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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
⌧ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to ________
Commission file number 001-38761
Legacy Housing Corporation
(Exact Name of Registrant as Specified in its Charter)
Texas
(State or Other Jurisdiction of Incorporation or Organization)
20-2897516
(I.R.S. Employer Identification No.)
1600 Airport Freeway, #100
Bedford, Texas
(Address of Principal Executive Offices)
76022
(Zip Code)
Registrant’s telephone number, including area code (817)-799-4900
Securities registered pursuant to Section 12(b) of the Act:
Title of each class:
Common Stock ($0.001 par value)
Trading Symbol
LEGH
Name of each exchange on which registered:
NASDAQ Global Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to
Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company,
or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth
company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☒
Non-accelerated filer ☐
Smaller reporting company ☒
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with
any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its
internal control over financial reporting under section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that
prepared or issued its audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the registrant’s common equity held by non-affiliates as of June 30, 2022 (the last business day of the registrant’s
most recently completed second fiscal quarter) was $108,311,007; 8,299,694 shares of common stock were held by non-affiliates. For purposes of the
foregoing calculation only, all directors and the executive officers who were SEC reporting persons of the Registrant as of June 30, 2022 have been
deemed affiliates.
As of March 10, 2023, the total number of shares outstanding of the registrant’s common stock was 24,380,224 shares.
Documents Incorporated by Reference: None
TABLE OF CONTENTS
PART I
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Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Item 6. Selected Financial Data
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
PART III
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
Item 15. Exhibits and Financial Statement Schedules
PART IV
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ITEM 1. BUSINESS.
Forward-Looking Statements
PART I
This Annual Report on Form 10-K (this “Form 10-K”) contains forward-looking statements. Forward-looking
statements are predictions based on expectations and projections about future events, and are not statements of historical
fact. Forward-looking statements include statements concerning business strategy, among other things, including
anticipated trends and developments in and management plans for our business and the markets in which we operate. In
some cases, you can identify these statements by forward-looking words, such as “estimate,” “expect,” “anticipate,”
“project,” “plan,” “intend,” “believe,” “forecast,” “foresee,” “likely,” “may,” “should,” “goal,” “target,” “might,” “will,”
"would," "can," “could,” “predict,” and “continue,” the negative or plural of these words and other comparable
terminology. All forward-looking statements included in this Form 10-K are based upon information available to us as of
the filing date of this Form 10-K, and we undertake no obligation to update any of these forward-looking statements for
any reason. You should not place undue reliance on forward-looking statements. The forward-looking statements involve
known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance,
or achievements to differ materially from those expressed or implied by these statements. These factors include the matters
discussed under “Risk Factors” in our Registration Statement on Form S-1 and those described elsewhere in this Form 10-
K and from time to time in future reports that we file with the Securities and Exchange Commission. You should carefully
consider the risks and uncertainties described in this Form 10-K.
In this Form 10-K, unless otherwise indicated or the context otherwise requires, “Legacy,” “the Company,” “we,”
“us” or “our” refers to Legacy Housing Corporation, a Texas corporation.
Our Company
We build, sell and finance manufactured homes and “tiny houses” that are distributed through a network of
independent retailers and company-owned stores and also sold directly to manufactured home communities. The company
was founded in 2005 as a Texas limited partnership named Legacy Housing, Ltd. Effective January 1, 2018, we converted
into a Delaware corporation and changed our name to Legacy Housing Corporation. Effective December 31, 2019, we
converted from a Delaware corporation to a Texas corporation. Our corporate office is located in Bedford, Texas (between
Dallas and Fort Worth). We completed our initial public offering (the “IPO”) in December 2018 and our common stock
trades on The NASDAQ Global Market under the symbol “LEGH.”
We are the fifth largest producer of manufactured homes in the United States as ranked by number of homes
manufactured based on information available from the Manufactured Housing Institute and IBTS for the twelve month
period ending September 30, 2022. With current operations focused primarily in the southern United States, we offer our
customers an array of quality homes ranging in size from approximately 395 to 2,667 square feet consisting of 1 to 5
bedrooms, with 1 to 31/2 bathrooms. Our homes range in price, at retail, from approximately $33,000 to $180,000. During
2022, we sold 4,189 home sections (which are entire modules or single floors) and in 2021 we sold 3,635 home sections.
We commenced operations in 2005 and have experienced strong sales growth since our inception.
Our homes address the significant need in the United States for affordable housing. This need for affordable
housing is being driven by a nationwide trend of increasing rental rates for housing, higher prices for site-built homes and
decreasing percentages of home ownership among portions of the U.S. population. Our customers typically have annual
household incomes of less than $75,000 and include young and working class families, as well as persons age 55 and older.
In 2021, there were approximately 68,619,000 households in the United States with annual household incomes of less than
$75,000, representing 52% of all U.S. households, according to the Current Population Survey published by the U.S.
Census Bureau.
We believe our company is one of the most vertically integrated in the manufactured housing industry, allowing us
to offer a complete solution to our customers, from manufacturing custom-made homes using quality materials and
distributing those homes through our expansive network of independent retailers and company-owned distribution
locations, to providing tailored financing solutions for our customers. Our homes are constructed in the United States at
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one of our three manufacturing facilities in accordance with the construction and safety standards of the U.S. Department
of Housing and Urban Development (“HUD”). Our factories employ high-volume production techniques that allow us to
produce approximately 70 home sections, or approximately 60 fully-completed homes on average depending on product
mix, in total per week. We use quality materials and operate our own component manufacturing facilities for many of the
items used in the construction of our homes. Each home can be configured according to a variety of floor plans and
equipped with such features as fireplaces, central air conditioning and state-of-the-art kitchens.
Our homes are marketed under our premier “Legacy” brand name and, as of December 31, 2022, are sold to
consumers, primarily across 15 states through a network of 156 independent retail locations, 13 company-owned retail
locations and through direct sales to owners of manufactured home communities. Our 13 company-owned retail locations,
including 11 Heritage Housing stores and two Tiny House Outlet stores, exclusively sell our homes. During 2022,
approximately 53% of our manufactured homes were sold in Texas, followed by 9% in Georgia, 5% in Florida, 5% in
Alabama, 5% in Arizona and 4% in Louisiana. During 2021, approximately 50% of our manufactured homes were sold in
Texas, followed by 16% in Georgia, 8% in Louisiana and 5% in Alabama.
We offer three types of financing solutions to our customers. We provide floor plan financing for our independent
retailers, which takes the form of a consignment arrangement or a financed sale between the retailer and us. We also
provide consumer financing for our products which are sold to end-users through both independent and company-owned
retail locations, and we provide financing solutions to manufactured housing community owners that buy our products for
use in their housing communities. Our ability to offer competitive financing options at our retail locations provides us with
several competitive advantages and allows us to capture sales which may not have otherwise occurred without our ability
to offer consumer financing.
Corporate Conversion
Prior to January 1, 2018, we were a Texas limited partnership named Legacy Housing, Ltd. Effective January 1,
2018, we converted into a Delaware corporation pursuant to a statutory conversion, or the Corporate Conversion, and
changed our name to Legacy Housing Corporation. All of our outstanding partnership interests were converted on a
proportional basis into shares of common stock of Legacy Housing Corporation. The conversion qualified as a tax free
transaction under Section 351 of the Internal Revenue Code. Effective December 31, 2019, the Company reincorporated
from a Delaware corporation to a Texas corporation.
Following the Corporate Conversion, Legacy Housing Corporation continues to hold all of the property and assets
of Legacy Housing, Ltd. and all of the debts and obligations of Legacy Housing, Ltd. continue as the debts and obligations
of Legacy Housing Corporation. The purpose of the Corporate Conversion was to reorganize our corporate structure so that
the top-tier entity in our corporate structure, the entity that offered common stock to the public in the IPO, was a
corporation rather than a limited partnership. Except as otherwise noted, the financial statements included in this Form 10-
K are those of Legacy Housing Corporation.
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Our Market Opportunity
Manufactured housing is a competitive alternative to other forms of affordable housing, whether new or existing,
or located in urban, suburban or rural areas. We believe the target universe of manufactured home buyers consists of
households with total annual income below $75,000 which comprised 52% of total U.S. households in 2021. We believe
our target U.S. age group is wide ranging from young families who are often first time homebuyers to older homebuyers
who may be downsizing or moving towards a more rural lifestyle. The comparatively low all-in cost of fully-equipped
manufactured housing is attractive to our target consumers. The chart below highlights the increasing all-in average sales
price per square foot difference between a new manufactured home and a new site-built home (excluding land).
Average Price per Square Foot Comparison
Source: U.S. Census Bureau, the Institute for Building Technology and Safety, and the Manufactured Housing Institute.
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Manufactured homes are an attractive alternative for consumers as new single-family home prices continue to rise
at a rapid rate. As shown in the chart below, there is a growing gap between the average sale price for new single-family
homes (including the land on which they were built) and the price of the average manufactured home; management sees
this gap as an opportunity for the industry.
Source: U.S. Census Bureau, the Institute for Building Technology and Safety, and the Manufactured Housing Institute.
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Additionally, innovative engineering and design, as well as efficient production techniques, including the advent
and development of the “tiny house” market, continue to position manufactured homes as a viable housing alternative.
Demand for high-quality affordable housing below $150,000 has also been driven by increasing rental rates for housing,
higher prices for site-built homes, decreasing percentages of home ownership among portions of the U.S. population and
stagnant U.S. wage growth.
Source: U.S. Census Bureau.
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The manufactured housing industry shipped 112,882 and 105,772 manufactured homes in 2022 and 2021,
respectively, according to data published by the U.S. Census Bureau. Manufactured housing shipments have increased by
22% over the past five years and represent approximately 8% of total completed privately owned housing units.
Source: U.S. Census Bureau
Our Competitive Advantages
We offer a complete solution for affordable manufactured housing. We believe that we differentiate ourselves
from our competition and have been able to grow our business as a result of the following key competitive strengths:
● Quality and Variety of Housing Designs. Based on more than 80 combined years of industry experience, our
co-founders have developed an operating model that enables the efficient production of quality, customizable
manufactured homes. All of our homes are constructed in one of our three U.S.-based manufacturing
facilities. By utilizing an assembly-line process that employs from approximately 150 to 275 individuals per
facility, we are able to manufacture a home in approximately three to six days and, are on average producing
approximately 70 home sections, or 60 fully-completed homes depending on product mix, in total per week.
We utilize local market research to design homes that meet the specific needs of our customers and offer a
variety of structural and decorative customization options, including, among others,
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fireplaces, central air conditioning, overhead heat ducts, stipple-textured ceilings, decorative woodgrain vinyl
floors, wood cabinetry and energy conservation elements. Additionally, our homes have vaulted ceilings in
every room, have numerous proprietary advantages such as our copyrighted “furniture friendly” floor plans
and, in most cases, are wider, have taller ceilings and a steeper roof pitch than our competitors’ products.
Taken together, we believe our ability to offer our customers a range of home sizes and styles, as well as
sophisticated design and customization, allows us to accommodate virtually all reasonable customer requests.
Our vertical integration allows us the ability to respond quickly to our customers’ needs and modify designs
during the construction process.
● Manufacturing Facilities Strategically Located Near Customers in Key Markets. Our three manufacturing
facilities are strategically located to allow us to serve our 156 independent and 13 company-owned retail
locations primarily across 15 states. Currently, we have a manufacturing plant in Fort Worth, Texas that
measures 97,000 square feet in size and produced 1,082 homes in 2022 and 1,095 homes in 2021, a
manufacturing plant in Commerce, Texas that measures 130,000 square feet in size and produced 946 homes
in 2022 and 732 homes in 2021, and a manufacturing plant in Eatonton, Georgia that measures 388,000
square feet in size and produced 913 homes in 2022 and 1,046 homes in 2021. Once our homes are
constructed and equipped at our facilities, we have the ability to transport the finished products directly to
customers ensuring timely and efficient delivery of our manufactured homes. We currently have
approximately 52 company-owned trucks, which transported approximately 79% of our production during
2022 to manufactured home communities, our company-owned retail locations and independent dealers.
● Expansive and Growing Distribution Network. We distribute our products primarily in the southern United
States through a network of independent retail locations, company-owned retail locations and direct sales to
owners of manufactured home communities. Our first company-owned retail location opened in June 2016.
We believe our company-owned stores will, on average, carry higher gross margins.
● Competitive Production Strategies and Direct Sourcing. We develop and maintain the resources necessary
to build custom homes efficiently that incorporate unique and varied customer-requested features. We are
constantly seeking ways in which to directly source materials to be used in the manufacturing process, which
allows us to ensure the materials are of high-quality and can be customized to meet our customers’ needs.
Customization enables us to attract additional retailers and consumers who seek individualized homes that
are assembled on a factory production line. When these custom homes are sold through company-owned
retail stores, we expect to capture higher gross margins.
● Available Financing for our Dealers and Retail Customers. Our financial position allows us to develop and
offer financing solutions to our customers in connection with their purchase of our homes. We offer three
types of financing solutions to our customers. We provide floor plan financing for our independent retailers,
which takes the form of a consignment arrangement between the retailer and us. We also provide consumer
financing for our products sold to end-users through both independent and our company-owned retail
locations, and we provide financing to community owners that buy our products for use in their rental
housing communities. Our company has been providing floor plan financing to our independent retailers
since our formation and we now have 156 independent retailers using our consignment solution. We now
have more than 3,400 retail customers that purchased their homes utilizing our retail financing solutions.
● Support for Owners of Manufactured Home Communities. We provide manufacturing and financing
solutions for owners of manufactured home communities in connection with the development of
communities in our geographic market area. Such development projects can vary, but generally include
custom park development financing and large purchase orders of manufactured homes. We also make loans
to community owners for the purpose of acquiring or developing properties and, as part of the arrangement,
these community owners contract to buy homes from us. These financing solutions are structured to give us
an attractive return on investment, when coupled with the gross margin we realize on products specifically
targeted for these new manufactured housing communities.
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● Strong Alignment of Interests through Co-Founders’ Ownership. We believe that a strong alignment of
interests with stockholders and investors exists through the ownership of a significant percentage of our
outstanding shares by our co-founders, Curtis D. Hodgson (Executive Chairman of the Board) and Kenneth
E. Shipley (Executive Vice President and Director). Messrs. Hodgson and Shipley acquired their ownership
in 2005 when they founded the company. Each individual has received a minimal annual salary ($50,000).
Messr. Shipley continues to receive a minimal annual salary ($50,000). In January 2022, Messr. Hodgson
entered into an amended and restated employment agreement which provides him with an annual salary of
$200,000 and a signing bonus of 150,000 shares of restricted stock, which vested upon grant. Under this new
agreement, he is also eligible for an annual incentive bonus and equity awards. By providing structural and
economic alignment with the performance of our company, Messrs. Hodgson’s and Shipley’s continuing
controlling interests are directly aligned with those of our investors. We believe the combination of these
characteristics has promoted long-term planning, an enhanced culture among our customers, strategic
partners and employees, and ultimately the creation of value for our investors.
Our Growth Strategy
We have a strong operating history of investing in successful growth initiatives over the past 18 years. We believe
that the solution we are able to provide for our customers, as a result of the vertical integration of our company, enhances
our brand recognition as a leading producer, results in higher and more efficient utilization of our manufacturing factories
and expands our direct-to-consumer outreach on the competitive advantages of our wide variety of customizable homes.
This operational focus has provided us with sustainable net sales and net income growth over the years. Our growth
strategy includes the following key initiatives:
● Expand Financing Solutions for Our Customers. We recognize that offering financing solutions to our
customers is an important component of being a vertically integrated company that provides affordable
manufactured housing. Providing financing improves our responsiveness to the needs of prospective
purchasers while also providing us with opportunities for interest and servicing revenues, which act as
additional drivers of net income for us. During the years ended December 31, 2022 and 2021, we financed
approximately 45% and 46% of the homes we sold to customers, respectively. We intend to expand financing
and leasing solutions to manufactured housing community-owner customers, in a manner that includes
developing new sites for products in or near urban locations where there is a shortage of sites to place our
products.
● Continue to Focus on Innovation and Customization for Core Customer Groups. Our production strategy
is focused on continually developing the resources necessary to efficiently build homes that incorporate
unique, varied and innovative customer preferences. We are constantly seeking ways to directly source
materials to be used in the manufacturing process, which allows us to ensure we have quality materials that
can be customized to meet our customers’ needs. Our principal focus is on designing and building highly
functional and durable products that appeal to families of all sizes.
● Seek Additional Agreements with Owners of Manufactured Home Communities. Community housing
developments provide us with large, concentrated sales opportunities. These projects vary in size and density
but generally include sales of 30 to 300 homes. We believe there are significant growth opportunities to work
with our development partners on such projects and view these opportunities as an important driver for both
the sale of more homes and for financing bulk purchases of those homes by community owners.
● Pursue Selective Development Opportunites. We seek to grow through selective acquisition of developable
land in proximity to our manufacturing footprint which will serve as a future revenue stream for the
underlying land as well as ensuring high utilization of our expertise in manufacturing and distribution. In
April 2018, we acquired approximately 420 acres of raw land located in Bastrop County near Austin, Texas
for $4.2 million. In November 2018, we acquired approximately 69 acres of raw land located near Adkins,
Texas for $0.8 million. In July and August 2019, we acquired approximately 140 acres of raw land in
Johnson County, Texas for $0.9 million. In September 2020, we acquired
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approximately 80 acres of raw land in Wise County, Texas for $0.9 million. In February 2021, we acquired
approximately 233 acres of raw land in Bexar County, Texas for $1.6 million. We will continue to evaluate
opportunities to develop the remaining land, or to provide financing to third party developers of additional
manufactured housing communities in order to provide locations for manufactured homes for our customers.
Management estimates that our land holdings will yield approximately 3000 manufactured home pad sites.
● Focus on our Retail Process. As of December 31, 2022, we distribute our products primarily across 15 states
through a combination of 13 company-owned retail locations and 156 independent retail locations. We
believe that a focused network of company-owned retail locations will allow us to be more responsive and
improve the customer experience at all stages, from manufacturing and design to sales, financing and
customer service. We believe our company-owned stores will, on average, carry higher gross margins due to
our ability to select critical markets and develop highly-trained sales representatives who possess a deep
understanding of our business and customer needs.
Our Products
Overview. We are the fifth largest producer of manufactured homes in the United States as ranked by number of
homes manufactured based on information available from the Manufactured Housing Institute and IBTS for the twelve
month period ending September 30, 2022. We produce a wide variety of homes that can be used by our customers in a
number of ways. We build a variety of sizes and floor plans of residential homes and tiny houses. We work collaboratively
with our partners to meet diverse housing needs, such as residences on privately-owned land and in manufactured home
communities, recreational and vacation properties, such as hunting cabins, and accommodations for workforces in oilfields
and other industries.
Manufacturing and Quality Design. We utilize local market research to design homes that meet the specific
requirements of our customers and our homes are designed after extensive field research and consumer feedback. We
frequently introduce new floor plans, decor, exterior design, features and accessories to appeal to changing consumer
trends and we offer an assortment of customizations to match each customer’s individual tastes. Each home typically
contains a living room, dining area, kitchen, 1 to 5 bedrooms and 1 to 31/2 bathrooms, and each home can be customized to
include certain features including, among others, fireplaces, central air conditioning, mini-split climate control, overhead
heat ducts, stipple-textured ceilings, decorative wood grain vinyl floors, wood cabinetry and energy conservation elements.
The manufactured homes we build are constructed in accordance with the construction and safety standards of
HUD. Our Texas factories are certified to build homes according to the Texas Industrialized Housing and Buildings law
(known as the Texas Modular Code) and our Georgia factory is certified to build homes according to Georgia state
construction codes. In addition to traditional manufactured homes, we offer a diverse assortment of tiny houses, which are
recreational structures between 320 and 399 square feet in size that are used as temporary dwellings, can be pulled by a
pick-up truck and are generally aesthetically similar to larger homes. Our tiny houses are built in a variety of models and
floor plans and typically range from 1 to 3 bedrooms with 1 to 2 bathrooms. Tiny houses do not need to be built to HUD
standards.
Manufacturing Process. Our manufactured homes are entirely constructed and equipped at our three factories.
Our homes are constructed using high-volume production techniques and employ approximately 150 to 275 employees at
each facility. Most of our homes are constructed in one or more sections (or floors) on a steel chassis. Each section is
assembled in stages beginning with the construction of the chassis, followed by the addition of other constructed and
purchased components and ending with a final quality control inspection. The efficiency of the production process and the
benefits of constructing homes in a controlled factory environment enable us to produce homes in less time, generating less
waste and at a lower cost per-square-foot than traditional home building. The finished home is then transported directly to a
customer at a retail sales center, work site or manufactured home community. During the years ended December 31, 2022
and 2021 we sold 4,189 and 3,635 home sections, including 139 and 230 tiny houses, respectively.
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Manufacturing Facilities. We currently operate three manufacturing facilities located in Fort Worth, Texas,
Commerce, Texas and Eatonton, Georgia, each of which range in size from approximately 97,000 to 388,000 square feet.
The production schedules for our manufacturing facilities are based on wholesale orders received from distributors, which
fluctuate from week to week. In general, our facilities are structured to operate on one 8- to 9-hour shift per day, five days
per week. We currently manufacture a typical home in approximately three to six production days. For the years ended
December 31, 2022 and 2021, we produced, on average, approximately 70 home sections per week, or 60 fully-completed
homes.
Raw Materials and Suppliers. The principal materials used in the production of our manufactured homes include
wood, wood products, steel, aluminum, gypsum wallboard, windows, doors, fiberglass insulation, carpet, vinyl, fasteners,
plumbing materials, appliances and electrical items. We currently buy these materials from various third-party
manufacturers and distributors. We procure multiple sources of supplies for all key materials in order to mitigate any
supply chain risk. We intend to continue seeking greater direct sourcing of materials from original manufacturers. This will
allow us to save costs, gain greater control over the quality of the materials we use in our products and increase
customization to meet our customers’ changing preferences. The inability to obtain any materials used in the production of
our homes, whether resulting from material shortages, limitation of supplier facilities or other events affecting production
of component parts, may affect our ability to meet or maintain production requirements. Pricing and availability of certain
raw materials were volatile during 2022 and 2021 due to a number of factors in the economic environment. We continue to
monitor and react to inflation in these materials by maintaining a focus on our product pricing in response to higher
materials costs.
Warranties. We provide the retail home buyer with a one-year limited warranty from the date of purchase
covering defects in material or workmanship in home structure, plumbing and electrical systems. Our warranty does not
extend to installation and setup of the home, which is generally arranged by the retailer. Appliances, carpeting, roofing and
similar items are warranted by their original manufacturer for various lengths of time. At this time, we do not provide any
warranties with respect to tiny houses.
Distribution
As of December 31, 2022, we distribute our manufactured homes primarily across 15 states through a network of
156 independent retail locations, 13 company-owned retail locations and direct sales to owners of manufactured home
communities. As is common in the industry, our independent distributors typically sell manufactured homes produced by
other manufacturers in addition to our manufactured homes. Additionally, some independent retailers operate multiple sales
outlets. During the years ended December 31, 2022 and 2021, no independent retailer accounted for 10% or more of our
manufacturing sales.
