Item 7. Management’s Discussion and Analysis
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with the financial statements and accompanying notes and the information contained in other sections of this Form 10-K. It contains forward-looking statements that involve risks and uncertainties, and is based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Our actual results could differ materially from those anticipated by our management in these forward-looking statements as a result of various factors, including those discussed in this Form 10-K and in our Registration Statement on Form S-1, particularly under the heading “Risk Factors.”Dollar amounts are in thousands unless otherwise noted.
Overview
Legacy Housing Corporation builds, sells and finances manufactured homes and “tiny houses” that are distributed through a network of independent retailers and company-owned stores and are sold directly to manufactured housing communities. We are one of the largest producers of manufactured homes in the United States. 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. During 2024, we sold 2,471 home sections (which are entire homes or single floors that are combined to create complete homes) and in 2023, we sold 2,877 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 the Company supports the others. For example, the sale of manufactured homes includes coordinating or providing transportation for dealers. We also provide financing options for customers to facilitate home sales. Accordingly, all significant operating and strategic decisions by the chief operating decision maker, the Chief Executive Officer, are based upon analyses of our company as one operating segment.
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. Our homes are constructed in the United States at one of our three manufacturing facilities in accordance with the construction and safety standards of the U.S. Department of Housing and Urban Development (“HUD”). Our factories employ high-volume production techniques that allow us to produce up to, on average, approximately 70 home sections, or 60 fully-completed homes depending on product mix, in total per week. We use quality materials and operate our own component manufacturing facilities for many of the items used in the construction of our homes. Each home can be configured according to a variety of floor plans and equipped with features such as fireplaces, central air conditioning and state-of-the-art kitchens.
Our homes are marketed under our premier “Legacy” brand name and currently are sold primarily across 15 states through a network of over 125 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 12 Heritage Housing stores and one Tiny House Outlet stores exclusively sell our homes. During the years ended December 31, 2024 and 2023, no independent retailer accounted for 10% or more of our product sales. Approximately 38% of our 2024 product sales were attributable to our independent retail distributors, 17% to our company-owned retail locations and 45% directly to owners of manufactured housing communities. 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.
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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 2024
% of 2023
Location
Product Sales
Product Sales
Texas
54
%
53
%
Georgia
11
%
12
%
North Carolina
7
%
2
%
Oklahoma
6
%
4
%
Michigan
3
%
3
%
Florida
3
%
3
%
Alabama
2
%
2
%
New Mexico
2
%
2
%
South Carolina
2
%
1
%
Kentucky
1
%
—
%
Louisiana
1
%
9
%
We offer three types of financing solutions to our customers. We provide inventory financing for our independent retailers who purchase homes from us and then sell them to consumers. We provide consumer financing for our products which are sold to end-users through both independent and company-owned retail locations. We also provide financing solutions to manufactured housing community owners that buy our products for use in their manufactured housing communities. Our ability to offer competitive financing options at our retail locations provides us with several competitive advantages and allows us to capture sales which may not have otherwise occurred without our ability to offer consumer financing.
Factors Affecting Our Performance
We believe that the growth of our business and our future success depend on various opportunities, challenges, trends and other factors, including, but not limited to, the following:
● We acquired several properties in our market area for the purpose of developing manufactured housing communities and subdivisions. As of December 31, 2024, 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
$
16,642
$
20,857
Bexar County, Texas
69 Acres
November 2018
842
138
980
Horseshoe Bay, Texas
39 Acres
Various 2018-2019
1,222
2,349
3,571
Johnson County, Texas
91.5 Acres
July 2019
449
-
449
Venus, Texas
50 Acres
August 2019
422
52
474
Wise County, Texas
81.5 Acres
September 2020
889
-
889
Bexar County, Texas
233 Acres
February 2021
1,550
539
2,089
Richland, Mississippi (1)
22 Acres
February, 2024
1,141
-
1,141
Bonham, Texas
109 Acres
December, 2024
1,533
-
1,533
Balch Springs, Texas
6 Acres
December, 2024
1,117
-
1,117
$
13,380
$
19,720
$
33,100
(1) Land and improvement values do not include the value of Company owned homes located in this community
● We also may provide financing solutions to certain manufactured housing community-owner customers in a manner that includes developing new sites for products in or near urban locations where there is a shortage of sites to place our products. These solutions are structured to give us an attractive return on
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investment when coupled with the gross margin we expect to make on products specifically targeted for sale to these new manufactured housing communities.
