What changed in this filing

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Item 1. Financial Statements

2021-11-09 compared with 2021-08-09 · 130 added, 107 removed, 531 unchanged (31% of the section changed)

3 unchanged sentences

(in thousands, except share and per share data)

September 30,

Current assets:

29 unchanged sentences

Common stock, $ .001 par value, 90,000,000 shares authorized;

24,647,696 and 24,639,125 issued and 24,202,631 and 24,194,060 outstanding at June 30, 2021 and December 31, 2020, respectively

Treasury stock at cost, 445,065 shares at June 30, 2021 and December 31, 2020

24,654,621 and 24,639,125 issued and 24,209,556 and 24,194,060 outstanding at September 30, 2021 and December 31, 2020, respectively

Treasury stock at cost, 445,065 shares at September 30, 2021 and December 31, 2020

Additional paid-in-capital

6 unchanged sentences

(in thousands, except share and per share data)

Three months ended June 30,

Six months ended June 30,

Three months ended September 30,

Nine months ended September 30,

Product sales

19 unchanged sentences

(unaudited, in thousands)

Six months ended June 30,

Nine months ended September 30,

Operating activities:

Adjustments to reconcile net income to net cash used in operating activities:

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation expense

14 unchanged sentences

Dealer incentive liability

Net cash used in operating activities

Net cash provided by (used in) operating activities

Investing activities:

6 unchanged sentences

Financing activities:

Proceeds from exercise of stock options

Treasury stock purchase

3 unchanged sentences

Payments on lines of credit

Net cash provided by financing activities

Net cash used in financing activities

Net increase (decrease) in cash and cash equivalents

16 unchanged sentences

Balances, June 30, 2020

Share based compensation expense and stock units vested

Balances, September 30, 2020

paid-in-capital

4 unchanged sentences

Balances, June 30, 2021

Share based compensation expense and stock units vested

Share based compensation expense - stock options exercised

Balances, September 30, 2021

See accompanying notes to condensed financial statements.

32 unchanged sentences

Basis of Presentation

The accompanying unaudited interim condensed financial statements as of June 30, 2021 and for the three and six months ended June 30, 2021 and 2020, respectively, have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and pursuant to the rules and regulations of the U.S.

The accompanying unaudited interim condensed financial statements as of September 30, 2021 and for the three and nine months ended September 30, 2021 and 2020, respectively, have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and pursuant to the rules and regulations of the U.S.

Securities and Exchange Commission ("SEC") as required by Regulation S-X, Rule 8-03.

In the opinion of management, the unaudited interim financial statements have been prepared on the same basis as the audited financial statements, and include all adjustments, consisting only of normal recurring adjustments, necessary for the fair statement of the Company's financial position for the periods presented.

The results for the three and six months ended June 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31,

The results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be

LEGACY HOUSING CORPORATION

1 unchanged sentence

(dollars in thousands)

2021, or any other period.

expected for the year ending December 31, 2021, or any other period.

The accompanying balance sheet as of December 31, 2020 was derived from audited financial statements included in the Company's annual report on Form 10-K for the year ended December 31, 2020 (the "Form 10-K").

24 unchanged sentences

Contract costs, which include commissions incurred related to the sale of homes, are expensed at the point-in-time when the related revenue is recognized.

For the three months ended June 30, 2021 and 2020, sales to an independent third-party and its affiliates accounted for $ 2,400 or 5.8 % and $ 14,320 or 36.6 % of our product sales, respectively.

For the six months ended June

Warranty costs and contract costs are included in selling, general and administrative expenses in the statements of operations.

For the three months ended September 30, 2021 and 2020, sales to an independent third-party and its affiliates accounted for $ 2,335 or 4.8 % and $ 13,253 or 36.2 % of our product sales, respectively.

For the nine months ended

LEGACY HOUSING CORPORATION

1 unchanged sentence

(dollars in thousands)

30, 2021 and 2020, sales to an independent third-party and its affiliates accounted for $ 5,065 or 6.8 % and $ 26,306 or 37.4 % of our product sales, respectively.

For the three months ended June 30, 2021 and 2020, total cost of product sales included $ 3,007 and $ 7,849 of costs, mainly relating to subcontracted production for commercial sales and reimbursed dealer expenses for consignment sales and certain other similar costs incurred for retail store and commercial sales .