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Below is a list of the states in which we sold most of our manufactured homes and the approximate percentage of
those sales to our total product sales:
Location
Texas
Georgia
Florida
Alabama
Arizona
Louisiana
Oklahoma
North Carolina
New Mexico
South Carolina
Kansas
Colorado
Kentucky
% of 2022
Total
Net Sales
% of 2021
Total
Net Sales
53 %
9 %
5 %
5 %
5 %
4 %
3 %
2 %
2 %
2 %
1 %
1 %
1 %
50 %
16 %
2 %
5 %
— %
8 %
2 %
2 %
2 %
2 %
1 %
1 %
1 %
In 2022 and 2021, we also sold homes in Arkansas, Iowa, Illinois, Indiana, Michigan, Mississippi, Missouri,
Nevada, Ohio, Pennsylvania, Tennessee, Utah, Virginia and Wisconsin. We continually seek to increase our wholesale
shipments by growing sales at our existing independent retailers and by finding new independent retailers to sell our
homes. We provide comprehensive sales training to retail sales associates and bring them to our manufacturing facilities for
product training and to view new product designs as they are developed. These training seminars facilitate the sale of our
homes by increasing the skill and knowledge of the retail sales consultants. Additionally, we display our products at trade
shows and support our retailers through the distribution of floor plan literature, brochures, decor selection displays and
point of sale promotional material, as well as internet-based marketing assistance. We believe we have the most
comprehensive printed catalog of manufactured housing products in the industry.
Our independent retailers generally either pay cash to purchase inventory or finance their inventory needs through
our consignment arrangements or financed sales. Certain of our independent retailers finance a portion of their inventory
through wholesale floor plan financing arrangements with third parties. In such cases, we verify the order with the third
party, then manufacture the home and ship it to the retailer. Payment is due from the third-party lender upon shipment of
the product to the retailer and, depending on the terms of each arrangement, we may or may not have limited repurchase
obligations associated with this inventory. The maximum amount of our contingent obligations under such repurchase
agreements was approximately $8,925,000 and $4,908,000 as of December 31, 2022 and 2021, respectively, without
reduction for the resale value of the homes.
Approximately 63% of our 2022 product sales were attributable to our independent retail distributors, 9% to our
company-owned retail locations and 29% directly to owners of manufactured housing communities. Approximately 57% of
our 2021 product sales were attributable to our independent retail distributors, 13% to our company-owned retail locations
and 30% directly to owners of manufactured housing communities.
As of December 31, 2022, we operate 13 company-owned retail locations. Our company-owned locations allow
us to improve the customer experience through all steps of the buying process, from manufacturing and design to sales,
financing and customer service. This also gives us a direct window into consumer preferences and lending opportunities.
We believe that our company-owned stores will, on average, be more productive than our independent retail locations and
carry higher gross margins.
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Sales and Marketing
Our corporate marketing efforts focus on increasing our brand awareness and communicating our commitment to
quality along with the many other competitive advantages our company offers. Our marketing strategy is to offer several
lines of manufactured homes that appeal to a wide range of home buyers, continually elevate awareness of our brand and
generate demand for our products. We rely on a number of channels in this area, including digital advertising, email
marketing, social media and affiliate marketing, as well as through various strategic partnerships. We maintain our website
at www.legacyhousingcorp.com.
Our sales and marketing strategy focuses on households with annual incomes of less than $60,000 which includes
young families, working class families and persons age 50 and older. We also market to other types of customers, including
owners of manufactured home communities, buyers interested in tiny houses, recreational buyers and houses for
workforces or man-camp housing. Additionally, we continue to be well-positioned to react to any increase in demand for
affordable, quickly-delivered manufactured homes as a result of unforeseen harsh weather conditions and similar events.
All of our customers are located in the United States. During the years ended December 31, 2022 and 2021, no customer
accounted for more than 10% of our net sales.
Financing Solutions for Our Customers
We offer three types of financing solutions:
● Floor Plan Financing. We consign inventory or provide wholesale financing to our independent retailers.
● Consumer Financing. We provide consumer financing for our products sold to end-users through both
independent and our company-owned retail locations.
● Manufactured Housing Community Financing. We provide financing to community owners that buy or
lease our products for use in their rental housing communities.
Floor Plan Financing. We provide floor plan or wholesale financing for most of our independent retailers for
products we manufacture and for pre-owned products. This wholesale financing is a consignment from us to our
independent retailers. The retailers pay their own freight and pay us a monthly fee ranging from 1.0% to 1.4% per month of
the wholesale invoice amount of the home. They are also obligated to pay $1,000 toward the invoice amount each year
after the consignment with the first $1,000 reduction due one year following consignment. During 2022, we collected
$3,370,000 from the independent retailers. Upon sale, the independent retailer is obligated to pay us the invoice amount,
less any prepaid reductions, prior to moving the home away from their retail location. If they provide certain
documentation to us, we allow them to move the home to their customer’s location and we notify the customer’s lending
source to pay us the amount due upon funding of the loan. We have proprietary technology that we install in many
consigned homes that gives us the ability to determine if a consigned home has been moved from the retail location without
permission. The independent dealer is free to terminate the consignment agreement by giving us 90-days’ advance notice if
it is current on all its obligations to us. Our wholesale consignment contracts require us to defer income recognition until
we are paid in full. For the years ended December 31, 2022 and 2021, we recorded consignment sales of $84,037,000 and
$63,496,000, respectively. Consignment sales are recorded when a house under one of our consignment agreements is sold
to the end consumer.
Certain of our wholesale factory-built housing sales to independent retailers are purchased through wholesale
floor plan financing arrangements. Under a typical floor plan financing arrangement, an independent financial institution
specializing in this line of business provides the retailer with a loan for the purchase price of the home and maintains a
security interest in the home as collateral. The financial institution customarily requires us, as the manufacturer of the
home, to enter into a separate repurchase agreement with the financial institution under which we are obligated, upon
default by the retailer and under certain other circumstances, to repurchase the financed home at declining prices over the
term of the repurchase agreement (which is typically 24 months). The price at which we may be obligated to repurchase a
home under these agreements is based upon the amount financed, plus certain administrative and shipping expenses. Our
obligation under these repurchase agreements ceases upon the purchase of the home by the retail
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customer. The maximum amount of contingent obligations under our repurchase agreements (without reduction for the
resale value of the homes) as of December 31, 2022 was $8,925,000. The risk of loss under these agreements is spread over
many retailers and is further reduced by the resale value of the homes. We carry no reserve for this contingent liability.
Overview of Consumer and MHP Financing Options as of December 31, 2022
($ in thousands)
Consumer Financing
MHP Community Financing
Principal
Amount
Outstanding
$ 142,340
$ 144,321
Number of
Loans
3,405 13.4% average contractual rate 124 months
545 8.1% average contractual rate 48 months
Contractual Rate
or Monthly Fee
Remaining
Term
Average
We also offer inventory floor plan financing to retailers that takes the form of a consignment arrangement. As of
December 31, 2022, we had $5,132,000 of inventory under consignment to our retailers.
Consumer Financing. Sales of factory-built homes are significantly affected by the availability and cost of
consumer financing. There are three basic types of consumer financing in the factory-built housing industry: (i) chattel or
personal property loans, for purchasers of a home without any underlying land involved (generally HUD code homes),
(ii) non-conforming mortgages for purchasers of a home and the land on which the home is placed, and (iii) conforming
mortgage loans which comply with the requirements of the Federal Housing Administration (“FHA”), Veterans Affairs or
GSE loans. At the present time, we currently offer only chattel loans.
We provide retail consumer financing to consumers who purchase our full-size manufactured homes and tiny
houses and dealer incentive arrangements to encourage independent retailers to use our financing product. Under these
arrangements, once a customer executes a home purchase agreement with Legacy financing, we pay to the retailer 80% of
the retailer’s gross margin through these consignment arrangements and we retain 20% of the retail gross margins in the
consignment portfolio. We transfer the consigned value of the home to the consignment portfolio as our contribution to the
consignment arrangement. The retailer is obligated to remarket any repossessions associated with consignment
transactions, and obtain 90% of the outstanding balance on the home at the time of repossession. We charge each dealer in
the consignment arrangement fees for servicing the loans and receive a preferred return of 10% to 12% per annum for
amounts we invest. Upon payback of our contribution, fees and preferred returns, we split the remaining balance with the
independent retailer according to a negotiated formula which is accounted for as the dealer incentive liability. As of
December 31, 2022, we owned 3,405 retail consumer loans with an average principal balance of $38,891. Our average
remaining term on these loans as of December 31, 2022 was 124 months and the average percentage rate (APR) of interest
was 13.4%. Our average loan-to-value (“LTV”) at the time of loan origination, which is based on the gross sales price to
the borrower, was 83% for the consumer financing portfolio as of December 31, 2022. We have not financed, and have no
current plans to finance, new homes manufactured by our competitors in the ordinary course of our business.
All loan applications go through an underwriting process conducted at our corporate headquarters to evaluate
credit risk that takes into account numerous factors including the down payment, FICO score, monthly income, and total
housing payment coverage of the borrower. The interest rates on approved loans are determined by a buyer’s credit score
and down payment amount. We use payment history to monitor the credit quality of the consumer loans on an ongoing
basis.
Manufactured Housing Community Financing. We provide financing to owners of manufactured housing
communities for our products that they buy in order to rent to their residents. These loans generally have a ten-year term
and can have a fixed or variable interest rate. Approximately 97% of the these loans have a fixed interest rate ranging from
6.9% to 11.5%. The remaining loans bear interest at the prime rate plus 4%, with a floor and a ceiling. Down payments,
delivery expenses and installation expenses are negotiated on a case-by-case basis. As of December 31, 2022
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and 2021, loans outstanding from manufactured home communities totaled $143,253,000 and $102,992,000, which
comprised 545 and 530 loans, respectively. Our average remaining term on these loans was approximately four years and
six years as of December 31, 2022 and 2021, respectively.
We also make loans to community owners for the purpose of acquiring or developing properties and, as part of the
arrangement, these community owners contract to buy homes from us. These loans typically range in term from two to
five years and carry interest at 5.00% to 12.0%. For the year ended December 31, 2022, we originated loans to owners of
manufactured home communities for lot development purposes with a total amount of $4,010,000.
Competition
The manufactured housing industry is highly competitive at both the manufacturing and retail levels, with
competition based upon several factors, including price, product features, reputation for service and quality, depth of
distribution, promotion, merchandising and the terms of retail and wholesale consumer financing. We compete with other
producers of manufactured homes and new producers continue to enter the market. We also compete with companies
offering for sale homes repossessed from wholesalers or consumers and we compete with new and existing site-built
homes, as well as apartments, townhouses and condominiums.
In addition to our company, there are a number of other national manufacturers competing for a significant share
of the manufactured housing market in the United States, including Clayton Homes, Inc., Cavco Industries, Inc. and
Skyline Champion Corporation. Certain of these competitors possess greater financial, manufacturing, distribution and
marketing resources than we do. For the past 17 years, the industry has experienced a trend towards consolidation and, as a
result, the bulk of the market share is controlled by a small number of companies. We are the country’s fifth largest
producer of manufactured homes. Accordingly, we believe we have a significant opportunity to expand in this industry by
effectively growing our market share.
Among lenders to manufactured home buyers, there are significant competitors including national, regional and
local banks, independent finance companies, mortgage brokers and mortgage banks such as 21st Mortgage Corporation, an
affiliate of Clayton Homes, Inc., Berkshire Hathaway, Inc., Triad Finance Corporation and CU Factory Built Lending, LP.
Certain of these competitors are larger than us and have access to substantially more capital and cost efficiencies.
Protection of Proprietary Technology
We rely on a combination of copyright and trade secret laws in the United States and other jurisdictions, as well as
confidentiality procedures and contractual provisions, to protect our proprietary information, technology and brands. We
protect our proprietary information and technology, in part, by requiring certain of our employees to enter into agreements
providing for the maintenance of confidentiality and the assignment of rights to inventions made by them while employed
by us. We also may enter into non-disclosure and invention assignment agreements with certain of our technical
consultants to protect our confidential and proprietary information and technology. We cannot assure you that our
confidentiality agreements with our employees and consultants will not be breached, that we will be able to effectively
enforce these agreements, that we will have adequate remedies for any breach of these agreements, or that our trade secrets
and other proprietary information and technology will not be disclosed or will otherwise be protected.
Our intellectual property includes copyrights issued by the U.S. Copyright Office for many of our floor plans. We
are not currently aware of any claims of infringement or other challenges to our intellectual property rights.
Government Regulation
General. Our company operates in a regulated industry, and there are many federal, state and local laws, codes
and regulations that impact our business. Governmental authorities have the power to enforce compliance with their
regulations, and violations may result in the payment of fines, the entry of injunctions or both. Although we believe that
our operations are in substantial compliance with the requirements of all applicable laws and regulations, we are unable to
predict the ultimate cost of compliance with all applicable laws and enforcement policies.
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Federal Manufactured Homes Regulations. Our manufactured homes are subject to a number of federal, state
and local laws, codes and regulations. Construction of manufactured housing is governed by the National Manufactured
Housing Construction and Safety Standards Act of 1974, and the regulations issued under such act by HUD. The HUD
regulations, known collectively as the Federal Manufactured Home Construction and Safety Standards, cover all aspects of
manufactured home construction, including structural integrity, fire safety, wind loads, thermal protection and ventilation.
Our Texas manufacturing facilities, and the plans and specifications of the HUD-compliant homes they produce, have been
approved by a HUD-certified inspection agency. Further, an independent HUD-certified third-party inspector regularly
reviews our manufactured homes for compliance with HUD regulations during construction. Failure to comply with
applicable HUD regulations could expose us to a wide variety of sanctions, including mandated closings of our
manufacturing facilities. We believe our manufactured homes are in substantial compliance with all present HUD
requirements. Manufactured homes are typically built with wood products that contain formaldehyde resins. HUD
regulates the allowable concentrations of formaldehyde in certain products used in manufactured homes and requires
manufacturers to warn purchasers as to formaldehyde-associated risks. The Environmental Protection Agency (“EPA”) and
other governmental agencies have in the past evaluated the effects of formaldehyde. We use materials in our manufactured
homes that meet HUD standards for formaldehyde emissions and believe we comply with HUD and other applicable
government regulations in this regard.
Transportation and Zoning Regulations. The transportation of manufactured homes on highways is subject to
regulation by various federal, state and local authorities. Such regulations may prescribe size and road use limitations and
impose lower than normal speed limits and various other requirements. Our manufactured homes (including our tiny
houses) are also subject to local zoning and housing regulations. In certain cities and counties in areas where our homes are
sold, local governmental ordinances and regulations have been enacted which restrict the placement of manufactured
homes on privately-owned land or which require the placement of manufactured homes in manufactured home
communities. Such ordinances and regulations may adversely affect our ability to sell homes for installation in
communities where they are in effect. A number of states have adopted procedures governing the installation of
manufactured homes. Utility connections are subject to state and local regulations which must be complied with by the
retailer or other person installing the home.
Warranty Regulations. Certain warranties we issue may be subject to the Magnuson-Moss Warranty Federal
Trade Commission Improvement Act, which regulates the descriptions of warranties on consumer products. For example,
warranties that are subject to the act must be included in a single easy-to-read document that is generally made available
prior to purchase. The act also prohibits certain attempts to disclaim or modify implied warranties and the use of deceptive
or misleading terms. The description and substance of our warranties are also subject to a variety of state laws and
regulations. A number of states require manufactured home producers to post bonds to ensure the satisfaction of consumer
warranty claims.
Financial Services Regulations. A variety of laws affect the financing of the homes we manufacture. The Federal
Consumer Credit Protection Act and Regulation Z promulgated under that act require written disclosure of information
relating to such financing, including the amount of the annual percentage interest rate and the finance charge. The Federal
Fair Credit Reporting Act also requires certain disclosures to potential customers concerning credit information used as a
basis to deny credit. The Federal Equal Credit Opportunity Act and Regulation B promulgated under that act prohibit
discrimination against any credit applicant based on certain specified grounds. The Real Estate Settlement Procedures Act
and Regulation X promulgated under that act require certain disclosures regarding the nature and costs of real estate
settlements. The Federal Trade Commission has adopted or proposed various Trade Regulation Rules dealing with unfair
credit and collection practices and the preservation of consumers’ claims and defenses. Installment sales contracts, direct
loans and mortgage loans eligible for inclusion in a Ginnie Mae program are subject to the credit underwriting
requirements of the FHA. The American Housing Rescue and Foreclosure Prevention Act provides assistance for the
housing industry, including manufactured homes, including, among other things, increased loan limits for chattel (home-
only Title I) loans. Recent FHA guidelines provide Ginnie Mae the ability to securitize manufactured home FHA Title I
loans to allow lenders to obtain new capital, which can then be used to fund new loans for our customers. The Secure and
Fair Enforcement for Mortgage Licensing Act established requirements for the licensing and registration of all individuals
that are Mortgage Loan Originators (“MLOs”). Traditionally, manufactured housing retailers have assisted home buyers
with securing financing for the purchase of homes, including negotiating rates and the terms for their loans. Under the act,
however, these activities are prohibited unless performed by a
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registered or licensed MLO. A variety of state laws also regulate the form of financing documents and the allowable
deposits, finance charge and fees chargeable pursuant to financing documents. Regulation C of the Home Mortgage
Disclosure Act, among other things, requires certain financial institutions, including non-depository institutions, to collect,
record, report and disclose information about their mortgage lending activity, which is used to identify potential
discriminatory lending patterns and enforce anti-discrimination statutes.
The Dodd-Frank Wall Street Reform and Consumer Protection Act was passed into law and established the
Consumer Financial Protection Bureau (“CFPB”) regulates consumer financial products and services. Certain CFPB
mortgage finance rules apply to consumer credit transactions secured by a dwelling, including real property mortgages and
chattel loans secured by manufactured homes. These rules, among other things, define standards for origination of
“Qualified Mortgages,” establish specific requirements for lenders to prove borrowers’ ability to repay, outline conditions
under which Qualified Mortgages are subject to safe harbor limitations on liability to borrowers and establish interest rates
and other cost parameters for determining which Qualified Mortgages fall under safe harbor protection. While many
manufactured homes are financed with agency-conforming mortgages in which the ability to repay is verified, and interest
rates and other costs are within the safe harbor limits, a significant amount of loans to finance the purchase of
manufactured homes, particularly chattel loans and non-conforming land-home loans, fall outside such safe harbors.
Additionally, the CFPB rules, among other things, amended the Truth-in-Lending Act and the Real Estate Settlement
Procedures Act by expanding the types of mortgage loans that are subject to the protections of the Home Ownership and
Equity Protections Act of 1994 (“HOEPA”) and imposing additional restrictions on mortgages that are covered by HOEPA.
As a result, certain manufactured home loans are now subject to HOEPA limits on interest rates and fees. Loans with rates
or fees in excess of the limits are deemed “High Cost Mortgages” and provide additional protections for borrowers,
including with respect to determining the value of the home. Most loans for the purchase of manufactured homes have been
written at rates and fees that would not appear to be considered High Cost Mortgages under these rules and while some
lenders may offer loans that are deemed High Cost Mortgages, the rate and fee limits may deter some lenders from offering
such loans to borrowers or be reluctant to enter into loans subject to the provisions of HOEPA. Additionally, certain CFPB
rules apply to appraisals on principal residences securing higher-priced mortgage loans. Certain loans secured by
manufactured homes, primarily chattel loans, could be considered higher-priced mortgage loans. Among other things, the
rules require creditors to provide copies of appraisal reports to borrowers prior to loan closing. Compliance with the
regulations may constrain lenders’ ability to profitably price certain loans or may cause lenders to incur additional costs to
implement new processes, procedures, controls and infrastructure and may cause some lenders to curtail underwriting
certain loans altogether. Furthermore, some investors may be reluctant to participate in owning such loans because of the
uncertainty of potential litigation and other costs. As a result, some prospective buyers of manufactured homes may be
unable to secure necessary financing. Failure to comply with these regulations, changes in these or other regulations, or the
imposition of additional regulations, could affect our earnings, limit our access to capital and have a material adverse effect
on our business and results of operations.
On May 24, 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act (“Dodd-Frank Reform
Act”) was signed into law. The Dodd-Frank Reform Act revises portions of the Dodd-Frank Act, reduces the regulatory
burden on smaller financial institutions, including eliminating provisions of the Secure and Fair Enforcement for Mortgage
Licensing Act of 2008 (“SAFE Act”), and protects consumer access to credit. With the elimination of certain provisions of
the SAFE Act, manufactured housing retailers can now assist home buyers with securing financing for the purchase of
homes; however, they may not assist in negotiating the financing terms. This will enable buyers to more easily find access
to financing and make the overall home buying experience smoother.
On January 25, 2018, HUD announced a top-to-bottom review of its manufactured housing rules as part of a
broader effort to identify regulations that may be ineffective, overly burdensome, or excessively costly given the critical
need for affordable housing. If certain changes are made, our company may be able to more effectively serve buyers of
affordable homes.
In 2017, our lead lender required an extensive review of our retail installment contract and associated procedures,
which we use as part of our consumer financing solutions strategy. Based on that review, we improved certain elements of
the language used in our contracts, and modified certain aspects of our practices. Although we believe there are no material
compliance issues with our forms and procedures, we are subject to the federal and other regulations described above.
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Seasonality
Generally, we experience higher sales volume during the months of March through October. Our sales are
generally slower during the winter months, and shipments can be delayed in certain geographic market areas that we serve
which experience harsh weather conditions.
Employees
As of December 31, 2022, we had approximately 870 employees. Of our employees, approximately 770
individuals are hourly employees and 100 individuals are salaried employees. Our employees are currently not represented
by any collective bargaining unit. We believe that our relationship with our employees is good.
ITEM 1A. RISK FACTORS.
Not applicable for smaller reporting companies.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
None.
ITEM 2. PROPERTIES.
Facilities
The following table sets forth certain information with respect to the facilities where our company operates:
Location
Manufacturing/Warehouse Facilities
Date of
Commencement
of Operations
Fort Worth, TX
Commerce, TX
Eatonton, GA
Retail Locations
Acworth, GA
Albany, GA
Asheboro, NC
Athens, GA
Augusta, GA
Canton, TX
Jennings, LA
Minden, LA
Mt. Pleasant, TX
Sapulpa, OK
Greenville, TX
Gainesville, TX
Oklahoma City, OK
Corporate/Regional Headquarters
Bedford, TX
Norcross, GA
2005
2007
2016
2019
2018
2017
2016
2018
2018
2017
2017
2016
2020
2016
2017
2016
2018
2018
Owned /
Leased
Owned
Owned
Leased
Leased
Leased
Leased
Leased
Leased
Leased
Owned
Leased
Leased
Leased
Owned
Owned
Owned
Leased
Leased
Square
Feet
96,880
129,600
388,000
2,369
1,536
1,472
2,016
3,136
2,362
2,432
2,369
1,792
1,960
1,256
2,240
2,100
8,020
3,358
We own the manufacturing facilities and the land on which the facilities are located in Fort Worth, Texas and
Commerce, Texas. We believe that these facilities are adequately maintained and suitable for the purposes for which they
are used. We currently lease our facility in Eatonton, Georgia from the Putnam Development Authority. In
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December 2016, the Company entered into a Payment in Lieu of Taxes (“PILOT”) agreement commonly offered in
Georgia by local community development programs to encourage industry development. The net effect of the PILOT
agreement is to provide the Company with incentives through the abatement of local, city and county property taxes and to
provide financing for improvements to the Company’s Georgia plant (the “Project”). In connection with the PILOT
agreement, the Putman County Development Authority provided a credit facility for up to $10,000 which could have been
drawn upon to fund Project improvements and capital expenditures as defined in the agreement. If funds had been drawn,
the Company would have paid transactions costs and debt service payments. The PILOT agreement required interest
payments of 6.00% per annum on outstanding balances, which would have been due each December 1st through maturity
on December 1, 2021, at which time all unpaid principal and interest would have been due. The PILOT agreement was
collateralized by the assets of the Project. No amounts were drawn on this credit facility.
