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What changed in Legacy Housing Corp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Legacy Housing Corp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+195 added−225 removedSource: 10-K (2024-03-15) vs 10-K (2023-03-15)

Top changes in Legacy Housing Corp's 2023 10-K

195 paragraphs added · 225 removed · 145 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

81 edited+11 added−39 removed59 unchanged
Biggest changeWe carry no reserve for this contingent liability. ​ Overview of Consumer and MHP Financing Options as of December 31, 2022 ($ in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Principal ​ ​ Average ​ ​ Amount ​ Number of ​ Contractual Rate ​ Remaining ​ ​ Outstanding ​ Loans ​ or Monthly Fee ​ Term Consumer Financing ​ $ 142,340 3,405 13.4% average contractual rate 124 months MHP Community Financing ​ $ 144,321 545 8.1% average contractual rate 48 months ​ We also offer inventory floor plan financing to retailers that takes the form of a consignment arrangement.
Biggest changeWe provide financing to community owners that buy or lease our products for use in their rental housing communities. ​ The following table provides an overview of consumer, MHP and dealer financing options as of December 31, 2023 ($ in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Principal ​ ​ Average ​ ​ Amount ​ Number of ​ Contractual Rate ​ Remaining ​ ​ Outstanding ​ Loans (1) ​ or Monthly Fee ​ Term Consumer Financing ​ $ 159,738 3,527 13.2% average annual contractual rate 123 months MHP Community Financing ​ $ 184,280 612 8.0% average annual contractual rate 39 months Dealer Financing ​ $ 32,979 60 1.0% average monthly contractual rate 26 months ​ (1) Dealer finance number includes number of loan agreements which generally is one per dealer Inventory Financing.
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.
Each home can be configured according to a variety of floor plans and equipped with features such as fireplaces, central air conditioning and state-of-the-art kitchens.
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.
Competition The manufactured housing industry is highly competitive at both the manufacturing and retail levels and is 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 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 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, on average, carry higher gross margins. ● Competitive Production Strategies and Direct Sourcing.
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.
This 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.
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 3 1 / 2 bathrooms. Our homes range in price, at retail, from approximately $33,000 to $180,000.
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.
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.
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 this act must be included in a single easy-to-read document that is generally made available prior to purchase.
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 believe our company-owned stores, 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.
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.
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. We also provide dealer incentive arrangements to encourage our independent retailers to use our financing product.
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.
We 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.
Census Bureau, the Institute for Building Technology and Safety, and the Manufactured Housing Institute. 5 Table of Contents 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.
Census Bureau, the Institute for Building Technology and Safety, and the Manufactured Housing Institute. 4 Table of Contents 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.
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.
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 2 Table of Contents 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.
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.
We believe that the solution we are able to provide for our customers, as a result of the vertical integration of our company, 7 Table of Contents 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.
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.
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 12 Table of Contents 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.
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.
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 can produce, on average, approximately 70 home sections, or 60 fully-completed homes depending on product mix, in total per week.
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.
There are significant competitors among lenders to manufactured home buyers including national, regional and local banks, independent finance companies, mortgage brokers and mortgage banks. Examples of such lenders include 21st Mortgage Corporation, an affiliate of Clayton Homes, Inc., Berkshire Hathaway, Inc., Triad Finance Corporation and CU Factory Built Lending, LP.
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.
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 with which the retailer or other person installing the home must comply. Warranty Regulations.
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.
We also compete with companies offering for sale homes repossessed from wholesalers or consumers and we compete with new and existing site-built homes, apartments, townhouses and condominiums.
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.
For the past 19 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 sixth largest producer of manufactured homes. Accordingly, we believe we have a significant opportunity to expand in this industry by effectively growing our market share.
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 that a focused network of company-owned retail locations allows us to be more responsive and improve the customer experience at all stages, from manufacturing and design to sales, financing and customer service.
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 16 Table of Contents registered or licensed MLO.
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 this act, however, these activities are prohibited unless performed by a registered or licensed MLO.
Our homes are constructed in the United States at 2 Table of Contents 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 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”).
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.
Altogether, 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.
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.
Distribution As of December 31, 2023, we distribute our manufactured homes primarily across 15 states through a network of over 150 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.
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.
We develop and maintain the resources necessary to build custom homes efficiently and with unique and varied customer-requested features. We constantly seek ways to directly source materials 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.
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 maintain our website at www.legacyhousingcorp.com. Our sales and marketing strategy focuses on households with annual incomes of less than $75,000 which includes young families, working class families and persons age 55 and older.
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 homes are marketed under our premier “Legacy” brand name and, as of December 31, 2023, are sold to consumers, primarily across 15 states through a network of over 150 independent retail locations, 13 company-owned retail locations and through direct sales to owners of manufactured home communities.
