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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549-4631
DIVISION OF
CORPORATION FINANCE
Mail Stop 4631
March 1, 2018
Via E-Mail
Mr. Curtis D. Hodgson
Co-Chief Executive Officer
Mr. Kenneth E. Shipley
Co-Chief Executive Officer
Legacy Housing Corporation
1600 Forest Ridge Drive, #100
Bedford, TX 76002
Re: Legacy Housing Corporation
Draft Registration Statement
Submitted February 2, 2018
CIK No. 0001436208
Dear Messrs. Hodgson and Shipley:
We reviewed your draft registration statement and have the following
comments.
In some of our comments we may ask you to provide us information so that we
may
better understand your disclosure.
Please respond to this letter by providing the requested information
and either
submitting an amended draft registration statement or publicly filing your
registration
statement on EDGAR. If you do not believe that our comments apply to your
facts and
circumstances or do not believe that an amendment is appropriate, please tell
us why in
your response.
After reviewing the information you provide in response to these
comments and
your amended draft registration statement or filed registration statement, we
may have
additional comments.
General
1. Provide us copies of all written communications as defined in Rule 405
under the
Securities Act that you or anyone authorized on your behalf present to
potential
investors in reliance on Section 5(d) of the Securities Act, whether or
not they retain
copies of the communications. Similarly, provide us any research reports
about you
that are published or distributed in reliance upon Section 2(a)(3) of the
Securities Act
Mr. Curtis D. Hodgson
Mr. Kenneth E. Shipley
Legacy Housing Corporation
March 1, 2018
Page 2
added by Section 105(a) of the Jumpstart Our Business Startups Act by any
broker or
dealer that is participating or will participate in your offering.
2. Please disclose the lead underwriter in the next amendment.
Our Company, page 1
3. You state that in 2016 there were 63,799 households in the U.S. with annual
household incomes of less than $60,000 representing a majority of all U.S.
households. 63,799 households do not appear to represent a majority of all
U.S.
households. Please advise or revise.
Summary Consolidated Financial Data, page 11
4. Please remove the label "unaudited" from the header in the pro forma
information
table as the label may give an investor the impression that the consolidated
statements
of operations data and consolidated balance sheet data included in this
section have
been audited.
Risk Factors, page 13
5. Advise what consideration you have given to risk factor discussion of the
2017 Tax
Cuts and Jobs Act on your industry and your company.
Our operations are concentrated in the southern United States..., page 14
6. Disclosure indicates that 81% of your loan contracts are located in Texas as
of
December 31, 2016. Disclose your rates of delinquencies, default, and
foreclosure
losses in Texas during the periods presented in the financial statements.
Our involvement in vertically integrated lines of businesses...exposes us to
certain risks,
page 16
7. You indicate that you offer manufactured home chattel loans to purchasers of
your
homes sold by independent retailers and that you may repossess or foreclose
on the
secured property if customers do not repay their loans. Disclose the number
and the
dollar amount of your repossessions and foreclosures during the periods
presented in
the financial statements.
Mr. Curtis D. Hodgson
Mr. Kenneth E. Shipley
Legacy Housing Corporation
March 1, 2018
Page 3
Management's Discussion and Analysis of Financial Condition and Results of
Operations, page 33
General
8. Please revise to provide a table of contractual obligations. Refer to Item
303(a)(5) of
Regulation S-K.
Overview, page 33
9. You state that you currently have the largest backlog of orders in your 12
year
history. Please quantify the backlog both in dollar and units believed to be
firm as of
a recent date and as of a comparable date in the preceding fiscal year,
together with
an indication of the portion not reasonably expected to be filled within the
current
year, and seasonal or other material aspects of the backlog. Refer to Item
101(c)(1)(viii) of Regulation S-K.
Critical Accounting Policies and Estimates, page 38
10. Please revise to provide a robust discussion of your critical accounting
policies and
estimates that require significant management judgement. It appears to us
that at a
minimum you should discuss your portfolio loans receivables, notes
receivable,
allowance for loan losses, and inventories. Please note that the disclosure
should
supplement, not duplicate, the description of accounting policies that are
already
disclosed in the notes to the financial statements.