We currently operate 13 retail locations. Each retail location sits on approximately five to seven acres of land. We
lease 9 of the 13 retail locations we operate in the business, pursuant to leases expiring from 2023 to 2028. Total rent
expense for the years ended December 31, 2022 and 2021 was $713,000 and $698,000, respectively.
ITEM 3. LEGAL PROCEEDINGS.
We are party to certain legal proceedings that have arisen in the ordinary course of our business and are incidental
to our business. Certain of the claims pending against us allege, among other things, breach of contract, breach of express
and implied warranties, construction defects, deceptive trade practices, product liability and personal injury. Although
litigation is inherently uncertain, based on past experience and the information currently available, management does not
believe that the currently pending and threatened litigation or claims will have a material adverse effect on our 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 our financial position, liquidity or results of operations in any future reporting periods.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
Our common stock has traded on The NASDAQ Global Market under the symbol “LEGH” since December 14,
2018, when we completed our IPO. Prior to that date, there was no public market for our common stock. As of December
31, 2022, there were 13 holders of record of our common stock. This does not include persons who hold our common stock
in nominee or “street name” accounts through brokers or banks.
Dividends
We did not declare or pay cash dividends during 2022 or 2021. We have no plans to pay any cash dividends on our
common stock for the foreseeable future and instead plan to retain earnings, if any, for future operations, to finance the
growth of the business and service debt. Any decision to declare and pay dividends in the future will be made at the
discretion of our board of directors and will depend on, among other things, our results of operations, cash requirements,
financial condition, contractual restrictions and other factors that our board of directors may deem relevant.
Recent Sales of Unregistered Securities
We did not sell any unregistered equity securities during the period covered by this Form 10-K.
Issuer Purchases of Equity Securities
On April 12, 2019 our Board of Directors approved a stock repurchase program. On April 17, 2019, pursuant to
the repurchase program, we acquired 300,000 shares of our common stock at an average price of $10.20 per share. During
the year ended December 31, 2020, the Company purchased 145,065 shares of its common stock at an average price of
$9.77 per share, pursuant to the Company’s repurchase program.
In November 2022, the Company’s Board of Directors approved a new repurchase program (the “2022
Repurchase Program”). Under the 2022 Repurchase Program, the Company may purchase up to $10,000,000 of its
common stock. Share purchases may be made from time to time in the open market or through privately negotiated
transactions depending on market conditions, share price, trading volume and other factors. Such purchases, if any, will be
made in accordance with applicable insider trading and other securities laws and regulations. These repurchases may be
commenced or suspended at any time or from time to time without prior notice. No shares have been purchased under the
2022 Repurchase Program. The 2022 Repurchase Program expires October 31, 2025.
ITEM 6. [RESERVED]
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion should be read in conjunction with the financial statements and accompanying notes and
the information contained in other sections of this Form 10-K. It contains forward-looking statements that involve risks
and uncertainties, and is based on the beliefs of our management, as well as assumptions made by, and information
currently available to, our management. Our actual results could differ materially from those anticipated by our
management in these forward-looking statements as a result of various factors, including those discussed in this Form 10-
K and in our Registration Statement on Form S-1, particularly under the heading “Risk Factors.”
Overview
Legacy Housing Corporation builds, sells and finances manufactured homes and “tiny houses” that are distributed
through a network of independent retailers and company-owned stores and are sold directly to manufactured housing
communities. We are the fifth largest producer of manufactured homes in the United States as ranked by number of homes
manufactured based on information available from the Manufactured Housing Institute and IBTS for the twelve month
period ending September 30, 2022. With current operations focused primarily in the southern United States, we offer our
customers an array of quality homes ranging in size from approximately 395 to 2,667 square feet consisting of 1 to 5
bedrooms, with 1 to 31/2 bathrooms. Our homes range in price, at retail, from approximately $33,000 to $180,000. During
2022, we sold 4,189 home sections (which are entire homes or single floors that are combined to create complete homes)
and in 2021, we sold 3,635 home sections.
The Company has one reportable segment. All of our activities are interrelated, and each activity is dependent and
assessed based on how each of the activities of Company supports the others. For example, the sale of manufactured homes
includes providing transportation and consignment arrangements with dealers. We also provide financing options to the
customers to facilitate such sale of homes. In addition, the sale of homes is directly related to financing provided by us.
Accordingly, all significant operating and strategic decisions by the chief operating decision-maker, the Executive
Chairman of the Board, are based upon analyses of our company as one segment or unit.
We believe our company is one of the most vertically integrated in the manufactured housing industry, allowing us
to offer a complete solution to our customers, from manufacturing custom-made homes using quality materials and
distributing those homes through our expansive network of independent retailers and company-owned distribution
locations, to providing tailored financing solutions for our customers. Our homes are constructed in the United States at
one of our three manufacturing facilities in accordance with the construction and safety standards of the U.S. Department
of Housing and Urban Development (“HUD”). Our factories employ high-volume production techniques that allow us to
produce, on average, approximately 70 home sections, or 60 fully-completed homes depending on product mix, in total per
week. We use quality materials and operate our own component manufacturing facilities for many of the items used in the
construction of our homes. Each home can be configured according to a variety of floor plans and equipped with such
features as fireplaces, central air conditioning and state-of-the-art kitchens.
Our homes are marketed under our premier “Legacy” brand name and currently are sold primarily across 15 states
through a network of 156 independent retail locations, 13 company-owned retail locations and through direct sales to
owners of manufactured home communities. Our 13 company-owned retail locations, including 11 Heritage Housing stores
and two Tiny House Outlet stores exclusively sell our homes. During 2022, approximately 53% of our manufactured
homes were sold in Texas, followed by 9% in Georgia, 5% in Florida, 5% in Alabama, 5% in Arizona and 4% in
Louisiana. During 2021, approximately 50% of our manufactured homes were sold in Texas, followed by 16% in Georgia,
8% in Louisiana and 5% in Alabama.
We offer three types of financing solutions to our customers. We provide floor plan financing for our independent
retailers, which takes the form of a consignment arrangement or a financed sale between the retailer and us. We also
provide consumer financing for our products which are sold to end-users through both independent and company-owned
retail locations, and we provide financing solutions to manufactured housing community owners that buy our products for
use in their manufactured housing communities. Our ability to offer competitive financing options
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at our retail locations provides us with several competitive advantages and allows us to capture sales which may not have
otherwise occurred without our ability to offer consumer financing.
Corporate Conversion
Prior to January 1, 2018, we were a Texas limited partnership named Legacy Housing, Ltd. Effective January 1,
2018, we converted into a Delaware corporation pursuant to a statutory conversion, or the Corporate Conversion, and
changed our name to Legacy Housing Corporation. All of our outstanding partnership interests were converted on a
proportional basis into shares of common stock of Legacy Housing Corporation. Effective December 31, 2019, the
Company reincorporated from a Delaware corporation to a Texas corporation. For more information, see “Corporate
Conversion” in Note 1.
Following the Corporate Conversion, Legacy Housing Corporation continues to hold all of the property and assets
of Legacy Housing, Ltd. and all of the debts and obligations of Legacy Housing, Ltd. continue as the debts and obligations
of Legacy Housing Corporation. The purpose of the Corporate Conversion was to reorganize our corporate structure so that
the top-tier entity in our corporate structure is a corporation rather than a limited partnership and so that our existing
owners own shares of our common stock rather than partnership interests in a limited partnership. Except as otherwise
noted, the financial statements included in this Form 10-K are those of Legacy Housing Corporation.
Factors Affecting Our Performance
We believe that the growth of our business and our future success depend on various opportunities, challenges,
trends and other factors, including the following:
● We have purchased several properties in our market area for the purpose of developing manufactured housing
communities and subdivisions. As of December 31, 2022, these properties include the following ($’s in
thousands):
Location
Bastrop County, Texas
Bexar County, Texas
Horseshoe Bay, Texas
Johnson County, Texas
Venus, Texas
Wise County, Texas
Bexar County, Texas
April 2018
November 2018
Description Date of Acquisition
368 Acres
69 Acres
133 Acres
91.5 Acres
50 Acres
81.5 Acres
233 Acres
Various 2018-2019
July 2019
August 2019
September 2020
February 2021
Land
4,215 $
$
842
2,639
449
422
889
1,550
$ 11,006 $
Improvements
107
3,381 $
Total
7,596
949
4,012
449
446
889
1,796
5,131 $ 16,137
1,373
-
24
-
246
● We also expect to provide financing solutions to a select group of our manufactured housing community-
owner customers in a manner that includes developing new sites for products in or near urban locations
where there is a shortage of sites to place our products. These solutions will be structured to give us an
attractive return on investment when coupled with the gross margin we expect to make on products
specifically targeted for sale to these new manufactured housing communities.
● Finally, our financial performance will be impacted by our ability to fulfill current orders for our
manufactured homes from dealers and customers. Currently, our two Texas manufacturing facilities are
operating at or near peak capacity, with limited ability to increase the volume of homes produced at those
plants. Our Georgia manufacturing facility has unutilized square footage available and with additional
investment can add capacity to increase the number of homes that can be manufactured. We intend to
increase production at the Georgia facility over time, particularly in response to orders increasingly being
generated from new markets in Florida and the Carolinas. In order to maintain our growth, we will need to be
able to continue to properly estimate anticipated future volumes when making commitments regarding the
level of business that we will seek and accept, the mix of products that we intend to manufacture, the
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timing of production schedules and the levels and utilization of inventory, equipment and personnel. We are
actively reviewing organic and inorganic opportunities to add production capacity in attractive regions to
meet future demand.
Critical Accounting Policies and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based upon our
financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles
(“GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities.
Management bases its estimates and judgments on historical experience and on various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of
assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under
different assumptions or conditions.
Management believes the following accounting policies are critical to our operating results or may affect
significant judgments and estimates used in the preparation of our financial statements.
Allowance for Loan Losses—Consumer Loan 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. A
reserve is calculated after considering, 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. Our
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 our company. Specific reserves are determined
based on probable losses on specific classified impaired loans.
Our 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
and 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 we will be unable to collect all amounts due in accordance
with the original contractual 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 fair value of underlying collateral value, less estimated selling costs. We use
certain 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 will reduce the value; (4) units located on
private property present additional value loss because it tends to be more expensive to remove units from 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 and size, including 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
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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.
Allowance for Loan Losses—MHP Notes
MHP Notes are stated at amounts due from customers net of allowance for loan losses. We determine the
allowance by considering several factors including the aging of the past due balance, the customer’s payment history, and
our previous loss history. We establish an allowance reserve composed of specific and general reserve amounts that are
deemed to be uncollectible. Historically we have not experienced material losses on the MHP Notes.
Inventories
Inventories consist of raw materials, work-in-process, and finished goods. Finished goods are stated at the lower
of cost or net realizable value. Raw materials cost approximates the first-in first-out method. Finished goods and work-in-
process are based on a standard cost system that approximates actual costs using the specific identification method.
Estimates of the lower of cost and net realizable value of inventory are determined by comparing the actual cost of
the product to the estimated selling prices in the ordinary course of business based on current market and economic
conditions, less reasonably predictable costs of completion, disposal, and transportation of the inventory.
We evaluate inventory based on historical experience to estimate our inventory not expected to be sold in less than
a year. We classify our inventory not expected to be sold in one year as non-current.
Property, Plant and Equipment
Property, plant and equipment are carried at cost less accumulated depreciation. Depreciation expense is
calculated using the straight-line method over the estimated useful lives of each asset. Estimated useful lives for significant
classes of assets are as follows: buildings and improvements, 30 to 39 years; vehicles, 5 years; machinery and equipment,
7 years; and furniture and fixtures, 7 years. Repair and maintenance charges are expensed as incurred. Expenditures for
major renewals or betterments which extend the useful lives of existing property, plant, and equipment are capitalized and
depreciated. We periodically evaluate the carrying value of long-lived assets to be held and used and when events and
circumstances warrant such a review. The carrying value of long-lived assets is considered impaired when the anticipated
undiscounted cash flow from such assets is less than its carrying value. In that event, a loss is recognized based on the
amount by which the carrying value exceeds the fair value of the long-lived assets. Fair value is determined primarily using
the anticipated cash flows discounted at a rate commensurate with the risk involved. Losses on long-lived assets to be
disposed of are determined in a similar manner, except that the fair values are based primarily on independent appraisals
and preliminary or definitive contractual arrangements less costs to dispose.
Revenue Recognition
Direct Sales
Revenue from homes sold to independent retailers that are not financed and not under a consignment arrangement
are generally recognized upon execution of a sales contract and when the home is shipped, at which time title passes to the
independent retailer and collectability is reasonably assured. These types of homes are generally either paid for prior to
shipment or floor plan financed through a third party lender by the independent retailer through standard industry
arrangements, which can include repurchase agreements.
Commercial Sales
Revenue from homes sold to mobile home parks under commercial loan programs involving funds provided by
our company is recognized when the home is shipped, at which time title passes to the customer and a sales and financing
contract is executed, down payment received, and collectability is reasonably assured.
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Consignment Sales
We provide floor plan financing for independent retailers, which takes the form of a consignment arrangement or a
financed sale. Consignment sales under the inventory financing arrangement are considered sales of homes to the
independent dealer and are recognized as revenue upon delivery of the home to the dealer’s location. Sales under a
consignment agreement are recognized as revenue when we enter into a sales contract and receive full payment for cash
sales, and title passes; or, upon execution of a sales and financing contract, with a down payment received from and upon
delivery of the home to the final individual customer, at which time title passes and collectability is reasonably assured. For
homes sold to customers through independent retailers under consignment arrangements and financed by us, a percentage
of profit is paid to the independent retailer up front as a commission for sale and also reimburses certain direct expenses
incurred by the independent retailer for each transaction. Such payments are recorded as cost of product sales in our
statement of operations.
Retail Store Sales
Revenue from direct retail sales through company-owned retail locations are generally recognized when the
customer has entered into a legally binding sales contract, payment is received, the home is delivered at the customer’s site,
title has transferred, and collection is reasonably assured. Retail sales financed by us are recognized as revenue upon the
execution of a sales and financing contract with a down payment received and upon delivery of the home to the final
customer, at which time title passes and collectability is reasonably assured.
Revenue is recognized net of sales taxes.
Product Warranties
We provide retail home buyers with a one-year warranty from the date of purchase on manufactured inventory.
Product warranty costs are accrued when the covered homes are sold to customers. Product warranty expense is recognized
based on the terms of the product warranty and the related estimated costs. Factors used to determine the warranty liability
include the number of homes under warranty and the historical costs incurred in servicing the warranties. The accrued
warranty liability is reduced as costs are incurred and warranty liability balance is included as part of accrued liabilities in
our balance sheet.
Results of Operations
The following discussion should be read in conjunction with the information set forth in the financial statements
and the accompanying notes appearing elsewhere in this Form 10-K.
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Comparison of Years ended December 31, 2022 and 2021 (in thousands)
Net revenue:
Product sales
Consumer and MHP loans interest
Other
Total net revenue
Operating expenses:
Cost of product sales
Selling, general administrative expenses
Dealer incentive
Income from operations
Other income (expense)
Non‑operating interest income
Miscellaneous, net
Interest expense
Total other
Income before income tax expense
Income tax expense
Net income
Year ended
December 31,
2022
2021
$ change
% change
$ 222,052
28,564
6,399
257,015
$ 165,995
27,195
4,317
197,507
$
150,114
27,568
1,315
78,018
2,942
1,563
(375)
4,130
82,148
(14,375)
67,773
$
$
114,050
23,306
1,235
58,916
2,095
503
(887)
1,711
60,627
(10,756)
49,871
$
56,057
1,369
2,082
59,508
36,064
4,262
80
19,102
847
1,060
512
2,419
21,521
(3,619)
17,902
33.8 %
5.0 %
48.2 %
30.1 %
31.6 %
18.3 %
6.5 %
32.4 %
40.4 %
210.7 %
(57.7)%
141.4 %
35.5 %
33.6 %
35.9 %
Product sales primarily consist of direct sales, commercial sales, consignment sales and retail store sales. Product
sales increased $56.1 million, or 33.8%, in 2022 as compared to 2021. This increase was driven by higher average sales
price, the conversion of certain independent dealer consignment arrangements to financing arrangements and an increase in
unit volumes. The conversion of consignment arrangements to financing arrangements resulted in an increase to producet
sales of approximately $29.1 million during 2022. We expect the conversion of consignment arrangements to financing
arrangements to have minimal impact on product sales in 2023.
Net revenue attributable to our factory-built housing consisted of the following in 2022 and 2021:
Net revenue:
Products sold
Total products sold
Net revenue per product sold
Year Ended
December 31,
(in thousands)
2022
2021
$ Change
% Change
$ 222,052
3,339
66.5
$
$ 165,995
3,011
55.1
$
$
$
56,057
328
11.4
33.8 %
10.9 %
20.6 %
In 2022, our net revenue per product sold increased primarily because of the increase in unit prices over the first
half of 2022, as rising material and labor costs were passed on to our customers. We had increases in consignment sales,
direct sales, commercial sales and other product sales, slightly offset by a decrease in retail store sales. Sales through our
company-owned retail stores have higher margins than our direct sales and consignment sales. For the six months ending
December 31, 2022, we experienced a decrease in net revenue attributable to product sales due to the Company and the
State of Georgia’s efforts to evaluate and improve the quality and consistency of homes manufactured in our Eatonton
facility. These efforts have resulted in a temporary decrease of approximately 36% in the rate of issuing HUD Labels of
Certification and shipping finished homes from our Eatonton facility. We increased shipments from our Eatonton facility
during the fourth quarter and plan to meet or exceed historical levels in 2023.
Consumer and MHP loans interest income grew $1.4 million, or 5.0%, in 2022 as compared to 2021 and is
primarily related to our increase in average outstanding consumer loan portfolio balance partially offset by a decrease in
average outstanding MHP Note portfolio balance. The consumer loan portfolio has a higher average contractual interest
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rate compared to the MHP Note portfolio average contractual interest rate. Between December 31, 2022 and December 31,
2021 our consumer loan portfolio increased by $13.4 million resulting in an increase of consumer loan interest income. On
September 30, 2021, we collected $44.9 million in principal payment from one of our borrowers. As a result of this
payment, MHP loan interest income decreased during 2022 as compared to 2021, partially offsetting the increase in
consumer loan interest income.
Other revenue primarily consists of commercial lease rents, consignment fees and servicer fee revenue. Other
revenue increased $2.1 million or 48.2% primarily due to a $1.4 million increase in consignment fees, a $0.5 million
increase in commercial lease rents and a $0.2 million increase in servicer fee revenue.
The cost of product sales increased $36.1 million, or 31.6%, in 2022 as compared to 2021. The increase in costs is
primarily related to an increase in units sold and increases in the cost of materials and labor in 2022 which was materially
passed along to our end-customer.
Selling, general and administrative expenses increased $4.3 million, or 18.3%, in 2022 as compared to 2021. This
increase was primarily due to a $5.7 million increase in salaries and incentive costs, a $0.6 million increase in warranty
costs, a $0.6 million increase in consulting and professional fees, and a $0.2 million increase in depreciation and
amortization expense, partially offset by a $1.4 million decrease in legal expense, a $0.4 million increase in loan loss
provision and a net $1.0 million decrease in other miscellaneous costs.
Dealer incentive expense increased $0.1 million, or 6.5% in 2022 as compared to 2021.
Other income (expense), net increased $2.4 million, or 141.4%, in 2022, as compared to 2021. This increase was
primarily due to a $0.8 million increase in non-operating interest income, a $0.6 million increase in capital gains related to
the sale of leased property, a $0.5 million increase in miscellaneous income, net, and a decrease of $0.5 million in interest
expense.
Income tax expense was $14.4 million for 2022 compared to $10.8 million for and 2021. The effective tax rate for
the year ended December 31, 2022 was 17.5% and primarily differs from the federal statutory rate of 21% primarily due to
a federal tax credit for energy efficient construction and partially offset by state income taxes. The effective tax rate for the
year ended December 31, 2021 was 17.7% and primarily differs from the federal statutory rate of 21% primarily due to a
federal tax credit for energy efficient construction and partially offset by state income taxes.
Liquidity and Capital Resources
Cash and Cash Equivalents
We consider all cash and highly liquid investments with an original maturity of three months or less to be cash
equivalents. We maintain cash balances in bank accounts that may, at times, exceed federally insured limits. We have not
incurred any losses from such accounts and management considers the risk of loss to be minimal. We believe that cash flow
from operations, cash and cash equivalents at December 31, 2022, and availability on our lines of credit will be sufficient
to fund our operations and provide for growth for the next 12 to 18 months and into the foreseeable future. In 2020, we
negotiated a new credit agreement with Capital One, N.A. that expanded and extended our credit availability (see
Indebtedness – Capital One Revolver, below). As of December 31, 2022, we had approximately $2.8 million in cash and
cash equivalents, compared to $1.0 million as of December 31, 2021. We also held an investment of $8.4 million in US
Treasury Notes as of December 31, 2022.
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Cash Flow Activities
Net cash (used in) provided by operating activities
Net cash provided by (used in) investing activities
Net cash used in financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Comparison of Cash Flow Activities from 2022 to 2021
Year Ended
December 31,
(in thousands)
2022
2021
$
$
$
$
$
$
(1,691)
9,081
(5,614)
1,776
1,042
2,818
$
$
$
$
$
$
60,296
(31,942)
(28,080)
274
768
1,042
Net cash used in operating activities was $1.7 million during the year ended December 31, 2022, compared to net
cash of $60.3 million provided by operating activities during 2021. This change was primarily as a result of increased cash
used for MHP originations net of collections, increased dealer inventory loan originations net of collections, increased
volume of consumer loan originations net of principal collections, a decrease in accrued liabilities and an increase in other
assets. The increase in cash used in operating activities was partially offset by an increase in operating income before non-
cash adjustments, increased volume of other notes receivables principal collections net of originations, decreased
inventories, increase in customer deposits, and increased dealer incentive liability.
Net cash provided by investing activities of $9.1 million in 2022 was primarily attributable to $23.5 million of
collections related to loans we made to third parties for the development of manufactured housing parks, proceeds of $1.7
million for the sale of leased property and collections of $0.5 million from our purchased consumer loans. These were
offset by $8.4 million used for the purchase of our investment in treasury notes, $4.4 million used for loans to third parties
for the development of manufactured housing parks and $3.8 million used for the acquisition of property plant and
equipment.
Net cash used in financing activities of $5.6 million in 2022 was attributable to net payments of $5.6 million on
our lines of credit. Net cash used in financing activities of $28.1 million in 2021 was attributable to net payments of $28.2
million on our lines of credit offset by $0.1 million received from the exercise of stock options.
Indebtedness
Capital One Revolver. On March 30, 2020, we entered into an agreement with Capital One, N.A. for new
revolving line of credit (“Revolver”). The Revolver had a maximum credit limit of $70,000,000 and a maturity date of
March 30, 2024.
On June 21, 2022, we received a Reservation of Rights notice from Capital One, N.A. The letter stated that our
Revolver was in default. The default condition occurred due to our failure to timely file the Form 10-K and deliver certain
financial statement to Capital One, N.A. On July 28, 2022, we entered into a Limited Waiver and First Amendment to
Credit Agreement (the “Amendment”) with Capital One, N.A. The Amendment replaces the LIBOR borrowing rate with a
secured overnight financing rate (“SOFR”) and waives a default arising out of a monetary judgement against us that
exceeded the amount allowed in the Revolver.