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.
We completed our initial public offering (the “IPO”) in December 2018 and our common stock trades on The NASDAQ Global Select Market under the symbol “LEGH.” We are the sixth 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 nine month period ending September 30, 2023.
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 are the sixth 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 nine month period ending September 30, 2023. We produce a wide variety of homes that can be used by our customers in a number of ways.
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.
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. ● Expansive and Growing Distribution Network.
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.
Our 13 company-owned retail 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 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.
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. We manufacture custom-made homes using quality materials, distribute those homes through our expansive network of independent retailers and company-owned distribution locations, and provide tailored financing solutions for our customers.
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, 7 Table of Contents fireplaces, central air conditioning, overhead heat ducts, stipple-textured ceilings, decorative woodgrain vinyl floors, wood cabinetry and energy conservation elements.
We use 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, fireplaces, central air conditioning, overhead heat ducts, stipple-textured ceilings, decorative woodgrain vinyl floors, wood cabinetry and energy conservation elements.
We believe that our company-owned stores will, on average, be more productive than our independent retail locations and carry higher gross margins. 12 Table of Contents 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.
We believe that our company-owned stores are, on average, more productive than our independent retail locations and carry higher gross margins. 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.
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.
We also make loans to community owners for the purpose of acquiring or developing properties, and generally these community owners contract to buy homes from us.
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.
We seek to grow through selective acquisition of developable land in proximity to our manufacturing footprint. This will provide for a future revenue stream for the underlying land as well as ensure high utilization of our expertise in manufacturing and distribution.
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.
As of December 31, 2023, we distribute our products primarily across 15 states through a combination of 13 company-owned retail locations and over 150 independent retail locations.
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. 10 Table of Contents 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.
During the years ended December 31, 2023 and 2022 we sold 2,877 and 4,189 home sections, including 151 and 139 tiny houses, respectively. 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.
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.
Our vertical integration enables us to respond quickly to our customers’ needs and modify designs during the construction process. 6 Table of Contents ● Manufacturing Facilities Strategically Located Near Customers in Key Markets. Our three manufacturing facilities are strategically located to allow us to serve over 150 independent retail locations and 13 company-owned retail locations primarily across 15 states.
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.
In 2022, there were approximately 65,969,000 households in the United States with annual household incomes of less than $75,000, representing 50% of all U.S. households, according to the Current Population Survey published by the U.S. Census Bureau.
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.
Currently, we have a manufacturing plant in Fort Worth, Texas that measures 97,000 square feet in size and produced 779 homes in 2023 and 1,082 homes in 2022, a manufacturing plant in Commerce, Texas that measures 130,000 square feet in size and produced 726 homes in 2023 and 946 homes in 2022, and a manufacturing plant in Eatonton, Georgia that measures 388,000 square feet in size and produced 640 homes in 2023 and 913 homes in 2022.
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.
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.
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. 15 Table of Contents Federal Manufactured Homes Regulations.
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. Federal Manufactured Homes Regulations. Our manufactured homes are subject to a number of federal, state and local laws, codes and regulations.
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.
Additionally, our homes have vaulted ceilings in every room, have our copyrighted “furniture friendly” floor plans and, in most cases, are wider, have taller ceilings and steeper roof pitches than our competitors’ products.
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.
Our company has been providing inventory financing to our independent retailers since our formation, and we now have over 150 independent retailers using our inventory financing solutions. We now have more than 3,500 retail customers that purchased their homes using our retail financing solutions. ● Support for Owners of Manufactured Home Communities.
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 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. 8 Table of Contents Manufacturing and Quality Design.
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. 8 Table of Contents ● Strong Alignment of Interests through Co-Founders’ Ownership.
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. ● Strong Alignment of Interests through Co-Founders’ Ownership. We believe that our interests are strongly aligned with our stockholders as our co-founders, Curtis D.
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.
We 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. ● Focus on our Retail Process.
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 controlling interests and involvement of our co-founders has promoted long-term planning, an enhanced culture among our customers, development of strategic partners and employees, and ultimately the creation of value for our stockholders. Our Growth Strategy We have a strong operating history of investing in successful growth initiatives over the past 19 years.
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.
We offer three types of financing solutions to our customers. We provide inventory financing for our independent retailers. We provide consumer financing for our products sold to end-users through both independent and our company-owned retail locations. And we provide financing to mobile home community owners that buy our products for use in their rental housing communities.
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.
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.
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.
All of our customers are located in the United States. During the years ended December 31, 2023 and 2022, no customer accounted for more than 10% of our net sales. 10 Table of Contents Financing Solutions for Our Customers We offer three types of financing solutions: ● Inventory Financing.
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.