For the six months ended June 30, 2021 and 2020, total cost of product sales included $ 5,189 and $ 12,756 of costs, mainly relating to subcontracted production for commercial sales and reimbursed dealer expenses for consignment sales and certain other similar costs incurred for retail store and commercial sales .

September 30, 2021 and 2020, sales to an independent third-party and its affiliates accounted for $ 7,399 or 6.1 % and $ 39,559 or 37.0 % of our product sales, respectively.

For the three months ended September 30, 2021 and 2020, total cost of product sales included $ 3,978 and $ 7,073 of costs relating to subcontracted production for commercial sales, reimbursed dealer expenses for consignment sales, and certain other similar costs incurred for retail store and commercial sales .

For the nine months ended September 30, 2021 and 2020, total cost of product sales included $ 8,976 and $ 15,878 of costs relating to subcontracted production for commercial sales, reimbursed dealer expenses for consignment sales, and certain other similar costs incurred for retail store and commercial sales .

Other revenue consists of consignment fees, commercial lease rents, service fees and other miscellaneous income.

8 unchanged sentences

Disaggregation of Revenue .

The following table summarizes customer contract revenues disaggregated by source of the revenue for the three and six months ended June 30, 2021 and 2020:

The following table summarizes customer contract revenues disaggregated by source of the revenue for the three and nine months ended September 30, 2021 and 2020:

Three months ended

Six months ended

Nine months ended

September 30,

Product sales:

10 unchanged sentences

Share-Based Compensation

The Company accounts for share-based compensation in accordance with the provisions of ASC 718, Compensation—Stock Compensation .

The Company accounts for share-based compensation in accordance with the provisions of Accounting Standards Codification (“ASC”) 718, Compensation—Stock Compensation .

Share-based compensation expense is recognized based on the award’s estimated grant date fair value in order to recognize compensation cost for those shares expected to vest.

15 unchanged sentences

Accounts Receivable

Included in accounts receivable are receivables from direct sales of mobile homes and sales of parts and supplies to customers, consignment fees and interest receivables.

Included in accounts receivable are receivables from direct sales of mobile homes, sales of parts and supplies to customers, consignment fees and interest.

Accounts receivables are generally due within 30 days and are stated at amounts due from customers net of an allowance for doubtful accounts.

2 unchanged sentences

The Company establishes an allowance for doubtful accounts for amounts that are deemed to be uncollectible.

At June 30, 2021 and December 31, 2020, the allowance for doubtful accounts totaled $ 287 and $ 97 , respectively.

At September 30, 2021 and December 31, 2020, the allowance for doubtful accounts totaled $ 318 and $ 97 , respectively.

Leased Property

7 unchanged sentences

At the end of the lease term or in the event of default, the lessee is required to deliver to the Company the homes with all improvements in good repair and condition in substantially the same condition as existed at the commencement of the lease.

The lessee may terminate the lease with 30 days written notice to the Company and pay a lease termination fee of either 10 % of the remaining lease payments or six month ’s rent, whichever is greater.

The lessee may terminate the lease with 30 days written notice to the Company and pay a lease termination fee equal to 10 % of the remaining lease payments or six month ’s rent, whichever is greater.

The lessee has an option to purchase the homes at the end of the lease term for fair market value based on an agreed upon determination of fair market value by both parties using comparable sales, recent appraisal, or NADA official guidance.

4 unchanged sentences

Homes returned to the Company upon expiration of the lease or in the event of default will be sold by the Company through its standard sales and distribution channels.

Future minimum lease income under all operating leases for each of the next five years at June 30, 2021, are as follows:

Future minimum lease income under all operating leases for each of the next five years at September 30, 2021, are as follows:

LEGACY HOUSING CORPORATION

24 unchanged sentences

Interest income is recognized monthly per the terms of the financing agreements.

The average contractual interest rate per loan was approximately 13.6 % as of June 30, 2021 and 13.8 % as of December 31, 2020.

The average contractual interest rate per loan was approximately 13.6 % as of September 30, 2021 and 13.8 % as of December 31, 2020.

Consumer loans receivable have maturities that range from 3 to 30 years .

