorded in the statement of income. Revenue is measured as the amount of consideration expected to be received in exchange for transferring the homes to the customers. Sales and other similar taxes collected concurrently with revenue-producing activities are excluded from revenue. The Company made an accounting policy election to account for any shipping and handling costs that occur after the transfer of control as a fulfillment cost that is accrued when control is transferred. Warranty obligations associated with the sale of a unit are assurance-type warranties for a period of twelve months that are a guarantee of the home’s intended functionality and, therefore, do not represent a distinct performance obligation within the context of the contract. The Company has elected to use the practical expedient to expense the incremental costs of obtaining a contract if the amortization period of the asset that the Company would have otherwise recognized is one year or less. Contract costs, which include commissions incurred related to the sale of homes, are expensed at the point-in-time when the related revenue is recognized. Warranty costs and contract costs are included in selling, general and administrative expenses in the statements of income. Warranty costs were $764 and $1,392 for the three and six months ended June 30, 2023, respectively, and $538 and $1,108 for the three and six months ended June 30, 2022, respectively. For the three months ended June 30, 2023 and 2022, mobile home park (“MHP”) sales to an independent third party and it’s affiliates accounted for $3,886 or 9.6% and $2,495 or 4.5% of our product sales, respectively, and sales to another independent third party and it’s affiliates accounted for $480 or 1.2% and $3,296 or 6.0% of our product sales, respectively. For the six months ended June 30, 2023 and 2022, MHP sales to an independent third party and it’s affiliates accounted for $9,534 or 11.8% and $4,471 or 4.2% of our product sales, respectively, and sales to another independent third party and it’s affiliates accounted for $2,449 or 3.0% and $6,194 or 5.8% of our product sales, respectively. No other customer accounted for more than 5.0% of our product sales. For the three months ended June 30, 2023 and 2022, product sales included $3,949 and $3,253 of costs relating to subcontracted production for commercial sales, reimbursed dealer expenses for consignment sales, and certain other similar costs incurred for retail store and commercial sales. subcontracted production for commercial sales, reimbursed dealer expenses for consignment sales, and certain other similar costs incurred for retail store and commercial sales Other revenue recognized when the deposit is forfeited by the customer. Revenue for service fees and miscellaneous income is recognized when the performance obligation is satisfied. Disaggregation of Revenue Three months ended Six months ended June 30, June 30, 2023 2022 2023 2022 Product sales: Direct sales $ 3,752 $ 11,745 $ 11,178 $ 22,608 Commercial sales 15,893 14,305 31,458 28,364 Inventory finance sales 15,675 20,247 29,290 40,287 Retail store sales 4,282 5,657 8,248 9,816 Other (1) 2,714 3,144 5,323 5,810 Total product sales 42,316 55,098 85,497 106,885 Consumer and MHP loans interest: Interest - consumer installment notes 4,825 4,701 9,482 9,158 Interest - MHP notes 3,663 2,796 6,711 5,104 Total consumer and MHP loans interest 8,488 7,497 16,193 14,262 Other (2) 1,832 1,616 3,803 2,992 Total net revenue $ 52,636 $ 64,211 $ 105,493 $ 124,139 (1) Other product sales revenue from ancillary products and services including parts, freight and other services (2) Other revenue includes dealer finance charges, contract forfeitures, lease income and other miscellaneous income |
Share-Based Compensation | Share-Based Compensation The Company accounts for share-based compensation in accordance with the provisions of Accounting Standards Codification (“ASC”) 718, Compensation—Stock Compensation The fair value of each option grant with only service-based conditions is estimated using the Black-Scholes pricing model. The fair value of each restricted stock unit (the ”RSU”) with only service-based conditions is calculated based on the closing price of the Company’s common stock on the grant date. The fair value of each RSU with market based conditions is estimated using the Monte-Carlo Simulation valuation model. The fair value of stock option awards on the date of grant is estimated using the Black-Scholes option pricing model, which requires the Company to make certain predictive assumptions. The risk-free interest rate is based on the implied yield of U.S. Treasury zero-coupon securities that correspond to the expected life of the award. The volatility is based on the Company’s historical volatility calculated monthly over the most recent five year period prior to the applicable grant date. Management concluded that this group is more characteristic of the Company’s business than a broad industry index. The expected life of awards granted represents the period of time that the awards are expected to be outstanding based on the “simplified” method, which can be utilized by companies that cannot reasonably estimate the expected life of options based on its historical award exercise experience. The Company does not expect to pay dividends on its common stock. The fair value of RSU awards with market based conditions on the date of grant is estimated using the Monte-Carlo Simulation valuation model, and the Company uses the following methods to determine its underlying assumptions: expected volatilities are based on the Company’s historic stock price volatility; the expected term of the awards is based on the performance measurement period; the risk-free interest rate is based on the U.S. Treasury bond yield issued with similar life terms to the expected life of the grant. |