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, 2023, we had approximately 572 employees.
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.
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.
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.
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 fluctuated during 2023 and 2022 due to factors in th e economic environment.
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.
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. 13 Table of Contents The Dodd-Frank Wall Street Reform and Consumer Protection Act was passed into law and established the Consumer Financial Protection Bureau (“CFPB”) which regulates consumer financial products and services.
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.
Our warranty does not extend to installation and setup of the home, which is generally arranged by the retailer. Appliances, carpeting, roofing 9 Table of Contents 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.
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.
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.
Census Bureau, the Institute for Building Technology and Safety, and the Manufactured Housing Institute. 4 Table of Contents Manufactured homes are an attractive alternative for consumers as new single-family home prices continue to rise at a rapid rate.
Census Bureau, the Institute for Building Technology and Safety, and the Manufactured Housing Institute. 3 Table of Contents Manufactured homes are an attractive alternative for consumers as new single-family home prices have risen over the past several years..
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.
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.
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.
Our independent retailers generally either pay cash to purchase inventory or finance their inventory needs through our inventory finance program. Certain of our independent retailers finance a portion of their inventory through wholesale floor plan financing arrangements with third parties.
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.
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.
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.
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.
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.
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 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.
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.
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.
During 2023, we sold 2,877 home sections (which are entire modules or single floors). Our homes address the significant need in the United States for affordable housing.
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.
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.
Census Bureau. 6 Table of Contents 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. 5 Table of Contents The manufactured housing industry shipped 89,200 manufactured homes in 2023 and 112,882 manufactured homes in 2022 according to data published by the U.S. Census Bureau. Manufactured housing shipments represent approximately 4% 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 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.
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.
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.
Customization enables us to attract additional retailers and consumers who seek individualized homes that are assembled on a factory production line. ● 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.
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.
Under these arrangements, once a customer executes a home purchase agreement with Legacy financing, we pay to the retailer a majority of the retailer’s gross margin, and we retain the remainder. We service the loan, charge a servicing fee and receive an annual preferred return for amounts we contribute to the loan.
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.
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.
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.
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 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 inventory financing to our independent retailers, who purchase homes from us and then sell them to consumers. ● 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 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%.
We provide financing to owners of manufactured housing communities for our products that they buy in order to rent to their residents. 11 Table of Contents 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.
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.
Hodgson (Executive Chairman of the Board) and Kenneth E. Shipley (Executive Vice President and Director) own a significant percentage of outstanding shares. 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.
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).
The company was founded in 2005, and our corporate office is located in Bedford, Texas (between Dallas and Fort Worth).
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.
In late 2022 and early 2023, the Company transitioned many of its dealers from a traditional consignment arrangement to an inventory finance arrangement. Consumer Financing. Sales of factory-built homes are significantly affected by the availability and cost of consumer financing.
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.
Upon recovering our contribution, fees and preferred return, we split the remaining balance with the independent retailer according to a negotiated formula. We account for this as a dealer incentive liability. We have not financed, and have no current plans to finance, new homes manufactured by our competitors in the ordinary course of our business. Manufactured Housing Community Financing.
Except as otherwise noted, the financial statements included in this Form 10-K are those of Legacy Housing Corporation. 3 Table of Contents 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.
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 market of manufactured home buyers consists of households with total annual income below $75,000 which comprised 50% of total U.S. households in 2022.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe 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. ​
Biggest changeWe believe that these facilities are adequately maintained and suitable for the purposes for which they are used. 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 2024 to 2028.
Facilities The following table sets forth certain information with respect to the facilities where our company operates: ​ ​ ​ ​ ​ ​ ​ ​ Date of ​ ​ ​ ​ Commencement ​ Owned / ​ Square Location ​ of Operations ​ Leased ​ Feet Manufacturing/Warehouse Facilities Fort Worth, TX 2005 Owned 96,880 Commerce, TX 2007 Owned 129,600 Eatonton, GA 2016 Leased 388,000 Retail Locations Acworth, GA ​ 2019 ​ Leased ​ 2,369 Albany, GA 2018 Leased 1,536 Asheboro, NC 2017 Leased 1,472 Athens, GA 2016 Leased 2,016 Augusta, GA 2018 Leased 3,136 Canton, TX 2018 Leased 2,362 Jennings, LA 2017 Owned 2,432 Minden, LA 2017 Leased 2,369 Mt.
