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."
Legacy Housing Corporationbuilds, 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 the sixth largest producer of manufactured homes in the United Statesas ranked by number of homes manufactured based on information available from the Manufactured Housing Instituteand IBTS for the twelve month period ending September 30, 2021. 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 31/2 bathrooms. Our homes range in price, at retail, from approximately $33,000to $180,000. During 2021, we sold 3,635 home sections (which are entire homes or single floors that are combined to create complete homes) and in 2020, we sold 3,814 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. 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. 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. Our homes are constructed in the United Statesat 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, on average, approximately 75 home sections, or 62 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 such features 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 176 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 Housingstores and two Tiny House Outletstores exclusively sell our homes. During 2021, approximately 50% of our manufactured homes were sold in Texas, followed by 16% in Georgia, 8% in Louisianaand 5% in Alabama. During 2020, 46% of our manufactured homes were sold in Texas, followed by 8% in Georgia, 8% in Michigan, 5% in Kansasand 5% in North Carolina. We plan to deepen our distribution channel by using cash from operations and borrowings from our lines of credit to expand our company-owned retail locations in new and existing markets. 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 between the retailer and us. 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. Our ability to offer competitive financing options at our retail locations 21
provides us with several competitive advantages and allows us to capture sales that might not otherwise have occurred without our ability to offer consumer financing.
January 1, 2018, we were a Texaslimited partnership named Legacy Housing, Ltd.Effective January 1, 2018, we converted into a Delawarecorporation 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. Effective December 31, 2019, the Company reincorporated from a Delawarecorporation to a Texascorporation. For more information, see "Corporate Conversion" in Note 1. Following the Corporate Conversion, Legacy Housing Corporationcontinues 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. 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. Except as otherwise noted, the financial statements included in this Form 10-K are those of Legacy Housing Corporation.
Factors affecting our performance
We believe that the growth of our business and our future success depends on various opportunities, challenges, trends and other factors, including:
We have purchased several properties in our market area with the aim of
? develop communities and prefabricated housing estates. From December
As of 31, 2021, these properties include the following (in thousands of dollars):
Location Description Date of Acquisition Land Improvements Total Bastrop County, Texas 400 Acres April 2018
$ 4,400$ 1,001 $ 5,401Bexar County, Texas 100 Acres November 2018 1,300 114 1,414 Horseshoe Bay, Texas 133 Acres Various 2018-2019 2,431 1,970 4,401 Johnson County, Texas 91.5 Acres July 2019 445 16 461 Venus, Texas 50 Acres August 2019 422 7 429 Wise County, Texas 81.5 Acres September 2020 889 - 889 Bexar County, Texas 233 Acres February 2021
1,550 102 1,652
$ 11,437$ 3,210 $ 14,647
We also plan to provide financing solutions to a select group of our
customer owners of the prefab housing community in a manner that includes
develop new sites for the products in or near urban areas where there is a
? lack of sites to place our products. These solutions will be structured to
give us an attractive return on investment when coupled with gross margin
we plan to do on products specifically for sale to these new
prefabricated house communities.
Finally, our financial performance will be impacted by our ability to fulfill
current orders for our prefabricated houses with dealers and customers.
Currently our two
capacity, with a limited ability to increase the volume of homes produced at
these plants. Our
? available and with additional investment can add capacity to increase the
number of houses that can be made. We intend to increase production to
generated by new markets in
maintain our growth, we must be able to continue to estimate well
anticipated future volumes when making commitments regarding 22 Table of Contents
the level of activity we will seek and accept, the range of products we
intend to manufacture, the schedule of production schedules and the levels and
the use of inventory, equipment and personnel.