Accounts Receivable | Accounts Receivable Included in accounts receivable “net” are receivables from direct sales of mobile homes, sales of parts and supplies to customers, consignment fees and interest. Accounts receivable “dealer financed” are receivables for interest, fees and curtailments owed by dealers under their inventory finance agreements. Accounts receivables “net” are generally due within 30 days and are stated at amounts due from customers net of an allowance for doubtful accounts. Accounts receivables “dealer financed” are due upon receipt and are stated at amounts due from customers net of an allowance for doubtful accounts. Accounts outstanding longer than the contractual payment terms are considered past due. The Company determines the allowance by considering several factors, including the aging of the past due balance, the customer’s payment history, and the Company’s previous loss history. The Company establishes an allowance for doubtful accounts for amounts that are deemed to be uncollectible. On June 30, 2023 and December 31, 2022, the allowance for doubtful accounts totaled $333 and $279, respectively. |
Leased Property | Leased Property The Company offers mobile home park operators the opportunity to lease mobile homes for rent in lieu of purchasing the homes for cash or under a longer-term financing agreement. In this arrangement title to the mobile homes remains with the Company. The standard lease agreement is typically for 96 months or 120 months. Under the lease agreement, the lessee (mobile home park operator) uses the mobile homes as personal property to be rented at the lessee's mobile home park. The lessee makes monthly, periodic lease payments to the Company over the term of the lease. The lessee is responsible for maintaining the homes during the term of the lease. The lessee is also responsible for repairing any damage caused by force majeure events. At the end of the lease term or in the event of default, the lessee is required to deliver the homes to the Company with all improvements and in substantially the same condition as existed at the commencement of the lease. The lessee may terminate the lease on 30 days written notice and pay a lease termination fee equal to 10% of the remaining lease payments or six months’ rent, whichever is greater. The lessee has an option to purchase the homes at the end of the lease term for fair market value based on an agreed determination of fair market value by both parties using comparable sales, recent appraisal, or National Automobile Dealers Association official guidance. The lessee must provide the Company with 30 days written notice prior to expiration of the lease of intent to purchase the property for fair market value. The lease also includes a renewal option whereby the lessee has the option to extend the lease for an additional 48 months (the extended term) at the same terms and conditions as the original lease. The lessee must notify the Company of the intent to exercise this renewal option not less than six months prior to expiration of the lease term. The leased mobile homes are included in other assets on the Company’s balance sheet, capitalized at manufactured cost and depreciated over a 15 year useful life. Homes returned to the Company upon expiration of the lease or in the event of default will be sold by the Company through its standard sales and distribution channels. Depreciation expense for the leased property was $157 and $180 for the three months ended June 30, 2023 and 2022, respectively, and $317 and $340 for the six months ended June 30, 2023 and 2022, respectively. Future minimum lease income under all operating leases for each of the next five years at June 30, 2023, are as follows: 2023 $ 912 2024 1,825 2025 1,825 2026 1,825 2027 1,653 Thereafter 2,264 Total $ 10,304 |
Recent Accounting Pronouncements | Recent Accounting Pronouncements The Company has elected to use longer phase-in periods for the adoption of new or revised financial accounting standards under the JOBS Act as an emerging growth company. In June 2016, the FASB issued ASU 2016-13 Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments From time to time, new accounting pronouncements are issued by the FASB and other regulatory bodies that are adopted by the Company as of the specified effective dates. Unless otherwise discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company’s financial statements upon adoption. |
Fair Value Measurements | The Company accounts for its investments and derivative instruments in accordance with ASC 820-10, Fair Value Measurement, Fair Value Measurement Level I Quoted prices are available in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level II Significant observable inputs other than quoted prices in active markets for which inputs to the valuation methodology include: (1) Quoted prices for similar assets or liabilities in active markets; (2) Quoted prices for identical or similar assets or liabilities in inactive markets; (3) Inputs other than quoted prices that are observable; and (4) Inputs that are derived principally from or corroborated by observable market data by correlation or other means. If the asset or liability has a specified (contractual) term, the Level II input must be observable for substantially the full term of the asset or liability. Level III Significant unobservable inputs that reflect an entity’s own assumptions that market participants would use in pricing the assets or liabilities. The asset or liability fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company’s financial instruments consist primarily of cash and cash equivalents, investments in US Treasury Notes, accounts receivable, consumer loans, MHP Notes, other notes, accounts payable, lines of credit, notes payable, and the dealer portion of consumer loans. The carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable approximate their respective fair values because of the short-term maturities or expected settlement dates of these instruments. This is considered a Level I valuation technique. The investment in US Treasury Notes has quoted prices available in active markets that the Company can access at measurement dates. The US Treasury Notes were sold by the Company on June 22, 2023. The Company determined that the fair value of the investment in US Treasury Notes was approximately $8,409 compared to the book value of $8,412 as of December 31, 2022. This was considered a Level I valuation technique. The lines of credit, notes payable, part of the MHP Notes and part of the other notes receivables have variable interest rates that reflect market rates and their fair value approximates their carrying value. This is considered a