Facilities The following table sets forth certain information with respect to the facilities where our company operates: ​ ​ ​ ​ ​ ​ ​ ​ Date of ​ ​ ​ ​ Commencement ​ Owned / ​ Square Location ​ of Operations ​ Leased ​ Feet Manufacturing/Warehouse Facilities Fort Worth, TX 2005 Owned 96,880 Commerce, TX 2007 Owned 129,600 Eatonton, GA 2016 Owned 388,000 Retail Locations Acworth, GA ​ 2019 ​ Leased ​ 2,369 Albany, GA 2018 Leased 1,536 Asheboro, NC 2017 Leased 1,472 Athens, GA 2016 Leased 2,016 Augusta, GA 2018 Leased 3,136 Canton, TX 2018 Leased 2,362 Jennings, LA 2017 Owned 2,432 Minden, LA 2017 Leased 2,369 Mt.
Pleasant, TX 2016 Leased 1,792 Sapulpa, OK ​ 2020 ​ Leased ​ 1,960 Greenville, TX 2016 Owned 1,256 Gainesville, TX 2017 Owned 2,240 Oklahoma City, OK 2016 Owned 2,100 Corporate/Regional Headquarters Bedford, TX 2018 Leased 8,020 Norcross, GA 2018 Leased 3,358 We own the manufacturing facilities and the land on which the facilities are located in Fort Worth, Texas and Commerce, Texas.
Pleasant, TX 2016 Leased 1,792 Sapulpa, OK ​ 2020 ​ Leased ​ 1,960 Greenville, TX 2016 Owned 1,256 Gainesville, TX 2017 Owned 2,240 Oklahoma City, OK 2016 Owned 2,100 Corporate/Regional Headquarters Bedford, TX 2018 Leased 8,020 Norcross, GA 2018 Leased 3,358 We own the manufacturing facilities and the land on which the facilities are located in Fort Worth, Texas and Commerce, Texas and Eatonton, Georgia.
Removed
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.
Added
Total rent expense for the years ended December 31, 2023 and 2022 was $645,000 and $713,000, respectively. ​
Removed
In 18 Table of Contents 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.
Removed
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”).
Removed
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.
Removed
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.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeHowever, 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. ​ 19 Table of Contents PART II
Biggest changeHowever, 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. ​ 16 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeAs 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.
Biggest changeAs of December 31, 2023, there were 12 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 2023 or 2022.
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] ​ 20 Table of Contents
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] ​ 17 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeResults 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. 25 Table of Contents Comparison of Years ended December 31, 2022 and 2021 (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ ​ ​ ​ ​ December 31, ​ ​ ​ ​ ​ ​ ​ 2022 2021 $ change % change Net revenue: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Product sales ​ $ 222,052 ​ $ 165,995 ​ $ 56,057 33.8 % Consumer and MHP loans interest ​ 28,564 ​ 27,195 ​ 1,369 5.0 % Other ​ 6,399 ​ 4,317 ​ 2,082 48.2 % Total net revenue ​ 257,015 ​ 197,507 ​ 59,508 30.1 % Operating expenses: ​ ​ ​ ​ Cost of product sales ​ 150,114 ​ 114,050 ​ 36,064 31.6 % Selling, general administrative expenses ​ 27,568 ​ 23,306 ​ 4,262 18.3 % Dealer incentive ​ 1,315 ​ 1,235 ​ 80 6.5 % Income from operations ​ 78,018 ​ 58,916 ​ 19,102 32.4 % Other income (expense) ​ ​ ​ ​ Non‑operating interest income ​ 2,942 ​ 2,095 ​ 847 40.4 % Miscellaneous, net ​ 1,563 ​ 503 ​ 1,060 210.7 % Interest expense ​ (375) ​ (887) ​ 512 (57.7) % Total other ​ 4,130 ​ 1,711 ​ 2,419 141.4 % Income before income tax expense ​ 82,148 ​ 60,627 ​ 21,521 35.5 % Income tax expense ​ (14,375) ​ (10,756) ​ (3,619) 33.6 % Net income ​ $ 67,773 ​ $ 49,871 ​ $ 17,902 35.9 % ​ Product sales primarily consist of direct sales, commercial sales, consignment sales and retail store sales.