6 unchanged sentences

The Company may also receive escrow payments for property taxes and insurance included in its consumer loan collections.

The liabilities associated with these escrow collections totaled $ 8,737 and $ 7,729 as of June 30, 2021 and December 31, 2020, respectively, and are included in escrow liability in the balance sheets.

The liabilities associated with these escrow collections totaled $ 9,350 and $ 7,729 as of September 30, 2021 and December 31, 2020, respectively, and are included in escrow liability in the balance sheets.

Allowance for Loan Losses—Consumer Loans Receivable

5 unchanged sentences

Specific reserves are determined based on probable losses on specific classified impaired loans.

The Company’s policy is to place a loan on nonaccrual status when there is a clear indication that the borrower’s cash flow may not be sufficient to meet payments as they become due, which is normally when either principal or interest is past due and remains unpaid for more than 90 days.

The Company’s policy is to place a loan on nonaccrual status when there is a clear indication that the borrower’s cash flow may not be sufficient to meet payments as they become due, which is when either principal or interest is past due and remains unpaid for more than 90 days or other indications of distress.

Management implemented this policy based on an analysis of historical data, current performance of loans and the likelihood of recovery once principal or interest payments became delinquent and were aged more than 90 days.

18 unchanged sentences

At each reporting period, the fair value of the collateral is adjusted to the lower of the amount recorded at repossession or the estimated sales price less estimated costs to sell, based on current information.

Repossessed homes totaled $ 724 and $ 1,395 as of June 30, 2021 and December 31, 2020, respectively, and are included in other assets in the balance sheets.

Repossessed homes totaled $ 698 and $ 1,395 as of September 30, 2021 and December 31, 2020, respectively, and are included in other assets in the balance sheets.

LEGACY HOUSING CORPORATION

2 unchanged sentences

Consumer loans receivable, net of allowance for loan losses and deferred financing fees, consists of the following:

As of June 30,

As of September 30,

As of December 31,

Consumer loans receivable

Loan discount and deferred financing fees, net

Loan discount and deferred financing fees

Allowance for loan losses

1 unchanged sentence

The following table presents a detail of the activity in the allowance for loan losses:

Three months ended June 30,

Six Months Ended June 30,

Three months ended September 30,

Nine Months Ended September 30,

Allowance for loan losses, beginning of period

1 unchanged sentence

Allowance for loan losses

The impaired and general reserve for allowance for loan losses consists of the following:

As of June 30,

The reserve for loan losses consists of the following:

As of September 30,

As of December 31,

5 unchanged sentences

General allowance for loan losses

As of June 30, 2021 and December 31, 2020, the total principal outstanding for consumer loans on nonaccrual status was $ 1,368 and $ 1,603 , respectively.

A detailed aging of consumer loans receivable that are past due as of June 30, 2021 and December 31, 2020 were as follows:

As of June 30,

As of September 30, 2021 and December 31, 2020, the total principal outstanding for consumer loans on nonaccrual status was $ 1,328 and $ 1,603 , respectively.

A detailed aging of consumer loans receivable that are past due as of September 30, 2021 and December 31, 2020 were as follows:

As of September 30,

As of December 31,

14 unchanged sentences

(dollars in thousands)

Notes have a fixed interest rate ranging from 6.9 % to 9.5 %.

MHP Notes have a fixed interest rate ranging from 6.9 % to 8.9 %.

The remaining MHP Notes have a variable rate typically set at 4.0 % above prime with a minimum of 8.0 %.

The average interest rate per loan was approximately 7.6 % and 7.7 % as of June 30, 2021 and December 31, 2020, respectively, with maturities that range from 1 to 20 years .

The average interest rate per loan was approximately 7.7 % and 7.7 % as of September 30, 2021 and December 31, 2020, respectively, with maturities that range from 1 to 20 years .

The collateral underlying the MHP Notes are individual mobile homes which can be repossessed and resold.

The MHP Notes are generally personally guaranteed by the borrowers.

The Company had concentrations of MHP Notes with an independent third-party and its affiliates that equaled 49.5 % and 52.9 % of the principal balance outstanding, all of which was secured by the mobile homes, as of June 30, 2021 and December 31, 2020, respectively.

The MHP Notes are generally guaranteed by the borrowers personally.