● Inflation rates have been high in the U.S. recently. 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. We continue to explore opportunities to minimize the impact of inflation on our future profitability.
● Finally, our financial performance may be impacted by our ability to fulfill current orders for our manufactured homes from dealers and customers. Our Georgia manufacturing facility has space available and with additional investment can add capacity to increase the number of homes that can be manufactured. In order to continue to grow, we must be able to properly estimate 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. 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”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Allowance for Loan Losses—Consumer Loan Receivable
The allowance for loan losses reflects management’s estimate of losses inherent in the consumer loans that may be uncollectible based upon review and evaluation of the consumer loan portfolio as of the date of the balance sheet. A reserve is calculated after considering, among other things, the loan characteristics, including the financial condition of borrowers, the value and liquidity of collateral, delinquency and historical loss experience.
The allowance for loan losses is comprised of two components: the general reserve and specific reserves. Our calculation of the general reserve considers the historical loss rate for the last three years, adjusted for the estimated loss discovery period and any qualitative factors both internal and external to our company. Specific reserves are determined based on probable losses on specific classified impaired loans. For further information, see Note 2, Summary of Significant Accounting Policies, to our December 31, 2024 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. 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.
Allowance for Loan Losses—Other Notes Receivable
Other notes receivable are stated at amounts due from customers net of allowance for loan losses. We determine the allowance by considering several factors including the aging of the past due balance, the customer’s payment history,
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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 Other notes receivable.
Allowance for Loan Losses—Dealer Financed Receivables
Dealer financed receivables are stated at amounts due from customers net of allowance for loan losses. We determine the allowance by considering several factors including the aging of the past due balance, the customer’s payment history, and our previous loss history. We establish a general reserve for amounts that are deemed to be uncollectible. Historically we have not experienced material losses on the Dealer financed receivables.
Inventories
Inventories consist of raw materials, work in process, and finished goods and are stated at the lower of cost or net realizable value. The cost of raw materials is based on the first in first out method. Finished goods and work in process are based on a standard cost system that approximates actual costs using the specific identification method.
Estimates of the lower of cost and net realizable value of inventory are determined by comparing the actual cost of the product to the estimated selling prices in the ordinary course of business based on current market and economic conditions, less reasonably predictable costs of completion, disposal, and transportation of the inventory.
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. These types of homes are generally either paid for prior to shipment or floor plan financed through a third party lender by the independent retailer through standard industry arrangements, which can include repurchase agreements.
Commercial Sales
Revenue from homes sold to mobile home parks under commercial loan programs involving funds provided by our company is recognized when the home is shipped, at which time title passes to the customer and a sales and financing contract is executed, down payment received, and collectability is reasonably assured.
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.
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. 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.
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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.
Comparison of Years ended December 31, 2024 and 2023 (in thousands)
Year ended
December 31,
2024
2023
$ change
% change
Net revenue:
Product sales
$
129,345
$
145,100
$
(15,755)
(10.9)
%
Consumer, MHP and dealer loans interest
41,182
37,420
3,762
10.1
%
Other revenue
13,664
6,624
7,040
106.3
%
Total net revenue
184,191
189,144
(4,953)
(2.6)
%
Operating expenses:
Cost of product sales
90,071
99,692
(9,621)
(9.7)
%
Cost of other sales
8,218
—
8,218
N/A
%
Selling, general administrative expenses
23,222
24,279
(1,057)
(4.4)
%
Dealer incentive
(930)
586
(1,516)
(258.7)
%
Total operating expenses
120,581
124,557
(3,976)
(3.2)
%
Income from operations
63,610
64,587
(977)
(1.5)
%
Other income (expense)
Non‑operating interest income
2,635
3,019
(384)
(12.7)
%
Miscellaneous, net
10,482
2,060
8,422
408.8
%
Interest expense
(689)
(930)
241
(25.9)
%
Total other income
12,428
4,149
8,279
199.5
%
Income before income tax expense
76,038
68,736
7,302
10.6
%
Income tax expense
(14,396)
(14,276)
(120)
0.8
%
Net income
$
61,642
$
54,460
$
7,182
13.2
%
Product sales primarily consist of direct sales, commercial sales, inventory finance sales and retail store sales. Product sales decreased $15.8 million, or 10.9%, in 2024 as compared to 2023. This decrease was driven primarily by a decrease in unit volumes shipped, primarily in direct sales and inventory finance sales categories.