Biggest changeComparison of Years ended December 31, 2023 and 2022 (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended ​ ​ ​ ​ ​ December 31, ​ ​ ​ ​ ​ ​ ​ 2023 2022 $ change % change Net revenue: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Product sales ​ $ 145,100 ​ $ 222,052 ​ $ (76,952) (34.7) % Consumer and MHP loans interest ​ 37,420 ​ 28,564 ​ 8,856 31.0 % Other ​ 6,624 ​ 6,399 ​ 225 3.5 % Total net revenue ​ 189,144 ​ 257,015 ​ (67,871) (26.4) % Operating expenses: ​ ​ ​ ​ Cost of product sales ​ 99,692 ​ 150,114 ​ (50,422) (33.6) % Selling, general administrative expenses ​ 24,279 ​ 27,568 ​ (3,289) (11.9) % Dealer incentive ​ 586 ​ 1,315 ​ (729) (55.4) % Total operating expenses ​ ​ 124,557 ​ ​ 178,997 ​ ​ (54,440) ​ (30.4) % Income from operations ​ 64,587 ​ 78,018 ​ (13,431) (17.2) % Other income (expense) ​ ​ ​ ​ Non‑operating interest income ​ 3,019 ​ 2,942 ​ 77 2.6 % Miscellaneous, net ​ 2,060 ​ 1,563 ​ 497 31.8 % Interest expense ​ (930) ​ (375) ​ (555) 148.0 % Total other ​ 4,149 ​ 4,130 ​ 19 0.5 % Income before income tax expense ​ 68,736 ​ 82,148 ​ (13,412) (16.3) % Income tax expense ​ (14,276) ​ (14,375) ​ 99 (0.7) % Net income ​ $ 54,460 ​ $ 67,773 ​ $ (13,313) (19.6) % ​ Product sales primarily consist of direct sales, commercial sales, inventory finance sales and retail store sales.
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.
Each home can be configured according to a variety of floor plans and equipped with features such as fireplaces, central air conditioning and state-of-the-art kitchens.
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 3 1 / 2 bathrooms. Our homes range in price, at retail, from approximately $33,000 to $180,000.
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 3 1 / 2 bathrooms. Our homes range in price, at retail, from approximately $33 to $180.
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 Store Sales Revenue from direct retail sales through company-owned retail locations generally is 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.
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”).
We actively review 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”).
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 22 Table of Contents timing of production schedules and the levels and utilization of inventory, equipment and personnel.
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 timing of production schedules and the levels and utilization of inventory, equipment and personnel.
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 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 statements to Capital One. On July 28, 2022, we entered into a Limited Waiver and First Amendment to Credit Agreement (the “Amendment”) with Capital One.
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.
Retail sales financed by us are recognized as revenue upon the execution of a sales and financing contract, receipt of a down payment and 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.
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 notice stated that the July 28, 2022 forbearance agreement had been terminated and that Capital One 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 was limited to $20,000. The Revolver accrued interest at one-month SOFR plus 2.00%.
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.
Revenue Recognition Direct Sales Revenue from homes sold to independent retailers that are not financed and not under an inventory finance arrangement generally is 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.
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.
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.
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.
Lines of Credit Capital One Revolver. On March 30, 2020, we entered into an agreement with Capital One, N.A. (“Capital One”) for a revolving line of credit (“Revolver”). The Revolver had a maximum credit limit of $70,000 and a maturity date of March 30, 2024. On June 21, 2022, we received a Reservation of Rights notice from Capital One, N.A.
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.
During 2023, we sold 2,877 home sections (which are entire homes or single floors that are combined to create complete homes) and in 2022, we sold 4,189 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.
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.
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.
The maximum amount of our contingent obligations under such repurchase agreements was approximately $3,030,000 and $8,925,000 as of December 31, 2023 and 2022, 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.
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.
This decrease was primarily due to a $3.2 million decrease in salaries and benefits costs, a $0.4 million decrease in warranty costs, a $0.1 million decrease in consulting and professional fees, and a $0.1 million decrease in depreciation and amortization expense, partially offset by a $1.0 million increase in loan loss provision, a $0.7 million increase in legal expense, a $0.4 million increase in marketing and advertising expense and a net $1.5 million decrease in other miscellaneous costs.
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.
Liquidity and Capital Resources Liquidity We believe that cash flow from operations and cash at December 31, 2023, 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.
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 are the sixth 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 nine month period ending September 30, 2023.
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.
Net cash provided by financing activities of $21.2 million in 2023 was attributable to net uses of $21.1 million on our lines of credit offset by $0.1 million received from the exercise of stock options. 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.
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 Amendment replaced the LIBOR borrowing rate with a secured overnight financing rate (“SOFR”) and waived a default arising out of a monetary judgment against us that exceeded the amount allowed in the Revolver. 24 Table of Contents On August 24, 2022, we received a Notice of Default and Partial Suspension of Loan Commitments from Capital One.
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.
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.
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 Total 2023 2024 - 2025 2026 - 2027 After 2027 Lines of credit ​ $ 2,545 — 2,545 — — Operating lease obligations ​ $ 2,831 683 1,198 837 113 ​ Off-Balance Sheet Arrangements 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.
Contractual Obligations The following table is a summary of contractual cash obligations as of December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payments Due by Period (in thousands) ​ ​ ​ ​ ​ ​ ​ Contractual Obligations Total 2024 2025 - 2026 2027 - 2028 After 2028 Lines of credit ​ $ 23,680 — — 23,680 — Operating lease obligations ​ $ 1,935 519 925 491 — ​ 25 Table of Contents Off-Balance Sheet Arrangements 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.