The Company had concentrations of MHP Notes with an independent third-party and its affiliates that equaled 29.8 % and 52.9 % of the principal balance outstanding, all of which was secured by the mobile homes, as of September 30, 2021 and December 31, 2020, respectively.

MHP Notes are stated at amounts due from customers, net of allowance for loan losses.

1 unchanged sentence

The Company establishes an allowance reserve composed of specific and general reserve amounts.

There were minimal past due balances on the MHP Notes as of June 30, 2021 and December 31, 2020 and no charge offs were recorded for MHP Notes during the three and six months ended June 30, 2021 and 2020, respectively.

Allowance for loan loss is considered immaterial and accordingly no loss is recorded against the MHP Notes as of June 30, 2021 and December 31, 2020.

There were minimal past due balances on the MHP Notes as of September 30, 2021 and December 31, 2020 and no charge offs were recorded for MHP Notes during the three and nine months ended September 30, 2021 and 2020, respectively.

Allowance for loan loss is considered immaterial and accordingly no loss is recorded against the MHP Notes as of September 30, 2021 and December 31, 2020.

OTHER NOTES RECEIVABLE

1 unchanged sentence

The other notes have varying maturity dates and call for monthly principal and interest payments.

The other notes are collateralized by mortgages on real estate, units being financed and used as offices, as well as vehicles, and are typically personally guaranteed by the borrowers.

The other notes are collateralized by mortgages on real estate, units being financed and used as offices, as well as vehicles, and are typically guaranteed by the borrowers personally.

The interest rate on the other notes are fixed and range from 6.25 % to 12.00 %.

1 unchanged sentence

The balance outstanding on the other notes receivable were as follows:

As of June 30,

As of September 30,

As of December 31,

2 unchanged sentences

Inventories consists of the following:

As of June 30,

As of September 30,

As of December 31,

3 unchanged sentences

Allowance for obsolescence

(1) Finished goods includes $ 3,524 and $ 8,656 as of September 30, 2021 and December 31, 2020, respectively, is held for more than twelve months and classified as long-term.

LEGACY HOUSING CORPORATION

3 unchanged sentences

Property, plant and equipment consists of the following:

As of June 30,

As of September 30,

As of December 31,

4 unchanged sentences

Total property, plant and equipment

Depreciation expense was $ 261 with $ 109 included as a component of cost of product sales for the three months ended June 30, 2021 and $ 252 with $ 98 included as a component of cost of product sales for the three months ended June 30, 2020.

Depreciation expense was $ 524 with $ 214 included as a component of cost of product sales for the six months ended June 30, 2021 and $ 501 with $ 203 included as a component of cost of product sales for the six months ended June 30, 2020.

Depreciation expense was $ 403 with $ 113 included as a component of cost of product sales for the three months ended September 30, 2021 and $ 249 with $ 88 included as a component of cost of product sales for the three months ended September 30, 2020.

Depreciation expense was $ 784 with $ 327 included as a component of cost of product sales for the nine months ended September 30, 2021 and $ 750 with $ 267 included as a component of cost of product sales for the nine months ended September 30, 2020.

Other assets consists of the following:

As of June 30,

As of September 30,

As of December 31,

1 unchanged sentence

Repossessed homes

Depreciation expense for the leased property was $ 132 and $ 38 for the three months ended June 30, 2021 and 2020, respectively, and $ 230 and $ 71 for the six months ended June 30, 2021 and 2020, respectively.

Depreciation expense for the leased property was $ 143 and $ 53 for the three months ended September 30, 2021 and 2020, respectively, and $ 373 and $ 124 for the nine months ended September 30, 2021 and 2020, respectively.

ACCRUED LIABILITIES

Accrued liabilities consists of the following:

As of June 30,

As of September 30,

As of December 31,

15 unchanged sentences

The New Revolver accrues interest at one-month LIBOR plus 2.00 %.

The interest rate in effect as of June 30, 2021 and December 31, 2020 was 2.09 % and 2.15 %, respectively.

The interest rate in effect as of September 30, 2021 and December 31, 2020 was 2.14 % and 2.15 %, respectively.