On August 24, 2022, we received a Notice of Default and Partial Suspension of Loan Commitments from Capital
One, N.A. The notice stated that the July 28, 2022 forbearance agreement had been terminated and that Capital One, N.A.
was permitted to suspend $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.
The Revolver accrues interest at one-month SOFR plus 2.00%. The interest rates in effect as of December 31,
2022 and 2021 were 6.12% and 2.10%, respectively. Amounts available under the Revolver are subject to a formula
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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 $17,400,000 as of December 31, 2022. In connection with
the Revolver, we paid certain arrangement fees and other fees of approximately $295,000, which were capitalized as
unamortized debt issuance costs and will be amortized to interest expense over the life of the Revolver.
For the years ended December 31, 2022 and 2021, interest expense under the Revolver was $225,000 and
$887,000, respectively. The outstanding balance as of December 31, 2022 and 2021 was $2,545,000 and $7,993,000,
respectively. The Revolver requires the Company to comply with certain financial and non-financial covenants. We were in
compliance with all financial covenants as of December 31, 2022, including that we maintain a tangible net worth of at
least $120,000,000 and that we maintain a ratio of debt to EBITDA of 4-to-1, or less.
PILOT Agreement. In December 2016, we entered into a Payment in Lieu of Taxes (“PILOT”) agreement
commonly offered in Georgia by local community development programs to encourage industry development. The net
effect of the PILOT agreement was to provide us with incentives through the abatement of local, city and county property
taxes and to provide financing for improvements to our Georgia plant (the “Project”). In connection with the PILOT
agreement, the Putman County Development Authority provided a credit facility for up to $10,000, which could have been
drawn upon to fund Project improvements and capital expenditures as defined in the agreement. If funds had been drawn,
we would have paid transaction costs and debt service payments. The PILOT agreement required interest payments of
6.00% per annum on outstanding balances, which would have been due each December 1 through maturity on December 1,
2021, at which time all unpaid principal and interest would have been due. The PILOT agreement is collateralized by the
assets of the Project. No amounts were drawn on this credit facility.
Contractual Obligations
The following table is a summary of contractual cash obligations as of December 31, 2022:
Payments Due by Period (in thousands)
Contractual Obligations
Lines of credit
Operating lease obligations
Off-Balance Sheet Arrangements
Total
$ 2,545
$ 2,831
2023
2024 - 2025 2026 - 2027 After 2027
—
113
2,545
1,198
—
837
—
683
We did not have any off-balance sheet arrangements that are reasonably likely to have a current or future effect on
our financial condition, net sales, results of operations, liquidity or capital expenditures. However, we do have a repurchase
agreement with a financial institution providing inventory financing for independent retailers of our products. Under this
agreement, we have agreed to repurchase homes at declining prices over the term of the agreement (24 months). Our
obligation under this repurchase agreement ceases upon the purchase of the home by the retail customer. The maximum
amount of our contingent obligations under such repurchase agreements was approximately $8,925,000 and $4,908,000 as
of December 31, 2022 and 2021, respectively, without reduction for the resale value of the homes. We may be required to
honor contingent repurchase obligations in the future and may incur additional expense as a consequence of these
repurchase agreements. We consider our obligations on current contracts to be immaterial and accordingly we have not
recorded any reserve for repurchase commitment as of December 31, 2022.
Recent Accounting Pronouncements
For information regarding recently issued and adopted accounting pronouncements, see Note 2, Summary of
Significant Accounting Policies, to our December 31, 2022 financial statements included in Part II, Item 8, Financial
Statements and Supplementary Data, of this Form-10K.
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Emerging Growth Company Status
We are an “emerging growth company,” as defined in the JOBS Act. Section 107 of the JOBS Act provides that an
“emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the
Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company”
can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.
We have elected to take advantage of these exemptions until we are no longer an emerging growth company or until we
affirmatively and irrevocably opt out of this exemption.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable for smaller reporting companies.
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ITEM 8. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
AUDITED FINANCIAL STATEMENTS OF LEGACY HOUSING CORPORATION
Reports of Independent Registered Public Accounting Firms
Balance Sheets as of December 31, 2022 and 2021
Statements of Operations for the Years Ended December 31, 2022 and 2021
Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2022 and 2021
Statements of Cash Flows for the Years Ended December 31, 2022 and 2021
Notes to Financial Statements
Page
32
34
35
36
37
38
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Report of Independent Registered Public Accounting Firm (PCAOB ID: 229)
Audit Committee, Board of Directors and Shareholders
Legacy Housing Corporation
Bedford, Texas
Opinion on the financial statements
We have audited the accompanying balance sheet of Legacy Housing Corporation (the Company) as of December 31,
2022, and the related statements of income, changes in stockholders’ equity and cash flows for the year then ended, and the
related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to
above present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the
results of its operations and its cash flows for year then ended, in conformity with accounting principles generally accepted
in the United States of America.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audit.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (Unites States)
(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether
due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over
financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of
the financial statements. We believe that our audit provide a reasonable basis for our opinion.
/s/ Daszkal Bolton, LLP
We have served as the Company’s auditor since 2022.
Sunrise, Florida
March 15, 2023
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Report of Independent Registered Public Accounting Firm (PCAOB ID: 410)
Audit Committee, Board of Directors and Shareholders
Legacy Housing Corporation
Bedford, Texas
Opinion on the financial statements
We have audited the accompanying balance sheet of Legacy Housing Corporation (the Company) as of December 31,
2021, and the related statements of operations, changes in stockholders’ equity and cash flows for the year then ended, and
the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to
above present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the
results of its operations and its cash flows for year then ended, in conformity with accounting principles generally accepted
in the United States of America.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audit.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (Unites States)
(PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether
due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over
financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test
basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of
the financial statements. We believe that our audit provide a reasonable basis for our opinion.
/s/ Weaver, LLP
We served as the Company’s auditor from 2021 to 2022.
Dallas, Texas
August 3, 2022
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LEGACY HOUSING CORPORATION
BALANCE SHEETS (in thousands, except share data)
December 31, December 31,
2022
2021
Assets
Current assets:
Cash and cash equivalents
Held to Maturity Securities
Accounts receivable, net
Current portion of contracts - dealer financed
Current portion of consumer loans receivable
Current portion of notes receivable from mobile home parks (“MHP”)
Current portion of other notes receivable
Inventories
Prepaid expenses and other current assets
Total current assets
Contracts - dealer financed
Consumer loans receivable, net
Notes receivable from mobile home parks (“MHP”), net
Other notes receivable, net
Inventories, net
Other assets - leased mobile homes
ROU assets - operating leases
Other assets
Property, plant and equipment, net
Liabilities and Stockholders' Equity
Total assets
Current liabilities:
Accounts payable
Accrued liabilities
Customer deposits
Escrow liability
Operating lease obligation
Total current liabilities
Long‑term liabilities:
Operating lease obligation, less current portion
Lines of credit
Deferred income taxes, net
Dealer incentive liability
Total liabilities
Commitments and contingencies (Note 13)
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; 24,814,695 and 24,654,621 issued
and 24,369,630 and 24,209,556 outstanding at December 31, 2022 and December 31, 2021,
respectively
Treasury stock at cost, 445,065 shares at December 31, 2022 and December 31, 2021
Additional paid-in-capital
Retained earnings
Total stockholders' equity
Total liabilities and stockholders' equity
See accompanying notes to financial statements
34
$
$
$
$
$
$
$
2,818
8,412
4,873
29,441
6,801
9,670
8,927
32,075
4,064
107,081
595
132,208
133,072
13,795
6,987
8,824
2,663
1,482
30,106
436,813
4,549
16,895
9,715
9,653
650
41,462
2,121
2,545
3,065
5,516
54,709
1,042
—
5,118
3,496
6,080
10,049
20,300
42,000
4,456
92,541
—
119,543
92,943
20,930
2,678
9,419
—
1,097
27,516
366,667
4,155
20,686
7,749
9,350
—
41,940
—
7,993
3,004
4,336
57,273
—
—
30
(4,477)
180,555
205,996
382,104
436,813
$
25
(4,477)
175,623
138,223
309,394
366,667
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LEGACY HOUSING CORPORATION
STATEMENTS OF INCOME (in thousands, except share and per share data)
Net revenue:
Product sales
Consumer and MHP loans interest
Other
Total net revenue
Operating expenses:
Cost of product sales
Selling, general and administrative expenses
Dealer incentive
Income from operations
Other income (expense):
Non‑operating interest income
Miscellaneous, net
Interest expense
Total other
Income before income tax expense
Income tax expense
Net income
Weighted average shares outstanding:
Basic
Diluted
Net income per share:
Basic
Diluted
Year ended December 31,
2021
2022
$
$
$
$
222,052
28,564
6,399
257,015
150,114
27,568
1,315
78,018
2,942
1,563
(375)
4,130
82,148
(14,375)
67,773
24,357,785
24,742,419
2.78
2.74
$
$
$
$
165,995
27,195
4,317
197,507
114,050
23,306
1,235
58,916
2,095
503
(887)
1,711
60,627
(10,756)
49,871
24,204,437
24,275,989
2.06
2.05
See accompanying notes to financial statements.
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LEGACY HOUSING CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(in thousands, except share data)
Balances, December 31, 2020
Share based compensation expense and stock
units vested
Share based compensation expense - stock
options exercised
Net income
Balances, December 31, 2021
Share based compensation expense and stock
units vested
Net income
Balances, December 31, 2022
Shares
24,639,125
8,571
6,925
—
24,654,621
160,074
—
24,814,695
Common Stock
Amount
Treasury
stock
Additional
paid-in-capital
$
25
$ (4,477) $
175,293
Retained
earnings
$ 88,352
Total
$ 259,193
—
—
—
25
5
—
30
—
230
—
230
—
—
(4,477)
—
—
(4,477)
100
—
175,623
4,932
—
180,555
—
49,871
138,223
—
67,773
205,996
100
49,871
309,394
4,937
67,773
382,104
See accompanying notes to financial statements
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LEGACY HOUSING CORPORATION
STATEMENTS OF CASH FLOWS (in thousands)
Operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Year ended December 31,
2022
2021
$
67,773
$
49,871
Depreciation and amortization expense
Amortization of deferred revenue
Amortization of Treasury Note Discount
Amortization of lines of credit cost
Provision for accounts and notes receivable
Provision for long term inventory
Gain from sale of leased property
Amortization of operating lease right of use asset
Deferred income taxes
Share based payment expense
Changes in operating assets and liabilities:
Accounts receivable
Consumer loans activity, net
Notes receivable MHP activity, net
Dealer inventory loan activity, net
Inventories
Prepaid expenses and other current assets
Other assets
Accounts payable and accrued liabilities
Right of use activity, net
Customer deposits
Escrow liability
Dealer incentive liability
Net cash (used in) provided by operating activities
Investing activities:
Purchases of property, plant and equipment
Proceeds from sale of leased property
Purchase of investments - treasury notes
Issuance of notes receivable
Notes receivable collections
Collections from purchased loans
Net cash provided by (used in) investing activities
Financing activities:
Proceeds from exercise of stock options
Proceeds from lines of credit
Payments on lines of credit
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental disclosure of cash flow information:
Cash paid for interest
Cash paid for taxes
1,936
(1,383)
(25)
74
(109)
(83)
(753)
62
61
4,936
309
(13,346)
(39,423)
(26,553)
5,699
485
(1,449)
(3,397)
46
1,966
303
1,180
(1,691)
(3,800)
1,684
(8,386)
(4,394)
23,495
482
9,081
1,587
814
—
—
971
(188)
(98)
—
1,033
230
(5,325)
(15,525)
32,727
—
(7,840)
(1,221)
(1,739)
(1,453)
—
4,737
1,621
94
60,296
(5,952)
—
(36,806)
9,026
1,790
(31,942)
—
100,589
(106,203)
(5,614)
1,776
1,042
2,818
251
10,314
100
96,088
(124,268)
(28,080)
274
768
1,042
873
8,195
$
$
$
$
$
$
See accompanying notes to financial statements
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LEGACY HOUSING CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 2022 and 2021
(Dollars in thousands, except per share amounts)
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 and (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.
In December 2018, the Company sold 4,000,000 shares of its common stock through an initial public offering
(“IPO”) at $12.00 per share. Proceeds from the IPO, net of $4,504 of underwriting discounts and offering expenses paid by
the Company, were $43,492. In January 2019, the Company sold an additional 600,000 shares of its common stock as part
of the IPO at $12.00 per share. Proceeds from the January 2019 issuance, net of $505 of underwriting discounts and
offering expenses paid by the Company, were $6,695.
On April 17, 2019, the Company purchased 300,000 shares of its common stock at the price of $10.20 per share,
pursuant to the Company’s repurchase program. During the year ended December 31, 2020, the Company purchased
145,065 shares of its common stock at an average price of $9.77 per share, pursuant to the Company’s repurchase
program. In November 2022, the Company’s Board of Directors approved a new repurchase program (the “2022
Repurchase Program”). Under the 2022 Repurchase Program, the Company may purchase up to $10,000 of its common
stock. Share purchases may be made from time to time in the open market or through privately negotiated transactions
depending on market conditions, share price, trading volume and other factors. Such purchases, if any, will be made in
accordance with applicable insider trading and other securities laws and regulations. These repurchases may be
commenced or suspended at any time or from time to time without prior notice. The 2022 Repurchase Program expires
October 31, 2025.
Corporate Conversion
Effective January 1, 2018, the Partnership converted into a Delaware corporation pursuant to a statutory
conversion and changed its name to Legacy Housing Corporation. In order to consummate the corporate conversion
completed on January 1, 2018, a certificate of conversion was filed with the Secretary of State of the State of Delaware and
with the Secretary of State of the State of Texas. Holders of partnership interests in Legacy Housing, Ltd. received an
initial allocation, on a proportional basis, of 20,000,000 shares of common stock of Legacy Housing Corporation.
Following the corporate conversion, Legacy Housing Corporation continues to hold all property and assets of
Legacy Housing, Ltd. and all of the debts and obligations of Legacy Housing, Ltd. On the effective date of the corporate
conversion, the officers of Legacy Housing, Ltd. became the officers of Legacy Housing Corporation. As a result of the
corporate conversion, the Company is a federal corporate taxpayer.
Basis of Presentation
The financial statements of the Company have been prepared in accordance with U.S. generally accepted
accounting principles (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission
(“SEC”). 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.
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Use of Estimates
LEGACY HOUSING CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 2022 and 2021
(Dollars in thousands, except per share amounts)
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 and notes
receivable, inventory obsolescence, income taxes, fair value of financial instruments and contingent liabilities. Actual
results could differ from these estimates.
Segment Reporting
The Company has one reportable segment. All of the Company’s activities are interrelated, and each activity is
dependent and assessed based on how each of the activities of the Company supports the others. For example, the sale of
manufactured homes includes providing transportation and consignment arrangements with dealers. We also provide
financing options to the customers to facilitate such sale of homes. In addition, the sale of homes is directly related to
financing provided by us. Accordingly, all significant operating and strategic decisions by the chief operating decision-
maker, the Executive Chairman of the Board, are based upon analyses of our company as one segment or unit.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
The Company considers all cash and highly liquid investments with an original maturity of three months or less to
be cash equivalents. The Company maintains cash balances in bank accounts that may, at times, exceed federally insured
limits. The Company has not incurred any losses from such accounts and management considers the risk of loss to be
minimal. As of December 31, 2022, the Company had two bank accounts that exceeded the FDIC limit. One account
exceeded the FDIC limit by $1,504 and the second account exceeded the FDIC limit by $133.
Held to Maturity Securities
Management determines the appropriate classification of its investment securities at the time of purchase. The
Company’s investments consist of US Treasury Notes with a maturity date of November 2023.
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 from 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. At December 31, 2022 and
2021, the allowance for doubtful accounts totaled $279 and $343, respectively.
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Consumer Loans Receivable
LEGACY HOUSING CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 2022 and 2021
(Dollars in thousands, except per share amounts)
Consumer loans receivable 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 13.4% as of
December 31, 2022 and 13.5% as of December 31, 2021. Consumer loans receivable have maturities that range from 2 to
30 years.
Loan applications go through an underwriting process which considers credit history to evaluate 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 $9,653 and $9,350 as of December 31, 2022 and
2021, respectively, and are included in escrow liability in the 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.
As of December 31, 2022 and 2021, total principal outstanding for consumer loans on nonaccrual status was $1,610 and
$1,239, respectively.
Impaired loans are those loans where it is probable the Company will be unable to collect all amounts due in
accordance with the original contractual 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 fair value of underlying collateral value, less estimated selling costs.
The Company used various factors to determine the value of the underlying collateral for impaired loans. These factors
were: (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
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LEGACY HOUSING CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 2022 and 2021
(Dollars in thousands, except per share amounts)
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 collateral is recorded at the same amount as the
principal balance as the loan. The fair value of the collateral is then 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 $795 and $517
as of December 31, 2022 and 2021, respectively, and are included in other assets in the balance sheets.
Notes Receivable from Mobile Home Parks
The notes receivable from mobile home parks (“MHP Notes” or “Notes”) relate to mobile homes sold to mobile
home parks and financed through notes receivable. The 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 $130,000 of the Notes
have a fixed interest rate ranging from 6.9% to 11.5%. The remaining 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% and 7.6% as of
December 31, 2022 and 2021, respectively with maturities that range from 1 to 10 years. The collateral underlying the
Notes are individual mobile homes which can be repossessed and resold. The MHP Notes are generally personally
guaranteed by the borrowers with substantial financial resources.
As of December 31, 2022, the Company had concentrations of MHP Notes with three independent third-parties
and their respective affiliates that equaled 12.3%, 16.6% and 34.0% of the principal balance outstanding, all of which was
secured by the mobile homes. As of December 31, 2021, the Company had concentrations of MHP Notes with two
independent third-parties and their respective affiliates that equaled 10.4% and 30.1% of the principal balance outstanding,
all of which was secured by the mobile homes.
Allowance for Loan Losses—MHP Notes
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. There were minimal past due balances on the MHP Notes as December 31, 2022 and 2021 and no charge
offs were recorded for MHP Notes for the years ended December 31, 2022 and 2021, respectively. Allowance for loan loss
is considered immaterial and accordingly no provision is recorded against the MHP Notes as of December 31, 2022 and
2021.
There were no impaired MHP Notes for the years ended December 31, 2022 and 2021, respectively, and there
were no repossessed homes balances as of December 31, 2022 and 2021, respectively. 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 relate to various notes issued to mobile home park owners and dealers, which are not
directly tied to 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
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LEGACY HOUSING CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 2022 and 2021
(Dollars in thousands, except per share amounts)
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. As of December 31, 2022 and 2021, the allowance for loan losses on other notes was $0 and $5, respectively.
There were no past due balances for other notes as of December 31, 2022 and 2021, respectively, and there were no
impaired balances for other notes as of December 31, 2022 and 2021, respectively.
Inventories
Inventories consist of raw materials, work-in-process, and finished goods and are stated at the lower of cost or net
realizable value. The cost of raw materials is based on the first-in first-out method. Finished goods and work-in-process are
based on a standard cost system that approximates actual costs using the specific identification method.
Estimates of the lower of cost and net realizable value of inventory are determined by comparing the actual cost of
the product to the estimated selling prices in the ordinary course of business based on current market and economic
conditions, less reasonably predictable costs of completion, disposal, and transportation of the inventory. For the periods
ending, December 31, 2022 and 2021, the Company recorded an insignificant amount of inventory write-down.
The Company evaluates inventory based on historical experience to estimate its inventory not expected to be sold
in less than a year. The Company classifies its inventory not expected to be sold in one year as non-current. As of
December 31, 2022 and 2021, non-current inventory was $6,987 and $2,678, 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 for the mobile homes
remains with the Company, and the lease is accounted for as an operating lease.
The standard lease agreement is typically for 96 months or 120 months. Under the lease arrangement, the lessee
(mobile home park operator) uses the mobile homes as personal property to be rented as a residence 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 all damages
caused by force majeure events even in cases of total or partial loss of the property. At the end of the lease term or in the
event of default, the lessee is required to deliver to the Company the homes with all improvements in good repair and
condition in substantially the same condition as existed at the commencement of the lease. The lessee may terminate the
lease with 30 days written notice to the Company and pay a lease termination fee equal to 10% of the remaining lease
payments or six month’s 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 upon determination of fair market value by both parties using comparable
sales, recent appraisal, or NADA 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 the renewal extension 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 $582 and $442 for the years ended
December 31, 2022 and 2021, respectively.
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LEGACY HOUSING CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 2022 and 2021
(Dollars in thousands, except per share amounts)
Future minimum lease income under all operating leases for each of the next five years at December 31, 2022, are
as follows:
2023
2024
2025
2026
2027
Thereafter
Total
$
$
1,964
1,964
1,964
1,964
1,792
2,561
12,209
Property, Plant, and Equipment
Property, plant and equipment are carried at cost less accumulated depreciation. Depreciation expense is
calculated using the straight-line method over the estimated useful lives of each asset. Estimated useful lives for significant
classes of assets are as follows: buildings and improvements, 30 to 39 years; vehicles, 5 years; machinery and equipment, 7
years; and furniture and fixtures, 7 years. Repair and maintenance charges are expensed as incurred. Expenditures for
major renewals or betterments which extend the useful lives of existing property, plant and equipment are capitalized and
depreciated.
Impairment of Long-Lived Assets
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate the
carrying amount of an asset may not be recoverable. Assets are grouped at the lowest level in which there are identifiable
cash flows that are largely independent of the cash flows of other groups of assets. In such cases, if the future undiscounted
cash flows of the underlying assets are less than the carrying amount, then the carrying amount of the long-lived asset will
be adjusted for impairment to a level commensurate with a discounted cash flow analysis of the underlying asset or its
determinable fair value. No impairment for long-lived assets was recorded for the years ended December 31, 2022 and
2021.
Dealer Incentive Liability
Under a dealer agreement with qualifying independent retailers, a portfolio is created for houses sold by the
independent retailer with consumer loan arrangements financed by the Company. The independent retailer is eligible to a
receive dealer incentive, which is a portion of total collections expected on a consumer loan portfolio after the Company’s
contribution (collection thresholds set per the terms of dealer agreement which includes Legacy’s initial contribution, plus
an allocation of interest and other agreed upon periodic fees) is met.
A dealer incentive liability is recorded in the Company’s balance sheet based on total outstanding balance of
individual dealer loan portfolios at period end, less the remaining portion of the Company’s contribution in respective
portfolios. As of December 31, 2022 and 2021, the dealer incentive liability was $5,516 and $4,336, respectively. Dealer
incentive expense for the years ended December 31, 2022 and 2021 totaled $1,315 and $1,235, respectively, and is
included in the Company’s statements of income.
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Product Warranties
LEGACY HOUSING CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 2022 and 2021
(Dollars in thousands, except per share amounts)
The Company provides retail home buyers with a one-year warranty from the date of purchase on manufactured
inventory. Product warranty costs are accrued when the covered homes are sold to customers. Product warranty expense is
recognized based on the terms of the product warranty and the related estimated costs. Factors used to determine the
warranty liability include the number of homes under warranty and the historical costs incurred in servicing the warranties.
The accrued warranty liability is reduced as costs are incurred and warranty liability balance is included as part of accrued
liabilities in the Company’s balance sheet.
