Legacy Housing Corp

Previous wording

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. We are the fourth largest producer of manufactured homes in the United States as ranked by the number of homes manufactured based on information available from the Manufactured Housing Institute and the Institute for Building Technology and Safety for the twelve month period ending December 31, 2023. 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 and 1 to 3 1/2 bathrooms. Our homes range in price, at retail, from approximately $33,000 to $180,000. For the three months ended March 31, 2024 and 2023, we sold 645 and 810 home sections, respectively (which are entire modules or single floors).

Current wording

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. We are the fourth largest producer of manufactured homes in the United States as ranked by the number of homes manufactured based on information available from the Manufactured Housing Institute and the Institute for Building Technology and Safety for the twelve month period ending December 31, 2023. 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 and 1 to 3 1/2 bathrooms. Our homes range in price, at retail, from approximately $33,000 to $180,000. For the three and six months ended June 30, 2024, we sold 578 and 1,223 home sections, respectively (which are entire modules or single floors). For the three and six months ended June 30, 2023, we sold 793 and 1,603 home sections, respectively

Previous wording

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 the Company supports the others. For example, the sale of manufactured homes includes providing transportation for 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 Chief Executive Officer, are based upon analyses of our company as one operating segment.

Current wording

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 the Company supports the others. For example, the sale of manufactured homes includes providing transportation for dealers. We also provide financing options to the customers to facilitate home sales. Accordingly, all significant operating and strategic decisions by the chief operating decision maker, the Chief Executive Officer, are based upon analyses of our company as one operating segment.

Previous wording

Our homes are marketed under our premier “Legacy” brand name and, as of March 31, 2024, are sold to consumers, primarily across 15 states through a network of 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. For the three months ended March 31, 2024, approximately 54% of our manufactured homes were sold in Texas, followed by 18% in North Carolina, 8% in Oklahoma, 4% in Georgia, and 2% in New Mexico. For the three months ended March 31, 2023, approximately 38% of our manufactured homes were sold in Texas, followed by 19% in Georgia, 8% in Louisiana, 7% in Florida, and 4% in Alabama.

Current wording

Our homes are marketed under our premier “Legacy” brand name and, as of June 30, 2024, are sold to consumers, primarily in over 15 states through a network of 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. For the six months ended June 30, 2024, approximately 49% of our manufactured homes were sold in Texas, followed by 12% in North Carolina, 9% in Georgia, 7% in Oklahoma, and 4% in Michigan. For the six months ended June 30, 2023, approximately 48% of our manufactured homes were sold in Texas, followed by 19% in Georgia, 7% in Louisiana, 4% in Florida, and 3% in Oklahoma.

Previous wording

We offer three types of financing solutions to our customers. We provide inventory financing for our independent retailers who purchase homes from us and then sell them to consumers. We provide consumer financing for our products which are sold to end users through both independent and company owned retail locations. We also 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 at our retail locations provides us with several

Current wording

We offer three types of financing solutions to our customers. We provide consumer financing for our products which are sold to end users through both independent and company owned retail locations. We provide inventory financing for our independent retailers who purchase homes from us and then sell them to consumers. We also 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 at our retail locations provides us with several

Previous wording

Product sales primarily consist of direct sales, commercial sales, inventory finance sales and retail store sales. Product sales decreased $12.5 million, or 28.8%, during the three months ended March 31, 2024 as compared to the same period in 2023. This decrease was driven by an industry wide decrease in unit volumes shipped, primarily in direct sales, mobile home park sales and inventory finance sales categories.

Current wording

Product sales primarily consist of direct sales, commercial sales, inventory finance sales and retail store sales. Product sales decreased $10.7 million, or 25.2%, during the three months ended June 30, 2024 as compared to the same period in 2023. This decrease was driven by an industry wide decrease in unit volumes shipped, primarily in direct sales, mobile home park sales and inventory finance sales categories.