Level II valuation technique. The Company also assessed the fair value of the consumer loans receivable, the fixed rate MHP Notes and the portion of other note receivables with fixed rates based on the discounted value of the remaining principal and interest cash flows. The Company determined that the fair value of the consumer loan portfolio was approximately $145,700 compared to the book value of $146,010 as of June 30, 2023, and a fair value of approximately $138,800 compared to the book value of $139,009 as of December 31, 2022. The Company determined that the fair value of the fixed rate MHP Notes was approximately $157,100 compared to the book value of $159,241 as of June 30, 2023, and a fair value of approximately $128,400 compared to the book value of $129,966 as of December 31, 2022. The Company determined that the fair value of the fixed rate other notes was approximately $26,100 compared to the book value of $26,740 as of June 30, 2023, and a fair value of approximately $21,600 compared to the book value of $22,722 as of December 31, 2022. This is a Level II valuation technique. |
NATURE OF OPERATIONS (Tables)
NATURE OF OPERATIONS (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
NATURE OF OPERATIONS | |
Schedule of disaggregation of revenue | Three months ended Six months ended June 30, June 30, 2023 2022 2023 2022 Product sales: Direct sales $ 3,752 $ 11,745 $ 11,178 $ 22,608 Commercial sales 15,893 14,305 31,458 28,364 Inventory finance sales 15,675 20,247 29,290 40,287 Retail store sales 4,282 5,657 8,248 9,816 Other (1) 2,714 3,144 5,323 5,810 Total product sales 42,316 55,098 85,497 106,885 Consumer and MHP loans interest: Interest - consumer installment notes 4,825 4,701 9,482 9,158 Interest - MHP notes 3,663 2,796 6,711 5,104 Total consumer and MHP loans interest 8,488 7,497 16,193 14,262 Other (2) 1,832 1,616 3,803 2,992 Total net revenue $ 52,636 $ 64,211 $ 105,493 $ 124,139 (1) Other product sales revenue from ancillary products and services including parts, freight and other services (2) Other revenue includes dealer finance charges, contract forfeitures, lease income and other miscellaneous income |
Schedule of future minimum lease income | Future minimum lease income under all operating leases for each of the next five years at June 30, 2023, are as follows: 2023 $ 912 2024 1,825 2025 1,825 2026 1,825 2027 1,653 Thereafter 2,264 Total $ 10,304 |
CONSUMER LOANS (Tables)
CONSUMER LOANS (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
CONSUMER LOANS | |
Schedule of consumer loans, net of allowance for loan losses and deferred financing fees | As of June 30, As of December 31, 2023 2022 Consumer loans receivable $ 149,368 $ 142,340 Loan discount and deferred financing fees (2,491) (2,501) Allowance for loan losses (867) (830) Consumer loans receivable, net $ 146,010 $ 139,009 |
Schedule of allowance for loan losses | Three months ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Allowance for loan losses, beginning of period $ 816 $ 724 $ 830 $ 884 Provision for loan losses 7 55 (63) (257) Charge offs (recoveries) 44 (16) 100 136 Allowance for loan losses $ 867 $ 763 $ 867 $ 763 |
Schedule of impaired and general reserve for allowance for loan losses | As of June 30, As of December 31, 2023 2022 Total consumer loans $ 149,368 $ 142,340 Allowance for loan losses $ 867 $ 830 Impaired loans individually evaluated for impairment $ 1,666 $ 1,610 Specific reserve against impaired loans $ 699 $ 612 Other loans collectively evaluated for allowance $ 147,702 $ 140,730 General allowance for loan losses $ 168 $ 218 |
Schedule of consumer loans receivable that are past due | As of June 30, As of December 31, 2023 % 2022 % Total consumer loans receivable $ 149,368 100.0 $ 142,340 100.0 Past due consumer loans: 31 - 60 days past due $ 1,217 0.8 $ 1,150 0.8 61 - 90 days past due 330 0.2 108 0.1 91 - 120 days past due 31 0.0 486 0.3 Greater than 120 days past due 1,635 1.1 1,255 0.9 Total past due $ 3,213 2.2 $ 2,999 2.1 |
OTHER NOTES RECEIVABLE (Tables)
OTHER NOTES RECEIVABLE (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
OTHER NOTES RECEIVABLE | |
Schedule of other notes receivable, net of allowance for loan losses and deferred financing fees | As of June 30, As of December 31, 2023 2022 Outstanding principal balance $ 26,971 $ 22,722 Allowance for loan losses (231) — Total $ 26,740 $ 22,722 |
LEASES (Tables)
LEASES (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
LEASES | |
Schedule of future minimum lease payments under operating lease liabilities | 2023 $ 305 2024 534 2025 509 2026 446 2027 297 Thereafter 113 Total lease payments $ 2,204 Less amount representing interest (28) Total lease liability $ 2,176 Less current lease liability (561) Total non-current lease liability $ 1,615 |
INVENTORIES (Tables)
INVENTORIES (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
INVENTORIES | |
Schedule of inventory | As of June 30, As of December 31, 2023 2022 Raw materials $ 14,482 $ 17,442 Work in progress 562 592 Finished goods, net of allowance (1) 25,783 21,028 Total $ 40,827 $ 39,062 (1) Finished goods includes $7,091 and $6,987 as of June 30 , 2023 and December 31, 2022 , respectively , held for more than twelve months and classified as long-term. |
PROPERTY, PLANT AND EQUIPMENT (
PROPERTY, PLANT AND EQUIPMENT (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
PROPERTY, PLANT AND EQUIPMENT | |
Schedule of property, plant and equipment | As of June 30, As of December 31, 2023 2022 Land $ 14,953 $ 14,953 Buildings and leasehold improvements 18,297 16,949 Vehicles 1,548 1,556 Machinery and equipment 5,918 5,750 Furniture and fixtures 329 300 Total 41,045 39,508 Less accumulated depreciation (9,933) (9,402) Total property, plant and equipment $ 31,112 $ 30,106 |
OTHER ASSETS (Tables)
OTHER ASSETS (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
OTHER ASSETS. | |
Schedule of Other assets | As of June 30, As of December 31, 2023 2022 Stadium license $ 349 $ 349 Other 7 338 Repossessed homes 1,204 795 Total $ 1,560 $ 1,482 |
ACCRUED LIABILITIES (Tables)
ACCRUED LIABILITIES (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
ACCRUED LIABILITIES. | |