Net revenue attributable to our factory-built housing consisted of the following in 2024 and 2023:
Year Ended
December 31,
($ in thousands)
2024
2023
$ Change
% Change
Net revenue:
Product Sales
$
129,345
$
145,100
$
(15,755)
(10.9)
%
Total units sold
2,129
2,434
(305)
(12.5)
%
Net revenue per unit sold
$
60.8
$
59.6
$
1.1
1.9
%
In 2024, our net revenue per product sold increased primarily because of a moderate increase in unit prices, as rising material and labor costs were passed on to our customers. We had decreases in direct sales, inventory finance sales and other product sales. We believe the market for mobile homes in 2024 remained slow due to the economic environment, including higher inflation and rising home costs. Direct sales decreased $8.4 million, or 47.8% from 2023 to 2024, mainly due to general slowdown in the market for mobile homes. Commercial sales increased $0.2 million, or 0.3% from 2023 to 2024 reflecting steady purchases of mobile homes by mobile home park operators. Retail store sales increased $0.9 million, or 4.5% from 2023 to 2024 as our continued efforts to focus on our own retail sales channel helped moderate the impact of market conditions. Inventory finance sales decreased $7.4 million, or 16.8% from 2023 to 2024, primarily due to dealers continuing to sell through their existing inventories.
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Consumer, MHP and dealer loans interest income increased $3.8 million, or 10.1%, from 2023 to 2024 due to growth in our loan portfolios. Between December 31, 2024 and December 31, 2023 our consumer loan portfolio increased by $17.6 million, our MHP loan portfolio increased by $24.5 million, and our dealer finance notes balance did not change. The change in the balance of our MHP loan portfolio is primarily due a settlement agreement we reached with a significant borrower, as discussed in Note 5, Notes Receivable from Mobile Home Parks, to our December 31, 2024 financial statements included in Part II, Item 8, Financial Statements and Supplementary Data, of this Form-10K, which resulted in reclassifying balances from Other notes receivable, net to Notes receivable from mobile home parks on our balance sheet.
Other revenue primarily consists of contract deposit forfeitures, consignment fees, commercial lease rents, land sales, service fees and other miscellaneous income and increased $7.0 million, or 106.3%, primarily due to $8.9 million in land sales related to the Forest Hollow mobile home community and the property in Marble Falls, Texas, $0.5 million in rental income from our mobile home park properties, partially offset by a $1.5 million decrease in forfeited deposits, a $0.6 million decrease in rental income from leased mobile homes and a $0.3 million decrease in other miscellaneous revenue.
The cost of product sales decreased $9.6 million, or 9.7%, in 2024 as compared to 2023. The decrease in costs is primarily related to a decrease in units sold. The cost of other sales was $8.2 million in 2024 and primarily reflects the cost associated with our land sales.
Selling, general and administrative expenses decreased $1.1 million, or 4.4%, in 2024 as compared to 2023. This decrease was primarily due to a $1.4 million decrease in warranty costs, a $0.4 million decrease in consulting and professional fees, and a $0.4 million decrease in salaries and benefits costs, partially offset by a $0.4 million increase in real estate taxes and a net $0.7 million increase in other miscellaneous costs.
Dealer incentive expense decreased $1.5 million, or 258.7% in 2024 as compared to 2023.
Other income (expense), net increased by $8.3 million in 2024, as compared to 2023. We had a $8.5 million increase in Miscellaneous, net primarily due to (i) gains related to the settlement agreement described above, (ii) a gain on the sale of property in Georgia, (iii) gains related to properties acquired through foreclosure and (iv) reversals of certain balance sheet liabilities. We had a $0.4 million decrease in interest income on Other notes and a $0.2 million decrease in interest expense.