A tabular presentation of the activity within the warranty liability account for the years ended December 31, 2022
and 2021 is presented below:
Warranty liability, beginning of year
Product warranty accrued
Warranty costs incurred
Warranty liability, end of year
Advertising Costs
2022
$ 2,876
2,874
(2,701)
$ 3,049
2021
$ 2,594
2,152
(1,870)
$ 2,876
The Company expenses all advertising and marketing expenses in the period incurred. Advertising costs for
the years ended December 31, 2022 and 2021 were $120 and $367, respectively.
Fair Value Measurements
The Company accounts for its investments and derivative instruments in accordance with the provisions of
Accounting Standards Codification (“ASC”) 820-10, Fair Value Measurement, which among other things provides the
framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation
techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities (Level I measurement) and the lowest priority to unobservable inputs (Level III
measurements). The three levels of fair value hierarchy under ASC 820-10, Fair Value Measurement, are as follows:
Level I
Level II
Level III
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.
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;
(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.
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.
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LEGACY HOUSING CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 2022 and 2021
(Dollars in thousands, except per share amounts)
The Company has used derivatives to manage risks related to interest rate movements. The Company does not
enter into derivative contracts for speculative purposes. Interest rate swap contracts are recognized as assets or liabilities on
the balance sheets and are measured at fair value. The fair value was calculated and provided by the lender, a Level II
valuation technique. Management reviewed the fair values for the instruments as provided by the lender and determined the
related asset and liability to be an accurate estimate of future gains and losses to the Company. The Company was not a
party to any interest rate swap agreements during the years ended December 31, 2022 and 2021.
Fair Value of Financial Instruments
The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable,
consumer loans, MHP Notes, other notes, accounts payable, lines of credit, notes payable, and 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 lines of credit, notes payable, part of the MHP Notes and part of the other
note 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 $138,800 compared to the book value of $139,009 as of December 31, 2022, and a fair value
of approximately $125,600 compared to the book value of $125,623 as of December 31, 2021. The Company determined
that the fair value of the fixed rate MHP Notes was approximately $128,400 compared to the book value of $129,966 as of
December 31, 2022, and a fair value of approximately $83,000 compared to the book value of $83,773 as of December 31,
2021. The Company determined that the fair value of the fixed rate other notes was approximately $21,600 compared to
the book value of $22,722 as of December 31, 2022, and a fair value of approximately $38,500 compared to the book value
of $38,886 as of December 31, 2021. This is a Level II valuation technique.
Revenue Recognition
Product sales, primarily consist of sales of mobile homes to consumers and mobile home parks through various
sales channels, which include Direct Sales, Commercial Sales, Consignment Sales, and Retail Store Sales. Direct Sales
include homes sold directly to independent retailers or customers that are not financed by the Company and are not sold
under a consignment arrangement. These types of homes are generally paid for prior to shipment. Commercial Sales
include homes sold to mobile home parks under commercial loan programs or paid for upfront. The Company provides
floor plan financing for independent retailers, which can take the form of a consignment arrangement or an inventory
financing arrangement. Consignment Sales under the consignment arrangement are considered sales of consigned homes
from independent dealers to individual customers. Consignment Sales under the inventory financing arrangement are
considered sales of homes to the independent dealer. Retail Store Sales are homes sold through Company-owned retail
locations. Consignment Sales and Retail Sales of homes may be financed by the Company, by a third party, or paid in cash.
Revenue from product sales is recognized at a point in time when the performance obligation under the terms of a
contract with our customer is satisfied, which typically occurs upon delivery and transfer of title of 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.
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LEGACY HOUSING CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 2022 and 2021
(Dollars in thousands, except per share amounts)
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.
For the year ended December 31, 2022, sales to two independent third-parties and their affiliates accounted for
$13,008 or 5.9% and $11,879 or 5.4% of our product sales, respectively. For the years ended December 31, 2021, sales to
an independent third-party and its affiliates accounted for $9,165 or 5.5% of our product sales, respectively.
For the years ended December 31, 2022 and 2021, total cost of product sales included $11,588 and $11,303 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.
Other revenue consists of consignment fees, commercial lease rents, service fees and other miscellaneous income.
Consignment fees are charged to independent retailers on a monthly basis for homes held by the independent retailers
pursuant to a consignment arrangement until the home is sold to an individual customer. Consignment fees are determined
as a percentage of the home’s wholesale price to the independent dealer. Revenue recognition for consignment fees is
recognized over time using the output method as it provides a faithful depiction of the Company’s performance toward
completion of the performance obligation under the contract and the value transferred to the independent retailer for the
time the home is held under consignment. Revenue for commercial leases is recognized as earned monthly over a
contractual period of 96 or 120 months. Revenue for service fees and miscellaneous income is recognized at a point in time
when the performance obligation is satisfied.
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LEGACY HOUSING CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 2022 and 2021
(Dollars in thousands, except per share amounts)
Disaggregation of Revenue. The following table summarizes customer contract revenues disaggregated by source
of the revenue for the years ended December 31, 2022 and 2021:
Product sales:
Direct sales
Commercial sales
Consignment sales
Retail store sales
Other (1)
Total product sales
Consumer and MHP loans interest:
Interest - consumer installment notes
Interest - MHP notes
Total consumer and MHP loans interest
Other
Total net revenue
Year ended
December 31,
2022
2021
$
$
45,549
61,373
84,037
19,629
11,464
222,052
18,369
10,195
28,564
6,399
257,015
$
$
25,173
46,835
63,496
20,011
10,480
165,995
16,658
10,537
27,195
4,317
197,507
(1) Other product sales revenue from ancillary products and services including parts, freight and other services
Reserve for Repurchase Commitments
In accordance with customary business practice in the manufactured housing industry, the Company has entered
into certain repurchase agreements with certain financial institutions and other credit sources who provide floor plan
financing to industry retailers, which provided that the Company will be obligated, under certain circumstances, to
repurchase homes sold to retailers in the event of a default by a retailer in its obligation to such credit sources. The
Company’s obligation under these repurchase agreements ceases upon the purchase of the home by the retail customer. The
Company applies ASC 460, Guarantees and ASC 450-20, Loss Contingencies, to account for its liability for repurchase
commitments. The Company considers its current obligations on current contracts to be immaterial and accordingly have
not recorded any reserve for repurchase commitments as of December 31, 2022 and 2021.
Other Income, Net
Other income primarily consists of interest related to other notes receivable balances and interest income earned
on cash balances, reduced by interest expenses.
Interest Income
Interest on consumer loans, MHP Notes and other notes is recognized using the effective-interest method on the
daily balances of the principal amounts outstanding and recorded as part of total revenue. Fees associated with the
origination of loans and certain direct loan origination costs are netted and the net amount is deferred and recognized over
the life of the loan as an adjustment of yield.
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Share-Based Compensation
LEGACY HOUSING CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 2022 and 2021
(Dollars in thousands, except per share amounts)
The Company accounts for share-based compensation in accordance with the provisions of ASC 718,
Compensation—Stock Compensation. Share-based compensation expense is recognized based on the award’s estimated
grant date fair value in order to recognize compensation cost for those shares expected to vest. The Company has elected to
record forfeitures as they occur. Compensation cost is recognized on a straight-line basis over the vesting period of the
awards and adjusted as forfeitures occur.
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. As a recently formed public
entity with a small public float and limited trading of its common shares on the NASDAQ Global Market, it was not
practicable for the Company to estimate the volatility of its common shares; therefore, management estimated volatility
based on the historical volatilities of a small group of companies considered as close to comparable to the Company as
available, all equally weighted, over the expected life of the option. 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 is allowed for
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
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.
Shipping and Handling Costs
Shipping and handling costs incurred to deliver product to our customers are included as a component of cost of
product sales in the statement of operations. Shipping and handling costs for the years ended December 31, 2022 and 2021
were $1,804 and $1,981, respectively.
Income Taxes
The Company is subject to U.S. federal and state income taxes as a corporation. Prior to the corporate conversion,
the Partnership was treated as a flow-through entity for U.S. federal income tax purposes, and as such, was generally not
subject to U.S. federal income tax at the entity level. Rather, the tax liability with respect to its taxable income was passed
through to its partners. Accordingly, prior to the corporate conversion, the Partnership only recorded a provision for Texas
franchise tax as the Partnership’s taxable income was included in the income tax returns of the individual partners.
Income tax expense for the Company is recognized for the tax effects of the transactions reported in the financial
statements and consist of taxes currently due, plus deferred taxes. The deferred tax assets and liabilities represent the future
tax return consequences of those differences, which will be either taxable or deductible when the assets and liabilities are
recovered or settled. Deferred tax assets and liabilities are reflected at income tax rates
48
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LEGACY HOUSING CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 2022 and 2021
(Dollars in thousands, except per share amounts)
applicable to the period in which the deferred tax assets or liabilities are expected to be realized or settled. As changes in
tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.
A valuation allowance, if needed, reduces deferred tax assets to the expected amount most likely to be realized.
Realization of deferred tax assets is dependent upon the generation of a sufficient level of future taxable income and
recoverable taxes paid in prior years. Although realization is not assured, management believes it is more likely than not
that the deferred tax assets will be realized. In addition, management does not believe there are any unrecorded deferred tax
liabilities that are material to the financial statements.
The determination of the provision for income taxes requires significant judgment, use of estimates, and the
interpretation and application of complex tax laws. Significant judgment is required in assessing the timing and amounts of
deductible and taxable items and the probability of sustaining uncertain tax positions. The benefits of uncertain tax
positions are recorded in the Company’s financial statements only after determining a more-likely-than-not probability that
the uncertain tax positions will withstand challenge, if any, from taxing authorities. When facts and circumstances change,
the Company reassesses these probabilities and records any changes through the provision for income taxes. The Company
recognizes interest and penalties relating to uncertain tax provisions as a component of tax expense. For the periods
presented, management has determined there are no material uncertain tax positions for the tax years that remain subject to
examination by major tax jurisdictions as of December 31, 2022, which includes the tax years 2019, 2020 and 2021.
Concentrations
Financial instruments that potentially subject the Company to concentrations of credit risk are accounts receivable,
consumer loans, MHP Notes and other notes receivable. Management believes that its credit policies are adequate to
minimize potential credit risk related to accounts receivable and other notes receivable. The consumer loans are secured by
the mobile homes that were financed through the loans. The MHP Notes are secured by mobile homes, other assets, and are
personally guaranteed. The MHP Notes personal guarantor may cover multiple parks and each park is treated as a
customer. As of December 31, 2022, the Company had concentrations of MHP Notes with three independent third-parties
and their respective affiliates that equaled 12.3%, 16.6% and 34.0% of the principal balance outstanding, all of which was
secured by the mobile homes. As of December 31, 2021, the Company had concentrations of MHP Notes with two
independent third-parties and their respective affiliates that equaled 10.4% and 30.1% of the principal balance outstanding,
all of which was secured by the mobile homes.
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 February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update
(“ASU”) 2016-02, Leases (Topic 842), to increase transparency and comparability among organizations by recognizing
lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. A lessee
should recognize in the balance sheet a liability to make lease payments (the lease liability) and an asset representing its
right to use the underlying asset for the lease term. As an emerging growth company, ASU 2016-02 is effective for fiscal
years beginning after December 15, 2021, and interim periods within those years. The Company adopted this standard in
the first quarter of fiscal 2022 and elected certain practical expedients permitted under the transition guidance, including
the package of practical expedients; however, the Company did not elect the hindsight practical expedient. Additionally,
the Company elected the optional transition method that allowed for a cumulative-effect adjustment in the period of
adoption and did not restate prior periods. The adoption of ASU 2016-02 resulted in an increase in total assets and total
liabilities of $3,258 at transition. However, this standard did not have a material impact on the consolidated statement of
income or the consolidated statement of cash flows. See Note 6 for further discussion on leases.
49
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LEGACY HOUSING CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 2022 and 2021
(Dollars in thousands, except per share amounts)
In June 2016, the FASB issued ASU 2016-13 Financial Instruments—Credit Losses (Topic 326): Measurement of
Credit Losses on Financial Instruments, which amends guidance on reporting credit losses for assets held at amortized cost
basis and available for sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial
recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit
losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial
assets to present the net amount expected to be collected. For available for sale debt securities, credit losses should be
measured in a manner similar to current GAAP, however Topic 326 will require that credit losses be presented as an
allowance rather than as a write-down and affects entities holding financial assets and net investment in leases that are not
accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net
investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not
excluded from the scope that have the contractual right to receive cash. The Company plans to use the longer phase-in
period for adoption, and accordingly this ASU is effective for the Company’s fiscal year beginning January 1, 2023. The
Company expects that allowance amounts will increase due to the adoption of this ASU.
In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset
Date of Topic 848. The amendments in this update extend the transition relief period for reference rate reform from
December 31, 2022 to December 31, 2024. The amendments in ASU 2022-06 apply to all entities, subject to meeting
certain criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference
rate expected to be discontinued because of reference rate reform. ASU 2022-06 was effective upon issuance. The new
standard has had no material impact on the Company's financial statements.
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.
3. CONSUMER LOANS RECEIVABLE
Consumer loans receivable, net of allowance for loan losses and deferred financing fees, consisted of the
following at December 31, 2022 and 2021:
Consumer loans receivable
Loan discount and deferred financing fees
Allowance for loan losses
Consumer loans receivable, net
2022
$ 142,340
(2,501)
(830)
$ 139,009
$
2021
129,119
(2,612)
(884)
$ 125,623
The following table presents a detail of the activity in the allowance for loan losses for the years ended December
31, 2022 and 2021:
Allowance for loan losses, beginning of period
Provision for loan losses
Charge offs (recoveries)
Allowance for loan losses
2022
2021
$
$
884
(243)
189
830
$
$
905
725
(746)
884
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LEGACY HOUSING CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 2022 and 2021
(Dollars in thousands, except per share amounts)
The impaired and general reserve for allowance for loan losses at December 31, 2022 and 2021:
Total consumer loans
Allowance for loan losses
Impaired loans individually evaluated for impairment
Specific reserve against impaired loans
Other loans collectively evaluated for allowance
General allowance for loan losses
2022
$ 142,340
$
830
1,610
$
612
$
$ 140,730
218
$
2021
129,119
$
884
$
1,239
$
533
$
$ 127,880
351
$
A detailed aging of consumer loans receivable that are past due as of December 31, 2022 and 2021 were as
follows:
Total consumer loans receivable
Past due consumer loans:
31 - 60 days past due
61 - 90 days past due
91 - 120 days past due
Greater than 120 days past due
Total past due
2022
$ 142,340
%
100.0
2021
$ 129,119
%
100.0
$
$
1,150
108
486
1,255
2,999
0.8
0.1
0.3
0.9
2.1
$
$
594
407
114
967
2,082
0.5
0.3
0.1
0.7
1.6
4. NOTES RECEIVABLE FROM MOBILE HOME PARKS (“MHP Notes”)
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 December 31, 2022 and 2021, the MHP Note balance is presented net of unamortized finance fees
of $1,068 and $445, 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 December 31, 2022 and 2021, respectively, and no
charge offs were recorded for MHP Notes during the for the years ended December 31, 2022 and 2021, respectively.
Allowance for loan loss is considered immaterial and accordingly no loss is recorded against the MHP Notes as of
December 31, 2022 and 2021.
5. OTHER NOTES RECEIVABLE
Other notes receivable, net of allowance for loan losses and deferred financing fees, consisted of the following at
December 31, 2022 and 2021:
Outstanding principal balance
Allowance for loan losses
Total
$
$
51
2022
22,722
$
—
$
22,722
2021
41,235
(5)
41,230
Table of Contents
6. LEASES
LEGACY HOUSING CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 2022 and 2021
(Dollars in thousands, except per share amounts)
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 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.
Under ASC 842, a modified retrospective transition is required, applying the new standard to all leases at the date
of initial application. The Company chose to use the adoption date of January 1, 2022 for ASC 842. As such, all periods
presented after January 1, 2022, are under ASC 842 whereas periods presented prior to January 1, 2022, are in accordance
with prior lease accounting of ASC 840. Financial information was not updated and the disclosures required under ASC
842 were not provided for dates and periods before January 1, 2022.
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 obligation and Operating lease obligation, 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 in the
lease arrangement. 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 have to 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 4.54 years and the
weighted-average discount rate is 2.12%.
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 year ended December 31, 2022.
Short-term leases, those with a term of 12 months or less, are not recorded on our Balance Sheet. Our short-term
lease costs were not material for the year ended December 31, 2022.
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LEGACY HOUSING CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 2022 and 2021
(Dollars in thousands, except per share amounts)
As of December 31, 2022, future minimum lease payments under our operating lease liabilities were as follows:
2023
2024
2025
2026
2027
Thereafter
Total lease payments
Less amount representing interest
Total lease liability
Less current lease liability
Total non-current lease liability
7. INVENTORIES
$
$
$
$
683
610
588
526
311
113
2,831
(60)
2,771
(650)
2,121
Inventories consisted of the following at December 31, 2022 and 2021:
Raw materials
Work in progress
Finished goods (1)
Allowance for obsolescence
Total
2022
17,442
592
21,429
(401)
39,062
$
$
2021
15,431
714
29,034
(501)
44,678
$
$
(1) Finished goods includes $6,987 and $2,678 as of December 31, 2022 and 2021, respectively, held for more
than twelve months and classified as long-term.
8. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following at December 31, 2022 and 2021:
Land
Buildings and leasehold improvements
Vehicles
Machinery and equipment
Furniture and fixtures
Total
Less accumulated depreciation
Total property, plant and equipment
2022
14,953
16,949
1,556
5,750
300
39,508
(9,402)
30,106
$
$
2021
14,949
13,722
1,682
5,058
298
35,709
(8,193)
27,516
$
$
Depreciation expense was $1,137 with $568 included as a component of cost of product sales for the year ended
December 31, 2022 and $1,145 with $450 included as a component of cost of product sales for the year ended
December 31, 2021.
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9. OTHER ASSETS
LEGACY HOUSING CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 2022 and 2021
(Dollars in thousands, except per share amounts)
Other assets consisted of the following at December 31, 2022 and 2021:
Prepaid rent
Other
Repossessed homes
Total
10. DEBT SECURITIES
2022
2021
$
$
349
338
795
1,482
$
$
248
332
517
1,097
Debt Securities have been classified according to management’s intent. The Company purchased US Treasury
Notes in November 2022 and they mature in November 2023. The debt securities have been classified as held-to-maturity
and the amortized cost are $8,412 and $0 at December 31, 2022 and 2021, respectively.
11. ACCRUED LIABILITIES
Accrued liabilities consist of the following at December 31, 2022 and 2021:
Warranty reserve
Litigation reserve
Payroll
Portfolio taxes and title
Property tax
Dealer rebates
Sales tax
Federal and state income taxes
Other
Total accrued liabilities
12. DEBT
Lines of Credit
Revolver 1
2022
2021
$
$
3,049
753
1,006
1,610
54
1,402
61
6,699
2,261
16,895
$
$
2,876
2,764
1,685
2,467
546
1,160
310
7,445
1,433
20,686
On March 30, 2020, the Company entered into an agreement with Capital One, N.A. for a new 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. 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 statement to Capital One, N.A. On July 28, 2022, the Company entered into a
Limited Waiver and First Amendment to Credit Agreement (the “Amendment”) with Capital One, N.A.
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LEGACY HOUSING CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 2022 and 2021
(Dollars in thousands, except per share amounts)
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, N.A. The notice stated that the July 28, 2022 forbearance agreement had been terminated and that Capital One, N.A.
was permitted to suspend $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.
The Revolver accrues interest at one-month SOFR plus 2.00%. The interest rates in effect as of December 31,
2022 and 2022 were 6.12% and 2.10%, 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 $17,400 and $61,841 as of December 31, 2022 and 2021,
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 will be amortized to interest expense over the life of
the Revolver.
For the years ended December 31, 2022 and 2021, interest expense under the Revolver was $225 and $887,
respectively. The outstanding balance as of December 31, 2022 and 2021 was $2,545 and $7,993, respectively. The
Revolver requires the Company to comply with certain financial and non-financial covenants. As of December 31, 2022,
the Company was in compliance with all financial covenants, including that it maintain a tangible net worth of at least
$120,000 and that it maintain a ratio of debt to EBITDA of 4 to 1, or less.
PILOT Agreement
In December 2016, the Company entered into a Payment in Lieu of Taxes (“PILOT”) agreement commonly
offered in Georgia by local community development programs to encourage industry development. The net effect of the
PILOT agreement was to provide the Company with incentives through the abatement of local, city and county property
taxes and to provide financing for improvements to the Company’s Georgia plant (the “Project”). In connection with the
PILOT agreement, the Putman County Development Authority provided a credit facility for up to $10,000 which could
have been drawn upon to fund Project improvements and capital expenditures as defined in the agreement. If funds had
been drawn, the Company would have paid transaction costs and debt service payments. The PILOT agreement required
interest payments of 6.00% per annum on outstanding balances, which would have been due each December 1st through
maturity on December 1, 2021, at which time all unpaid principal and interest would have been due. The PILOT agreement
was collateralized by the assets of the Project. No amounts were drawn on this credit facility.
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13. INCOME TAXES
LEGACY HOUSING CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 2022 and 2021
(Dollars in thousands, except per share amounts)
Significant components of the provision for income taxes are as follows (in thousands):
Current:
Federal
State
Total current income tax provision
Deferred:
Federal
State
Total deferred income tax provision
Provision for income taxes
Year ended
December 31,
2022
2021
$
$
13,092
1,222
14,314
51
10
61
14,375
$
$
8,443
1,280
9,723
934
99
1,033
10,756
A reconciliation of the Company’s effective tax rate from operations to the U.S. federal income tax rate is as
follows:
Federal statutory rate
State income taxes, net of federal tax benefit
Energy efficiency credit
Effective tax rate
Year ended
December 31,
2022
2021
21.0 %
1.5
(5.0)
17.5 %
21.0 %
1.9
(5.2)
17.7 %
The tax effects of cumulative temporary differences that give rise to deferred tax assets and liabilities are as
follows (in thousands):
Deferred tax assets:
Allowance for doubtful accounts
Reserve accounts
State taxes
Payroll taxes
Uniform capitalization
Other
Total deferred tax assets
Deferred tax liabilities:
Installment sale revenue
Depreciation
Accrued interest receivable
Other
Total deferred tax liabilities
Net deferred tax liabilities
56
Year ended
December 31,
2022
2021
$
$
$
439
204
76
8
15
256
998
(674)
(2,808)
(581)
—
(4,063)
(3,065) $
486
636
44
157
58
1,381
(853)
(2,998)
(518)
(16)
(4,385)
(3,004)
Table of Contents
LEGACY HOUSING CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 2022 and 2021
(Dollars in thousands, except per share amounts)
14. 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 December 31, 2022, 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 becoming 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 December 2020, the Company granted 2,022 restricted shares of its common stock to the independent directors
on the Company’s Board of Directors. The shares were granted on December 2, 2020 and had a grant date fair value of
$30. The shares became fully vested on October 4, 2021.
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 reaches and remains for a
period of fifteen consecutive market days at a closing price of $36 per share (the “$36 Equity Award”). The $36
Equity Awards had a grant date fair value of $1,412 and fifty percent of the shares shall be vested at grant and fifty
percent shall vest on June 16, 2024, so long as the Executive Chairman is employed by the Company on that date. An
additional equity award of 175,000 shares of the Company’s restricted stock will be granted if the Company’s stock
price reaches and remains for a period of fifteen consecutive market days at a closing price of $48 per share (the “$48
Equity Award”). The $48 Equity Awards had a grant date fair value of $683 and fifty percent of the shares shall be
vested at grant and fifty percent shall vest on June 16, 2024, so long as the Executive Chairman is employed by the
Company on that date.