Schedule of accrued liabilities | As of June 30, As of December 31, 2023 2022 Warranty reserve $ 2,829 $ 3,049 Litigation reserve 515 753 Payroll 922 1,006 Portfolio taxes and title 1,781 1,610 Property tax 643 54 Dealer rebates 1,292 1,402 Sales tax 61 61 Federal and state income taxes 3,923 6,699 Other 3,613 2,261 Total accrued liabilities $ 15,579 $ 16,895 |
SHARE-BASED COMPENSATION (Table
SHARE-BASED COMPENSATION (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
SHARE-BASED COMPENSATION | |
Schedule of restricted stock units activity | The following is a summary of restricted stock units (the “RSU”) activity (in thousands, except per unit data): Number of Units Weighted Average Grant Date Fair Value Per Unit Nonvested, January 1, 2023 42 $ 14.61 Granted — $ — Vested (16) $ 14.73 Canceled — $ — Nonvested, June 30, 2023 26 $ 14.54 |
Schedule of stock option activity | The following is a summary of option activity (number of units in thousands): Number of Units Weighted Average Exercise Price Per Unit Weighted Average Grant Date Fair Value Per Unit Weighted Average Remaining Contractual Life Aggregate Intrinsic Value Outstanding, January 1, 2022 83 $ 16.83 $ 12.27 9.36 Granted 1,025 $ 40.59 $ 4.99 9.94 Exercised — $ — $ — — Forfeited (28) $ 14.44 $ 8.67 — Outstanding, June 30, 2022 1,080 $ 39.43 $ 5.46 9.91 $ — Exercisable, June 30, 2022 — $ — $ — — $ — Outstanding, January 1, 2023 1,025 $ 40.59 $ 4.99 9.44 Granted 22 $ 22.62 $ 14.39 4.98 Exercised (6) $ 16.01 $ 8.57 8.95 Forfeited — $ — $ — — Outstanding, June 30, 2023 1,041 $ 40.21 $ 5.19 8.86 $ — Exercisable, June 30, 2023 6 $ 16.01 $ 8.57 8.95 $ 45 |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
EARNINGS PER SHARE | |
Summary of reconciliation of the numerators and denominators used in the computations of both basic and diluted EPS | Three months ended Six months ended June 30, June 30, 2023 2022 2023 2022 Numerator: Net income (in 000's) $ 15,020 $ 17,261 $ 31,296 $ 33,352 Denominator: Basic weighted-average common shares outstanding 24,380,894 24,406,020 24,377,803 24,355,412 Effect of dilutive securities: Restricted stock grants 10,446 254,403 8,311 266,358 Stock options 710,597 261,702 699,044 151,575 Diluted weighted-average common shares outstanding 25,101,937 24,922,125 25,085,158 24,773,345 Earnings per share attributable to Legacy Housing Corporation Basic $ 0.62 $ 0.71 $ 1.28 $ 1.37 Diluted $ 0.60 $ 0.69 $ 1.25 $ 1.35 |
NATURE OF OPERATIONS - Revenue
NATURE OF OPERATIONS - Revenue Recognition (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
Disaggregation of Revenue | ||||
Warranty costs | $ 764 | $ 538 | $ 1,392 | $ 1,108 |
Product sales | 42,316 | 55,098 | 85,497 | 106,885 |
Dealer commission, reimbursed dealer expenses and other similar costs | 3,949 | 3,253 | $ 6,573 | 6,252 |
Annual curtail payment period | 2 years | |||
Period required to pay off remaining principle balance | 3 years | |||
Revenue from contract with customer product and service benchmark | Customer concentration risk | Pertaining to independent third parties | ||||
Disaggregation of Revenue | ||||
Product sales | $ 3,886 | $ 2,495 | $ 9,534 | $ 4,471 |
Concentration risk percentage | 9.60% | 4.50% | 11.80% | 4.20% |
Revenue from contract with customer product and service benchmark | Customer concentration risk | Another independent third party and affiliates | ||||
Disaggregation of Revenue | ||||
Product sales | $ 480 | $ 3,296 | $ 2,449 | $ 6,194 |
Concentration risk percentage | 1.20% | 6% | 3% | 5.80% |
Minimum | ||||
Disaggregation of Revenue | ||||
Term of lease agreement | 96 months | 96 months | ||
Maximum | ||||
Disaggregation of Revenue | ||||
Term of lease agreement | 120 months | 120 months |
NATURE OF OPERATIONS - Disaggre
NATURE OF OPERATIONS - Disaggregation of Revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
Disaggregation of Revenue | ||||
Product sales | $ 42,316 | $ 55,098 | $ 85,497 | $ 106,885 |
Consumer and MHP loans interest: | ||||
Interest - consumer installments notes | 4,825 | 4,701 | ||
Interest - MHP notes | 3,663 | 2,796 | ||
Total consumer and MHP loans interest | 8,488 | 7,497 | 16,193 | 14,262 |
Other | 1,832 | 1,616 | 3,803 | 2,992 |
Total net revenue | 52,636 | 64,211 | $ 105,493 | $ 124,139 |
Direct sales | ||||
Disaggregation of Revenue | ||||
Product sales | 3,752 | 11,745 | ||
Commercial sales | ||||
Disaggregation of Revenue | ||||
Product sales | 15,893 | 14,305 | ||
Inventory finance sales | ||||
Disaggregation of Revenue | ||||
Product sales | 15,675 | 20,247 | ||
Retail store sales | ||||
Disaggregation of Revenue | ||||
Product sales | 4,282 | 5,657 | ||
Other | ||||
Disaggregation of Revenue | ||||
Product sales | $ 2,714 | $ 3,144 |
NATURE OF OPERATIONS - Share-Ba
NATURE OF OPERATIONS - Share-Based Compensation (Details) | 6 Months Ended |
Jun. 30, 2023 | |
NATURE OF OPERATIONS | |
Volatility period | 5 years |
NATURE OF OPERATIONS - Accounts
NATURE OF OPERATIONS - Accounts Receivable (Details) - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2023 | Dec. 31, 2022 | |
Accounts Receivable | ||
Credit period | 30 days | |
Allowance for doubtful accounts | $ 333 | $ 279 |
NATURE OF OPERATIONS - Leased P
NATURE OF OPERATIONS - Leased Property (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
Lessor, Description Of Leases [Line Items] | ||||
Notice period for lease termination | 30 days | |||
Termination fees as a percentage of remaining lease payments | 10% | |||
Number of month's rent to be paid | 6 months | |||
Notice period for purchase of property | 30 days | |||
Extended term of lease | 48 months | 48 months | ||
Notice period for exercise of renewal extension | 6 months | |||
Useful life | 15 years | |||
Depreciation expense on leased property | $ 157 | $ 180 | $ 317 | $ 340 |
Minimum | ||||
Lessor, Description Of Leases [Line Items] | ||||
Term of lease agreement | 96 months | 96 months | ||
Maximum | ||||
Lessor, Description Of Leases [Line Items] | ||||
Term of lease agreement | 120 months | 120 months |
NATURE OF OPERATIONS - Leased_2
NATURE OF OPERATIONS - Leased Property - Future minimum lease income (Details) $ in Thousands | Jun. 30, 2023 USD ($) |
Operating Leases, Future Minimum Payments Receivable [Abstract] | |
2023 | $ 912 |
2024 | 1,825 |
2025 | 1,825 |
2026 | 1,825 |
2027 | 1,653 |
Thereafter | 2,264 |
Total | $ 10,304 |
NATURE OF OPERATIONS - Recent A