As of December 31, 2022, these properties include the following ($’s in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Location Description ​ Date of Acquisition ​ Land ​ ​ Improvements ​ Total Bastrop County, Texas 368 Acres April 2018 ​ $ 4,215 ​ $ 3,381 ​ $ 7,596 Bexar County, Texas 69 Acres November 2018 ​ 842 ​ 107 ​ 949 Horseshoe Bay, Texas ​ 133 Acres Various 2018-2019 ​ 2,639 ​ 1,373 ​ 4,012 Johnson County, Texas ​ 91.5 Acres July 2019 ​ 449 ​ - ​ 449 Venus, Texas ​ 50 Acres August 2019 ​ 422 ​ 24 ​ 446 Wise County, Texas ​ 81.5 Acres ​ September 2020 ​ ​ 889 ​ ​ - ​ ​ 889 Bexar County, Texas ​ 233 Acres ​ February 2021 ​ ​ 1,550 ​ ​ 246 ​ ​ 1,796 ​ ​ ​ ​ ​ ​ $ 11,006 ​ $ 5,131 ​ $ 16,137 ​ ● 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.
As of December 31, 2023, these properties include the following ($’s in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Location Description ​ Date of Acquisition ​ Land ​ ​ Improvements ​ Total Bastrop County, Texas 368 Acres April 2018 ​ $ 4,215 ​ $ 8,884 ​ $ 13,099 Bexar County, Texas 69 Acres November 2018 ​ 842 ​ 107 ​ 949 Horseshoe Bay, Texas ​ 133 Acres Various 2018-2019 ​ 2,639 ​ 2,161 ​ 4,800 Johnson County, Texas ​ 91.5 Acres July 2019 ​ 449 ​ - ​ 449 Venus, Texas ​ 50 Acres August 2019 ​ 422 ​ 42 ​ 464 Wise County, Texas ​ 81.5 Acres ​ September 2020 ​ ​ 889 ​ ​ - ​ ​ 889 Bexar County, Texas ​ 233 Acres ​ February 2021 ​ ​ 1,550 ​ ​ 382 ​ ​ 1,932 ​ ​ ​ ​ ​ ​ $ 11,006 ​ $ 11,576 ​ $ 22,582 ​ ● 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.
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.
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.
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.
Income tax expense was $14.3 million for 2023 compared to $14.4 million for and 2022. The effective tax rate for the year ended December 31, 2023 was 20.8% 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.
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.
Our homes are marketed under our premier “Legacy” brand name and currently are sold primarily across 15 states through a network of over 150 independent retail locations, 13 company-owned retail locations and through direct sales to owners of manufactured home communities.
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. 24 Table of Contents Consignment Sales We provide floor plan financing for independent retailers, which takes the form of a consignment arrangement or a financed sale.
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.
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.
Factors used to determine the warranty liability include the number of homes under warranty and the historical costs incurred in servicing the warranties.
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 $2.7 million of collections related to loans we made to third parties for the development of manufactured housing parks, proceeds of $1.1 million for the sale of leased property and collections of $0.4 million from our purchased consumer loans.
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.
Finished goods and work-in-process are based on a standard cost system that approximates actual costs using the specific identification method.
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.
In connection with the Revolver, we paid certain arrangement fees and other fees of approximately $295, which were capitalized as unamortized debt issuance costs and were amortized to interest expense over the life of the Revolver. The Revolver required the Company to comply with certain financial and non-financial covenants.
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.
Inventory Finance Sales We provide inventory financing for independent retailers who purchase homes from us and then resell them to consumers. Sales under an 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.
Our ability to offer competitive financing options 21 Table of Contents 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.
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.
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.
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.”Dollar amounts are in thousands unless otherwise noted.
We have not incurred any losses from such accounts and management considers the risk of loss to be minimal.
We have not incurred any losses from such accounts and management considers the risk of loss to be minimal. As of December 31, 2023, we had approximately $0.7 million in cash, compared to $2.8 million as of December 31, 2022.
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 consider all cash and highly liquid investments with an original maturity of three months or less to be cash equivalents.
We also held an investment of $8.4 million in US Treasury Notes as of December 31, 2022. 27 Table of Contents Cash Flow Activities ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ ​ (in thousands) ​ 2022 2021 ​ ​ ​ ​ ​ ​ ​ Net cash (used in) provided by operating activities ​ $ (1,691) ​ $ 60,296 Net cash provided by (used in) investing activities ​ $ 9,081 ​ $ (31,942) Net cash used in financing activities ​ $ (5,614) ​ $ (28,080) Net change in cash and cash equivalents ​ $ 1,776 ​ $ 274 Cash and cash equivalents at beginning of year ​ $ 1,042 ​ $ 768 Cash and cash equivalents at end of year ​ $ 2,818 ​ $ 1,042 ​ Comparison of Cash Flow Activities from 2022 to 2021 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.