Income tax expense was $14.4 million for 2024 compared to $14.3 million for 2023. The effective tax rate for the year ended December 31, 2024 was 18.9% and primarily differs from the federal statutory rate of 21% primarily due to a federal tax credit for energy efficient construction and partially offset by state income taxes. The effective tax rate for the year ended December 31, 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.
Liquidity and Capital Resources
Liquidity
We believe that cash flow from operations and cash at December 31, 2024, 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. On July 28, 2023, we terminated our credit agreement with Capital One, N.A. and entered into a new credit agreement with Prosperity Bank that expanded and extended our credit availability (see Lines of Credit , below).
Cash
We maintain cash balances in bank accounts that may, at times, exceed federally insured limits. We have not incurred any losses from such accounts and management considers the risk of loss to be minimal. As of December 31, 2024, we had approximately $1.1 million in cash, compared to $0.7 million as of December 31, 2023. We consider all cash and highly liquid investments with an original maturity of three months or less to be cash equivalents.
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Cash Flow Activities
Year Ended
December 31,
(in thousands)
2024
2023
Net cash provided by (used in) operating activities
$
35,993
$
(13,536)
Net cash used in investing activities
$
(6,714)
$
(9,769)
Net cash (used in) provided by financing activities
$
(28,878)
$
21,235
Net change in cash
$
401
$
(2,070)
Cash at beginning of period
$
748
$
2,818
Cash at end of period
$
1,149
$
748
Comparison of Cash Flow Activities from 2024 to 2023
Net cash provided by operating activities was $36.0 million during the year ended December 31, 2024, compared to net cash of $13.5 million used in operating activities during 2023. This change was primarily a result of increased cash provided by operating income before non-cash adjustments, decreased volume of MHP loan originations net of principal collections, decreased inventories, decreased other assets – leased mobile homes, increased accounts payable, increased customer deposits and increased escrow liability. The increase in cash provided by operating activities was partially offset by decreased accrued liabilities and decreased dealer incentive liability.
Net cash used in investing activities of $6.7 million in 2024 was primarily attributable to $5.5 million of originations related to loans we made to third parties for the development of manufactured housing parks, and $9.2 million in improvements and development related to property, plant and equipment. These were offset by $6.4 million of collections related to loans we made to third parties for the development of manufactured housing parks and proceeds of $1.6 million from the sale of property.
Net cash used in financing activities of $28.9 million in 2024 was attributable to net uses of $23.7 million to pay down our lines of credit and $5.4 million of stock repurchases offset by $0.2 million received from the exercise of stock options. Net cash provided by financing activities of $21.2 million in 2023 was attributable to net proceeds from our lines of credit.
In November 2022, our Board of Directors approved a share repurchase program to authorize the repurchase of up to $10.0 million of the Company’s common stock. On August 6, 2024, our Board of Directors authorized the repurchase of an additional $10.0 million of the Company’s common stock under the share repurchase program. We repurchased 262,530 shares of common stock for $5,398 in the open market during the year ended December 31, 2024. As of December 31, 2024, we had a remaining authorization of approximately $14,602. Between January 1, 2025 and March 10, 2025 we repurchased 29,385 shares of common stock for $674 in the open market
Lines of Credit
On July 28, 2023, the Company entered into a new Credit Agreement (the “Revolver”), by and among the Company as borrower, the financial institutions from time to time party thereto, as lenders, and Prosperity Bank as administrative agent. Subsequently, the Company repaid in full the balance due on its prior line of credit with Capital One, N.A. and all commitments under this prior line of credit were terminated. The Revolver provides for a four-year senior secured revolving credit facility with an initial commitment of $50,000 and an additional $25,000 commitment under an accordion feature. The Revolver is secured by the Company’s consumer loans receivables and all escrow accounts associated with the consumer loans receivables. At the Company's option, borrowings will bear interest at a per annum rate equal to, (i) Term Secured Overnight Financing Rate (“SOFR”) plus an applicable margin of 2.5% or 2.75% based upon the Company's average quarterly borrowings under the Revolver or (ii) a base rate plus an applicable margin of 2.5% or 2.75% based upon the Company's average quarterly borrowings under the Revolver. The Company paid certain arrangement fees and other fees in connection with the Revolver of approximately $271, which were capitalized
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as unamortized debt issuance costs and included in Prepaid expenses and other current assets in the accompanying balance sheets and are amortized to interest expense over the life of the Revolver. The Revolver matures July 28, 2027.