Our Company, page 41
11. You indicate that you market your homes through a network of independent
retail
distributors, company-owned retail locations, and direct sales to owners of
manufactured home communities. Disclose the amount of your revenues
attributed to
each of the independent retail distributors, company-owned retail
locations, and direct
sales to owners of manufactured home communities during the periods
presented in
the financial statements.
Manufacturing in Close Proximity to Customers in Key Markets, page 43
12. Disclosure that you have additional manufacturing capacity to support
future growth
appears inconsistent with disclosure in the third bullet point on page 34
that your two
Texas manufacturing facilities are operating at or near capacity and your
Georgia
manufacturing facility is operating with limited excess capacity. Please
reconcile the
disclosures.
Mr. Curtis D. Hodgson
Mr. Kenneth E. Shipley
Legacy Housing Corporation
March 1, 2018
Page 4
Raw Materials and Suppliers, page 46
13. Disclose the names of your principal suppliers. See Item 101(h)(4)((v) of
Regulation
S-K. If you have any material supply agreements, advise what consideration
you
have given to filing the agreements as exhibits to the registration
statement. See Item
601(b)(10) of Regulation S-K.
Third-Party Inventory Financing, page 49
14. We note from your disclosure that you have repurchase agreements with the
financial
institutions that provide wholesale floor plan financing to your
independent retailers.
We note also your disclosure that you currently have no repurchase
obligations.
Please disclose the maximum amount of contingent obligations under the
agreements
without reduction of resale value of the homes as of the most recent
balance sheet
date. Please also consider discussing your potential repurchase obligations
under risk
factors.
Facilities, page 53
15. Disclose the duration of the lease for your facility in Eatonton, Georgia,
and advise
what consideration you have given to filing the lease agreement and also
the payment
in lieu of taxes agreement as exhibits to the registration statement. See
Item
601(b)(10) of Regulation S-K.
Financial Statements
General
16. Please revise the notes to your financial statements to include the
disclosures required
by ASC 280-10-50, as applicable. Should you determine that you have a
single
reportable segment, disclose that fact and the basis for your conclusion,
including a
discussion of whether your different revenue streams represent separate
operating
segments. If operating segments have been aggregated, please tell us the
basis for
such aggregation and also tell us your consideration of the disclosure
requirements in
ASC 280-10-50-21.
Auditor Report, page F-2
17. We note that the audit report refers to the financial statements as of and
for the years
ended December 31, 2016 and 2015. However, you only included the 2016
financial
statements. Please ensure that the audit report refers to the periods
presented once the
financial statements are updated with the 2017 data.
Mr. Curtis D. Hodgson
Mr. Kenneth E. Shipley
Legacy Housing Corporation
March 1, 2018
Page 5
Consolidated Statement of Operations, page F-4
18. We note from your disclosure on page F-12 that your net revenues primarily
consist
of product revenue related to the manufactured homes and financial service
revenue
from financing transactions. Please separately state your product and
service
revenues and cost of sales on the face of the income statement in
accordance with
Rule 5-03 of Regulation S-X, or explain why you believe that you are not
required to
do so.
19. Please revise your consolidated statements of operations to present
interest income
net of provision for loan losses. Refer to Article 9 of Regulation S-X and
SAB Topic
11K. Alternatively, please tell us how you determined that your
presentation is
appropriate, and tell us the authoritative accounting literature you relied
upon.
Note 2 Summary of Significant Accounting Policies, page F-8
Allowance for Loan Losses, page F-8
20. You state that you will charge off a loan once it is determined to be
uncollectible.
Please disclose how you determine when a loan is deemed uncollectible.
Specifically
discuss the triggering events or other facts and circumstances that cause
you to charge
off a loan. Refer to ASC 310-10-50-11B.
Notes Receivable from Mobile Home Parks, page F-8
21. Your MHP notes appear to be significant to your earnings and liquidity.
Please
disclose your past due, non-accrual, and charge-off accounting policies
related to
MHP notes and quantify the related balances as of the end of each period
presented.