Previous wording

Net revenue attributable to our factory-built housing consisted of the following during the first three months of 2024 and 2023:

Current wording

Net revenue attributable to our factory-built housing consisted of the following during the three months ended June 30, 2024 and 2023:

Previous wording

For the three months ended March 31, 2024, our net revenue per product sold decreased primarily due to a shift in product mix to smaller units and to a large sale of homes from our leased home portfolio to a mobile home park customer at a lower average price than our typical new home. We had decreases in direct sales, commercial sales, inventory finance sales and other product sales, partially offset by an increase in retail store sales. Direct sales decreased $5.6 million, or 75.8% during the three months ended March 31, 2024 as compared to the same period in 2023. Commercial sales decreased $2.0 million, or 12.6% during the three months ended March 31, 2024 as compared to the

Current wording

For the three months ended June 30, 2024, our net revenue per product sold decreased primarily due to a shift in product mix to smaller units. We had decreases in direct sales, commercial sales and inventory finance sales, partially offset by an increase in retail store sales and other product sales. Direct sales decreased $0.4 million, or 10.1% during the three months ended June 30, 2024 as compared to the same period in 2023. Commercial sales decreased $4.6 million, or 29.2% during the three months ended June 30, 2024 as compared to the same period in 2023. Inventory finance sales to dealers decreased $6.5 million, or 41.6% during the three months ended June 30, 2024 as compared to the same period in 2023. Retail store sales increased $0.2 million, or 3.7% during the three months ended June 30, 2024 as compared to the same period in 2023. Our revenue has decreased primarily due to a lower volume of shipments, a shift in product mix generally to smaller units and a slowdown in our dealer and mobile home park sales. Our current business is dependent

Previous wording

Consumer, MHP and dealer loans interest income increased $2.9 million, or 38.0%, during the three months ended March 31, 2024 as compared to the same period in 2023 due to growth in our loan portfolios. Between March 31, 2024 and March 31, 2023 our consumer loan portfolio increased by $17.9 million, our MHP loan portfolio increased by $28.2 million, and our dealer finance notes increased by $2.1 million.

Current wording

Consumer, MHP and dealer loans interest income increased $1.4 million, or 16.0%, during the three months ended June 30, 2024 as compared to the same period in 2023 due to growth in our loan portfolios. Between June 30, 2024 and June 30, 2023 our consumer loan portfolio increased by $15.8 million, our MHP loan portfolio increased by $16.6 million, and our dealer finance notes increased by $0.9 million.

Previous wording

Other revenue primarily consists of contract deposit forfeitures, consignment fees, commercial lease rents, service fees and other miscellaneous income and decreased $0.1 million, or 3.1%, during the three months ended March 31, 2024 as compared to the same period in 2023. This decrease was primarily due to a $1.0 million decrease in dealer finance fees, a $0.2 million decrease in commercial lease rents, partially offset by a $1.1 million increase in forfeited deposits.

Current wording

Other revenue primarily consists of contract deposit forfeitures, consignment fees, commercial lease rents, service fees and other miscellaneous income and decreased $0.8 million, or 45.5%, during the three months ended June 30, 2024 as compared to the same period in 2023. This decrease was primarily due to a $1.0 million decrease in dealer finance fees, a $0.2 million decrease in commercial lease rents, partially offset by a $0.4 million increase in other miscellaneous revenue.

Previous wording

The cost of product sales decreased $8.5 million, or 29.3%, during the three months ended March 31, 2024 as compared to the same period in 2023. The decrease in costs is primarily related to the decrease in units sold.

Current wording

The cost of product sales decreased $8.2 million, or 27.4%, during the three months ended June 30, 2024 as compared to the same period in 2023. The decrease in costs is primarily related to the decrease in units sold.

Previous wording

Income tax expense remained the same during the three months ended March 31, 2024 as compared to the same period in 2023. The effective tax rate for the three months ended March 31, 2024 and 2023 was 18.2% and 17.4%, respectively, and differs from the federal statutory rate of 21% primarily due to a federal tax credit for energy efficient construction, partially offset by state income taxes.

Current wording

Income tax increased $0.5 million during the three months ended June 30, 2024 as compared to the same period in 2023. The effective tax rate for the three months ended June 30, 2024 and 2023 was 18.2% and 17.0%, respectively, and differs from the federal statutory rate of 21% primarily due to a federal tax credit for energy efficient construction, partially offset by state income taxes.

Previous wording

same period in 2023. Inventory finance sales to dealers decreased $5.2 million, or 37.8% during the three months ended March 31, 2024 as compared to the same period in 2023. Retail store sales increased $0.8 million, or 20.9% during the three months ended March 31, 2024 as compared to the same period in 2023. Our revenue has decreased primarily due to a lower volume of shipments, a shift in product mix generally to smaller units and a slowdown in our dealer and mobile home park sales. Our current business is dependent on dealer sales, as reflected in direct sales and inventory finance sales, and our sales have slowed due to high levels of inventory on dealer lots and seasonality. Our retail sales have improved as we have focused on improving the performance of our company owned stores. Our mobile home park business has been impacted by higher interest rates, and transaction volumes and new development have declined.