As with Revolver 1, amounts available under the New Revolver are subject to a formula based on eligible consumer loans and MHP Notes and are secured by all accounts receivable, consumer loans and MHP Notes.

The New Revolver requires the Company to comply with certain quarterly financial and non-financial covenants.

The amount of available credit under the New Revolver was $ 20,325 and $ 33,826 as of June 30, 2021 and December 31, 2020, respectively.

The amount of available credit under the New Revolver was $ 61,719 and $ 33,826 as of September 30, 2021 and December 31, 2020, respectively.

In connection with the New Revolver, we paid certain arrangement fees and other fees of approximately $ 300 , which were capitalized as deferred debt issuance costs and will be amortized to interest expense over the life of the New Revolver.

For the three months ended June 30, 2021 and 2020, interest expense under the Capital One Revolvers was $ 283 and $ 226 , respectively.

For the six months ended June 30, 2021 and 2020, interest expense under the Capital One Revolvers was $ 509 and $ 545 , respectively.

The outstanding balance as of June 30, 2021 and December 31, 2020 was $ 49,675 and $ 36,174 , respectively.

For the three months ended September 30, 2021 and 2020, interest expense under the Capital One Revolvers was $ 318 and $ 239 , respectively.

For the nine months ended September 30, 2021 and 2020, interest expense under the Capital One Revolvers was $ 827 and $ 785 , respectively.

The outstanding balance as of September 30, 2021 and December 31, 2020 was $ 8,281 and $ 36,174 , respectively.

In April 2016, the Company entered into an agreement with Veritex Community Bank to secure an additional revolving line of credit of $ 15,000 (“Revolver 2”).

7 unchanged sentences

The amount of available credit under Revolver 2 was $ 12,028 at March 31, 2020.

For the three and six months ended June 30, 2020 interest expense was $ 0 and $ 17 .

For the three and nine months ended September 30, 2020 interest expense was $ 0 and $ 17 .

In April 2020, this note was paid in full and the facility was terminated.

14 unchanged sentences

The PILOT agreement is collateralized by the assets of the Project.

As of June 30, 2021 and December 31, 2020, the Company had not drawn on this credit facility.

As of September 30, 2021 and December 31, 2020, the Company had not drawn on this credit facility.

SHARE-BASED COMPENSATION

1 unchanged sentence

Stock options may be granted with a contractual life of up to ten years .

At June 30, 2021, the Company had 9.7 million shares available for grant under the Compensation Plan.

At September 30, 2021, the Company had 9.7 million shares available for grant under the Compensation Plan.

In February 2019, the Company granted 120,000 restricted shares of its common stock to members of senior management.

1 unchanged sentence

The shares vest at a rate of 14.3 % annually, beginning on February 7, 2019, and becoming fully vested on February 7, 2025.

During the second quarter of 2020, 42,857 of these restricted shares were forfeited due to the departure of a member of senior managment.

During the second quarter of 2020, 42,857 of these restricted shares were forfeited due to the departure of a member of senior management.

In February 2019, the Company granted 2,936 restricted shares of its common stock to the independent directors on the Company’s Board of Directors.

4 unchanged sentences

The shares vest at a rate of 20.0 % annually, beginning on August 2, 2020, becoming fully vested on August 2, 2024.

This grant was canceled during the second quarter of 2020 due to the departure of the member of senior managment.

This grant was canceled during the second quarter of 2020 due to the departure of the member of senior management.

In March 2020, the Company granted 1,903 restricted shares of its common stock to the independent directors on the Company’s Board of Directors.

9 unchanged sentences

Number of Units

Weighted Average Grant date Fair Value

Weighted Average Grant Date Fair Value Per Unit

Nonvested, January 1, 2021

Nonvested, June 30, 2021

As of June 30, 2021, approximately 36,000 RSUs remained unvested.

Unrecognized compensation expense related to these RSUs at June 30, 2021 was $ 431 and is expected to be recognized over 3.54 years.

Nonvested, September 30, 2021

As of September 30, 2021, approximately 36,000 RSUs remained unvested.

Unrecognized compensation expense related to these RSUs at September 30, 2021 was $ 392 and is expected to be recognized over 3.36 years.

The Company granted 58,694 incentive stock options to a member of senior management.

15 unchanged sentences

expected volatility of common stock of 75.0 % and expected life of options of 6.5 years.