For the year ended December 31, 2024 and 2023, interest expense under the Revolver was $689 and $930, respectively. The outstanding balance of the Revolver as of December 31, 2024 and 2023 was $0 and $23,680, respectively. The interest rate in effect as of December 31, 2024 and 2023 for the Revolver was 7.61% and 7.95%, respectively. The amount of available credit under the Revolver was $50,000 and $26,320 as of December 31, 2024 and 2023, respectively. The Revolver requires the Company to comply with certain financial and non-financial covenants. As of December 31, 2024, the Company was in compliance with all financial covenants, including that it maintain a maximum leverage ratio of no more than 1.00 to 1.00 and a minimum fixed charge coverage ratio of no less than 1.75 to 1.00.
Contractual Obligations
The following table is a summary of contractual cash obligations as of December 31, 2024:
Payments Due by Period (in thousands)
Contractual Obligations
Total
2025
2026 - 2027
2028 - 2029
After 2029
Lines of credit
$
—
—
—
—
—
Operating lease obligations
$
1,415
494
776
145
—
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. However, we do have repurchase agreements with financial institutions providing inventory financing for independent retailers of our products. Under these agreements, we have agreed to repurchase homes at declining prices over the term of the agreement. Our obligation under these repurchase agreements ceases upon the purchase of the home by the retail customer. The maximum amount of our contingent obligations under such repurchase agreements was approximately $805 and $3,030 as of December 31, 2024 and 2023, respectively, without reduction for the resale value of the homes. We may be required to honor contingent repurchase obligations in the future and may incur additional expense as a consequence of these repurchase agreements. We consider our obligations on current contracts to be immaterial and accordingly we have not recorded any reserve for repurchase commitment as of December 31, 2024.
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016 13 Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available for sale debt securities, credit losses should be measured in a manner similar to current GAAP, however Topic 326 will require that credit losses be presented as an allowance rather than as a write down and affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The Company used the longer phase in period for adoption, and accordingly this ASU became effective for the Company’s fiscal year beginning January 1, 2023. The adoption of ASU 2016-13 resulted in an increase in portfolio allowances of $900 at transition. The $900 was comprised of a $225 increase for MHP notes, a $187 increase for dealer financed contracts and a $488 increase for other
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notes receivable. The cumulative effect of the adoption was a net decrease of $698 to beginning retained earnings at January 1, 2023.
In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848. The amendments in this update extend the transition relief period for reference rate reform from December 31, 2022 to December 31, 2024. The amendments in ASU 2022-06 apply to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. ASU 2022-06 was effective upon issuance. The new standard has had no material impact on the Company's financial statements.
In November, 2023 the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 enhances current and interim annual reportable segment disclosures and requires additional disclosures about significant segment expenses. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU 2023-07, as well as existing segment disclosures and reconciliation requirements in ASC 280 – Segment Reporting on an interim and annual basis. In 2024, we adopted ASU 2023-07 on a retrospective basis for annual periods starting with this Annual Report on Form 10-K. For additional information, refer to “Note 18 Segment Information.”
Pronouncements Issued But Not Yet Adopted
In December 2023, the FASB issued Accounting Standard Update 2023-09, Income taxes (Topic 740): Improvements to Income Tax Disclosures which requires entities to disclose disaggregated information about their effective tax rate reconciliation as well as expanded information on income taxes paid by jurisdiction. The disclosure requirements will be applied on a prospective basis, with the option to apply them retrospectively. The standard is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the disclosure requirements related to the new standard.
In November 2024, the FASB issued ASU 2024-03, Income Statement Reporting-Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40), Disaggregation of Income Statement Expenses. The standard update improves the disclosures about a public business entity’s expenses by requiring more detailed information about certain types of costs and expenses in the notes to the financial statements. The guidance will be effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The standard updates are to be applied prospectively with the option for retrospective application. We are currently evaluating the impact of disclosure requirements related to the new standard on our financial statements.
From time to time, new accounting pronouncements are issued by the FASB and other regulatory bodies that are adopted by the Company as of the specified effective dates. Unless otherwise discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the Company’s Financial Statements upon adoption.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable for smaller reporting companies.
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