NATURE OF OPERATIONS - Recent Accounting Pronouncements (Details) - USD ($) $ in Thousands | Jun. 30, 2023 | Dec. 31, 2022 |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Assets | $ 465,779 | $ 436,813 |
Liabilities | 52,590 | 54,709 |
Retained earnings | 236,594 | 205,996 |
Cumulative effect, period of adoption, adjustment | ASU 2016-13 | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Allowance for loan losses | 900 | |
Retained earnings | (698) | |
MHP Notes | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Allowance for loan losses | 358 | 0 |
MHP Notes | Cumulative effect, period of adoption, adjustment | ASU 2016-13 | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Allowance for loan losses | 225 | |
Dealer Financed Contracts [Member] | Cumulative effect, period of adoption, adjustment | ASU 2016-13 | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Allowance for loan losses | 187 | |
Other Note Receivable [Member] | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Allowance for loan losses | $ 231 | |
Other Note Receivable [Member] | Cumulative effect, period of adoption, adjustment | ASU 2016-13 | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Allowance for loan losses | $ 488 |
CONSUMER LOANS - Narrative (Det
CONSUMER LOANS - Narrative (Details) $ in Thousands | 6 Months Ended | 12 Months Ended |
Jun. 30, 2023 USD ($) item | Dec. 31, 2022 USD ($) | |
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Escrow liability | $ 10,022 | $ 9,653 |
Repossessed assets | $ 1,204 | $ 795 |
Consumer | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Average contractual interest rate | 13.30% | 13.40% |
Escrow liability | $ 10,022 | $ 9,653 |
Number of components comprising the allowance for loan losses | item | 2 | |
Number of years historical loss rate considers for calculation | 3 years | |
Repossessed assets | $ 1,204 | 795 |
Principal outstanding on consumer loans | $ 1,666 | $ 1,610 |
Minimum | Consumer | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Consumer loans receivable term | 2 years | |
Maximum | Consumer | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Consumer loans receivable term | 30 years |
CONSUMER LOANS - Consumer loans
CONSUMER LOANS - Consumer loans receivable, net (Details) - Consumer - USD ($) $ in Thousands | Jun. 30, 2023 | Mar. 31, 2023 | Dec. 31, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Dec. 31, 2021 |
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||
Consumer loans receivable | $ 149,368 | $ 142,340 | ||||
Loan discount and deferred financing fees | (2,491) | (2,501) | ||||
Allowance for loan losses | (867) | $ (816) | (830) | $ (763) | $ (724) | $ (884) |
Consumer loans receivable, net | $ 146,010 | $ 139,009 |
CONSUMER LOANS - Allowance for
CONSUMER LOANS - Allowance for loan losses (Details) - Consumer - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
Financing Receivable, Allowance for Credit Loss [Roll Forward] | ||||
Allowance for loan losses, beginning of period | $ 816 | $ 724 | $ 830 | $ 884 |
Provision for loan losses | 7 | 55 | (63) | (257) |
Charge offs (recoveries) | 44 | (16) | 100 | 136 |
Allowance for loan losses | $ 867 | $ 763 | $ 867 | $ 763 |
CONSUMER LOANS - Impaired and g
CONSUMER LOANS - Impaired and general reserve for allowance for loan losses (Details) - Consumer - USD ($) $ in Thousands | Jun. 30, 2023 | Mar. 31, 2023 | Dec. 31, 2022 | Jun. 30, 2022 | Mar. 31, 2022 | Dec. 31, 2021 |
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||
Total consumer loans | $ 149,368 | $ 142,340 | ||||
Allowance for loan losses | 867 | $ 816 | 830 | $ 763 | $ 724 | $ 884 |
Impaired loans individually evaluated for impairment | 1,666 | 1,610 | ||||
Specific reserve against impaired loans | 699 | 612 | ||||
Other loans collectively evaluated for allowance | 147,702 | 140,730 | ||||
General allowance for loan losses | $ 168 | $ 218 |
CONSUMER LOANS - Aging of consu
CONSUMER LOANS - Aging of consumer loans receivable (Details) - Consumer $ in Thousands | Jun. 30, 2023 USD ($) |
Past due consumer loans: | |
Consumer loans receivable | $ 149,368 |
Financial Asset, Past Due | |
Past due consumer loans: | |
Consumer loans receivable | 3,213 |
31 - 60 days past due | |
Past due consumer loans: | |
Consumer loans receivable | 1,217 |
61 - 90 days past due | |
Past due consumer loans: | |
Consumer loans receivable | 330 |
91 - 120 days past due | |
Past due consumer loans: | |
Consumer loans receivable | 31 |
Greater than 120 days past due | |
Past due consumer loans: | |
Consumer loans receivable | $ 1,635 |
NOTES RECEIVABLE FROM MOBILE _2
NOTES RECEIVABLE FROM MOBILE HOME PARKS (Details) $ in Thousands | 3 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2023 USD ($) | Jun. 30, 2022 USD ($) | Jun. 30, 2023 USD ($) item | Jun. 30, 2022 USD ($) | Dec. 31, 2022 USD ($) item | |
Notes Receivable | |||||
Repossessed Assets | $ 1,204 | $ 1,204 | $ 795 | ||
Notes Receivable from Mobile Home Parks | |||||
Notes Receivable | |||||
Note receivable with fixed rate of interest | $ 159,000 | $ 159,000 | |||
Interest rate spread (as a percent) | 4% | 4% | |||
Interest rate on the MHP Notes | 8.10% | 8.10% | |||
Impaired loans individually evaluated for impairment | $ 0 | $ 0 | $ 0 | ||
Repossessed Assets | 0 | 0 | 0 | ||
Unamortized finance fees | 1,423 | 1,423 | 1,068 | ||
Charge offs | 0 | $ 0 | 0 | $ 0 | |
Allowance for loan losses | $ 358 | $ 358 | $ 0 | ||
Notes Receivable from Mobile Home Parks | Credit concentration risk | Pertaining to independent third parties | |||||
Notes Receivable | |||||
Number of Independent third parties | item | 3 | 3 | |||
Notes Receivable from Mobile Home Parks | Credit concentration risk | Independent third party and affiliates one | |||||
Notes Receivable | |||||
Concentration risk percentage | 16.10% | 12.30% | |||
Notes Receivable from Mobile Home Parks | Credit concentration risk | Independent third party and affiliates two | |||||
Notes Receivable | |||||
Concentration risk percentage | 16.50% | 16.60% | |||
Notes Receivable from Mobile Home Parks | Credit concentration risk | Independent third party and affiliates three | |||||
Notes Receivable | |||||
Concentration risk percentage | 28.40% | 34% | |||
Minimum | Notes Receivable from Mobile Home Parks | |||||
Notes Receivable | |||||
Fixed rate of interest (as a percent) | 6.90% | ||||