The Company granted 55,490 incentive stock options to a member of management.

The options were granted on September 23, 2021 at an exercise price of $ 18.02 per share.

The options vest at a rate of 10.0 % annually, beginning on September 23, 2022, and becoming fully vested on September 23, 2031.

All options expire ten years after the date of grant.

Weighted-average assumptions used in the Black-Scholes option pricing model for stock options granted were as follows:

risk free interest rate of 1.41 %;

dividend yield of 0.00 %;

expected volatility of common stock of 75.0 % and expected life of options of 7.8 years.

The following is a summary of option activity (in thousands, except per unit data):

Number of Units

Exercise Price

Exercise Price Per Unit

Average Grant Date

Fair Value Per Unit

Contractual Life

Outstanding, January 1, 2021, nonvested

Outstanding, June 30, 2021, nonvested

Exercisable, June 30, 2021

As of June 30, 2021, approximately 35,000 options remained nonvested.

Unrecognized compensation expense related to these options at June 30, 2021 was $ 247 and is expected to be recognized over 4.12 years.

On March 31, 2020, the Company filed a registration statement on Form S-8 to register with the SEC approximately 2.3 million shares of Legacy common stock available for issuance under the 2018 Incentive Compensation Plan.

The registration statement became effective upon filing.

Outstanding, September 30, 2021, nonvested

Exercisable, September 30, 2021

LEGACY HOUSING CORPORATION

1 unchanged sentence

(dollars in thousands)

The provision for income tax expense for the six months ended June 30, 2021 and 2020 was $ 4,317 and $ 5,611 , respectively.

The effective tax rate for the six months ended June 30, 2021 was 16.8 % and differs from the federal statutory rate of 21 % primarily due to a federal tax credit for energy efficient construction and partially offset by state income taxes.

The effective tax rate for the six months ended June 30, 2020 was 22.7 % and differs from the federal statutory rate of 21 % due to state income taxes.

As of September 30, 2021, approximately 83,000 options remained nonvested.

Unrecognized compensation expense related to these options at September 30, 2021 was $ 1,011 and is expected to be recognized over 9.98 years.

The registration statement became effective upon filing.

The provision for income tax expense for the nine months ended September 30, 2021 and 2020 was $ 7,581 and $ 8,097 , respectively.

The effective tax rate for the nine months ended September 30, 2021 was 17.3 % and differs from the federal statutory rate of 21 % primarily due to a federal tax credit for energy efficient construction and partially offset by state income taxes.

The effective tax rate for the nine months ended September 30, 2020 was 22.7 % and differs from the federal statutory rate of 21 % due to state income taxes.

COMMITMENTS AND CONTINGENCIES

3 unchanged sentences

The Company will adjust its self-insured medical benefits reserve based on actual experience, estimated costs and changes to assumptions.

At June 30, 2021 and December 31, 2020, the Company accrued a $ 192 and $ 110 , respectively, liability for incurred but not reported claims.

At September 30, 2021 and December 31, 2020, the Company accrued a $ 323 and $ 110 , respectively, liability for incurred but not reported claims.

The Company is contingently liable under terms of repurchase agreements with financial institutions providing inventory financing for independent retailers of its products.

1 unchanged sentence

The Company’s obligation under these repurchase agreements ceases upon the purchase of the home by the retail customer.

The maximum amount for which the Company was liable under such agreements totalled $ 3,393 and $ 2,967 at June 30, 2021 and December 31, 2020, respectively, without reduction for the resale value of the homes.

The Company considers its obligations on current contracts to be insignificant and accordingly have not recorded any reserve for repurchase commitment as of June 30, 2021 or December 31, 2020.

The maximum amount for which the Company was liable under such agreements totaled $ 5,292 and $ 2,967 at September 30, 2021 and December 31, 2020, respectively, without reduction for the resale value of the homes.

The Company considers its obligations on current contracts to be insignificant and accordingly have not recorded any reserve for repurchase commitment as of September 30, 2021 or December 31, 2020.

The Company leases facilities under operating leases that typically have 10-year terms.

These leases usually offer the Company a right of first refusal that affords the Company the option to purchase the leased premises under certain terms in the event the landlord attempts to sell the leased premises to a third party.