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 any payment therefor. The
effective date of the Rescission Agreement is 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-half of the shares vest on June 7, 2023 and the remaining half vest on June 7, 2024.
57
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LEGACY HOUSING CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 2022 and 2021
(Dollars in thousands, except per share amounts)
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 became fully vested on October 23, 2023.
The following is a summary of restricted stock units (the “RSU”) activity (in thousands, except per unit data):
Nonvested, January 1, 2022
Granted
Vested
Canceled
Nonvested, December 31, 2022
Weighted
Average
Grant
Date Fair
Value Per
Unit
14.01
11.82
24.32
5.99
6.93
Number
of Units
$
35
$
517
(160) $
(350) $
$
42
As of December 31, 2022, approximately 42,000 RSUs remained unvested. Unrecognized compensation expense
related to these RSUs at December 31, 2022 was $442 and is expected to be recognized over 1.77 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 becoming 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 becoming 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, these options were forfeited due to the individual’s departure.
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 becoming 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
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LEGACY HOUSING CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 2022 and 2021
(Dollars in thousands, except per share amounts)
becoming 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 becoming 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 following is a summary of option activity (in thousands, except per unit data):
Weighted
Average
Grant
Date
Fair
Value
Weighted
Average
Exercise
Price Per
Unit
14.44
18.02
14.44
16.83
Number
of Units
$
35
$
55
$
(7)
83
$
— $
Per Unit
8.67
$
14.07
$
8.67
$
12.27
$
—
— $
83
1,025
$
$
— $
$
(83)
$
1,025
— $
16.83
40.59
16.83
40.59
$
$
— $
$
$
— $
12.27
4.99
—
12.27
4.99
—
Weighted
Average
Remaining
Contractual
Life
Aggregate
Intrinsic
Value
9.61
9.73
—
9.36
$
— $
9.36
9.44
—
—
9.44
$
— $
802
—
—
—
Outstanding, January 1, 2021
Granted
Exercised
Outstanding, December 31, 2021
Exercisable, December 31, 2021
Outstanding, January 1, 2022
Granted
Exercised
Forfeited
Outstanding, December 31, 2022
Exercisable, December 31, 2022
As of December 31, 2022, approximately 1,025,000 options remain nonvested. Unrecognized compensation
expense related to these options at December 31, 2022 was $4,825 and is expected to be recognized over 9.44 years.
15. 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 estimates and records 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. At December 31, 2022 and 2021, the Company accrued a
$149 and $373 liability for incurred but not reported claims, respectively.
The Company is contingently liable under terms of repurchase agreements with financial institutions providing
inventory financing for independent retailers of its products. These arrangements, which are customary in the industry,
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LEGACY HOUSING CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 2022 and 2021
(Dollars in thousands, except per share amounts)
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 approximated $8,925 and $4,908 at December 31, 2022 and 2021,
respectively, without reduction for the resale value of the homes. The Company considers its obligations on current
contracts to be immaterial and accordingly have not recorded any reserve for repurchase commitment as of December 31,
2022 or 2021.
Leases. The Company leases facilities under operating leases that typically have 10-year terms. These leases
usually offer the Company a right of first refusal that affords the Company the option to purchase the leased premises
under certain terms in the event the landlord attempts to sell the leased premises to a third party. Rent expense was $710
and $698 for the years ended December 31, 2022 and 2021, respectively. The Company also subleases properties to third
parties, ranging from 3-year to 11-year terms with various renewal options. Rental income from the subleased property was
approximately $326 and $394 for the years ended December 31, 2022 and 2021, respectively. See Note 6 – Leases, for a
schedule of the Company’s future minimum lease commitments.
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 the claims. The Company has included legal reserves of $753 and $2,764 as of December 31, 2022
and 2021, respectively, in accrued liabilities on the accompanying balance sheets. Although litigation is inherently
uncertain, based on past experience and the information currently available, management does not believe that the currently
pending and threatened litigation or claims 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.
16. EARNINGS PER SHARE
Basic earnings per common share (“EPS”) is computed based on the weighted-average number of common shares
outstanding during the 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
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LEGACY HOUSING CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 2022 and 2021
(Dollars in thousands, except per share amounts)
issued. The following table reconciles the numerators and denominators used in the computations of both basic and diluted
EPS.
Numerator:
Net income (in 000's)
Denominator:
Basic weighted-average common shares outstanding
Effect of dilutive securities:
Restricted stock grants
Stock options
Diluted weighted-average common shares outstanding
Earnings per share attributable to Legacy Housing Corporation
Basic
Diluted
Year ended
December 31,
2022
2021
$
67,773
$
49,871
24,357,785
24,204,437
13,286
371,348
24,742,419
12,846
58,706
24,275,989
$
$
2.78
2.74
$
$
2.06
2.05
The diluted earnings per share calculation excludes 102,408 and zero potential shares related to stock grants and
stock options for the years ended December 31, 2022 and 2021, respectively, because the effect of including these potential
shares would be antidilutive.
17. RELATED PARTY TRANSACTIONS
Bell Mobile Homes, a retailer owned by one of the Company’s significant shareholders, purchases manufactured
homes from the Company. Accounts receivable balances due from Bell Mobile Homes were $0 and $1 as of December 31,
2022 and 2021, respectively. Accounts payable balances due to Bell Mobile Homes for maintenance and related services
were $132 and $49 as of December 31, 2022 and 2021, respectively. Home sales to Bell Mobile Homes were $4,499 and
$3,724 for the years ended December 31, 2022 and 2021, 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 $3,181 and $2,825 as of
December 31, 2022 and 2021, respectively. There were no accounts receivable balances or accounts payable balances due
from/to Shipley Bros. as of December 31, 2022 and 2021, respectively.
At December 31, 2022, the Company had a receivable of $68 from a principal shareholder. This amount is
included in the Company’s accounts receivable balance as of December 31, 2022.
18. SUBSEQUENT EVENTS
In connection with the preparation of these financial statements, an evaluation of subsequent events was
performed through the date of filing.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
We are subject to the periodic reporting requirements of the Exchange Act which requires designing disclosure
controls and procedures to provide reasonable assurance that information we disclose in reports we file or submit under the
Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of
the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and
communicated to our management, including our principal executive officer and principal financial officer, as appropriate,
to allow for timely decisions regarding required disclosures.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated
the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Exchange Act), as of the end of the period covered by this Report. Based on the evaluation of our disclosure controls and
procedures as of December 31, 2022, our Chief Executive Officer and Chief Financial Officer have concluded that our
disclosure controls and procedures were not effective as of such date due to material weaknesses in internal control over
financial reporting.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial
reporting. Internal control over financial reporting is a process designed to provide reasonable assurance of the reliability of
financial reporting and of the preparation of financial statements for external reporting purposes, in accordance with U.S.
generally accepted accounting principles. Internal control over financial reporting includes policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and disposition of
assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures are being
made only in accordance with the authorization of its management and directors; and (3) provide reasonable assurance
regarding the prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a
material effect on its financial statements.
Our management has assessed the effectiveness of our internal control over financial reporting as of December 31,
2022. In making this assessment, management used the criteria established by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO) in Internal Control - Integrated Framework (2013). These criteria are in the areas of
control environment, risk assessment, control activities, information and communication, and monitoring. Management’s
assessment included extensive documentation, evaluating and testing the design and operating effectiveness of its internal
controls over financial reporting. Based on management’s processes and assessment, as described above, management has
concluded that, as of December 31, 2022, our internal control over financial reporting was not effective.
Material Weaknesses in Internal Control Over Financial Reporting
As previously disclosed in our Annual report on Form 10-K filed with the SEC on August 3, 2022, we identified
material weaknesses in our internal control over financial reporting during the preparation of our financial statements for
the year ended December 31, 2021. Under standards established by the PCAOB, a material weakness is a deficiency or
combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a
material misstatement of annual or interim financial statements will not be prevented or detected and corrected on a timely
basis. The material weaknesses in internal control over financial reporting have not been fully remediated as of December
31, 2022.
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The material weaknesses in financial reporting as of December 31, 2022 are summarized as follows:
● We determined that we did not have sufficient accounting systems and procedures in place, particularly in the
areas of revenue recognition; processing of accounts payable; prepaid expenses; and inventory costing and
management.
● We determined that we did not have sufficient policies and procedures to ensure the appropriate review and
approval of user access rights to our accounting system; and lack of approval of journal entries and segregation of
duties in our financial reporting process.
● We determined that our information technology infrastructure does not provide sufficient safeguards required by
the COBIT framework.
Remediation Efforts to Address Previously-Identified Material Weaknesses
In connection with these material weaknesses, we are in the process of taking remediation action, including the
evaluation and implementation of appropriate processes and procedures with respect to key areas, including inventory
costing and revenue recognition. We are also in the process of implementing remediation measures, including designing
internal controls over financial reporting, defining user access rights and journal entry processes and approvals, and
implementing more robust financial reporting databases and systems.
Changes in Internal Control over Financial Reporting
Except for the remediation measures described above, there were no changes in our internal control over financial
reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the
fourth quarter of fiscal 2022 that materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.
Inherent Limitations in Effectiveness of Controls
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our
disclosure controls and procedures, or our internal controls, will prevent all error and all fraud. A control system, no matter
how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control
system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the
Company have been detected. These inherent limitations include the realities that judgments in decision making can be
faulty, and that breakdowns can occur because of simple error or mistake or fraud. Additionally, controls can be
circumvented by individuals or groups of persons or by an unauthorized override of the controls. Accordingly, because of
the inherent limitations in our control system, misstatements in our public reports due to error or fraud may occur and not
be detected.
Exemption from Auditor Attestation on Internal Controls
This Report on Form 10-K does not include an attestation report of our independent registered public accounting
firm due to a transition period established by rules of the SEC for newly public companies and emerging growth
companies.
ITEM 9B. OTHER INFORMATION.
Restatement of Previously Issued Condensed Financial Statements (unaudited)
The Company has restated these financial statements to correct; (i) an overstatement of costs errantly assigned to
accounts payable for inventory received but not invoiced for the period ended March 31, 2021 and for the period ended
June 30, 2021, (ii) an understatement of costs errantly assigned to accounts payable for inventory received but not
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invoiced for the period ended September 30, 2021, (iii) an overstatement of prepaid inventory and an understatement of
cost of product sales and property, plant & equipment for the period ended September 30, 2021, (iv) an overstatement in
finished goods inventory and an understatement of cost of product sales for the period ending September 30, 2021, (v) a
reclassification between prepaid expenses and other current assets and other assets for the period ended March 31, 2021,
for the period ended June 30, 2021 and for the period ended September 30, 2021, (vi) a reclassification between prepaid
expenses and other current assets and lines of credit for the period ended March 31, 2021, for the period ended June 30,
2021 and for the period ended September 30, 2021, (vii) change in accrued liabilities and income tax expense for the period
ended March 31, 2021, for the period ended June 30, 2021 and for the period ended September 30, 2021.
The decision to restate the Company’s financial statements previously reported on its Quarterly Report on Form
10-Q for the first quarter of 2021, its Quarterly Report on Form 10-Q for the second quarter of 2021, and its Quarterly
Report on Form 10-Q for the third quarter of 2021 was approved by, and with the continuing oversight of, the Company’s
Audit Committee.
The effects of the restatement on the line items within the Company’s condensed balance sheet as of March 31,
2021, as of June 30, 2021 and as of September 30, 2021 are as follows:
March 31, 2021
June 30, 2021
September 30, 2021
As
Originally
As
Reported Adjustments Restated
As
Originally
Reported Adjustments Restated
As
As
Originally
Reported Adjustments Restated
As
Current assets:
Inventories
Prepaid expenses and
other current assets
Total current assets:
Other assets
Propert, plant and
equipment, net
Total assets:
Current liabilities:
Accounts payable
Accrued liabilities
Total current liabilities:
Long-term liabilities:
Lines of credit
Total liabilities:
Stockholders' equity:
Retained earnings
Total stockholders' equity
Total liabilities and
stockholders' equity
$ 31,915
3,649
$
$ 60,847
8,794
$
$ 24,070
$ 356,918
9,422
$
$ 13,677
$ 36,264
$ 45,347
$ 88,657
$ 97,376
$ 268,261
$ 356,918
$
$
$
$
$
$
$
$
$
$
$
$
$
$
— $ 31,915
$ 39,702
3,096
(553) $
(553) $ 60,294
9,126
$
332
3,860
$
$ 69,731
9,533
$
— $ 24,070
(221) $ 356,697
$ 24,422
$ 373,794
(2,023) $
346
7,399
$ 14,023
(1,677) $ 34,587
8,193
$
$ 14,701
$ 37,376
(221) $ 45,126
(1,898) $ 86,759
$ 49,675
$ 93,042
1,677
1,677
$ 99,053
$ 269,938
$ 109,803
$ 280,752
(221) $ 356,697
$ 373,794
$
$
$
$
$
$
$
$
$
$
$
$
$
$
64
— $ 39,702 $ 36,951
3,325 $
5,805
(535) $
(535) $ 69,196 $ 83,437
9,865 $ 10,862
332
$
— $ 24,422 $ 26,428
(203) $ 373,591 $ 348,989
5,905 $
(2,288) $
390
6,170
$ 15,091 $ 17,073
(1,898) $ 35,478 $ 38,937
(203) $ 49,472 $
8,281
(2,101) $ 90,941 $ 53,349
1,898
1,898
$ 111,701 $ 124,536
$ 282,650 $ 295,640
(203) $ 373,591 $ 348,989
$
$
$
$
$
$
$
$
$
$
$
$
$
$
(257) $ 36,694
3,519
(2,286) $
(2,543) $ 80,894
$ 11,194
332
47
$ 26,475
(2,164) $ 346,825
(1,983) $
4,187
(24) $ 17,049
(2,007) $ 36,930
(185) $
8,096
(2,192) $ 51,157
28
28
$ 124,564
$ 295,668
(2,164) $ 346,825
Table of Contents
The effects of the restatement on the line items within the Company’s condensed statement of operations for the
three months ended March 31, 2021, for the three months ended June 30, 2021 and for the three months ended September
30, 2021 are as follows:
Three Months Ended March 31, 2021
Three Months Ended June 30, 2021
Three Months Ended September 30, 2021
As
Originally
As
As
Originally
As
Originally
As
As
Reported Adjustments Restated Reported Adjustments Restated Reported Adjustments Restated
$ 24,024
$ 10,660
$ 10,886
$ (1,862)
$ 9,024
$
$
0.37
0.37
$
$
$
$
$
$
$
(2,023)
$ 22,001
$ 28,608
2,023
$ 12,683
$ 14,702
2,023
$ 12,909
$ 14,882
(346)
$ (2,208) $ (2,454)
1,677
$ 10,701
$ 12,428
0.07
0.07
$
$
0.44
0.44
$
$
0.51
0.51
$
$
$
$
$
$
$
(265)
$ 28,343
$ 33,392
265
$ 14,967
$ 17,612
265
$ 15,147
$ 17,998
(44)
$ (2,498) $
(3,265)
221
$ 12,649
$ 14,733
0.01
0.01
$
$
0.52
0.52
$
$
0.61
0.61
$
$
$
$
$
$
$
2,284
(2,284)
(2,284)
544
(1,740)
(0.07)
(0.07)
$
$
$
$
$
$
$
35,676
15,328
15,714
(2,721)
12,993
0.54
0.54
Operating expenses:
Cost of product sale
Income from operations
Income before income
tax expense
Income tax expense
Net income
Net income per share:
Basic
Diluted
The effects of the restatement on the line items within the Company’s condensed statement of operations for the
six months ended June 30, 2021 and for the nine months ended September 30, 2021 are as follows:
Six Months Ended June 30, 2021
As
Originally
As
Nine Months Ended September 30, 2021
As
Originally
As
Reported Adjustments Restated Reported Adjustments Restated
Operating expenses:
Cost of product sale
Income from operations
Income before income tax expense
Income tax expense
Net income
Net income per share:
Basic
Diluted
$ 52,632
$ (2,288) $ 50,344 $ 86,024
$ 27,650 $ 42,972
$ 25,362
$
$ 28,056 $ 43,764
$
$ 25,768
$ (4,317) $
$
$ 21,451
$
2,288
$
$
2,288
(390) $ (4,707) $ (7,581) $
$
1,898
$ 23,349 $ 36,183
(4) $ 86,020
$ 42,976
4
$ 43,768
4
$ (7,427)
154
$ 36,341
158
$
$
0.89
0.89
$
$
0.07
0.07
$
$
0.96 $
0.96 $
1.50
1.49
$
$
— $
$
0.01
1.50
1.50
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The effects of the restatement on the line items within the condensed statement of cash flows for the three months
ended March 31, 2021, for the six months ended June 30, 2021 and for the nine months ended September 30, 2021 are as
follows:
Three months March 31, 2021
As
As Originally
Six months June 30, 2021
As Originally
As
Reported Adjustments Restated
Reported Adjustments Restated
Nine months September 30, 2021
As
Restated
Adjustments
As Originally
Reported
Operating activities:
Net income
Inventories
Prepaid expenses and other
current assets
Other assets
Accounts payable
Accrued liabilities
Net cash used in operating
activities
Investing activities:
Purchases of property,
plant and equipment
Net cash used in investing
activities
Financing activities:
Payments on lines of credit
Net cash provided by
financing activities
$
$
$
$
$
$
$
$
$
$
$
9,024 $
(3,502)$
1,677 $ 10,701
$
— $ (3,502) $
21,451 $
(8,864)$
1,898 $ 23,349
$
— $ (8,864) $
36,183
$
(4,595) $
158
257
$
$
36,341
(4,338)
(433)$
(5)$
(775)$
(1,183)$
553 $
(332)$
120
$
(337) $
(2,023)$ (2,798) $
(837) $
346 $
(893)$
(876)$
(2,004)$
(792)$
535 $
(358) $
(332)$ (1,208) $
(2,288)$ (4,292) $
(402) $
390 $
(2,571) $
(2,352) $
(4,027) $
$
1,583
2,286
$
(332) $
(1,983) $
(154) $
(285)
(2,684)
(6,010)
1,429
(1,692)$
221 $ (1,471) $
(4,978)$
203 $ (4,775) $
50,226
$
232
$
50,458
(1,717)$
— $ (1,717) $
(2,330)$
— $ (2,330) $
(4,596) $
(47) $
(4,643)
(6,127)$
— $ (6,127) $
(8,482)$
— $ (8,482) $
(22,348) $
(47) $ (22,395)
(13,208)$
(221)$
(13,429) $
(32,608)$
(203)$ (32,811) $ (103,165) $
(185) $ (103,350)
9,459 $
(221)$ 9,238
$
13,501 $
(203)$ 13,298
$
(27,793) $
(185) $ (27,978)
Restated Results of Operations
Comparison of Three Months ended March 31, 2021 and 2020
The cost of product sales increased $0.1 million, or 0.6%, during the three months ended March 31, 2021 as
compared to the same period in 2020.
Income tax expense during the three months ended March 31, 2021 was $2.2 million compared to $2.6 million for
the same period in 2020. The effective tax rate for the three months ended March 31, 2021 was 17.1% and primarily differs
from the federal statutory rate of 21% primarily due to a federal tax credit for energy efficient construction and partially
offset by state income taxes. The effective tax rate for the three months ended March 31, 2020 was 22.3% and primarily
differs from the federal statutory rate of 21% primarily due to state income taxes.
Comparison of Three Months ended June 30, 2021 and 2020
The cost of product sales decreased $0.3 million, or 1.2%, during the three months ended June 30, 2021 as
compared to the same period in 2020.
Income tax expense during the three months ended June 30, 2021 was $2.5 million compared to $3.0 million for
the same period in 2020. The effective tax rate for the three months ended June 30, 2021 was 16.5% and primarily differs
from the federal statutory rate of 21% primarily due to a federal tax credit for energy efficient construction and partially
offset by state income taxes. The effective tax rate for the three months ended June 30, 2020 was 23.1% and primarily
differs from the federal statutory rate of 21% primarily due to state income taxes.
Comparison of Six Months ended June 30, 2021 and 2020
The cost of product sales decreased $0.2 million, or 0.4%, during the six months ended June 30, 2021 as
compared to the same period in 2020.
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Income tax expense during the six months ended June 30, 2021 was $4.7 million compared to $5.6 million for the
same period in 2020. The effective tax rate for the six months ended June 30, 2021 was 16.7% and primarily differs from
the federal statutory rate of 21% primarily due to a federal tax credit for energy efficient construction and partially offset by
state income taxes. The effective tax rate for the six months ended June 30, 2020 was 22.7% and primarily differs from the
federal statutory rate of 21% primarily due to state income taxes.
Comparison of Three Months ended September 30, 2021 and 2020
The cost of product sales increased $7.8 million, or 28.2%, during the three months ended September 30, 2021 as
compared to the same period in 2020. The increase in costs is primarily related to increases in the cost of materials and
labor in 2021 and was materially passed along to our end-customer.
Income tax expense during the three months ended September 30, 2021 was $2.7 million compared to $2.5
million for the same period in 2020. The effective tax rate for the three months ended September 30, 2021 was 17.3% and
primarily differs from the federal statutory rate of 21% primarily due to a federal tax credit for energy efficient construction
and partially offset by state income taxes. The effective tax rate for the three months ended September 30, 2020 was 22.7%
and primarily differs from the federal statutory rate of 21% primarily due to state income taxes.
Comparison of Nine Months ended September 30, 2021 and 2020
The cost of product sales increased $7.6 million, or 9.7%, during the nine months ended September 30, 2021 as
compared to the same period in 2020. The increase in costs is primarily related to increases in the cost of materials and
labor in 2021 and was materially passed along to our end-customer.
Income tax expense during the nine months ended September 30, 2021 was $7.4 million compared to $8.1 million
for the same period in 2020. The effective tax rate for the nine months ended September 30, 2021 was 17.0% and primarily
differs from the federal statutory rate of 21% primarily due to a federal tax credit for energy efficient construction and
partially offset by state income taxes. The effective tax rate for the nine months ended September 30, 2020 was 22.7% and
primarily differs from the federal statutory rate of 21% primarily due to state income taxes.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
Executive Officers and Directors
The following table identifies our executive officers and directors as of the date of this filing.
Name
Executive Officers and Employee Directors
Curtis D. Hodgson
Kenneth E. Shipley
R. Duncan Bates
Ronald C. Arrington
Jeffrey V. Burt
Non‑Employee Directors
Francisco J. Coll
Joseph P. Lane
Jeffrey K. Stouder
Age
Position (s)
68 Executive Chairman of the Board
63 Founder, Executive Vice President and Director
35
60 Chief Financial Officer
61 Chief Accounting Officer
President and Chief Executive Officer
37 Director
56 Director
51 Director
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The following information provides a brief description of the business experience of each executive officer and
director.
Executive Officers and Employee Directors
Curtis D. Hodgson co-founded our company in 2005 and served as our Co-Chief Executive Officer from January
2018 to February 2019, then became our executive Chairman of the Board. He has been a member of our board of directors
since January 2018. Prior to that, Mr. Hodgson served as a partner of the company’s predecessor, Legacy Housing, Ltd.,
and controlled its general partner. Over the past 38 years, Mr. Hodgson has owned and operated several manufactured
home retail operations and manufactured housing communities in Texas. Mr. Hodgson has significant expertise in the
manufactured housing industry. Mr. Hodgson earned a B.S. in Engineering from the University of Michigan and J.D. from
The University of Texas.