Interest rate spread (as a percent) | 8% | 8% | |||
Term Of Notes Receivables | 1 year | ||||
Maximum | Notes Receivable from Mobile Home Parks | |||||
Notes Receivable | |||||
Fixed rate of interest (as a percent) | 12.25% | ||||
Term Of Notes Receivables | 10 years |
OTHER NOTES RECEIVABLE (Details
OTHER NOTES RECEIVABLE (Details) - Other note receivable - USD ($) $ in Thousands | Jun. 30, 2023 | Dec. 31, 2022 |
Notes Receivable | ||
Impaired loans individually evaluated for impairment | $ 0 | $ 0 |
Outstanding principal balance | 26,971 | 22,722 |
Allowance for loan losses | (231) | |
Total | 26,740 | 22,722 |
Financial Asset, Past Due [Member] | ||
Notes Receivable | ||
Outstanding principal balance | $ 0 | $ 0 |
Minimum | ||
Notes Receivable | ||
Interest rate on the other notes | 5% | |
Maximum | ||
Notes Receivable | ||
Interest rate on the other notes | 17.90% |
LEASES (Details)
LEASES (Details) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2023 USD ($) | Jun. 30, 2022 USD ($) | Jun. 30, 2023 USD ($) lease | Jun. 30, 2022 USD ($) | |
LEASES | ||||
Number of operating leases | 13 | |||
Number of operating leases subleased | 3 | |||
Operating lease, term of contract (in years) | 10 years | 10 years | ||
Options to renew | true | |||
Operating lease weighted average remaining lease term1 | 4 years 2 months 8 days | 4 years 2 months 8 days | ||
Weighted Average Discount Rate | 2.10% | 2.10% | ||
Variable lease cost | $ | $ 0 | $ 0 | $ 0 | $ 0 |
Minimum | ||||
LEASES | ||||
Operating lease, term of contract (in years) | 5 years | 5 years | ||
Maximum | ||||
LEASES | ||||
Operating lease, term of contract (in years) | 10 years | 10 years | ||
Heritage Housing and Tiny Homes retail locations | ||||
LEASES | ||||
Number of operating leases | 8 | |||
Corporate and administrative offices in Bedford, TX and Norcross, GA | ||||
LEASES | ||||
Number of operating leases subleased | 2 |
LEASES - Future minimum lease p
LEASES - Future minimum lease payments (Details) - USD ($) $ in Thousands | Jun. 30, 2023 | Dec. 31, 2022 |
LEASES | ||
2023 | $ 305 | |
2024 | 534 | |
2025 | 509 | |
2026 | 446 | |
2027 | 297 | |
Thereafter | 113 | |
Total lease payments | 2,204 | |
Less amount representing interest | (28) | |
Total lease liability | 2,176 | |
Less current lease liability | (561) | $ (650) |
Total non-current lease liability | $ 1,615 | $ 2,121 |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) $ in Thousands | Jun. 30, 2023 | Dec. 31, 2022 |
INVENTORIES | ||
Raw materials | $ 14,482 | $ 17,442 |
Work in progress | 562 | 592 |
Finished goods, net of allowance | 25,783 | 21,028 |
Total | 40,827 | 39,062 |
Inventories | $ 7,091 | $ 6,987 |
PROPERTY, PLANT AND EQUIPMENT_2
PROPERTY, PLANT AND EQUIPMENT (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | Dec. 31, 2022 | |
PROPERTY, PLANT AND EQUIPMENT | |||||
Total | $ 41,045 | $ 41,045 | $ 39,508 | ||
Less accumulated depreciation | (9,933) | (9,933) | (9,402) | ||
Total property, plant and equipment | 31,112 | 31,112 | 30,106 | ||
Depreciation expense | 269 | $ 286 | 540 | $ 563 | |
Cost of product sales | |||||
PROPERTY, PLANT AND EQUIPMENT | |||||
Depreciation expense | 124 | $ 127 | 249 | $ 248 | |
Land | |||||
PROPERTY, PLANT AND EQUIPMENT | |||||
Total | 14,953 | 14,953 | 14,953 | ||
Buildings and leasehold improvements | |||||
PROPERTY, PLANT AND EQUIPMENT | |||||
Total | 18,297 | 18,297 | 16,949 | ||
Vehicles | |||||
PROPERTY, PLANT AND EQUIPMENT | |||||
Total | 1,548 | 1,548 | 1,556 | ||
Machinery and equipment | |||||
PROPERTY, PLANT AND EQUIPMENT | |||||
Total | 5,918 | 5,918 | 5,750 | ||
Furniture and fixtures | |||||
PROPERTY, PLANT AND EQUIPMENT | |||||
Total | $ 329 | $ 329 | $ 300 |
OTHER ASSETS (Details)
OTHER ASSETS (Details) - USD ($) $ in Thousands | Jun. 30, 2023 | Dec. 31, 2022 |
OTHER ASSETS. | ||
Stadium License | $ 349 | $ 349 |
Other | 7 | 338 |
Repossessed homes | 1,204 | 795 |
Total | $ 1,560 | $ 1,482 |
DEBT SECURITIES (Details)
DEBT SECURITIES (Details) - USD ($) $ in Thousands | 6 Months Ended | ||
Jun. 22, 2023 | Jun. 30, 2023 | Dec. 31, 2022 | |
DEBT SECURITIES | |||
Held to maturity securities | $ 8,412 | ||
percentage of discount on debt securities sold | 99% | ||
Gain on sale of debt securities | $ 12 | $ 12 |
ACCRUED LIABILITIES (Details)
ACCRUED LIABILITIES (Details) - USD ($) $ in Thousands | Jun. 30, 2023 | Dec. 31, 2022 |
ACCRUED LIABILITIES. | ||
Warranty reserve | $ 2,829 | $ 3,049 |
Litigation reserve | 515 | 753 |
Payroll | 922 | 1,006 |
Portfolio taxes and title | 1,781 | 1,610 |
Property tax | 643 | 54 |
Dealer rebates | 1,292 | 1,402 |
Sales tax | 61 | 61 |
Federal and state income taxes | 3,923 | 6,699 |
Other | 3,613 | 2,261 |
Total accrued liabilities | $ 15,579 | $ 16,895 |
DEBT - Lines of Credit (Details
DEBT - Lines of Credit (Details) - Revolver 1 - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | Dec. 31, 2022 | Jul. 28, 2022 | Mar. 30, 2020 | |
Lines of Credit | |||||||
Maximum borrowing capacity | $ 70,000 | ||||||
Effective interest rate | 7.17% | 7.17% | 6.12% | ||||
Amount of available credit | $ 15,315 | $ 15,315 | $ 17,400 | ||||
Interest expense | 195 | $ 182 | 286 | $ 239 | |||
Outstanding balance | 4,685 | 4,685 | $ 2,545 | ||||
Tangible net worth | 120,000 | $ 120,000 | |||||
Debt to EBITDA ratio | 4 | ||||||
Deferred debt issuance costs | $ 295 | $ 295 | |||||
Borrowing amount suspended | $ 50,000 | ||||||
Current borrowing capacity | $ 20,000 | ||||||
SOFR | |||||||
Lines of Credit | |||||||
Spread rate | 2% |
SHARE-BASED COMPENSATION - Plan
SHARE-BASED COMPENSATION - Plan (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | |||||||||
Jun. 22, 2023 | Nov. 29, 2022 | Nov. 15, 2022 | Jun. 07, 2022 | Jan. 06, 2022 | Nov. 30, 2021 | Sep. 23, 2021 | Aug. 10, 2020 | Feb. 07, 2019 | Jun. 30, 2020 | Jun. 30, 2023 | |
SHARE-BASED COMPENSATION | |||||||||||
Number of shares may be issued to employees, directors, consultants and nonemployee service providers in the form of stock options, stock and stock appreciation rights | 10,000,000 | ||||||||||
Number of shares available for grant | 9,700,000 | ||||||||||
Stock options | |||||||||||
SHARE-BASED COMPENSATION | |||||||||||
Contractual life | 10 years | ||||||||||
Stock options | Management | |||||||||||
SHARE-BASED COMPENSATION | |||||||||||