Further, please provide us with a breakout of MHP notes by aging category
and an
allowance rollforward schedule. Please also explain to us your basis for
your current
recorded allowance.
Inventory, page F-9
22. Please expand your disclosures to provide insight regarding your inventory
impairment policies and assessment, including methods and assumptions used
to
determine fair market value. If you apply more than one method in
estimating the
market value of your inventory, please tell us how the results of your
multiple
methods are weighted to determine the applicable market value.
23. Please expand your accounting policy to address inventories on consignment,
and
disclose the amount of those inventories. We note your disclosure that you
determined a reserve for slow moving inventory was not necessary for
finished goods
Mr. Curtis D. Hodgson
Mr. Kenneth E. Shipley
Legacy Housing Corporation
March 1, 2018
Page 6
inventory due to dealers' incentive to sell these units. Please advise us
how you
consider factors such as physical deterioration, obsolescence, and changes
in price
levels in valuating your slow moving and aged finished goods inventory. As
part of
your response, please tell us how long it normally takes for the dealers to
sell the
units and what happens to the units when the dealers are unable to sell them
within an
extend period of time.
24. Please tell us what consideration was given to presenting slow moving
inventory not
expected to be sold within one year from the balance sheet date as
non-current
inventory on the face of the balance sheets.
Dealer portfolio Positions, page F-10
25. Please disclose how and when you recognize the expense associated with
compensating your dealers for assisting with collection efforts on the
portfolio loans.
Revenue Recognition, page F-11
26. Please expand your accounting policy related to consignment sales,
including the
material terms of the consignment arrangements with your retailers and your
consideration for presenting the consignment transactions on a gross or net
basis.
Tell us the accounting literature upon which you relied. Please also
disclose the
consignment sales amounts recorded for all the periods presented.
Note 3 Portfolio Loans Receivable, page F-13
27. You disclose in the allowance for loan losses and net charge off activity
table on page
F-14 that the allowance for loan losses as of December 31, 2016 was $1.2
million.
The amount appears to be inconsistent with the amount disclosed in the
portfolio
loans table on page F-13. Please advise or revise.
Note 5 Inventories, page F-15
28. Please tell us how recording an allowance for slow moving inventory is in
compliance with SAB Topic 5.BB and ASC 330-10-35-14. Under that guidance,
inventory should be recorded at cost and impairment charges establish a new
costs
basis for impaired inventory that cannot be marked up based on changes in
underlying facts and circumstances. As such, reserve balances as of the
period end
should not be reflected in a separate account.
29. Your net inventory amount disclosed in the table on page F-15 does not
appear to be
consistent with the amount presented on the balance sheet on page F-3.
Please advise
or revise.
Mr. Curtis D. Hodgson
Mr. Kenneth E. Shipley
Legacy Housing Corporation
March 1, 2018
Page 7
Note 8 Accrued Liabilities, page F-16
30. Your warranty reserve as of December 31, 2016 presented in the table on
page F-16
does not appear to be consistent with the balance presented on page F-10.
Please
advise or revise.
Note 12 Related Party Transactions, page F-19
31. Please revise this section to discuss also the $1,500,000 notes payable
agreement that
you entered into with a captive insurance company which you disclose to be
a related
party through common ownership. Please also name the related party.
You may contact SiSi Cheng, Staff Accountant, at (202) 551-5004 or W. John
Cash,
Accounting Branch Chief, at (202) 551-3768 if you have questions about comments
on
the financial statements and related matters. You may contact Edward M. Kelly,
Senior
Counsel, at (202) 551-3728 or me at (202) 551-3395 if you have any other
questions.
Sincerely,
/s/ Jay Ingram
Jay Ingram
Legal Branch Chief
Office of Manufacturing and
Construction
cc: Via E-mail
Steve Wolosky, Esq.
Spencer G. Feldman, Esq.
Olshan Frome Wolosky LLP
1325 Avenue of the Americas, 15th Floor
New York, NY 10019