Cash Flow Activities ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ ​ (in thousands) ​ 2023 2022 ​ ​ ​ ​ ​ ​ ​ Net cash used in operating activities ​ $ (13,536) ​ $ (1,691) Net cash (used in) provided by investing activities ​ $ (9,769) ​ $ 9,081 Net cash provided by (used in) financing activities ​ $ 21,235 ​ $ (5,614) Net change in cash ​ $ (2,070) ​ $ 1,776 Cash at beginning of year ​ $ 2,818 ​ $ 1,042 Cash at end of year ​ $ 748 ​ $ 2,818 ​ Comparison of Cash Flow Activities from 2023 to 2022 Net cash used in operating activities was $13.5 million during the year ended December 31, 2023, compared to net cash of $1.7 million used in operating activities during 2022.
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 28 Table of Contents based on eligible consumer loans and MHP Notes and are secured by all accounts receivable, consumer loans and MHP Notes.
Amounts available under the Revolver were subject to a formula based on eligible consumer loans and MHP Notes and were secured by all accounts receivable, consumer loans and MHP Notes.
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.
This change was primarily a result of increased cash used for a decrease in operating income before non-cash adjustments, increased volume of consumer loan originations net of principal collections, increased inventories, increased prepaid expenses and other current assets, decreased customer deposits and a decrease in dealer incentives.
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.
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 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.
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.
Dealer incentive expense decreased $0.7 million, or 55.4% in 2023 as compared to 2022. Other income (expense), net did not change in 2023, as compared to 2022.
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.
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.
Net revenue attributable to our factory-built housing consisted of the following in 2022 and 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ ​ December 31, ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) ​ ​ ​ ​ ​ ​ 2022 2021 $ Change % Change Net revenue: ​ ​ ​ ​ Products sold ​ $ 222,052 ​ $ 165,995 ​ $ 56,057 33.8 % Total products sold ​ 3,339 ​ 3,011 ​ 328 10.9 % Net revenue per product sold ​ $ 66.5 ​ $ 55.1 ​ $ 11.4 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.
Net revenue attributable to our factory-built housing consisted of the following in 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ ​ December 31, ​ ​ ​ ​ ​ ​ ​ ​ ($ in thousands) ​ ​ ​ ​ ​ ​ 2023 2022 $ Change % Change Net revenue: ​ ​ ​ ​ Product Sales ​ $ 145,100 ​ $ 222,052 ​ $ (76,952) (34.7) % Total units sold ​ 2,434 ​ 3,339 ​ (905) (27.1) % Net revenue per unit sold ​ $ 59.6 ​ $ 66.5 ​ $ (6.9) (10.4) % ​ 22 Table of Contents In 2023, our net revenue per product sold decreased primarily because of the conversion of consignment arrangements to inventory finance arrangements that occurred in 2022 but not in 2023, and this was partially offset by an increase in unit prices in 2023, as rising material and labor costs were passed on to our customers.
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.
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. 19 Table of Contents ● Inflation recently was near its highest rates in the U.S. over the last 30 years.
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.
For the year ended December 31, 2023, interest expense under the Revolver and New Revolver was $930, and for the year ended December 31, 2022, interest expense under the Revolver was $225. The outstanding balance of the New Revolver as of December 31, 2023 was $23,680, and the outstanding balance of the Revolver as of December 31, 2022 was $2,545.
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.
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, 2023. Recent Accounting Pronouncements The Company elected to use longer phase in periods for the adoption of new or revised financial accounting standards under the JOBS Act while it was an emerging growth company.
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.
Other revenue primarily consists of contract deposit forfeitures, consignment fees, commercial lease rents, service fees and other miscellaneous income and increased $0.2 million, or 3.5%, primarily due to a $2.7 million increase in forfeited deposits, a $0.3 million increase in servicer fee revenue and a $2.8 million decrease in consignment fees.
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.
The cost of product sales decreased $50.4 million, or 33.6%, in 2023 as compared to 2022. The decrease in costs is primarily related to a decrease in units sold. Selling, general and administrative expenses decreased $3.3 million, or 11.9%, in 2023 as compared to 2022.
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.
We manufacture custom-made homes using quality materials, distribute those homes through our expansive network of independent retailers and company-owned distribution locations and provide 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.
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.
The increase in cash used in operating activities was partially offset by a decreased volume of dealer inventory loans net of collections, decreased other assets, and decreased accounts payable and accrued liabilities.
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.