Mr. Hodgson is the co-founder, executive Chairman and one of our largest stockholders and he was selected to
serve on our board of directors due to his decades of experience and deep knowledge of our industry, his leadership and
substantial operational and strategic planning expertise. His service as the executive Chairman creates a critical link
between management and the board.
Kenneth E. Shipley co-founded our company in 2005 with Curtis D. Hodgson. Mr. Shipley was our Co-Chief
Executive Officer from January 2018 and, from February 2019 to June 2022, has served as our President and sole Chief
Executive Officer. Effective in June 2022, Mr. Shipley became the Execitive Vice President of the Company. He has been a
member of our board of directors since January 2018, when our company converted to a corporation and prior to that,
Mr. Shipley, together with Mr. Hodgson, served as a general partner of the company’s predecessor, Legacy Housing, Ltd.
Mr. Shipley has more than 30 years of experience in the manufactured home industry. Since 1981, he has also owned and
operated Bell Mobile Homes and Shipley Bros. in Lubbock, Texas, a manufactured home retailer.
Mr. Shipley is the co-founder, Executive Vice President and one of our largest stockholders and he was selected to
serve on our board of directors due to his decades of experience and knowledge of our industry, his leadership and
substantial sales and distribution experience with dealers and customers in the industry. His service as a director and the
Executive Vice creates a critical link between management and the board.
Duncan Bates joined our company in June 2022 and serves as President and Chief Executive Officer. Mr. Bates
most recently served as Senior Vice President, Mergers & Acquisitions of Arcosa Inc., a publicly traded infrastructure
products company since August 2018. Under his leadership, Arcosa executed 16 acquisitions and 2 divestitures in a three
and ½ year period to reposition its portfolio around growth-oriented, high-margin products. Previously, he served as a Vice
President in the Industrials Investment Banking Group at Stephens Inc. from June 2015 to August 2018. From February
2012 to June 2015, he worked in the Energy Investment Banking Group at Seaport Global Securities, LLC. Mr. Bates
began his career in New York at Willis Re Inc. in July 2010. Mr. Bates received his B.S. Management degree with a double
major in Finance and Legal Studies from Tulane University.
Mr. Bates resigned from the Company’s Board upon his appointment as the President and Chief Executive
Officer.
Ronald Arrington joined our company in May 2022 and serves as Chief Financial Officer. In this capacity, he
oversees the financial actions of the Company, as well as oversight of the accounting systems, policies and financial
reporting of the Company. Mr. Arrington, in a career spanning more than thirty years, has served as chief financial officer,
as well as finance vice president and corporate controller for construction, retail and restaurant franchisee companies,
including most recently serving as the Controller for XIT Paving and Construction. He brings extensive experience in
operational finance, financial management systems, operational restructuring, and process improvement. Mr. Arrington
earned his Bachelor of Business Administration from the University of Texas at Arlington and is a Certified Public
Accountant.
Jeffrey V. Burt joined our company in September 2010 and serves as Chief Accounting Officer. In this capacity,
Mr. Burt oversees all accounting functions with respect to our manufacturing facilities. Mr. Burt began his
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career with our company as Controller from 2010 to 2013, then as Chief Financial Officer and Treasurer from April 2013
to July 2019. Prior to joining our company, from 1993 to 2009, Mr. Burt served as Vice President and Chief Financial
Officer of Kohner Properties, Inc., a company that manages multi-family housing for owners across the central part of the
United States. Mr. Burt has more than 20 years of experience in the real estate and manufactured housing industry and has
expertise in the areas of accounting systems, performance reporting tools and evaluations of key performance indicators
versus a company’s goals. Mr. Burt earned a B.S. degree from the University of Southern Illinois and M.B.A. from the
University of Notre Dame.
Non-Employee Directors
Jeffrey K. Stouder was elected to our board of directors at the annual meeting of stockholders, held on December
2, 2020. He has served as the Vice President, Global Controller at E2open, LLC, a leading provider of cloud-based supply
chain software and solutions, since August 2019. Previously, he served as the Chief Financial Officer at Global Resale,
LLC, a global leader in aftermarket services and reverse logistics for IT hardware, from March 2018 to August 2019. From
July 2015 to March 2018, Mr. Stouder served as the Corporate Controller at NBG Home, the largest provider of affordable
home décor products, with manufacturing and distribution facilities across the United States and internationally. From 2000
to 2015, he served at Dell, Inc. in various accounting and finance positions including SEC Reporting Manager, Global
Sales Controller, and Finance Director for Dell Services. Mr. Stouder began his career at Arthur Andersen LLP in the
Dallas office, where he worked in the audit practice as staff, senior, and audit manager from 1994 to 2000. Mr. Stouder
received his B.B.A. and M.S. Accounting degrees from Texas Tech University and is a certified public accountant.
Mr. Stouder brings over 25 years of experience in accounting, finance, audit, corporate governance, mergers, and
investor relations. His expertise in these areas make him well qualified as a member of the Board.
Joseph P. Lane was appointed to our board of directors on December 7, 2021 to fill the vacancy in the Board
created by the resignation of Stephen Crawford. Mr. Lane is currently Co-Founder, Chairman, and Chief Executive Officer
at Bingie, Inc., a technology and entertainment company offering movie and television content across all streaming
platforms. Prior to Mr. Lane’s current role, he served as Co-Founder, Chairman, and Chief Executive Officer of Growth
Hackers, LLC, an advertising technology company, and he served as Founder, Chairman, and Chief Executive Officer of
The Service Vault, LLC, a software company. Prior to his roles with Growth Hackers LLC and The Service Vault, LLC,
Mr. Lane founded Lane Custom Homes, LP, a full-service real estate development and homebuilding company and he
served as a Principal in JP Lane Investments, structuring partnerships that purchased, owned, and sold single family
developments and home sites. Mr. Lane holds a BA in History from the University of Pennsylvania.
Mr. Lane has extensive experience and knowledge of real estate development, homebuilding industry,
entertainment technology and the software industry, and this expertise is highly beneficial to our company.
Francisco J. Coll was appointed to our board of directors on June 7, 2022 to fill the vacancy in the Board created
by the resignation of Duncan Bates. Mr. Coll has served as the President of Universal Air Conditioner, Inc., a wholesale
distributor of aftermarket auto parts since March 2015. Previously, he was the US Head of Sales for BTG Pactual, a
Brazilian investment bank and asset manager that operates throughout Latin America, from March 2011 until March 2015.
Mr. Coll began his career at UBS Investment Bank in the sales & trading and wealth management rotational program in
July 2007. Mr. Coll received his B.S. degree in East Asian Studies with a minor in Financial Economics from Vanderbilt
University.
Mr. Coll’s substantial knowledge in capital markets transactions and risk management solutions make him well
qualified as a member of the Board.
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Board Composition
Our business and affairs are managed under the direction of our board of directors. The number of directors is
determined by our board of directors, subject to the terms of our certificate of incorporation and bylaws. Our board of
directors currently consists of five members. The Board of Directors held its inaugural meeting on February 7, 2019.
Director Independence
Our common stock trades on The NASDAQ Global Market. Under Nasdaq rules, independent directors must
comprise a majority of a listed company’s board of directors. In addition, Nasdaq rules require that, subject to specified
exceptions, each member of a listed company’s audit, compensation and nominating and governance committees must be
independent. Under Nasdaq rules, a director will only qualify as an “independent director” if, in the opinion of that
company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent
judgment in carrying out the responsibilities of a director.
Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange
Act. In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed
company may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other
board committee: (i) accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the listed
company or any of its subsidiaries; or (ii) be an affiliated person of the listed company or any of its subsidiaries.
Our board of directors undertook a review of its composition, the composition of its committees and the
independence of each director. Based upon information requested from and provided by each director concerning his or her
background, employment and affiliations, including family relationships, our board of directors has determined that
Jeffrey K. Stouder, Francisco J. Coll and Joseph P. Lane, representing a majority of our directors, do not have any
relationships that would interfere with the exercise of independent judgment in carrying out the responsibilities of a
director and that each of these directors is “independent” as that term is defined under Nasdaq rules. In making these
determinations, our board of directors considered the relationships that each non-employee director has with our company
and all other facts and circumstances our board of directors deemed relevant in determining their independence, including
the beneficial ownership of our capital stock by each non-employee director.
Board Committees
Commencing with the closing of our IPO on December 14, 2018, our board of directors established three standing
committees: an audit committee, a compensation committee and a nominating and corporate governance committee. Under
Nasdaq rules, the membership of each committee consists entirely of independent directors. Given the date our committees
were first established, our committees did not separately meet until early 2019. The following is a brief description of our
committees.
Audit committee. In accordance with our audit committee charter, our audit committee oversees our corporate
accounting and financial reporting processes and our internal controls over financial reporting; evaluates the independent
public accounting firm’s qualifications, independence and performance; engages and provides for the compensation of the
independent public accounting firm; approves the retention of the independent public accounting firm to perform any
proposed permissible non-audit services; reviews our financial statements; reviews our critical accounting policies and
estimates and internal controls over financial reporting; and discusses with management and the independent registered
public accounting firm the results of the annual audit and the reviews of our quarterly financial statements. We believe that
our audit committee members meet the requirements for financial literacy under the current requirements of the Sarbanes-
Oxley Act, Nasdaq and SEC rules and regulations. In addition, the board of directors has determined that Jeffrey K.
Stouder is qualified as an audit committee financial expert within the meaning of SEC regulations. We have made this
determination based on information received by our board of directors. The audit committee is composed of
Messrs. Stouder (Chairman), Coll and Lane.
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Compensation committee. In accordance with our compensation committee charter, our compensation committee
reviews and recommends policies relating to compensation and benefits of our officers and employees, including reviewing
and approving corporate goals and objectives relevant to compensation of the Chief Executive Officer and other senior
officers, evaluating the performance of these officers in light of those goals and objectives and setting compensation of
these officers based on such evaluations. The compensation committee also administers the issuance of stock options and
other awards under our equity-based incentive plans. We believe that the composition of our compensation committee
meets the requirements for independence under, and the functioning of our compensation committee complies with, any
applicable requirements of the Sarbanes-Oxley Act, Nasdaq and SEC rules and regulations. We intend to comply with
future requirements to the extent they become applicable to us. The compensation committee is composed of Messrs. Lane
(Chairman), Coll and Stouder.
Nominating and governance committee. In accordance with our nominating and governance committee charter,
our nominating and governance committee recommends to the board of directors nominees for election as directors, and
meets as necessary to review director candidates and nominees for election as directors; recommends members for each
committee of the board; oversees corporate governance standards and compliance with applicable listing and regulatory
requirements; develops and recommends to the board governance principles applicable to the company; and oversees the
evaluation of the board and its committees. We believe that the composition of our nominating and governance committee
meets the requirements for independence under, and the functioning of our compensation committee complies with, any
applicable requirements of the Sarbanes-Oxley Act, Nasdaq and SEC rules and regulations. We intend to comply with
future requirements to the extent they become applicable to us. The nominating and governance committee is composed of
Messrs. Lane (Chairman) and Stouder.
Board Composition
In August 2021, the SEC approved a Nasdaq Stock Market proposal to adopt new listing rules relating to board
diversity and disclosure. As approved by the SEC, the new Nasdaq listing rules require all Nasdaq listed companies to
disclose consistent, transparent diversity statistics regarding their boards of directors. Because our Board consists of only
five (5) directors, the Company is required to have at least one diverse director. The Board Diversity Matrix below presents
the board’s diversity statistics in the format prescribed by the Nasdaq rules.
Board Diversity Matrix (as of December 31, 2022)
Total Number of Directors
Part I: Gender Identity
Directors
Part II: Demographic Background
Hispanic
White
Code of Business Conduct and Ethics
5
Male
5
1
4
We adopted a code of business conduct and ethics that applies to all of our officers, directors and employees,
including our principal executive officer, principal financial officer, principal accounting officer and controller, or persons
performing similar functions, which is posted on our website. Our code of business conduct and ethics is a “code of
ethics,” as defined in Item 406(b) of Regulation S-K. The information contained on, or accessible from, our website is not
part of this Form 10-K by reference or otherwise. We will make any legally required disclosures regarding amendments to,
or waivers of, provisions of our code of business conduct and ethics on our website.
Compensation Committee Interlocks and Insider Participation
None of the members of our compensation committee is an executive officer or employee of our company. None
of our executive officers serves as a member of the board of directors or compensation committee of any entity that has one
or more executive officers serving on our board of directors or compensation committee.
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Limitations on Director and Officer Liability and Indemnification
Our certificate of incorporation limits the liability of our directors to the maximum extent permitted by Texas law.
Texas law provides that directors of a corporation will not be personally liable for monetary damages for breach of their
fiduciary duties as directors, except liability for:
● any breach of their duty of loyalty to the corporation or its stockholders;
● acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
● unlawful payments of dividends or unlawful stock repurchases or redemptions; or
● any transaction from which the director derived an improper personal benefit.
Our certificate of incorporation and our bylaws provide that we are required to indemnify our directors and
officers, in each case to the fullest extent permitted by Texas law. Any repeal of, or modification to, our certificate of
incorporation and our bylaws may not adversely affect any right or protection of a director or officer for or with respect to
any acts or omissions of such director or officer occurring prior to such amendment or repeal. Our bylaws also provide that
we will advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding,
and permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of
his or her actions in connection with their services to us, regardless of whether our bylaws permit such indemnification.
We have entered into separate indemnification agreements with our directors and executive officers, in addition to
the indemnification provided for in our bylaws. These agreements, among other things, provide that we will indemnify our
directors and executive officers for certain expenses (including attorneys’ fees), judgments, fines, penalties and settlement
amounts incurred by a director or executive officer in any action or proceeding arising out of such person’s services as one
of our directors or executive officers, or any other company or enterprise to which the person provides services at our
request. We believe that these provisions and agreements are necessary to attract and retain qualified persons as directors
and executive officers.
The limitation of liability and indemnification provisions that are contained in our certificate of incorporation and
our bylaws may discourage stockholders from bringing a lawsuit against our directors for breach of their fiduciary duty.
They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if
successful, might benefit us and other stockholders. Further, a stockholder’s investment may be adversely affected to the
extent that we pay the costs of settlement and damage awards against directors and officers as required by these
indemnification provisions. There is no pending litigation or proceeding involving one of our directors or executive officers
as to which indemnification is required or permitted, and we are not aware of any threatened litigation or proceeding that
may result in a claim for indemnification.
ITEM 11. EXECUTIVE COMPENSATION.
Summary Compensation Table
The following table sets forth summary compensation information for the following persons: (i) all persons
serving as our principal executive officers during the years ended December 31, 2022 and 2021, and (ii) our three other
most highly compensated executive officers who received compensation during the years ended December 31, 2022 and
2021 of at least $100,000 and who were executive officers on December 31, 2022 and 2021. We refer to these persons as
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our “named executive officers” in this Form 10-K. The following table includes all compensation earned by the named
executive officers for the respective period, regardless of whether such amounts were actually paid during the period:
Stock
Option
All Other
Name and Position
Curtis D. Hodgson
Executive Chairman
Kenneth E. Shipley
Executive Vice President
(former President and Chief
Executive Officer)
R. Duncan Bates
President and Chief
Executive Officer (1)
Jeffrey V. Burt
Chief Accounting Officer
Ronald C. Arrington
Chief Financial Officer (2)
Years
2022
2021
2022
Salary ($)
200,000
49,846
50,000
Bonus ($) Awards ($) Awards ($) Compensation ($)
—
—
—
3,741,000
—
—
—
—
—
—
—
—
Total ($)
3,941,000
49,846
50,000
2021
2022
49,846
167,308
—
50,000
2021
2022
2021
2022
2021
—
266,923
240,000
125,385
—
—
—
10,000
10,000
—
—
—
—
229,301
143,735
—
—
—
—
—
—
—
—
—
—
49,846
— 217,308
—
—
—
—
—
—
496,224
393,735
135,385
—
(1) Mr. Bates joined the Company as President and Chief Executive Officer in June 2022.
(2) Mr. Arrington joined the Company as Chief Financial Officer in May 2022.
Mr. Hodgson and Mr. Shipley’s compensation structure, in light of the fact they have historically only received a
relatively nominal salary of $50,000, is focused on increasing the equity value of our company as their primary
compensation is in the value of their ownership interests in the company. Mr. Hodgson, whether individually or through
entities or trusts he controls, owned 50% of the partnership interests in the company as of year-end 2017, which interests
were converted to an initial allocation of 10,000,000 shares of common stock of the company upon the conversion to a
corporation effective January 1, 2018. Mr. Shipley and his family members, whether individually or through an entity
Mr. Shipley controls, owned 50% of the partnership interests of the company as of year-end 2017, which interests were
converted into an initial allocation of 10,000,000 shares of our common stock of the company upon the conversion to a
corporation. Mr. Shipley will continue to be compensated based on a fixed annual salary of $50,000. In January 2022,
Mr. Hodgson entered into an amended and restated employment agreement (see Employment Agreements below).
Employment Agreements
On November 27, 2018, we entered into an employment agreement with each of Curtis D. Hodgson and Kenneth
E. Shipley to serve as our Co-Chief Executive Officer for an initial term beginning January 1, 2018 and ending
December 31, 2021. Following the initial expiration date of the employment agreements, and on each subsequent one year
anniversary of such date, the term of the employment agreements will automatically be extended for one year, unless
earlier terminated by either party. Generally, since founding our company, Mr. Hodgson has overseen our day-to-day
business operations, including strategic planning and manufacturing, and Mr. Shipley has overseen our sales and
distribution, including our company-owned retail locations. Under the employment agreements, each executive’s annual
salary is $50,000, which is subject to increase at the discretion of our compensation committee. The employment
agreements provide for customary provisions for the termination of the executive’s employment with us for cause (as
defined in the applicable employment agreement) and for any reason other than for cause. The executive will be entitled to
receive his salary for the remaining portion of the employment period if he is terminated other than for cause, payable in
accordance with our company’s regular payroll practices. Additionally, in the event the executive’s employment with us is
terminated within one year after a change of control (as defined in the applicable employment agreement) for reasons other
than cause, we have agreed to pay the executive an amount equal to two years’ compensation at his then current rate of pay.
The employment agreements also contain covenants (a) confirming that all intellectual property developed by
each executive and relating to our business constitutes our sole and exclusive property, (b) prohibiting each executive
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from disclosing confidential information regarding our company at any time, (c) restricting each executive from engaging
in any activities competitive with our business during his employment with us and for a period of one year thereafter, and
(d) preventing each executive from recruiting, soliciting or hiring away employees of our company for a period of
two years after his employment with us. The employment agreements are governed by the laws of the State of Delaware.
On December 31, 2021, Mr. Shipley’s employment agreement was automatically extended for one year. In January 2022,
Mr. Hodgson entered into an amended and restated employment agreement which provides him with an annual salary of
$200,000 and a signing bonus of 150,000 shares of restricted stock, which vested upon grant. Under this new agreement, he
is also eligible for an annual incentive bonus at the discretion of our compensation committee and he is eligible for equity
awards if the Company’s stock price achieves certain targets.
On February 7, 2019, our board of directors separated the roles of Chief Executive Officer and Chairman of the
Board, consistent with corporate governance best practices. Mr. Hodgson transitioned from his role as our Co-Chief
Executive Officer to become our executive Chairman of the Board and Mr. Shipley became our sole Chief Executive
Officer and President. Effective in June 2022, Mr. Shipley became the Executive Vice President and Duncan Bates was
appointed President and Chief Executive Officer of the Company. Mr. Hodgson, as an executive Chairman, will remain
actively involved in our management in this role, including with respect to overall corporate strategy and manufactured
home park development and financing.
Outstanding Equity Awards at December 31, 2022
The following table shows outstanding option awards held by the named executive officers as of December 31,
2022.
Name
Curtis D. Hodgson
Kenneth E. Shipley
R. Duncan Bates (1)
Jeffrey V. Burt
Ronald C. Arrington (2)
Vested Shares Unvested Shares Total Shares
—
—
962,460
—
62,460
—
—
—
—
—
—
—
962,460
62,460
—
(1) Mr. Bates was awarded options to purchase 962,460 shares of common stock under our 2018 Incentive Compensation
Plan. The grant date of the options was June 7, 2022 and the options vest at a rate of 10.0% annually, beginning June
7, 2023, until fully vested on June 7, 2032. The options expire on June 7, 2032. The options were granted in three
tranches; (1) 62,460 options with a strike price of $16.01, (2) 300,000 options with a strike price of $36.00 and (3)
600,000 options with a strike price of $48.00.
(2) Mr. Arrington was awarded options to purchase 62,460 shares of common stock under our 2018 Incentive
Compensation Plan. The grant date of the options was June 7, 2022 and the strike price is $16.01. The options vest at a
rate of 10.0% annually, beginning June 7, 2023, until fully vested on June 7, 2032. The options expire on June 7, 2032.
2018 Incentive Compensation Plan
Our board of directors and the holders of a majority of our outstanding shares of common stock adopted our 2018
Incentive Compensation Plan (the “Plan”) prior to the closing of our IPO. The purpose of our Plan is to assist us in
attracting, motivating, retaining and rewarding high-quality executives and other employees, officers, directors, consultants
and other persons who provide services to us. We have set aside an aggregate of 2,500,000 shares of common stock
(including stock options) as additional compensation that we expect to award to our officers, directors and key personnel
under the terms of our Plan, and this amount will not exceed 10% of the then outstanding shares of our common stock.
Administration. Our Plan is to be administered by our Compensation Committee, provided, however, that except
as otherwise expressly provided in the Plan, the board of directors may exercise any power or authority granted to the
committee under our Plan. Subject to the terms of our Plan, the committee is authorized to select eligible persons to
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receive awards, determine the type, number and other terms and conditions of, and all other matters relating to, awards,
prescribe award agreements (which need not be identical for each participant), and the rules and regulations for the
administration of the Plan, construe and interpret the Plan and award agreements, and correct defects, supply omissions or
reconcile inconsistencies in them, and make all other decisions and determinations as the committee may deem necessary
or advisable for the administration of our Plan.
Eligibility. The persons eligible to receive awards under our Plan are the officers, directors, employees,
consultants and other persons who provide services to us. An employee on leave of absence may be considered as still in
the employ of our company for purposes of eligibility for participation in our Plan.
Types of Awards. Our Plan provides for the issuance of stock options, stock appreciation rights, or SARs,
restricted stock, deferred stock, dividend equivalents, bonus stock and awards in lieu of cash compensation, other stock-
based awards and performance awards. Performance awards may be based on the achievement of specified business or
personal criteria or goals, as determined by the committee.
Shares Available for Awards. The total number of shares of common stock that may be subject to the granting of
awards under our Plan at any time during the term of the Plan will be equal to 2,500,000 shares. This limit will be
increased by the number of shares with respect to which awards previously granted under our Plan that are forfeited, expire
or otherwise terminate without issuance of shares, or that are settled for cash or otherwise do not result in the issuance of
shares, and the number of shares that are tendered (either actually or by attestation) or withheld upon exercise of an award
to pay the exercise price or any tax withholding requirements.
Stock Options and Stock Appreciation Rights. The committee is authorized to grant stock options, including both
incentive stock options, or ISOs, which can result in potentially favorable tax treatment to the participant, and non-
qualified stock options, and stock appreciation rights entitling the participant to receive the amount by which the fair
market value of a share of common stock on the date of exercise exceeds the grant price of the stock appreciation right.