Contractual life | 5 years | 10 years | 10 years | ||||||||
Vesting percentage | 20% | 10% | 20% | ||||||||
Stock options | Chief Executive Officer | |||||||||||
SHARE-BASED COMPENSATION | |||||||||||
Contractual life | 10 years | ||||||||||
Vesting percentage | 10% | ||||||||||
Restricted shares | Management | |||||||||||
SHARE-BASED COMPENSATION | |||||||||||
Restricted shares granted (in shares) | 120,000 | ||||||||||
Grant date fair value | $ 1,636 | ||||||||||
Vesting percentage | 14.30% | ||||||||||
Restricted shares forfeited (in shares) | 42,857 | ||||||||||
Restricted shares | Independent directors | |||||||||||
SHARE-BASED COMPENSATION | |||||||||||
Restricted shares granted (in shares) | 1,734 | 301 | 1,202 | ||||||||
Grant date fair value | $ 30 | $ 5 | $ 30 | ||||||||
Restricted shares | Executive Chairman | |||||||||||
SHARE-BASED COMPENSATION | |||||||||||
Restricted shares granted (in shares) | 150,000 | ||||||||||
Grant date fair value | $ 3,741 | ||||||||||
Restricted shares | Chief Executive Officer | |||||||||||
SHARE-BASED COMPENSATION | |||||||||||
Restricted shares granted (in shares) | 14,700 | ||||||||||
Grant date fair value | $ 235 | ||||||||||
Vesting percentage | 50% | ||||||||||
Contingent equity awards | $36 Equity Award | |||||||||||
SHARE-BASED COMPENSATION | |||||||||||
Restricted shares granted (in shares) | 175,000 | ||||||||||
Threshold market days remained granted | 15 days | ||||||||||
Granted (in dollars per share) | $ 36 | $ 36 | |||||||||
Grant date fair value | $ 1,412 | ||||||||||
Contingent equity awards | $36 Equity Award | Vested on June 16, 2024 | |||||||||||
SHARE-BASED COMPENSATION | |||||||||||
Vesting percentage | 50% | ||||||||||
Contingent equity awards | $48 Equity Award | |||||||||||
SHARE-BASED COMPENSATION | |||||||||||
Restricted shares granted (in shares) | 175,000 | ||||||||||
Threshold market days remained granted | 15 days | ||||||||||
Granted (in dollars per share) | $ 48 | $ 48 | |||||||||
Grant date fair value | $ 683 | ||||||||||
Contingent equity awards | $48 Equity Award | Vested at granted | |||||||||||
SHARE-BASED COMPENSATION | |||||||||||
Vesting percentage | 50% | ||||||||||
Contingent equity awards | Executive Chairman | |||||||||||
SHARE-BASED COMPENSATION | |||||||||||
Restricted shares granted (in shares) | 350,000 |
SHARE-BASED COMPENSATION - Rest
SHARE-BASED COMPENSATION - Restricted stock units (Details) - Restricted stock units $ / shares in Units, $ in Thousands | 6 Months Ended |
Jun. 30, 2023 USD ($) $ / shares shares | |
Number of units | |
Nonvested at the beginning | shares | 42,000 |
Vested | shares | (16,000) |
Nonvested at the end | shares | 26,000 |
Weighted average grant date fair value | |
Nonvested at the beginning (in dollars per share) | $ / shares | $ 14.61 |
Vested (in dollars per share) | $ / shares | 14.73 |
Nonvested at the end (in dollars per share) | $ / shares | $ 14.54 |
Unrecognized compensation expense | $ | $ 309 |
Unrecognized compensation expense, recognition period | 1 year 3 months 29 days |
SHARE-BASED COMPENSATION - Stoc
SHARE-BASED COMPENSATION - Stock options (Details) - $ / shares | 3 Months Ended | 6 Months Ended | ||||||
Jun. 22, 2023 | Jun. 07, 2022 | Sep. 23, 2021 | Aug. 10, 2020 | Dec. 31, 2022 | Mar. 31, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
Stock options | ||||||||
SHARE-BASED COMPENSATION | ||||||||
Stock options granted (in shares) | 22,000 | 1,025,000 | ||||||
Exercise price (in dollar per share) | $ 22.62 | $ 40.59 | ||||||
Stock option forfeited (in shares) | 28,000 | |||||||
Fair value assumptions for options granted | ||||||||
Expiration period | 10 years | |||||||
Stock options | Management | ||||||||
SHARE-BASED COMPENSATION | ||||||||
Stock options granted (in shares) | 22,104 | 55,490 | 34,626 | |||||
Exercise price (in dollar per share) | $ 22.62 | $ 18.02 | $ 14.44 | |||||
Vesting percentage | 20% | 10% | 20% | |||||
Stock option forfeited (in shares) | 55,490 | 27,701 | ||||||
Fair value assumptions for options granted | ||||||||
Risk free interest rate | 4.03% | 1.41% | 0.24% | |||||
Dividend yield | 0% | 0% | 0% | |||||
Expected volatility | 85% | 75% | 75% | |||||
Expiration period | 5 years | 10 years | 10 years | |||||
Expected life | 4 years | 7 years 9 months 18 days | 6 years 6 months | |||||
Stock options | Chief Executive Officer | ||||||||
SHARE-BASED COMPENSATION | ||||||||
Stock options granted (in shares) | 900,000 | |||||||
Vesting percentage | 10% | |||||||
Fair value assumptions for options granted | ||||||||
Risk free interest rate | 2.98% | |||||||
Dividend yield | 0% | |||||||
Expected volatility | 45.70% | |||||||
Expiration period | 10 years | |||||||
Expected life | 7 years 9 months 18 days | |||||||
Stock options | Chief Executive Officer | Tranche One | ||||||||
SHARE-BASED COMPENSATION | ||||||||
Stock options granted (in shares) | 300,000 | |||||||
Exercise price (in dollar per share) | $ 36 | |||||||
Stock options | Chief Executive Officer | Tranche Two | ||||||||
SHARE-BASED COMPENSATION | ||||||||
Stock options granted (in shares) | 600,000 | |||||||
Exercise price (in dollar per share) | $ 48 | |||||||
Incentive stock options | Chief Executive Officer | ||||||||
SHARE-BASED COMPENSATION | ||||||||
Stock options granted (in shares) | 62,460 | |||||||
Exercise price (in dollar per share) | $ 16.01 | |||||||
Vesting percentage | 10% | |||||||
Fair value assumptions for options granted | ||||||||
Risk free interest rate | 2.98% | |||||||
Dividend yield | 0% | |||||||
Expected volatility | 45.70% | |||||||
Expiration period | 10 years | |||||||
Expected life | 7 years 9 months 18 days | |||||||
Incentive stock options | Chief Financial Officer | ||||||||
SHARE-BASED COMPENSATION | ||||||||
Stock options granted (in shares) | 62,460 | |||||||
Exercise price (in dollar per share) | $ 16.01 | |||||||
Vesting percentage | 10% | |||||||
Fair value assumptions for options granted | ||||||||
Risk free interest rate | 2.98% | |||||||
Dividend yield | 0% | |||||||
Expected volatility | 45.70% | |||||||
Expiration period | 10 years | |||||||
Expected life | 7 years 9 months 18 days |
SHARE-BASED COMPENSATION - Summ
SHARE-BASED COMPENSATION - Summary of Stock options activity (Details) - Stock options - USD ($) $ / shares in Units, $ in Thousands | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Dec. 31, 2022 | Dec. 31, 2021 | |