Current wording

For the six months ended June 30, 2024, our net revenue per product sold decreased primarily due to a shift in product mix to smaller units and to a large sale of homes in the first quarter of 2024 from our leased home portfolio to a mobile home park customer at a lower than average price than our typical new home. We had decreases in direct sales, commercial sales and inventory finance sales, partially offset by an increase in retail store sales and other product sales. Direct sales decreased $6.0 million, or 53.8% during the six months ended June 30, 2024 as compared to the same period in 2023. Commercial sales decreased $6.6 million, or 21.0% during the six months ended June 30, 2024 as compared to the same period in 2023. Inventory finance sales to dealers decreased $11.7 million, or 39.9% during the six months ended June 30, 2024 as compared to the same period in 2023. Retail store sales increased $1.0 million, or 12.0% during the six months ended June 30, 2024 as compared to the same period in 2023. Our revenue has decreased primarily due to a lower volume of shipments, a shift in product mix generally to smaller units and a slowdown in our dealer and mobile home park sales. Our current business is dependent on dealer sales, as reflected in direct sales and inventory finance sales, and our sales have slowed due to high levels of inventory on dealer lots and seasonality. Our retail sales have

Previous wording

Selling, general and administrative expenses increased $0.5 million, or 8.8%, during the three months ended March 31, 2024 as compared to the same period in 2023. This increase was primarily due to a $0.3 million increase in warranty costs, a $0.1 million increase in legal expense, a $0.2 million increase in professional fees and a net $0.2 million increase in other miscellaneous costs, partially offset by a $0.3 million decrease in loan loss provision.

Current wording

Selling, general and administrative expenses increased $0.5 million, or 4.8%, during the six months ended June 30, 2024 as compared to the same period in 2023. This increase was primarily due to a $1.0 million increase in legal expense, a $0.5 million increase in property tax expense, a $0.1 million increase in marketing expense, a $0.1 million increase in professional fees, and a net $0.1 million increase in other miscellaneous expense partially offset by a $0.7 million decrease in payroll and related expense, a $0.5 million decrease in warranty costs, and a $0.1 million decrease in loan loss provision.

Previous wording

Other income (expense) increased $0.4 million, or 29.9%, during the three months ended March 31, 2024 as compared to the same period in 2023. There was an increase of $0.6 million in non-operating interest income offset by an increase of $0.2 million in interest expense.

Current wording

Other income (expense) increased $3.6 million, or 183.8%, during the six months ended June 30, 2024 as compared to the same period in 2023. There was (i) an increase of $2.6 million in miscellaneous income as a result of a gain of $1.3 million on the sale of real property in Georgia and a reversal of $1.3 million of accrued liabilities, (ii) an increase of $0.6 million in interest income for other notes receivable net of allowances, (iii) an increase of $0.6 million in other miscellaneous income, and (iii) an increase of $0.2 million in interest expense.

Previous wording

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. As of March 31, 2024, we had approximately $0.6 million in cash, compared to $0.7 million as of December 31, 2023. We consider all cash and highly liquid investments with an original maturity of three months or less to be cash equivalents.

Current wording

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. As of June 30, 2024, we had approximately $0.1 million in cash, compared to $0.7 million as of December 31, 2023. We consider all cash and highly liquid investments with an original maturity of three months or less to be cash equivalents.

Previous wording

Net cash provided by operating activities was $10.8 million during the three months ended March 31, 2024, compared to net cash of $2.7 million used in operating activities during the three months ended March 31, 2023. This change was a result of an increase of cash used for a decrease in operating income before non-cash adjustments, decreased MHP originations net of collections, decreased dealer inventory loan originations net of collections, decrease in the reduction of accounts receivable, an increase in the change in inventories, an increase in the change in prepaid expenses and other current assets, an increase in the change in accounts payable and accrued liabilities, an increase in the change in customer deposits, and increase in the change in other assets – leased mobile homes and an increase in the change in escrow liability.

Current wording

Net cash provided by operating activities was $14.3 million during the six months ended June 30, 2024, compared to net cash of $7.5 million used in operating activities during the six months ended June 30, 2023. This change was predominantly the result of decreased MHP loan originations net of collections, decreased consumer loan originations net of collections, and decreased dealer inventory loan originations net of collections.

Previous wording

Net cash provided by investing activities of $2.7 million during the three months ended March 31, 2024 was primarily attributable to $4.1 million of collections of loans we made to third parties for the development of manufactured housing parks, offset by $0.9 million used in improvements and development of property, plant and equipment and $0.6 million used to issue notes to third parties for the development of manufactured housing parks.