The exercise price per share subject to an option and the grant price of a stock appreciation right are determined by the
committee, but in the case of an ISO must not be less than the fair market value of a share of common stock on the date of
grant. For purposes of our Plan, the term “fair market value” means the fair market value of common stock, awards or other
property as determined by the committee or under procedures established by the committee. The maximum term of each
option or stock appreciation right, the times at which each option or stock appreciation right will be exercisable, and
provisions requiring forfeiture of unexercised options or stock appreciation rights at or following termination of
employment generally are fixed by the committee, except that no option or stock appreciation right may have a term
exceeding ten years.
Restricted and Deferred Stock. The committee is authorized to grant restricted stock and deferred stock. Restricted
stock is a grant of shares of common stock which may not be sold or disposed of, and which may be forfeited in the event
of certain terminations of employment, prior to the end of a restricted period specified by the committee. A participant
granted restricted stock generally has all of the rights of a stockholder of our company, unless otherwise determined by the
committee. An award of deferred stock confers upon a participant the right to receive shares of common stock at the end of
a specified deferral period, subject to possible forfeiture of the award in the event of certain terminations of employment
prior to the end of a specified restricted period. Prior to settlement, an award of deferred stock carries no voting or dividend
rights or other rights associated with share ownership, although dividend equivalents may be granted, as discussed below.
Other Terms of Awards. Awards may be settled in the form of cash, shares of common stock, other awards or other
property, in the discretion of the committee. The committee may require or permit participants to defer the settlement of all
or part of an award in accordance with such terms and conditions as the committee may establish, including payment or
crediting of interest or dividend equivalents on deferred amounts, and the crediting of earnings, gains and losses based on
deemed investment of deferred amounts in specified investment vehicles. The committee is authorized to place cash, shares
of common stock or other property in trusts or make other arrangements to provide for payment of our obligations under
our Plan.
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Awards under our Plan are generally granted without a requirement that the participant pay consideration in the
form of cash or property for the grant (as distinguished from the exercise), except to the extent required by law. The
committee may, however, grant awards in exchange for other awards under our Plan, awards under other company plans or
other rights to payment from us, and may grant awards in addition to and in tandem with such other awards, rights or other
awards.
Acceleration of Vesting; Change in Control. The committee may, in its discretion, accelerate the exercisability, the
lapsing of restrictions or the expiration of deferral or vesting periods of any award, and such accelerated exercisability,
lapse, expiration and if so provided in the award agreement or otherwise determined by the committee, vesting will occur
automatically in the case of a “change in control” of our company, as defined in our Plan (including the cash settlement of
stock appreciation rights which may be exercisable in the event of a change in control). In addition, the committee may
provide in an award agreement that the performance goals relating to any performance award will be deemed to have been
met upon the occurrence of any “change in control.”
Amendment and Termination. The board of directors may amend, alter, suspend, discontinue or terminate our Plan
or the committee’s authority to grant awards without further stockholder approval, except stockholder approval must be
obtained for any amendment or alteration if such approval is required by law or regulation or under the rules of any stock
exchange or quotation system on which shares of common stock are then listed or quoted. Thus, stockholder approval may
not necessarily be required for every amendment to our Plan which might increase the cost of our Plan or alter the
eligibility of persons to receive awards. Stockholder approval will not be deemed to be required under laws or regulations,
such as those relating to ISOs, that condition favorable treatment of participants on such approval, although the board of
directors may, in its discretion, seek stockholder approval in any circumstance in which it deems such approval advisable.
Our Plan will terminate at the earliest of (a) such time as no shares of common stock remain available for issuance under
our Plan, (b) termination of our Plan by the board of directors, or (c) the tenth anniversary of the effective date of the Plan.
Awards outstanding upon expiration of our Plan will remain in effect until they have been exercised or terminated, or have
expired.
It is intended that any amounts payable under the Plan will either be exempt from Section 409A of the Code or
will comply with Section 409A (including Treasury regulations and other published guidance related thereto) so as not to
subject an employee to payment of any other additional tax, penalty or interest imposed under Section 409A of the Code.
Director Compensation
We currently compensate each non-employee director through annual stock option grants and by paying annual
fees for their participation on the board and on respective board committees. Our board members will receive
compensation of $10,000 per quarter, as well as an annual award of $10,000 in stock option grants that vest as of the next
annual meeting or in one year. Our board of directors review director compensation annually or when circumstances exist
requiring reexamination and adjust it according to then current market conditions and good business practices.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS. TO BE UPDATED
The following table and accompanying footnotes set forth certain information with respect to the beneficial
ownership of our common stock as of March 10, 2023, referred to in the table below as the “Beneficial Ownership Date,”
by:
● each person who is known to be the beneficial owner of 5% or more of the outstanding shares of our
common stock;
● each of our current directors and director nominees and each of our named executive officers individually;
and
● all our current directors, director nominees and executive officers as a group.
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Beneficial ownership is determined in accordance with the rules of the SEC. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person, shares of common stock subject to stock
options or warrants held by that person that are currently exercisable or exercisable within 60 days of the Beneficial
Ownership Date and shares of restricted stock subject to vesting until the occurrence of certain events are deemed
outstanding, but are not deemed outstanding for computing the percentage ownership of any other person. Percentage of
beneficial ownership is based on 24,380,224 shares of common stock outstanding as of the Beneficial Ownership Date.
To our knowledge, except as set forth in the footnotes to this table and subject to applicable community property
laws, each person named in the table has sole voting and investment power with respect to the shares set forth opposite
such person’s name. Except as otherwise indicated, the address of each of the persons in this table is c/o Legacy Housing
Corporation, 1600 Airport Freeway, #100, Bedford, Texas 76022.
Name and Address of Beneficial Owner
Directors and Executive Officers
Curtis D. Hodgson (1)
Kenneth E. Shipley (2)
Duncan Bates (3)
Ronald C. Arrington
Jeffrey V. Burt (4)
Francisco J. Coll
Joseph P. Lane
Jeffrey K. Stouder
5% Stockholders
William Shipley (2)
Douglas Shipley (2)
All directors, director nominees and executive officers as a
group (9 persons)
* Less than 1% of outstanding shares of common stock
Shares of Common
Stock Beneficially
Owned
Number of Shares
Percentage
5,292,642
3,161,667
1,075
—
27,857
301
400
1,075
3,024,758
3,061,000
8,485,017
21.7 %
13.0 %
*
*
*
*
*
*
12.4 %
12.6 %
34.8 %
(1) Mr. Hodgson’s beneficial ownership includes 1,000,000 shares of common stock owned by Hodgson Ventures, a Texas
limited partnership, of which Mr. Hodgson is the general partner, 2,669,056 shares of common stock owned by the
Hodgson 2015 Grandchild’s Trust, of which Mr. Hodgson shares voting and investment power with respect to such
shares and 100,000 shares owned by Cusach, Inc., an entity controlled by Mr. Hodgson.
(2) Kenneth E. Shipley’s beneficial ownership includes 100,000 shares of common stock owned by Shipley Bros., Ltd., an
entity controlled by Kenneth E. Shipley. Each of Kenneth E. Shipley’s brothers, William Shipley and Douglas Shipley,
owns 3,024,758 and 3,061,000 shares of our common stock, respectively, as to which shares Kenneth E. Shipley
disclaims any beneficial interest.
(3) Mr. Bates’ beneficial ownership consists of 1,075 shares of common stock, representing 674 shares of common stock
granted to him for service as a board member during 2021 and 401 shares of common stock granted to him for service
as a board member during 2022.
(4) Mr. Burt’s beneficial ownership consists of 27,857 shares of common stock, representing 71.4% of the 60,000 shares
of common stock granted to him during the seven-year period commencing February 7, 2019 under our 2018 Incentive
Compensation Plan, which are currently vested, less 5,143 shares sold during 2019 and 9,857 shares sold during 2020.
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Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires that our directors and executive officers, and persons who own more
than ten percent (10%) of our common stock, file with the SEC initial statements of beneficial ownership of common stock
and statements of changes in beneficial ownership of common stock.
To the best of our knowledge based solely on a review of Forms 3, 4, and 5 (and any amendments thereof)
received by us during or with respect to the year ended December 31, 2022 and through the date of this filing, the
following persons failed to file, on a timely basis, the identified reports required by Section 16(a) of the Exchange Act
during fiscal year ended December 2022 and through the date of this filing:
Name and Principal Position
Curtis D. Hodgson, Executive Chairman of the Board
Kenneth E. Shipley, Founder, Executive Vice President and Director
Thomas J. Kerkaert, Chief Financial Officer (former)
Jeffrey V. Burt, Chief Accounting Officer
Stephen L. Crawford, Director (former)
Jeffrey K. Stouder, Director
R Duncan Bates, President and Chief Executice Officer
Ronald C. Arrington, Chief Financial Officer
Francisco J. Coll, Director
Joseph P. Lane, Director
Number Of
Late Reports
Transactions
Not Reported
In A Timely
Manner
Number Of
Reports Not
Filed
1
3
1
1
1
1
1
1
5
3
1
1
1
1
1
1
1
1
1
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE.
Transactions and Relationships with Directors, Officers and 5% Stockholders
Bell Mobile Homes, a retailer owned by one of the Company’s significant shareholders, purchases manufactured
homes from the Company. Accounts receivable balances due from Bell Mobile Homes were $0 and $1,000 as of
December 31, 2022 and 2021, respectively. Accounts payable balances due to Bell Mobile Homes for maintenance and
related services were $132,000 and $49,000 as of December 31, 2022 and 2021, respectively. Home sales to Bell Mobile
Homes were $4,499,000 and $3,724,000 for the years ended December 31, 2022 and 2021, 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 $3,181,000 and $2,825,000 as of
December 31, 2022 and 2021, respectively. There were no accounts receivable balances or accounts payable balances due
from/to Shipley Bros. as of December 31, 2022 and 2021, respectively.
At December 31, 2022, the Company had a receivable of $68,000 from a principal shareholder. This amount is
included in the Company’s accounts receivable balance as of December 31, 2022.
Indemnification Agreements
We have entered into an indemnification agreement with each of our directors and executive officers. The
indemnification agreements and our certificate of incorporation and bylaws require us to indemnify our directors and
executive officers to the fullest extent permitted by Texas law.
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Corporate Conversion
Effective January 1, 2018, we converted to a Delaware corporation and changed our name to Legacy Housing
Corporation. Prior to January 1, 2018, we were a Texas limited partnership controlled by our Executive Chairman and
President and Chief Executive Officer. Upon the corporate conversion, all of our outstanding partnership interests were
exchanged on a proportional basis for shares of common stock of Legacy Housing Corporation. The conversion qualified
as a tax free transaction under Section 351 of the Internal Revenue Code. Effective December 31, 2019, the Company
converted from a Delaware corporation to a Texas corporation.
Policies and Procedures for Transactions with Related Persons
Our board of directors adopted a written related person transaction policy setting forth the policies and procedures
for the review and approval or ratification of related person transactions. Related persons include any executive officer,
director or a holder of more than 5% of our common stock, including any of their immediate family members and any
entity owned or controlled by such persons. Related person transactions refer to any transaction, arrangement or
relationship, or any series of similar transactions, arrangements or relationships in which (i) we were or are to be a
participant, (ii) the amount involved exceeds $120,000, and (iii) a related person had or will have a direct or indirect
material interest. Related person transactions include, without limitation, purchases of goods or services by or from the
related person or entities in which the related person has a material interest, indebtedness, guarantees of indebtedness, and
employment by us of a related person, in each case subject to certain exceptions set forth in Item 404 of Regulation S-K
under the Securities Act.
The policy provides that in any related person transaction, our audit committee and board of directors will
consider all of the available material facts and circumstances of the transaction, including the direct and indirect interests of
the related persons, in the event the related person is a director (or immediate family member of a director or an entity with
which a director is affiliated), the impact that the transaction will have on a director’s independence, the risks, costs and
benefits of the transaction to us, and whether any alternative transactions or sources for comparable services or products
are available. After considering all such facts and circumstances, our audit committee and board of directors will determine
whether approval or ratification of the related person transaction is in our best interests. For example, if our audit
committee determines that the proposed terms of a related person transaction are reasonable and at least as favorable as
could have been obtained from unrelated third parties, it will recommend to our board of directors that such transaction be
approved or ratified. In addition, if a related person transaction will compromise the independence of one of our directors,
our audit committee may recommend that our board of directors reject the transaction if it could affect our ability to
comply with securities laws and regulations or Nasdaq listing requirements.
Each transaction described above was entered into prior to the adoption of our audit committee charter and the
foregoing policy.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
Daszkal Bolton, LLP served as our independent registered public accountants for the year ended December 31,
2022 and Weaver, LLP served as our independent registered public accountants for the year ended December 31, 2021.
Audit Fees
For our fiscal year ended December 31, 2022, we were billed approximately $142,500 for professional services
rendered by Daszkal Bolton, LLP and for our fiscal year ended December 31, 2021, we were billed approximately
$581,000 for professional services rendered by Weaver, LLP. Audit fees consist of the aggregate fees billed for (i) the audit
of our annual financial statements included herein (ii) services that are normally provided in connection with statutory and
regulatory filings or engagements such as comfort letters, consents and other services, and (iii) accounting consultations.
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Audit Related Fees
There were no fees for audit related services rendered by our independent auditors for the years ended December
31, 2022 and 2021.
Tax Fees
For our fiscal years ended December 31, 2022 and 2021, there were no fees for professional services rendered by
our independent auditors for tax compliance, tax advice, and tax planning.
All Other Fees
There were no fees that fell into the classification of “Other Fees” for our fiscal years ended December 31, 2022
and 2021.
Pre-Approval Policies
Following the appointment of all three current members to the Board’s audit committee, such committee began its
activities in December 2018. Prior to then, all of the above services and fees were reviewed and approved by the entire
Board. No services were performed before or without approval.
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PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
Exhibit
Number
Description
3.1
3.2
4.1
4.2
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
Amended and Restated Certificate of Incorporation of Legacy Housing Corporation.
Amended and Restated Bylaws of Legacy Housing Corporation.
Specimen Common Stock Certificate.
* Description of Securities of the Registrant
† 2018 Incentive Compensation Plan.
Promissory Note, dated December 14, 2011, from Legacy Housing, Ltd. to Capital One, N.A.
Amended and Restated Promissory Note, dated December 12, 2013, from Legacy Housing, Ltd. to Capital
One, N.A.
Second Amended and Restated Promissory Note, dated March 31, 2014, from Legacy Housing, Ltd. to
Capital One, N.A.
Third Amended and Restated Promissory Note, dated May 12, 2017, from Legacy Housing, Ltd. to Capital
One, N.A.
Fourth Amendment to Loan and Security Agreement, dated July 2015, between Legacy Housing, Ltd. and
Capital One, N.A.
Amended and Restated Promissory Note, dated April 4, 2016, from Legacy Housing, Ltd. to Veritex
Community Bank.
Promissory Note, dated April 7, 2011, from Legacy Housing, Ltd. to Woodhaven Bank Fossil Creek, a
Branch of Woodhaven National Bank.
Promissory Note, dated May 24, 2016, from Legacy Housing, Ltd. to Eagle One, LLC.
Promissory Note, dated February 16, 2016, from Legacy Housing, Ltd. to DT Casualty Insurance
Company Ltd.
Lease Agreement, dated as of December 1, 2016, between Putnam Development Authority and Legacy
Housing, Ltd., together with related Option Agreement.
Bond Purchase Loan Agreement, dated as of December 1, 2016, between Putnam Development Authority
and Legacy Housing, Ltd.
Form of Indemnification Agreement.
Form of Non-Disclosure, Non-Competition and Non-Solicitation Agreement between Legacy Housing
Corporation and its employees.
10.15
† Employment Agreement, dated as of November 27, 2018, between Legacy Housing Corporation and Curtis
D. Hodgson.
10.16
† Employment Agreement, dated as of November 27, 2018, between Legacy Housing Corporation and
10.17
10.18
10.19
10.20
10.21
10.22
10.23
14.1
Kenneth E. Shipley.
Loan and Security Agreement, dated December 14, 2011, between Legacy Housing, Ltd. and Capital One,
N.A.
First Amendment to Loan and Security Agreement, dated December 12, 2013, between Legacy
Housing, Ltd. and Capital One, N.A.
Second Amendment to Loan and Security Agreement, dated March 31, 2014, between Legacy Housing, Ltd.
and Capital One, N.A.
Third Amendment to Loan and Security Agreement, dated May 20, 2014, between Legacy Housing, Ltd. and
Capital One, N.A.
Amendment to Loan and Security Agreement, dated May 12, 2017, between Legacy Housing, Ltd. and
Capital One, N.A.
Loan Agreement, dated April 4, 2016, by and between Legacy Housing, Ltd. and Veritex Bank.
† Amended and Restated Employment Agreement, dated as of January 5, 2022, between Legacy Housing
Corporation and Curtis D. Hodgson (incorporated by reference to Exhibit 10.1 of the registrant’s Current
Report on Form 8-K filed on January 6, 2022).
Code of Ethics and Business Conduct.
81
Table of Contents
Exhibit
Number
14.2
31.1
31.2
32.1
32.2
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
104
Description
Code of Ethics for the CEO and Senior Financial Officers.
* Rule 13a-14(a)/15d-14(a) Certification.
* Rule 13a-14(a)/15d-14(a) Certification.
* Section 1350 Certifications.
* Section 1350 Certifications.
Inline XBRL Instance Document
Inline XBRL Taxonomy Extension Schema Document
Inline XBRL Taxonomy Extension Calculation Linkbase Document
Inline XBRL Taxonomy Extension Definition Linkbase Document
Inline XBRL Taxonomy Extension Label Linkbase Document
Inline XBRL Taxonomy Extension Presentation Linkbase Document
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
Unless otherwise indicated, each document was filed as an exhibit to the Company’s Registration Statement on Form S-1
(File No. 333-228288).
†
*
Compensatory plan or agreement.
Filed herewith.
(a)2.
Financial Statement Schedules
There are no Financial Statement Schedules included with this filing for the reason that they are not
applicable or are not required or the information is included in the financial statements or notes thereto.
82
Table of Contents
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has
duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
LEGACY HOUSING CORPORATION
By:
/s/ R. Duncan Bates
Name: R. Duncan Bates
Title:
Date: March 15, 2023
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
Executive Chairman of the Board
March 15, 2023
/s/ Curtis D. Hodgson
Curtis D. Hodgson
/s/ Kenneth E. Shipley
Kenneth E. Shipley
Executive Vice President and
Director (principal executive
officer)
/s/ Ronald C. Arrington
Ronald C. Arrington
Chief Financial Officer (principal
financial officer)
/s/ Jeffrey V. Burt
Jeffrey V. Burt
/s/ Jeffrey K. Stouder
Jeffrey K. Stouder
/s/ Joseph P. Lane
Joseph P. Lane
/s/ Francisco J. Coll
Francisco J. Coll
Chief Accounting Officer
(principal accounting officer)
Director
Director
Director
83
March 15, 2023
March 15, 2023
March 15, 2023
March 15, 2023
March 15, 2023
March 15, 2023
DESCRIPTION OF THE REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934
Exhibit 4.2
The following description of our securities is intended as a summary only and is qualified in its entirety by
reference to our Amended and Restated Certificate of Incorporation and Bylaws as amended, which are filed as exhibits to
the annual report on Form 10 K of which this Exhibit 4.2 is a part. We encourage you to read our Articles of Incorporation,
our Bylaws and the applicable provisions for additional information.
Unless the context otherwise requires, all references to “we”, “us”, the “Company”, or “Legacy” in this
Exhibit 4.2 refer to Legacy Housing Corporation.
Authorized Capitalization
Our authorized capital stock consists of 90,000,000 shares of Common Stock, $0.01 par value per share
(“Common Stock”) and 10,000,000 shares of preferred stock, $0.01 par value per share (“Preferred Stock”) in one or more
series. As of December 31, 2022, we had outstanding 24,369,630 shares of our Common Stock and -0- shares of our
Preferred Stock.
Common Stock
Holder of our Common Stock are entitled to one vote for each share on all matters to be voted upon by the
stockholders and there are no cumulative rights. Subject to any preferential rights of any outstanding preferred stock,
holders of our Common Stock are entitled to receive ratably the dividends, if any, as may be declared from time to time by
the board of directors out of legally available funds. If there is a liquidation, dissolution or winding up of our company,
holders of our common stock would be entitled to share in our assets remaining after the payment of liabilities and any
preferential rights of any outstanding preferred stock. Holders of our Common Stock have no preemptive or conversion
rights or other subscription rights, and there are no redemption or sinking fund provisions applicable to the Common Stock.
All outstanding shares of our Common Stock will be fully paid and non-assessable. The rights, preferences and privileges
of the holders of our Common Stock are subject to, and may be adversely affected by, the rights of the holders of shares of
any series of Preferred Stock which we may designate and issue in the future.
Preferred Stock
Under the terms of our certificate of incorporation, our board of directors is authorized to issue shares of Preferred
Stock in one or more series without stockholder approval. Our board of directors has the discretion to determine the rights,
preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges
and liquidation preferences, of each series of Preferred Stock.
The purpose of authorizing our board of directors to issue Preferred Stock and determine its rights and preferences
is to eliminate delays associated with a stockholder vote on specific issuances. The issuance of Preferred Stock, while
providing flexibility in connection with possible future acquisitions and other corporate purposes, will affect, and may
adversely affect, the rights of holders of Common Stock. It is not possible to state the actual effect of the issuance of any
shares of Preferred Stock on the rights of holders of Common Stock until the board of directors determines the specific
rights attached to that Preferred Stock.
Transfer Agent and Registrar
The transfer agent and registrar for our Common Stock is Continental Stock Transfer & Trust Company.
Exchange Listing
Our Common Stock is traded on The Nasdaq Global Select Market under the symbol “LEGH.”
EXHIBIT 31.1
CERTIFICATION
I, Duncan Bates, certify that:
1.
I have reviewed this annual report on Form 10-K of Legacy Housing Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
Date: March 15, 2023
/s/ Duncan Bates
Name: Duncan Bates
Title: President and Chief Executive Officer
EXHIBIT 31.2
CERTIFICATION
I, Ronald Arrington certify that:
1.
I have reviewed this annual report on Form 10-K of Legacy Housing Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present
in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the
periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is
being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to
be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in
the registrant’s internal control over financial reporting.
Date: March 15, 2023
/s/ Ronald Arrington
Name: Ronald Arrington
Title: Chief Financial Officer
EXHIBIT 32.1
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350
(as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)
In connection with the Annual Report on Form 10-K for the year ended December 31, 2022 (the “Report”), I, Duncan
Bates, President and Chief Executive Officer of Legacy Housing Corporation (the “Company”) hereby certify that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities
Exchange Act of 1934; and
2. The information contained in the Periodic Report fairly presents, in all material respects, the financial condition
and results of operations of the Company.
Dated: March 15, 2023
/s/ Duncan Bates
Name: Duncan Bates
Title: President and Chief Executive Officer
EXHIBIT 32.2
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350
(as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002)
In connection with the Annual Report on Form 10-K for the year ended December 31, 2022 (the “Report”), I, Ronald
Arrington, Chief Financial Officer of Legacy Housing Corporation (the “Company”) hereby certify that:
1. The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities
Exchange Act of 1934; and
2. The information contained in the Periodic Report fairly presents, in all material respects, the financial condition
and results of operations of the Company.
Dated: March 15, 2023
/s/ Ronald Arrington
Name: Ronald Arrington
Title: Chief Financial Officer