Number of units | ||||
Outstanding | 1,025,000 | 83,000 | 83,000 | |
Granted | 22,000 | 1,025,000 | ||
Exercised | (6,000) | |||
Forfeited | (28,000) | |||
Outstanding | 1,041,000 | 1,080,000 | 1,025,000 | 83,000 |
Exercisable | 6,000 | |||
Weighted Average Exercise Price Per Unit | ||||
Outstanding at the beginning (in dollars per share) | $ 40.59 | $ 16.83 | $ 16.83 | |
Granted (in dollars per share) | 22.62 | 40.59 | ||
Exercised (in dollars per share) | 16.01 | |||
Forfeited (in dollars per share) | 14.44 | |||
Outstanding at the end (in dollars per share) | 40.21 | 39.43 | 40.59 | $ 16.83 |
Exercisable (in dollars per share) | 16.01 | |||
Weighted Average Grant Date Fair Value Per Unit | ||||
Outstanding at the beginning (in dollars per share) | 4.99 | 12.27 | 12.27 | |
Granted (in dollars per share) | 14.39 | 4.99 | ||
Exercised (in dollars per share) | 8.57 | |||
Forfeited (in dollars per share) | 8.67 | |||
Outstanding at the end (in dollars per share) | 5.19 | $ 5.46 | $ 4.99 | $ 12.27 |
Exercisable (in dollars per share) | $ 8.57 | |||
Weighted Average Remaining Contractual Life and Aggregate Intrinsic Value | ||||
Outstanding (in years) | 8 years 10 months 9 days | 9 years 10 months 28 days | 9 years 5 months 8 days | 9 years 4 months 9 days |
Granted (in years) | 4 years 11 months 23 days | 9 years 11 months 8 days | ||
Exercisable (in years) | 8 years 11 months 12 days | |||
Exercisable (in dollars) | $ 45 | |||
Non-vested shares | 1,041,000 | |||
Unrecognized compensation expense | $ 4,888 | |||
Unrecognized compensation expense, recognition period | 8 years 10 months 9 days |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
INCOME TAXES | ||||
Tax expense | $ 3,070 | $ 3,816 | $ 6,505 | $ 7,375 |
Effective tax rate (as a percent) | 17% | 18.10% | 17.20% | 18.10% |
Federal statutory rate | 21% | 21% | 21% | 21% |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) - USD ($) $ in Thousands | Jun. 30, 2023 | Dec. 31, 2022 |
Commitment | ||
Self-insured liability | $ 219 | $ 149 |
Repurchase agreements | Maximum | ||
Commitment | ||
Repurchase commitment | $ 6,740 | $ 8,925 |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Leases (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
Operating Leased Assets [Line Items] | ||||
Operating lease, term of contract (in years) | 10 years | 10 years | ||
Rent expense | $ 141 | $ 176 | $ 323 | $ 339 |
Sublease rental income | $ 39 | $ 55 | $ 95 | $ 110 |
Minimum | ||||
Operating Leased Assets [Line Items] | ||||
Operating lease, term of contract (in years) | 5 years | 5 years | ||
Sublease, term of contract (in years) | 3 years | |||
Maximum | ||||
Operating Leased Assets [Line Items] | ||||
Operating lease, term of contract (in years) | 10 years | 10 years | ||
Sublease, term of contract (in years) | 11 years |
COMMITMENTS AND CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES - Legal Matters (Details) - USD ($) $ in Thousands | Jun. 30, 2023 | Dec. 31, 2022 |
COMMITMENTS AND CONTINGENCIES | ||
Legal reserves | $ 515 | $ 753 |
FAIR VALUE MEASUREMENTS - Fair
FAIR VALUE MEASUREMENTS - Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands | Jun. 30, 2023 | Dec. 31, 2022 |
Fair Value | Level 1 | US Treasury Notes | ||
Receivables, Fair Value Disclosure [Abstract] | ||
Debt securities | $ 8,409 | |
Fair Value | Level 2 | Consumer Loan | ||
Receivables, Fair Value Disclosure [Abstract] | ||
Loans | $ 145,700 | 138,800 |
Fair Value | Level 2 | Notes Receivable from Mobile Home Parks | ||
Receivables, Fair Value Disclosure [Abstract] | ||
Notes receivable | 157,100 | 128,400 |
Fair Value | Level 2 | Other Note Receivable [Member] | ||
Receivables, Fair Value Disclosure [Abstract] | ||
Notes receivable | 26,100 | 21,600 |
Book Value | US Treasury Notes | ||
Receivables, Fair Value Disclosure [Abstract] | ||
Debt securities | 8,412 | |
Book Value | Consumer Loan | ||
Receivables, Fair Value Disclosure [Abstract] | ||
Loans | 146,010 | 139,009 |
Book Value | Notes Receivable from Mobile Home Parks | ||
Receivables, Fair Value Disclosure [Abstract] | ||
Notes receivable | 159,241 | 129,966 |
Book Value | Other Note Receivable [Member] | ||
Receivables, Fair Value Disclosure [Abstract] | ||
Notes receivable | $ 26,740 | $ 22,722 |
EARNINGS PER SHARE- Tabular (De
EARNINGS PER SHARE- Tabular (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
Numerator: | ||||
Net income (in 000's) | $ 15,020 | $ 17,261 | $ 31,296 | $ 33,352 |
Denominator: | ||||
Basic weighted-average common shares outstanding | 24,380,894 | 24,406,020 | 24,377,803 | 24,355,412 |
Effect of dilutive securities: | ||||
Diluted weighted-average common shares outstanding | 25,101,937 | 24,922,125 | 25,085,158 | 24,773,345 |
Earnings per share attributable to Legacy Housing Corporation | ||||
Basic | $ 0.62 | $ 0.71 | $ 1.28 | $ 1.37 |
Diluted | $ 0.60 | $ 0.69 | $ 1.25 | $ 1.35 |
Restricted stock units | ||||
Effect of dilutive securities: | ||||
Dilutive securities | 10,446 | 254,403 | 8,311 | 266,358 |
Stock options | ||||
Effect of dilutive securities: | ||||
Dilutive securities | 710,597 | 261,702 | 699,044 | 151,575 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | Dec. 31, 2022 | |
Bell Mobile Homes | |||||
RELATED PARTY TRANSACTIONS | |||||
Accounts receivable related parties | $ 0 | $ 0 | $ 0 | ||
Accounts payable related parties | 222 | 222 | 132 | ||
Home sales to related parties | 1,507 | $ 1,223 | 1,987 | $ 1,855 | |
Shipley Bros. | |||||
RELATED PARTY TRANSACTIONS | |||||
Accounts receivable related parties | 0 | 0 | 0 | ||
Accounts payable related parties | 0 | 0 | $ 0 | ||
Home sales to related parties | 252 | $ 1,018 | 622 | $ 1,711 | |
Principal Shareholder | |||||
RELATED PARTY TRANSACTIONS | |||||
Accounts payable related parties | $ 5 | $ 5 |
SUBSEQUENT EVENTS (Details)
SUBSEQUENT EVENTS (Details) - Subsequent event - Revolving Credit Agreement $ in Thousands | Jul. 28, 2023 USD ($) |
SUBSEQUENT EVENTS | |
Term of facility | 4 years |
Maximum borrowing capacity | $ 50,000 |
Additional commitment accordion feature | $ 25,000 |
Interest rate based upon average quarterly borrowings | 2.75% |
SOFR | |
SUBSEQUENT EVENTS | |
Spread rate | 2.50% |
Base rate | |
SUBSEQUENT EVENTS | |
Spread rate | 2.50% |