Net changes included a $1.3 million increase in income from gains related to financing dealer and consumer loans, a decrease of $0.2 million in capital gains related to the sale of leased property, an increase of $0.1 million in interest income, a decrease of $0.5 million in other income, a $0.6 million increase in interest expense and an increase of $0.1 million in other expense.
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. 29 Table of Contents Emerging Growth Company Status We are an “emerging growth company,” as defined in the JOBS Act.
For further information, see Note 2, Summary of Significant Accounting Policies, to our December 31, 2023 financial statements included in Part II, Item 8, Financial Statements and Supplementary Data, of this Form-10K. Allowance for Loan Losses—MHP Notes MHP Notes are stated at amounts due from customers net of allowance for loan losses.
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.
Product sales decreased $77.0 million, or 34.7%, in 2023 as compared to 2022. This decrease was driven by (i) the conversion of certain independent dealer consignment arrangements to inventory finance arrangements in 2022 that did not occur in 2023 and (ii) a decrease in unit volumes.
We expect the conversion of consignment arrangements to financing arrangements to have minimal impact on product sales in 2023.
The conversion of consignment arrangements to inventory finance arrangements resulted in an increase to product sales of approximately $29.1 million during 2022, and the conversion had a minimal impact on product sales in 2023.
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. ​ 30 Table of Contents
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not applicable for smaller reporting companies. ​ 27 Table of Contents
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 investing activities of $9.8 million in 2023 was primarily attributable to $14.8 million of originations related to loans we made to third parties for the development of manufactured housing parks, $8.5 million in proceeds from the sale of U.S. treasury notes, and $7.7 million in improvements and development related to property, plant and equipment.
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.
As of December 31, 2023, 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.
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.
We evaluate finished goods inventory based on age, and we classify our finished goods inventory greater than one year old as non-current.
Removed
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”).
Added
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.
Removed
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.
Added
Our 13 company-owned retail locations, including 11 Heritage Housing stores and two Tiny House Outlet stores exclusively sell our homes. During the years ended December 31, 2023 and 2022, no independent retailer accounted for 10% or more of our product sales.
Removed
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.
Added
Approximately 51% of our 2023 product sales were attributable to our independent retail distributors, 12% to our company-owned retail locations and 37% directly to owners of manufactured housing communities.
Removed
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.
Added
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. 18 Table of Contents The following table shows the states in which we sold most of our manufactured homes and the approximate percentage of this sales to our total product sales: ​ ​ ​ ​ ​ ​ ​ ​ ​ % of 2023 ​ % of 2022 ​ ​ Total ​ Total Location ​ Net Sales ​ Net Sales Texas 53 % 53 % Georgia 12 % 9 % Louisiana ​ 9 % 4 % Oklahoma ​ 4 % 3 % Michigan ​ 3 % — % Florida 3 % 5 % New Mexico 2 % 2 % North Carolina ​ 2 % 2 % Alabama ​ 2 % 5 % Colorado ​ 1 % 1 % Indiana ​ 1 % — % Kansas ​ 1 % 1 % South Carolina ​ 1 % 2 % Arizona ​ 1 % 5 % ​ We offer three types of financing solutions to our customers.
Removed
Effective December 31, 2019, the Company reincorporated from a Delaware corporation to a Texas corporation. For more information, see “Corporate Conversion” in Note 1.
Added
Our ability to maintain gross margins can be adversely impacted by sudden increases in specific costs, such as the increases in material and labor. In addition, measures used to combat inflation, such as increases in interest rates, could also have an impact on the ability of home buyers to obtain affordable financing.
Removed
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.
Added
We continue to explore opportunities to minimize the impact of inflation on our future profitability. ● Finally, our financial performance will be impacted by our ability to fulfill current orders for our manufactured homes from dealers and customers.
Removed
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.
Added
Historically we have not experienced material losses on the MHP Notes. 20 Table of Contents 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.
Removed
Except as otherwise noted, the financial statements included in this Form 10-K are those of Legacy Housing Corporation.
Added
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. 21 Table of Contents 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.
Removed
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.
Added
We had decreases in direct sales, commercial sales, inventory finance sales and retail store sales. We believe the market for mobile homes in 2023 slowed considerably from prior years due to the economic environment, including higher inflation and rising home costs.
Removed
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.
Added
Direct sales decreased $28.0 million, or 61.5% from 2023 to 2022, mainly due to general slowdown in the market for mobile homes. Commercial sales decreased $6.4 million, or 10.5% from 2023 to 2022, due to mobile home park operators slowing or delaying purchases of mobile homes.
Removed
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.
Added
Retail store sales decreased $0.5 million, or 2.4% from 2023 to 2022, and we believe our efforts to to focus on our own retail sales channel in 2023 helped moderate the impact of market conditions.

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