The coronavirus pandemic is an evolving threat to the economy and all
? companies. Currently, both the duration of the pandemic and the magnitude of
the economic consequences are unknown. Risks to the Company include but are not
increased loan losses or deferred loan repayments as loan debtors suffer from liquidity
o flow issues resulting from reduced employment, lower rental income or
sales or other factors;
reduced sales volume as potential customers cannot buy new homes or
o cannot qualify for a home purchase, retailer or company store discount or
stop operations, or MHP owners reduce future home purchases;
reduced production resulting from factors such as the spread of disease
o through the company’s workforce, reducing demand for products or
closures of our factories, company-owned stores or independent retail lots
resellers who sell our products;
delays in development projects as zoning, regulatory and permitting decisions
o are likely to be postponed and the expected negative impact of the pandemic on
the construction industry;
o Reduced raw material availability due to global supply chain disruption
the pandemic, including possible border closures;
o a decline in cash flow from operations which could negatively affect our
an outbreak of illness among our management and accounting staff could
o adversely affect our ability to maintain our operations, operate our
systems, delaying our statutory reports and reducing our internal control over
We continue to monitor government responses to support the economy and assess how these actions could mitigate the above risks.
Significant 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.
Management believes that the following accounting policies are material to our results of operations or may affect the significant judgments and estimates used in the preparation of our financial statements.
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. 23
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. 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. 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. Payments received on nonaccrual loans are accounted for on a cash basis, first to interest and then to principal, as long as the remaining book balance of the asset is deemed to be collectible. The accrual of interest resumes when the past due principal or interest payments are brought within 90 days of being current. Impaired loans are those loans where it is probable we will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement, including scheduled principal and interest payments. Impaired loans, or portions thereof, are charged-off when deemed uncollectible. A loan is generally deemed impaired if it is more than 90 days past due on principal or interest, is in bankruptcy proceedings, or is in the process of repossession. A specific reserve is created for impaired loans based on fair value of underlying collateral value, less estimated selling costs. We use certain factors to determine the value of the underlying collateral for impaired loans. These factors are: (1) the length of time the unit was unsold after construction; (2) the amount of time the house was occupied; (3) the cooperation level of the borrowers, i.e., loans requiring legal action or extensive field collection efforts will reduce the value; (4) units located on private property present additional value loss because it tends to be more expensive to remove units from private property as opposed to a manufactured home park; (5) the length of time the borrower has lived in the house without making payments; (6) location and size, including market conditions; and (7) the experience and expertise of the particular dealer assisting in collection efforts. Collateral for repossessed loans is acquired through foreclosure or similar proceedings and is recorded at the estimated fair value of the home, less the costs to sell. At repossession, the fair value of the collateral is computed based on the historical recovery rates of previously charged-off loans; the loan is charged off and the loss is charged to the allowance for loan losses. 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.
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.
Inventories consist of raw materials, work-in-process, and finished goods and 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. 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.
We evaluate inventory based on historical experience to estimate our inventory that is not expected to be sold in less than a year. We classify our inventory that is not expected to be sold within a year as non-current.
Property, plant and equipment are carried at cost less accumulated depreciation. Depreciation expense is calculated using the straight-line method over the estimated useful lives of each asset. Estimated useful lives for significant classes of assets are as follows: buildings and improvements, 30 to 39 years; vehicles, 5 years; machinery and equipment, 7 years; and furniture and fixtures, 7 years. Repair and maintenance charges are expensed as incurred. Expenditures for major renewals or betterments which extend the useful lives of existing property, plant, and equipment are capitalized and depreciated. We periodically evaluate the carrying value of long-lived assets to be held and used and when events and circumstances warrant such a review. The carrying value of long-lived assets is considered impaired when the anticipated undiscounted cash flow from such assets is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair value of the long-lived assets. Fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Losses on long-lived assets to be disposed of are determined in a similar manner, except that the fair values are based primarily on independent appraisals and preliminary or definitive contractual arrangements less costs to dispose.
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. 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.
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.
We provide floor plan financing for independent retailers, which takes the form of a consignment arrangement. Sales under a consignment agreement are recognized as revenue when we enter into a sales contract and receive full payment for cash sales, and title passes; or, upon execution of a sales and financing contract, with a down payment received from and upon delivery of the home to the final individual customer, at which time title passes and collectability is reasonably assured. For homes sold to customers through independent retailers under consignment arrangements and financed by us, a percentage of profit is paid to the independent retailer up front as a commission for sale and also reimburses certain direct expenses incurred by the independent retailer for each transaction. Such payments are recorded as cost of product sales in our statement of operations.