Current wording

Net cash provided by investing activities of $2.1 million during the six months ended June 30, 2024 was primarily attributable to $4.8 million of collections of loans we made to third parties for the development of manufactured housing parks and $1.6 million in proceeds from the sale of property, offset by $2.6 million used in improvements and development of property, plant and equipment and $1.7 million used to issue notes to third parties for the development of manufactured housing parks. Net cash provided by investing activities of $3.9 million during the six months ended June 30, 2023 was primarily attributable to $8.5 million received from the sale of treasury notes, $1.1 million received from the sale of leases homes, $0.9 million of collections of loans we made to third parties for the development of manufactured housing parks and $0.2 million of collections from other purchased loans, offset by $5.3 million of loans we made to third parties for the development of manufactured housing parks and $1.5 used in improvements and development of property, plant and equipment.

Previous wording

Net cash used in financing activities of $13.7 million during the three months ended March 31, 2024 was attributable to net payments of $11.9 million on our lines of credit, $1.9 million of stock repurchases and $0.1 million received from the exercise of stock options. Net cash provided by financing activities of $5.3 million during the three months ended March 31, 2023 was attributable to net proceeds of $5.3 million on our lines of credit.

Current wording

Net cash used in financing activities of $17.1 million during the six months ended June 30, 2024 was attributable to net payments of $11.8 million on our lines of credit, $5.4 million of stock repurchases and $0.1 million received from the exercise of stock options. Net cash provided by financing activities of $2.2 million during the six months ended June 30, 2023 was attributable to net proceeds of $2.2 million on our lines of credit.

Previous wording

In November 2022, our Board of Directors approved a share repurchase program to authorize the repurchase of up to $10.0 million of the Company’s common stock. We repurchased 91,187 shares for $1.9 million in the open market during the three months ended March 31, 2024. As of March 31, 2024, we had a remaining authorization of approximately $8.1 million. Between April 1, 2024 and May 9, 2024, we repurchased 170,342 shares for $3.5 million in the open market.

Current wording

In November 2022, our Board of Directors approved a share repurchase program to authorize the repurchase of up to $10.0 million of the Company’s common stock. We repurchased 170,342 shares for $3.5 million in the open market during the three months ended June 30, 2024, and we repurchased 261,529 shares for $5.4 million in the open market during the six months ended June 30, 2024. As of June 30, 2024, we had a remaining authorization of

Previous wording

For the three months ended March 31, 2024, interest expense for the under the Revolver was $276, and for the three months ended March 31, 2023, interest expense under the prior line of credit was $91. The outstanding balance of the Revolver as of March 31, 2024 and December 31, 2023 was $11,797 and $23,680, respectively. The interest rate in effect as of March 31, 2024 and December 31, 2023 for the Revolver was 7.67% and 7.95%, respectively. The amount of available credit under the Revolver was $38,203 and $26,320 as of March 31, 2024 and December 31, 2023, respectively. The Revolver requires the Company to comply with certain financial and non-financial covenants. As of March 31, 2024, the Company was in compliance with all financial covenants, including that it maintain a maximum leverage ratio of no more than 1.00 to 1.00 and a minimum fixed charge coverage ratio of no less than 1.75 to 1.00.

Current wording

For the three months ended June 30, 2024, interest expense under the Revolver was $235, and for the three months ended June 30, 2023, interest expense under the prior line of credit was $195. For the six months ended June 30, 2024, interest expense under the Revolver was $511, and for the six months ended June 30, 2023, interest expense under the prior line of credit was $285. The outstanding balance of the Revolver as of June 30, 2024 and December 31, 2023 was $11,861 and $23,680, respectively. The interest rate in effect as of June 30, 2024 and December 31, 2023 for the Revolver was 7.67% and 7.95%, respectively. The amount of available credit under the Revolver was $38,139 and $26,320 as of June 30, 2024 and December 31, 2023, respectively. The Revolver requires the Company to comply with certain financial and non-financial covenants. As of June 30, 2024, the Company was in compliance with all financial covenants, including that it maintain a maximum leverage ratio of no more than 1.00 to 1.00 and a minimum fixed charge coverage ratio of no less than 1.75 to 1.00.

Previous wording

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 that provides 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 $1,671 and $3,030 as of March 31, 2024 and December 31, 2023, 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 March 31, 2024.

Current wording

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 that provides 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 $1,040 and $3,030 as of June 30, 2024 and December 31, 2023, 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 June 30, 2024.