The world’s response to COVID-19 is throwing folks out of labor — over 26 million had filed for unemployment as of April 23, in response to the New York Instances
The $349 billion Paycheck Safety Program (PPP) was speculated to go to small companies to pay their workers for a bit over two months — and the loans will likely be forgiven if not less than 75% of the loan — which sports activities a 1% mounted rate of interest — is used to cowl payroll prices, in response to the Treasury Division.
Not all PPP recipients had been small companies. 103 publicly-traded corporations obtained greater than $380 million in PPP loans, in response to the Wall Road Journal.
And among the many 40 public corporations that obtained the biggest PPP loans, reported by MarketWatch, is Legacy Housing Company which earned a whopping 17% internet revenue margin — $28.eight million in internet earnings to $169 million in income — within the final twelve months.
Not solely is it extremely worthwhile — however it employs excess of the 500 people who the Treasury Division designated because the restrict for the PPP loans. In line with its newest 10Ok, Legacy had about 800 folks on its payroll on the finish of 2019.
Legacy’s PPP loan was for $6.5 million at 1% each year rate of interest, in response to an SEC submitting. Till November 10, Legacy doesn’t should make funds and the loan will be forgiven so long as the corporate makes use of the proceeds “for payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations.”
On April 25, Legacy Housing introduced its choice to return the funds. In line with a press release from Legacy’s president and CEO, Kenny Shipley, “We sought PPP funds for very simple reasons — we wanted to ensure our operations would continue to provide affordable housing, to maintain our payroll, and to keep our employees…Prior to being approved by SBA and receiving PPP funds, we had undertaken a series of layoffs, lowered the prices of our products, and decreased salaries across the company…However, in light of recent guidance from the SBA, we have made the difficult decision to return the funds.”
(I’ve no monetary curiosity within the securities talked about on this put up).
Legacy — whose stock trades 44% under its December 2019 excessive of $16.76 — loved 4.4% income progress for 2019 whereas internet earnings rose 24%, in response to a March 30 earnings press launch.
Legacy took pleasure from its 2019 outcomes. As Curtis D. Hodgson, Government Chairman of the Board, stated, “2019 was the best revenue year in Legacy’s history. We were particularly pleased we ended the year, which is typically a slower part of our sales cycle, with a lot of momentum, growing our fourth quarter revenue by approximately 24% from the same period in 2018 and our net income by a robust 147% compared to the fourth quarter of 2018.”
COVID-19 is hurting Legacy’s enterprise and the corporate is responding with price reductions and a few price chopping. We’re “offering discounts for the sale of aged inventory sitting on dealer and company-owned store lots… and new units, and reducing down payment requirements for certain manufactured home community operators,” he stated.
Legacy has “suspended most overtime and modified rates of pay for non-production workers” and “slightly reduced” manufacturing labor in “anticipation of reduced demand in the immediate future,” stated Hodgson.
But Legacy — whose properties vary from 390 to 2,667 sq. ft and are priced between $22,000 and $140,000 — expects issues to recuperate. “Our order book is still strong and we are well-positioned once the situation begins to normalize,” he concluded.
Together with its PPP loan, Legacy was additionally in a position to get an enormous improve in its financial institution line. On April 1, Legacy Housing boosted its line of credit score by 56% to $70 million, in response to SeekingAlpha, at a decrease rate of interest to one-month LIBOR plus 2%.
Legacy is happy with the deal. CFO Cornelius “Cork” Van Den Handel stated, “The brand new settlement will present the corporate with operational liquidity at extraordinarily aggressive charges, and gives room for the continued progress of our enterprise and monetary flexibility.”