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 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.
Revenues are recognized net of sales taxes.
25 Table of Contents Product Warranties We provide retail home buyers with a one-year warranty from the date of purchase on manufactured inventory. Product warranty costs are accrued when the covered homes are sold to customers. Product warranty expense is recognized based on the terms of the product warranty and the related estimated costs. 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.
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
Year ended December 31, 2021 2020 $ change % change Net revenue: Product sales
$ 165,995 $ 147,502 $ 18,49312.5 %
Consumer and MHP loans interest 27,195 25,360
1,835 7.2 % Other 4,317 3,862 455 11.8 % Total net revenue 197,507 176,724 20,783 11.8 % Operating expenses: Cost of product sales 114,050 109,723 4,327 3.9 %
Selling, general administrative expenses 23,306 19,068
4,238 22.2 % Dealer incentive 1,235 336 899 267.6 % Income from operations 58,916 47,597 11,319 23.8 % Other income (expense)
Nonoperating interest income 2,095 915
1,180 129.0 % Miscellaneous, net 503 288 215 74.7 % Gain on settlement, net - 1,075 (1,075) % Interest expense (887) (1,053) 166 (15.8) % Total other 1,711 1,225 486 39.7 %
Income before income tax expense 60,627 48,822
11,805 24.2 % Income tax expense (10,756) (10,827) 71 (0.7) % Net income
$ 49,871 $ 37,995 $ 11,87631.3 % Product sales primarily consist of direct sales, commercial sales, consignment sales and retail store sales. Product sales increased $18.5 million, or 12.5%, in 2021 as compared to 2020. This change was driven by higher average sales price partially offset by lower unit volumes. Net revenue attributable to our factory-built housing consisted of the following in 2021 and 2020: Year Ended December 31, (in thousands) 2021 2020 $ Change % Change Net revenue: Products sold $ 165,995 $ 147,502 $ 18,49312.5 % Total products sold 3,011 3,379 (368) (10.9) % Net revenue per product sold $ 55.1 $ 43.7 $ 11.526.3 % 26 Table of Contents In 2021, our net revenue per product sold increased 26.3% because of increases to our product prices due to rising material and labor costs, which resulted in higher home sales prices and more revenue generated per home sold. We had increases in consignment sales, direct sales, and sales through our company-owned retail stores. These increases were partially offset by declines in sales to manufactured home communities. Sales through our company-owned retail stores and sales to manufactured home communities have higher margins than our direct sales and consignment sales. Other product sales increased $5.6 million, or 115.0% and is primarily due to an increase in direct freight, molding revenue and miscellaneous sales income partially offset by a decrease in parts sales. Consumer and MHP loans interest income grew $1.8 million, or 7.2%, in 2021 as compared to 2020 and is related to our average increase in outstanding consumer loan portfolio and MHP Note portfolio. Between December 31, 2021and December 31, 2020our consumer loan portfolio increased by $13.7 million. Between September 29, 2021and December 31, 2020our MHP Note portfolio increased by $19.4 million. On September 30, 2021, we collected $44.9 millionin principal payment from one of our MHP borrowers. As a result of this payment, MHP loan interest income is expected to decrease during 2022 as compared to 2021. Other revenue primarily consists of commercial lease rents, consignment fees and servicer fee revenue. Other revenue increased $0.5 millionor 11.8% primarily due to a $0.4 millionincrease in commercial lease rents and a $0.1 millionincrease in miscellaneous other revenue, net. The cost of product sales increased $4.3 million, or 3.9%, in 2021 as compared to 2020. The increase in costs is primarily related to increases in the cost of materials and labor in 2021 and was materially passed along to our end-customer. Selling, general and administrative expenses increased $4.2 million, or 22.2%, in 2021 as compared to 2020. This increase was primarily due to $2.4 millionincrease in salaries and incentive costs, a $0.3 millionincrease in rent and facility costs, a $0.3 millionincrease in consulting and professional fees, a $0.3 millionincrease in depreciation & amortization expense, a $0.2 millionincrease in warranty costs, a $1.0 millionincrease in legal expenses. and a net $0.1 millionincrease in other miscellaneous costs. These increases were partially offset by a $0.4 milliondecrease in advertising and promotions.
Increased Dealer Incentive Spending
Other income (expense), net increased
$0.5 million, or 39.7%, in 2021, as compared to 2020. This increase was primarily due to an increase of $1.2 millionin non-operating interest income, an increase of $0.2 millionin miscellaneous income, net, and a decrease of $0.2 millionin interest expense. These increases were partially offset by a $1.1 milliongain in the second quarter of 2020 due to the settlement of a lawsuit with a previous vendor for the Company. Income tax expense was $10.8 millionfor 2021 and 2020. The effective tax rate for the year ended December 31, 2021was 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. The effective tax rate for the year ended December 31, 2020was 22.2% and primarily differs from the federal statutory rate of 21% primarily due to state income taxes net of a federal tax credit for energy efficient construction.
Cash 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 have not incurred any losses from such accounts and management considers the risk of loss to be minimal. We believe that cash flow from operations, cash and cash equivalents at
December 31, 2021, 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. In 2020, we negotiated a new credit agreement with Capital One, N.A.that expanded and extended our credit availability 27 Table of Contents
(see Indebtedness - Capital One Revolver, below). As of
December 31, 2021, we had approximately $1.0 millionin cash and cash equivalents, compared to $0.8 millionas of December 31, 2020. Cash Flow Activities Year Ended December 31, (in thousands) 2021 2020
Net cash provided by (used in) operating activities
Net cash used in investing activities
Net cash used in financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
Comparison of treasury activities from 2021 to 2020
Net cash provided by operating activities increased
$62.1 millionduring the year ended December 31, 2021, compared to 2020, primarily as a result of increased MHP principal collections, decreased MHP originations, and increased customer deposits and escrow. The increase in cash used in operating activities was partially offset by increased volume of consumer loan originations net of principal collections, increased inventories, increased accounts receivable and decreased payables. Net cash used in investing activities of $31.9 millionin 2021 was primarily attributable to $ $36.8 millionused for loans to third parties for the development of manufactured housing parks and $6.0 millionused for the acquisition of property plant and equipment. These were offset by collections of $9.0 millionof loans we made to third parties for the development of manufactured housing parks and collections of $1.8 millionfrom our purchased consumer loans. Net cash used in financing activities of $28.1 millionin 2021 was attributable to net payments of $28.2 millionon our lines of credit offset by $0.1 millionreceived from the exercise of stock options.
Capital One Revolver. At
December 31, 2019, we had a revolving line of credit ("Revolver 1") with Capital One, N.A.with a maximum credit limit of $45,000,000and a maturity date of May 11, 2020. On March 30, 2020, we entered into an agreement with Capital One, N.A.to replace Revolver 1 with a new revolving line of credit ("New Revolver"). The New Revolver has a maximum credit limit of $70,000,000and a maturity date of March 30, 2024. For the period January 1, 2020through March 30, 2020, Revolver 1 accrued interest at one-month LIBOR plus 2.40%. Amounts available under Revolver 1 were subject to a formula based on eligible consumer loans and MHP Notes and were secured by all accounts receivable and the consumer loans receivable and MHP Notes. The New Revolver accrues interest at one-month LIBOR plus 2.00%. The interest rates in effect as of December 31, 2021and 2020 were 2.10% 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 and the consumer loans receivable and MHP Notes. The amount of available credit under the New Revolver was $61,841,000as of December 31, 2021. In connection with the New Revolver, we paid certain arrangement fees and other fees of approximately $0.3 million, which were capitalized as unamortized debt issuance costs and will be amortized to interest expense over the life of the New Revolver. For the years ended December 31, 2021and 2020, interest expense under the Capital One Revolvers was $887,000and $1,020,000, respectively. The outstanding balance as of December 31, 2021and 2020 was $8,159,000and $36,174,000, respectively. We were in compliance with all financial covenants as of December 31, 2021, including that we maintain a tangible net worth of at least $120,000,000and that we maintain a ratio of debt to EBITDA of 4-to-1, or less. 28 Table of Contents On June 21, 2022, we received a Reservation of Rights notice from Capital One, N.A.The letter stated that the New Revolver was in default. The default condition occurred due to our failure to timely file the 10K and deliver certain financial statements to Capital One, N.A.On July 28, 2022, we executed a forbearance agreement with Capital One, N.A.Veritex Community Bank Revolver. In April 2016, we entered into an agreement with Veritex Community Bankto secure an additional revolving line of credit of $15,000,000("Revolver 2"). Revolver 2 accrues interest at one-month LIBOR plus 2.50% and all unpaid principal and interest is due at maturity on April 4, 2021. Revolver 2 is secured by all finished goods inventory excluding repossessed homes. Amounts available under Revolver 2 are subject to a formula based on eligible inventory. On May 12, 2017, we entered into an agreement to increase the maximum borrowing availability under Revolver 2 to $20,000,000. On October 15, 2018, Revolver 2 was amended to extend the maturity date from April 4, 2019to April 4, 2021. In April 2020, this note was paid in full and the facility was terminated. The amount of available credit under Revolver 2 was $12,028,000and the interest rates in effect as of March 31, 2020was 4.17%. For the year ended December 31, 2020interest expense was $17,000. The outstanding balance as of March 31, 2020was $2,001,000. We were in compliance with all financial covenants as of March 31, 2020including that we maintain a tangible net worth of at least $80,000,000. PPP Loan. On April 10, 2020, we Company entered into a loan with Peoples Bankas the lender in an aggregate principal amount of $6,545,700(the "Loan") pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act. The Loan was evidenced by a promissory note (the "Note") dated April 10, 2020and had a maturity date of April 10, 2022. The Note had an interest rate of 1.000% per annum, with the first six months of interest deferred. Principal and interest were payable monthly commencing on November 10, 2020and could be prepaid by us at any time prior to maturity with no prepayment penalties. On May 1, 2020, this loan was paid in full. PILOT Agreement. In December 2016, we entered into a Payment in Lieu of Taxes ("PILOT") agreement commonly offered in Georgiaby local community development programs to encourage industry development. The net effect of the PILOT agreement is to provide us with incentives through the abatement of local, city and county property taxes and to provide financing for improvements to our Georgiaplant (the "Project"). In connection with the PILOT agreement, the Putman County Development Authorityprovides a credit facility for up to $10,000,000, which can be drawn upon to fund Project improvements and capital expenditures as defined in the agreement. If funds are drawn, we would pay transactions costs and debt service payments. The PILOT agreement requires interest payments of 6.00% per annum on outstanding balances, which were due each December 1through maturity on December 1, 2021, at which time all unpaid principal and interest are due. The PILOT agreement is collateralized by the assets of the Project. As of December 31, 2021, we had not drawn down on this credit facility. Contractual Obligations The following table is a summary of contractual cash obligations as of December 31, 2021: Payments Due by Period (in thousands) Contractual Obligations Total 2022 2023 - 2024 2025 - 2026 After 2026 Lines of credit $ 8,159- 8,159 - - Operating lease obligations $ 2,914632 1,066 831 385
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 a repurchase agreement with a financial institution providing inventory financing for independent retailers of our products. Under this agreement, we have agreed to repurchase homes at declining prices over the term of the agreement (24 months). Our obligation under this repurchase agreement ceases upon the purchase of the home by the retail customer. The maximum amount of our contingent obligations under such repurchase agreements was approximately 29
$4,908,000and $140,000as of December 31, 2021and 2020, 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, 2021.
Recent accounting pronouncements
For information regarding recently issued and adopted accounting pronouncements, see Note 2, Summary of Significant Accounting Policies, to our
December 31, 2021financial statements included in Part II, Item 8, Financial Statements and Supplementary Data, of this Form-10K.
Emerging Growth Company Status
We are an "emerging growth company," as defined in the JOBS Act. Section 107 of the JOBS Act provides that an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an "emerging growth company" can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. 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.
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