Rent expense was $ 146 and $ 144 for the three months ended June 30, 2021, and 2020, respectively, and $ 402 and $ 308 for the six months ended June 30, 2021, and 2020, respectively.

Rent expense was $ 140 and $ 135 for the three months ended September 30, 2021, and 2020, respectively, and $ 436 and $ 423 for the nine months ended September 30, 2021, and 2020, respectively.

The Company also subleases properties to third parties, ranging from 3-year to 11-year terms with various renewal options.

Rental income from the subleased property was approximately $ 91 and $ 89 for the three months ended June 30, 2021 and 2020, respectively, and $ 182 and $ 182 for the six months ended June 30, 2021 and 2020, respectively.

Future minimum lease commitments under all non-cancelable operating leases for each of the next five years at June 30, 2021, are as follows:

Legal Matters

The Company is party to certain legal proceedings that arise in the ordinary course and are incidental to its business.

Certain of the claims pending against the Company in these proceedings allege, among other things, breach of contract and warranty, product liability and personal injury.

Although litigation is inherently uncertain, based on past

Rental income from the subleased property was approximately $ 82 and $ 90 for the three months ended September 30, 2021 and 2020, respectively, and $ 263 and $ 264 for the nine months ended September 30, 2021 and 2020, respectively.

LEGACY HOUSING CORPORATION

1 unchanged sentence

(dollars in thousands)

experience and the information currently available, management does not believe that the currently pending and threatened litigation or claims will have a material adverse effect on the Company’s financial position, liquidity or results of operations.

Future minimum lease commitments under all non-cancelable operating leases for each of the next five years at September 30, 2021, are as follows:

Legal Matters

The Company is party to certain legal proceedings that arise in the ordinary course and are incidental to its business.

Certain of the claims pending against the Company in these proceedings allege, among other things, breach of contract and warranty, product liability and personal injury.

Although litigation is inherently uncertain, based on past experience and the information currently available, management does not believe that the currently pending and threatened litigation or claims will have a material adverse effect on the Company’s financial position, liquidity or results of operations.

However, future events or circumstances currently unknown to management will determine whether the resolution of pending or threatened litigation or claims will ultimately have a material effect on the Company’s financial position, liquidity or results of operations in any future reporting periods.

3 unchanged sentences

The Company elected not to designate the interest rate swap agreements as cash flow hedges and, therefore, gains or losses on the agreements as well as the other offsetting gains or losses on the hedged items attributable to the hedged risk are recognized in current earnings.

Accounting Standards Codification (“ASC”) 815-10, Derivatives and Hedging , requires derivative instruments to be measured at fair value and recorded in the statements of financial position as either assets or liabilities.

ASC 815-10, Derivatives and Hedging , requires derivative instruments to be measured at fair value and recorded in the statements of financial position as either assets or liabilities.

The Company entered into interest rate swap agreement with Capital One Bank on June 12, 2017 to fix the variable rate portion for $ 8,000 of the line of credit.

This interest rate swap agreement matured on May 11, 2020.

Included in the statements of operations for the six months ended June 30, 2020 is a loss of $ 15 which was the result of the change in the fair value of the interest rate swap agreement.

Included in the statements of operations for the nine months ended September 30, 2020 is a loss of $ 15 which was the result of the change in the fair value of the interest rate swap agreement.

Fair Value Measurements

8 unchanged sentences

(3) Inputs other than quoted prices that are observable;

(4) Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

(4) Inputs that are derived principally from or corroborated

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands)

by observable market data by correlation or other means.

If the asset or liability has a specified (contractual) term, the Level II input must be observable for substantially the full term of the asset or liability.

6 unchanged sentences

Management reviewed the fair values for the instruments as provided by the lender and determined the related asset and liability to be an accurate estimate of future gains and losses to the Company.

The Company is not a party to any interest rate swaps as of June 30, 2021.

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands)

The Company is not a party to any interest rate swaps as of September 30, 2021.

Fair Value of Financial Instruments

The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, consumer loans, MHP Notes, other note recievables, accounts payable, lines of credit, notes payable, and dealer portion of consumer loans.

The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, consumer loans, MHP Notes, other note receivables, accounts payable, lines of credit, notes payable, and dealer portion of consumer loans.

The carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable approximate their respective fair values because of the short-term maturities or expected settlement dates of these instruments.

This is considered a Level I valuation technique.

The lines of credit, notes payable, part of the MHP Notes and part of the other note recievables have variable interest rates that reflect market rates and their fair value approximates their carrying value.

The lines of credit, notes payable, part of the MHP Notes and part of the other note receivables have variable interest rates that reflect market rates and their fair value approximates their carrying value.

This is considered a Level II valuation technique.

The Company also assessed the fair value of the consumer loans receivable, the fixed rate MHP Notes and the portion of other note recievables with fixed rates based on the discounted value of the remaining principal and interest cash flows.

The Company determined that the fair value of the consumer loan portfolio was approximately $ 117,000 compared to the book value of $ 116,025 as of June 30, 2021, and a fair value of approximately $ 115,000 compared to the book value of $ 111,742 as of December 31, 2020.

The Company determined that the fair value of the fixed rate MHP Notes was approximately $ 119,000 compared to the book value of $ 120,598 as of June 30, 2021, and a fair value of approximately $ 108,000 compared to the book value of $ 109,806 as of December 31, 2020.

The Company determined that the fair value of the other notes was approximately $ 17,600 compared to the book value of $ 17,731 as of June 30, 2021, and a fair value of approximately $ 15,000 compared to the book value of $ 15,104 as of December 31, 2020.

The Company also assessed the fair value of the consumer loans receivable, the fixed rate MHP Notes and the portion of other note receivables with fixed rates based on the discounted value of the remaining principal and interest cash flows.

The Company determined that the fair value of the consumer loan portfolio was approximately $ 123,000 compared to the book value of $ 121,637 as of September 30, 2021, and a fair value of approximately $ 115,000 compared to the book value of $ 111,920 as of December 31, 2020.

The Company determined that the fair value of the fixed rate MHP Notes was approximately $ 81,000 compared to the book value of $ 82,118 as of September 30, 2021, and a fair value of approximately $ 108,000 compared to the book value of $ 109,806 as of December 31, 2020.

The Company determined that the fair value of the other notes was approximately $ 33,859 compared to the book value of $ 34,066 as of September 30, 2021, and a fair value of approximately $ 15,000 compared to the book value of $ 15,104 as of December 31, 2020.

This is a Level III valuation technique.

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands)

EARNINGS PER SHARE

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Three months ended

Six months ended

Nine months ended

September 30,

Net income (in 000's)

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Earnings per share attributable to Legacy Housing Corporation

The diluted earnings per share calculation excludes 79,459 and 90,783 potential shares for the three and six months ended June 30, 2020, respectively because the effect of including theses potential shares would be antidilutive.

LEGACY HOUSING CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)

(dollars in thousands)

The diluted earnings per share calculation excludes zero and 54,446 potential shares for the three and nine months ended September 30, 2020, because the effect of including theses potential shares would be antidilutive.

RELATED PARTY TRANSACTIONS

Bell Mobile Homes, a retailer owned by one of the Company’s significant owners, purchases manufactured homes from the Company.

Accounts receivable balances due from Bell Mobile Homes were $ 27 and $ 1 as of June 30, 2021 and December 31, 2020, respectively.

Accounts payable balances due to Bell Mobile Homes for maintenance and related services were $ 76 and $ 61 as of June 30, 2021 and December 31, 2020, respectively.

Home sales to Bell Mobile Homes were $ 695 and $ 533 for the three months ended June 30, 2021 and 2020, respectively and $ 1,393 and $ 1,416 for the six months ended June 30, 2021 and 2020, respectively.

Accounts receivable balances due from Bell Mobile Homes were $ 124 and $ 1 as of September 30, 2021 and December 31, 2020, respectively.

Accounts payable balances due to Bell Mobile Homes for maintenance and related services were $ 84 and $ 61 as of September 30, 2021 and December 31, 2020, respectively.

Home sales to Bell Mobile Homes were $ 1,750 and $ 383 for the three months ended September 30, 2021 and 2020, respectively and $ 3,143 and $ 1,800 for the nine months ended September 30, 2021 and 2020, respectively.

SUBSEQUENT EVENTS

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements