☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Which Registered
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☐ | Smaller reporting company | ☒ | |||
Emerging growth company | ☐ |
Title of Class | Shares Outstanding on | |
Common Stock | 3,532,796 |
Title |
| |
Definitive proxy statement for Annual Meeting of Shareholders to be held | Part III, Items 10-14 |
Form 10-K | ||||||||
Item 1. | 2 | |||||||
Item 1A. | 4 | |||||||
Item 1B. | 4 | |||||||
Item 2. | ||||||||
Item 3. | 5 | |||||||
Item 4. | 5 | |||||||
Item 5. | 6 | |||||||
Item 6. | 6 | |||||||
Item 7. | 7 | |||||||
Item 7A. | 11 | |||||||
Item 8. | 12 | |||||||
12 | ||||||||
13 | ||||||||
14 | ||||||||
15 | ||||||||
16 | ||||||||
17 | ||||||||
18 | ||||||||
Item 9. | ||||||||
Item 9A. | ||||||||
Item 9B. | ||||||||
Item 9C. | 30 | |||||||
Item 10. | ||||||||
Item 11. | ||||||||
Item 12. | ||||||||
Item 13. | 31 | |||||||
Item 14. | 31 | |||||||
Item 15. | 32 | |||||||
32 | ||||||||
32 | ||||||||
Item 16. | 33 | |||||||
34 |
Item 1. | ||||||
Business |
1
PART I
|
Nobility Homes, Inc., a Florida corporation incorporated in 1967, designs, manufactures and sells a broad line of manufactured and modular homes through its own retail sales centers throughout Florida. Nobility also sells its manufactured homes on a wholesale basis to independent manufactured home retail dealers and manufactured home communities. All references in this annual report on Form
In December 2017 Prestige executed a lease to open an eleventh retail sales center in north Florida and has not yet opened the retail sales center due to backlog at the manufacturing facility.
2
Investments in Limited Partnerships
On October 30, 2019, the Company sold its 31.3% investment interest in Walden Woods South to certain related parties and existing owners, including the Company’s Executive Vice President, who purchased the majority of the 31.3% interest. The transaction value was based on a 3rd party appraisal, and the Company received $1,510,000 in cash. The Company’s investment historically was accounted for under the equity method, which was suspended when the carrying amount was reduced to $nil due to continued losses. (see Note 4 to the Company’s financial statements included herein).
2020.
3
Item 1A. | Risk Factors |
Item 1B. | Unresolved Staff Comments |
4
Item 2. | Properties |
Location | Approximate Size | |||
3741 SW Ocala, Florida | 72,000 sq. ft. |
In April 2018, Nobility sold its Belleview facility that had been vacant since June 2015 for $635,000.
Item 3. | Legal Proceedings |
Item 4. | Mine Safety Disclosures |
Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
Equity Compensation Plan Information | ||||||||||||
Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for issuance under equity compensation plans (excluding securities reflected in column (a)) | ||||||||||
(a) | (b) | (c) | ||||||||||
Equity compensation plans approved by security holders | 2,750 | $ | 12.10 | 297,250 | ||||||||
Equity compensation plans not approved by security holders | N/A | N/A | N/A | |||||||||
|
|
|
|
|
| |||||||
Total | 2,750 | $ | 12.10 | 297,250 |
Equity Compensation Plan Information | ||||||||||||
Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for issuance under equity compensation plans (excluding securities reflected in column (a)) | ||||||||||
(a) | (b) | (c) | ||||||||||
Equity compensation plans approved by security holders | 47,300 | $ | 24.41 | N/A | * | |||||||
Equity compensation plans not approved by security holders | N/A | N/A | 252,700 | * | ||||||||
Total | 47,300 | $ | 24.41 | 252,700 |
* | The Nobility Homes, Inc. 2011 Stock Incentive Plan was amended by the Board of Directors to extend the termination date from June 2021 until June 1, 2026. |
Period | Total number of shares purchased | Average price paid per share | Total number of shares purchased as part of publicly announced plans or programs* | Maximum number of shares that may yet be purchased under the plans or programs* | ||||||||
Aug 4 – Nov 2, 2019 | 82,500 | $ | 21.00 | 82,500 | 0 |
Item 6. |
Reserved |
|
As a smaller reporting company, we are not required to provide the information required by this item.
Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
In the third quarter of fiscal year 2009, Majestic 21, a joint venture that the Company owns 50% of, secured $5,000,000 in financing from a commercial bank to support loan originations. The Company guaranteed 50% of this financing. The outstanding principal balance of $94,694 on the note was repaid on February 1, 2019, at which time the Company was relieved of its guarantee obligation.
The lack of lenders in our industry, partly as a result of an increase in government regulations, still affects our results by limiting many affordable manufactured housing buyers from purchasing homes.
2020. According to the Florida Manufactured Housing Association, shipments for the industry in Florida for the period from November 2020 through October 2021 were up approximately 11% from the same period last year. During third and fourth quarters of 2021 our production of homes was impacted due to the challenges in hiring additional and retaining production workers and the unpredictable absenteeism of the
2019 | 2018 | |||||||
New homes sold through Company owned sales centers | 440 | 379 | ||||||
Pre-owned homes sold through Company owned sales centers: | ||||||||
Buy Back | 5 | 8 | ||||||
Repossessions | 7 | 14 | ||||||
Trade-Ins | 4 | 4 | ||||||
Homes sold to independent dealers | 145 | 212 | ||||||
Total new factory built homes produced | 662 | 610 | ||||||
Average new manufactured home price - retail | $ | 84,217 | $ | 79,334 | ||||
Average new manufactured home price - wholesale | $ | 45,757 | $ | 42,304 | ||||
As a percent of net sales: | ||||||||
Gross profit from the Company owned retail sales centers | 18 | % | 18 | % | ||||
Gross profit from the manufacturing facilities - including intercompany sales | 20 | % | 17 | % |
7
The demand for affordable manufactured housing in Florida continues to improve. According to the Florida Manufactured Housing Association, shipments in Florida for the period from November 2018 through October 2019 were up approximately 17% from the same period last year. Constrained consumer credit and the lack of lenders in our industry, partly as a result of an increase in government regulations, still affects our results by limiting many affordable manufactured housing buyers from purchasing homes. However, recent legislation may help improve this situation in the future.
31, 2020.
2021 | 2020 | |||||||
New homes sold through Company owned sales centers | 394 | 343 | ||||||
Pre-owned homes sold through Company owned sales centers | 15 | 12 | ||||||
Homes sold to independent dealers | 139 | 225 | ||||||
Total new factory built homes produced | 557 | 547 | ||||||
Average new manufactured home price - retail | $ | 93,824 | $ | 91,161 | ||||
Average new manufactured home price - wholesale | $ | 50,183 | $ | 43,758 | ||||
As a percent of net sales: | ||||||||
Gross profit from the Company owned retail sales centers | 17 | % | 19 | % | ||||
Gross profit from the manufacturing facilities - including intercompany sales | 15 | % | 22 | % |
Our many years of experience in the Florida market, combined with home buyers’ increased need for more affordable housing, should serve the Company well in the coming years. Management remains convinced that our specific geographic market is one of the best long-term growth areas in the country.
October 31, 2020.
production line to build homes.
As
monies invested.
The earnings from the Majestic 21 loan portfolio will continue to decrease due to the amortization, maturity and payoff of the loans.
The earnings from the FRSA loan portfolio will continue to decrease due to the amortization and payoff of the loans.
8
2020.
our homes, on our current manufacturing plant property in Ocala Florida.
9
Inventory Impairment Reserve
The Company has raw materials,work-in-process, finished home andpre-owned home inventory. The Company continually reviews its inventory to determine if there is a decline in the fair value below the cost basis. Historically, the Company has only recorded valuation allowances for itspre-owned home inventory. The Company acquirespre-owned homes from 21st Mortgage Corporation,trade-ins on new home sales, and other sources. Management primarily uses current sales values of new andpre-owned homes to determine market value. When the cost of a housing unit exceeds market value, a valuation reserve is recorded and the loss is recorded in the accompanying consolidated statements of comprehensive income.
Investments in Retirement Communities
Prior to its divestiture on October 30, 2019, the Company owned a 31.3% investment interest in Walden Woods South LLC , a manufactured home community located in Homosassa, Florida.
Investment in Majestic 21
On May 20, 2009, the Company became a 50% guarantor on a $5 million note payable entered into by Majestic 21, a joint venture in which the Company owns a 50% interest. The outstanding principal balance of $94,694 on the note was repaid on February 1, 2019, at which time the Company was relieved of its guarantee obligation.
10
Item 7A. | Quantitative and Qualitative Disclosures about Market Risk |
January 31, 2020
November 2, 2019 | November 3, 2018 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 22,533,965 | $ | 28,364,861 | ||||
Certificates of deposit | 10,153,575 | 6,034,093 | ||||||
Short-term investments | 521,283 | 537,767 | ||||||
Accounts receivable—trade | 1,351,838 | 1,783,073 | ||||||
Note receivable | 83,231 | 46,444 | ||||||
Mortgage notes receivable | 17,896 | 15,664 | ||||||
Inventories | 10,616,778 | 7,270,550 | ||||||
Pre-owned homes, net | 331,103 | 933,640 | ||||||
Prepaid expenses and other current assets | 1,217,762 | 1,090,152 | ||||||
|
|
|
| |||||
Total current assets | 46,827,431 | 46,076,244 | ||||||
Property, plant and equipment, net | 5,005,644 | 4,763,566 | ||||||
Pre-owned homes, net | 808,128 | 473,191 | ||||||
Note receivable, less current portion | 43,769 | 46,265 | ||||||
Mortgage notes receivable, less current portion | 232,148 | 236,402 | ||||||
Other investments | 1,649,273 | 1,571,166 | ||||||
Property held for sale | — | 213,437 | ||||||
Deferred income taxes | 80,405 | 40,156 | ||||||
Cash surrender value of life insurance | 3,617,974 | 3,437,974 | ||||||
Other assets | 156,287 | 156,287 | ||||||
|
|
|
| |||||
Total assets | $ | 58,421,059 | $ | 57,014,688 | ||||
|
|
|
| |||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 1,111,216 | $ | 1,085,095 | ||||
Accrued compensation | 748,626 | 869,657 | ||||||
Accrued expenses and other current liabilities | 2,055,952 | 1,349,381 | ||||||
Income taxes payable | 2,016,132 | 579,786 | ||||||
Customer deposits | 3,022,818 | 4,064,268 | ||||||
|
|
|
| |||||
Total current liabilities | 8,954,744 | 7,948,187 | ||||||
|
|
|
| |||||
Total liabilities | 8,954,744 | 7,948,187 | ||||||
|
|
|
| |||||
Commitments and contingent liabilities | ||||||||
Stockholders’ equity: | ||||||||
Preferred stock, $.10 par value, 500,000 shares authorized; none issued and outstanding | — | — | ||||||
Common stock, $.10 par value, 10,000,000 shares authorized; 5,364,907 shares issued 3,664,070 and 3,873,731 outstanding, respectively | 536,491 | 536,491 | ||||||
Additional paid in capital | 10,687,662 | 10,670,848 | ||||||
Retained earnings | 55,298,750 | 50,352,546 | ||||||
Accumulated other comprehensive income | 389,164 | 390,407 | ||||||
Less treasury stock at cost, 1,700,837 shares in 2019 and 1,491,176 shares in 2018 | (17,445,752 | ) | (12,883,791 | ) | ||||
|
|
|
| |||||
Total stockholders’ equity | 49,466,315 | 49,066,501 | ||||||
|
|
|
| |||||
Total liabilities and stockholders’ equity | $ | 58,421,059 | $ | 57,014,688 | ||||
|
|
|
|
October 31, 2020
November 6, 2021 | October 31,2020 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 36,126,059 | $ | 30,305,902 | ||||
Certificates of deposit | 2,093,015 | 4,602,307 | ||||||
Short-term investments | 621,928 | 358,960 | ||||||
Accounts receivable—trade | 680,228 | 790,046 | ||||||
Note receivable | 32,825 | 35,997 | ||||||
Mortgage notes receivable | 22,589 | 20,162 | ||||||
Income taxes receivable | — | 105,676 | ||||||
Inventories | 10,394,288 | 9,294,677 | ||||||
Pre-owned homes, net | 542,081 | 441,937 | ||||||
Prepaid expenses and other current assets | 1,821,267 | 1,014,849 | ||||||
Total current assets | 52,334,280 | 46,970,513 | ||||||
Property, plant and equipment, net | 6,847,780 | 5,142,714 | ||||||
Pre-owned homes, net | 755,394 | 1,077,240 | ||||||
Note receivable, less current portion | 38,895 | 6,573 | ||||||
Mortgage notes receivable, less current portion | 222,459 | 227,509 | ||||||
Mobile home park note receivable | 72,731 | — | ||||||
Other investments | 1,788,436 | 1,729,364 | ||||||
Deferred income taxes | — | 3,598 | ||||||
Operating lease right of use asset | 1,597 | 715,368 | ||||||
Cash surrender value of life insurance | 3,966,939 | 3,795,902 | ||||||
Other assets | 156,287 | 156,287 | ||||||
Total assets | $ | 66,184,798 | $ | 59,825,068 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 939,964 | $ | 928,095 | ||||
Accrued compensation | 555,222 | 670,520 | ||||||
Accrued expenses and other current liabilities | 1,513,967 | 1,383,833 | ||||||
Income taxes payable | 89,083 | — | ||||||
Operating lease obligation | 1,597 | 24,192 | ||||||
Customer deposits | 13,671,092 | 5,098,633 | ||||||
Total current liabilities | 16,770,925 | 8,105,273 | ||||||
Deferred income taxes | 99,568 | — | ||||||
Operating lease obligation, less current portion | — | 778,519 | ||||||
Total liabilities | 16,870,493 | 8,883,792 | ||||||
Commitments and contingent liabilities | 0 | 0 | ||||||
Stockholders’ equity: | ||||||||
Preferred stock, $.10 par value, 500,000 shares authorized; NaN issued and outstanding | 0— | 0— | ||||||
Common stock, $.10 par value, 10,000,000 shares authorized; 5,364,907 shares issued, 3,532,100 and 3,631,196 outstanding, respectively | 536,491 | 536,491 | ||||||
Additional paid in capital | 10,766,253 | 10,694,554 | ||||||
Retained earnings | 59,742,759 | 57,976,051 | ||||||
Less treasury stock at cost, 1,832,807 shares in 2021 and 1,733,711 shares in 2020 | (21,731,198 | ) | (18,265,820 | ) | ||||
Total stockholders’ equity | 49,314,305 | 50,941,276 | ||||||
Total liabilities and stockholders’ equity | $ | 66,184,798 | $ | 59,825,068 | ||||
Year Ended | ||||||||
November 2, 2019 | November 3, 2018 | |||||||
Net sales | $ | 46,347,931 | $ | 41,878,186 | ||||
Cost of goods sold | (32,694,931 | ) | (31,198,159 | ) | ||||
|
|
|
| |||||
Gross profit | 13,653,000 | 10,680,027 | ||||||
Selling, general and administrative expenses | (5,352,319 | ) | (4,957,201 | ) | ||||
|
|
|
| |||||
Operating income | 8,300,681 | 5,722,826 | ||||||
|
|
|
| |||||
Other income: | ||||||||
Interest income | 556,142 | 362,121 | ||||||
Undistributed earnings in joint venture—Majestic 21 | 78,107 | 100,137 | ||||||
Proceeds received under escrow arrangement | 379,104 | 172,911 | ||||||
Gain on sale of investment in retirement community | 1,510,000 | — | ||||||
Gain on sale of assets | 880,129 | 203,512 | ||||||
Miscellaneous | 75,366 | 43,955 | ||||||
|
|
|
| |||||
Total other income | 3,478,848 | 882,636 | ||||||
|
|
|
| |||||
Income before provision for income taxes | 11,779,529 | 6,605,462 | ||||||
Income tax expense | (2,969,109 | ) | (1,641,830 | ) | ||||
|
|
|
| |||||
Net income | 8,810,420 | 4,963,632 | ||||||
Other comprehensive loss | ||||||||
Unrealized investment loss, net of tax effect | (1,243 | ) | (21,826 | ) | ||||
|
|
|
| |||||
Comprehensive income | $ | 8,809,177 | $ | 4,941,806 | ||||
|
|
|
| |||||
Weighted average number of shares outstanding: | ||||||||
Basic | 3,803,400 | 3,912,188 | ||||||
Diluted | 3,804,673 | 3,914,312 | ||||||
Net income per share: | ||||||||
Basic | $ | 2.32 | $ | 1.27 | ||||
Diluted | $ | 2.32 | $ | 1.27 |
October 31, 2020
Year Ended | ||||||||
November 6, 2021 | October 31, 2020 | |||||||
Net sales | $ | 45,062,558 | $ | 41,612,307 | ||||
Cost of sales | (33,630,362 | ) | (29,481,820 | ) | ||||
Gross profit | 11,432,196 | 12,130,487 | ||||||
Selling, general and administrative expenses | (5,286,172 | ) | (4,984,318 | ) | ||||
Operating income | 6,146,024 | 7,146,169 | ||||||
Other income (loss): | ||||||||
Interest income | 180,635 | 286,897 | ||||||
Undistributed earnings in joint venture—Majestic 21 | 59,072 | 80,091 | ||||||
Proceeds received under escrow arrangement | 246,216 | 421,099 | ||||||
Increase (decrease) in fair value of equity investment | 262,968 | (155,406 | ) | |||||
Gain on sale of assets | — | 32,041 | ||||||
Miscellaneous | 223,818 | 58,194 | ||||||
Total other income | 972,709 | 722,916 | ||||||
Income before provision for income taxes | 7,118,733 | 7,869,085 | ||||||
Income tax expense | (1,719,925 | ) | (1,885,387 | ) | ||||
Net income | 5,398,808 | 5,983,698 | ||||||
Weighted average number of shares outstanding: | ||||||||
Basic | 3,597,756 | 3,638,592 | ||||||
Diluted | 3,607,448 | 3,639,950 | ||||||
Net income per share: | ||||||||
Basic | $ | 1.50 | $ | 1.64 | ||||
Diluted | $ | 1.50 | $ | 1.64 |
Common Stock Shares | Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income | Treasury Stock | Total | ||||||||||||||||||||||
Balance at November 4, 2017 | 3,997,569 | $ | 536,491 | $ | 10,669,231 | $ | 46,167,528 | $ | 412,233 | $ | (10,371,186 | ) | $ | 47,414,297 | ||||||||||||||
Cash dividend | — | — | — | (778,614 | ) | — | — | (778,614 | ) | |||||||||||||||||||
Purchase of treasury stock | (123,838 | ) | — | — | — | — | (2,512,605 | ) | (2,512,605 | ) | ||||||||||||||||||
Stock-based compensation | — | — | 1,617 | — | — | — | 1,617 | |||||||||||||||||||||
Unrealized investment loss, net of tax effect | — | — | — | — | (21,826 | ) | — | (21,826 | ) | |||||||||||||||||||
Net income | — | — | — | 4,963,632 | — | — | 4,963,632 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Balance at November 3, 2018 | 3,873,731 | $ | 536,491 | $ | 10,670,848 | $ | 50,352,546 | $ | 390,407 | $ | (12,883,791 | ) | $ | 49,066,501 | ||||||||||||||
Cash dividend | — | — | — | (3,864,216 | ) | — | — | (3,864,216 | ) | |||||||||||||||||||
Purchase of treasury stock | (212,396 | ) | — | — | — | — | (4,585,861 | ) | (4,585,861 | ) | ||||||||||||||||||
Stock-based compensation | 485 | — | 16,814 | — | — | 4,190 | 21,004 | |||||||||||||||||||||
Unrealized investment loss, net of tax effect | — | — | — | — | (1,243 | ) | — | (1,243 | ) | |||||||||||||||||||
Exercise of employee stock options | 2,250 | — | — | — | — | 19,710 | 19,710 | |||||||||||||||||||||
Net income | — | — | — | 8,810,420 | — | — | 8,810,420 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Balance at November 2, 2019 | 3,664,070 | $ | 536,491 | $ | 10,687,662 | $ | 55,298,750 | $ | 389,164 | $ | (17,445,752 | ) | $ | 49,466,315 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 31, 2020
Common Stock Shares | Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income | Treasury Stock | Total | ||||||||||||||||||||||
Balance at October 31, 2020 | 3,631,196 | $ | 536,491 | $ | 10,694,554 | $ | 57,976,051 | $ | — | $ | (18,265,820 | ) | $ | 50,941,276 | ||||||||||||||
Cash dividend | — | — | — | (3,632,100 | ) | — | — | (3,632,100 | ) | |||||||||||||||||||
Purchase of treasury stock | (100,346 | ) | — | — | — | — | (3,478,553 | ) | (3,478,553 | ) | ||||||||||||||||||
Stock-based compensation | — | — | 69,749 | — | — | — | 69,749 | |||||||||||||||||||||
Exercise of employee stock options | 1,250 | — | 1,950 | — | — | 13,175 | 15,125 | |||||||||||||||||||||
Net income | — | — | — | 5,398,808 | — | — | 5,398,808 | |||||||||||||||||||||
�� | ||||||||||||||||||||||||||||
Balance at November 6, 2021 | 3,532,100 | $ | 536,491 | $ | 10,766,253 | $ | 59,742,759 | $ | — | $ | (21,731,198 | ) | $ | 49,314,305 | ||||||||||||||
Balance at November 2, 2019 | 3,664,070 | $ | 536,491 | $ | 10,687,662 | $ | 55,298,750 | $ | 389,164 | $ | (17,445,752 | ) | $ | 49,466,315 | ||||||||||||||
Adoption of ASU 2016-01 | — | — | — | 389,164 | (389,164 | ) | — | — | ||||||||||||||||||||
Adoption of ASU 2016-02 | — | — | — | (64,591 | ) | — | — | (64,591 | ) | |||||||||||||||||||
Balance at November 2, 2019 as adjusted | 3,664,070 | 536,491 | 10,687,662 | 55,623,323 | — | (17,445,752 | ) | 49,401,724 | ||||||||||||||||||||
Cash dividend | — | — | — | (3,630,970 | ) | — | — | (3,630,970 | ) | |||||||||||||||||||
Purchase of treasury stock | (33,100 | ) | — | — | — | — | (822,450 | ) | (822,450 | ) | ||||||||||||||||||
Stock-based compensation | 226 | — | 6,892 | — | — | 2,382 | 9,274 | |||||||||||||||||||||
Net income | — | — | — | 5,983,698 | — | — | 5,983,698 | |||||||||||||||||||||
Balance at October 31, 202 0 | 3,631,196 | $ | 536,491 | $ | 10,694,554 | $ | 57,976,051 | $ | — | $ | (18,265,820 | ) | $ | 50,941,276 | ||||||||||||||
Year Ended | ||||||||
November 2, 2019 | November 3, 2018 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 8,810,420 | $ | 4,963,632 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation | 163,077 | 148,204 | ||||||
Deferred income taxes | (25,008 | ) | (437,540 | ) | ||||
Undistributed earnings in joint venture—Majestic 21 | (78,107 | ) | (100,137 | ) | ||||
Gain on sale of investment in retirement community | (1,510,000 | ) | — | |||||
Gain on property held for sale | (864,887 | ) | (203,512 | ) | ||||
Gain on disposal of property, plant and equipment | (15,242 | ) | — | |||||
Inventory impairment | — | 105,000 | ||||||
Stock-based compensation | 21,004 | 1,617 | ||||||
Decrease (increase) in: | ||||||||
Accounts receivable—trade | 431,235 | 1,151,227 | ||||||
Inventories | (3,346,228 | ) | 235,131 | |||||
Pre-owned homes | 267,600 | 445,390 | ||||||
Prepaid expenses and other current assets | (127,610 | ) | (269,928 | ) | ||||
Interest receivable | (73,517 | ) | (34,093 | ) | ||||
(Decrease) increase in: | ||||||||
Accounts payable | 26,121 | 235,313 | ||||||
Accrued compensation | (121,031 | ) | 244,668 | |||||
Accrued expenses and other current liabilities | 706,572 | 221,984 | ||||||
Income taxes payable | 1,436,346 | 319,370 | ||||||
Customer deposits | (1,041,450 | ) | 1,267,441 | |||||
|
|
|
| |||||
Net cash provided by operating activities | 4,659,295 | 8,293,767 | ||||||
|
|
|
| |||||
Cash flows from investing activities: | ||||||||
Purchase of property, plant and equipment | (447,413 | ) | (606,999 | ) | ||||
Purchase of certificates of deposit | (4,080,058 | ) | (6,000,000 | ) | ||||
Proceeds from property held for resale | 1,078,324 | 589,530 | ||||||
Proceeds from sale of investment in retirement community | 1,510,000 | — | ||||||
Collections on note receivable | — | 1,530,000 | ||||||
Collections on interest receivable | 34,093 | 101,301 | ||||||
Collections on mortgage notes receivable | 2,022 | 1,726 | ||||||
Collections on equipment and other notes receivable | 62,977 | 36,828 | ||||||
Issuance of equipment and other notes receivable | (39,768 | ) | (25,451 | ) | ||||
Increase in cash surrender value of life insurance | (180,001 | ) | (175,126 | ) | ||||
|
|
|
| |||||
Net cash used in investing activities | (2,059,824 | ) | (4,548,191 | ) | ||||
|
|
|
| |||||
Cash flows from financing activities: | ||||||||
Payment of cash dividend | (3,864,216 | ) | (778,614 | ) | ||||
Proceeds from exercise of employee stock options | 19,710 | — | ||||||
Purchase of treasury stock | (4,585,861 | ) | (2,512,605 | ) | ||||
|
|
|
| |||||
Net cash used in financing activities | (8,430,367 | ) | (3,291,219 | ) | ||||
|
|
|
| |||||
(Decrease) Increase in cash and cash equivalents | (5,830,896 | ) | 454,357 | |||||
Cash and cash equivalents at beginning of year | 28,364,861 | 27,910,504 | ||||||
|
|
|
| |||||
Cash and cash equivalents at end of year | $ | 22,533,965 | $ | 28,364,861 | ||||
|
|
|
| |||||
Supplemental disclosure of cash flow information: | ||||||||
Income taxes paid | $ | 1,550,000 | $ | 1,760,000 | ||||
|
|
|
|
October 31, 2020
Year Ended | ||||||||
November 6, 2021 | October 31, 2020 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 5,398,808 | $ | 5,983,698 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation | 186,320 | 180,047 | ||||||
Deferred income taxes | 103,166 | 83,724 | ||||||
Undistributed earnings in joint venture—Majestic 21 | (59,072 | ) | (80,091 | ) | ||||
Gain on disposal of property, plant and equipment | — | (32,041 | ) | |||||
(Increase) decrease in fair value of equity investments | (262,968 | ) | 155,406 | |||||
Stock-based compensation | 69,750 | 9,274 | ||||||
Amortization of operating lease right of use assets | 713,771 | 36,340 | ||||||
Decrease (increase) in: | ||||||||
Accounts receivable—trade | 109,818 | 561,792 | ||||||
Inventories | (1,099,611 | ) | 1,322,101 | |||||
Pre-owned homes | 221,702 | (379,946 | ) | |||||
Prepaid expenses and other current assets | (806,420 | ) | 202,913 | |||||
Interest receivable | (18,328 | ) | (150,459 | ) | ||||
Income taxes receivable | — | (105,676 | ) | |||||
(Decrease) increase in: | ||||||||
Accounts payable | 11,869 | (183,121 | ) | |||||
Accrued compensation | (115,298 | ) | (78,106 | ) | ||||
Accrued expenses and other current liabilities | 130,135 | (672,119 | ) | |||||
Income taxes payable | 194,759 | (2,016,132 | ) | |||||
Customer deposits | 8,572,459 | 2,075,815 | ||||||
Net cash provided by operating activities | 13,350,860 | 6,913,419 | ||||||
Cash flows from investing activities: | ||||||||
Purchase of property, plant and equipment | (1,891,386 | ) | (318,215 | ) | ||||
Purchase of certificates of deposit | — | (20,000 | ) | |||||
Proceeds from certificates of deposit | 2,496,000 | 5,574,124 | ||||||
Proceeds from disposal of property, plant and equipment | — | 33,139 | ||||||
Collections on interest receivable | 31,620 | 147,603 | ||||||
Collections on mortgage notes receivable | 2,623 | 2,373 | ||||||
Collections on equipment and other notes receivable | 39,350 | 84,430 | ||||||
Issuance of equipment note receivable | (68,500 | ) | ||||||
Issuance of mobile home park not receivable | (72,731 | ) | — | |||||
Increase in cash surrender value of life insurance | (171,037 | ) | (177,928 | ) | ||||
Net cash provided by investing activities | 365,939 | 5,325,526 | ||||||
Cash flows from financing activities: | ||||||||
Payment of cash dividend | (3,632,100 | ) | (3,630,970 | ) | ||||
Proceeds from exercise of employee stock options | 15,125 | — | ||||||
Proceeds from paycheck protection program | — | 1,449,700 | ||||||
Return of proceeds from paycheck protection program | — | (1,449,700 | ) | |||||
Purchase of treasury stock | (3,478,553 | ) | (822,450 | ) | ||||
Reduction of operating lease obligation | (801,114 | ) | (13,588 | ) | ||||
Net cash used in financing activities | (7,896,642 | ) | (4,467,008 | ) | ||||
Increase cash and cash equivalents | 5,820,157 | 7,771,937 | ||||||
Cash and cash equivalents at beginning of year | 30,305,902 | 22,533,965 | ||||||
Cash and cash equivalents at end of year | $ | 36,126,059 | $ | 30,305,902 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Income taxes paid | $ | 1,422,000 | $ | 4,002,000 | ||||
Table of ContentsNotes to Consolidated Financial Statements
Reclassification-Certain amounts in
Revenue Recognition–following five-step approach:
1. | Identify the contract(s) with a customer; |
2. | Identify each performance obligation in the contract; |
3. | Determine the transaction price; |
4. | Allocate the transaction price to each performance obligation; and |
5. | Recognize revenue when or as each performance obligation is satisfied. |
6, 2021 and October 31, 2020.
18
Notes to Consolidated Financial Statements
2, 20196, 2021 and November 3, 2018October 31, 2020 are as follows:
2019 | 2018 | |||||||
Manufactured housing | $ | 45,583,022 | $ | 40,708,950 | ||||
Pre-owned homes | 492,543 | 895,489 | ||||||
Insurance agent commissions | 272,366 | 273,747 | ||||||
|
|
|
| |||||
Total net sales | $ | 46,347,931 | $ | 41,878,186 | ||||
|
|
|
|
2021 | 2020 | |||||||
Manufactured housing | $ | 43,963,239 | $ | 40,775,887 | ||||
Pre-owned homes | 816,165 | 552,421 | ||||||
Insurance agent commissions | 283,154 | 283,999 | ||||||
Total net sales | $ | 45,062,558 | $ | 41,612,307 | ||||
The Company continually reviews its investments to determine whether a decline in fair value below Upon the cost basis is other than temporary. If the decline in fair value is judged to be other than temporary, the cost basisCompany’s adoption of the security is written down to fair valueASU
19
Notes to Consolidated Financial Statements
thenthan market value, determined on the specific identification method, plus refurbishment costs incurred to date to bring the inventory to a more saleable state. The inventory
October 31, 2020.
Other Investments - On October 30, 2019, the Company sold its 31.3% investment interest in Walden Woods South to certain related parties and existing owners, including the Company’s Executive Vice President, who purchased the majority of the 31.3% interest. The transaction value was based on a 3rd party appraisal, and the Company received $1,510,000 in cash. The Company’s investment historically was accounted for under the equity method, which was suspended when the carrying amount was reduced to $nil due to continued losses.
See Note 4 “Related Party Transactions”.
20
Notes to Consolidated Financial Statements
2019 | 2018 | |||||||
Beginning accrued warranty expense | $ | 125,000 | $ | 125,000 | ||||
Less: reduction for payments | (413,734 | ) | (392,479 | ) | ||||
Plus: additions to accrual | 413,734 | 392,479 | ||||||
|
|
|
| |||||
Ending accrued warranty expense | $ | 125,000 | $ | 125,000 | ||||
|
|
|
|
2021 | 2020 | |||||||
Beginning accrued warranty expense | $ | 125,000 | $ | 125,000 | ||||
Less: reduction for payments | (465,549 | ) | (419,731 | ) | ||||
Plus: additions to accrual | 465,549 | 419,731 | ||||||
Ending accrued warranty expense | $ | 125,000 | $ | 125,000 | ||||
2020.
21
Notes to Consolidated Financial Statements
2020.
In February 2016, the FASB issued Accounting Standards Update (ASU)No. 2016-02, “Leases” (ASU2016-02). The core principle of ASU2016-02 is that lessees should recognize on its balance sheet assets and liabilities arising from a lease. In accordance with that principle, ASU2016-02 requires that a lessee recognize a liability to make lease payments (the lease liability) and aright-of-use asset representing its right to use the underlying leased asset for the lease term. Lessees shall classify all leases as finance or operating leases. This new accounting guidance is effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company expects the adoption of ASU2016-02 will result in the recognition of theright-of-use assets and related obligations on its consolidated financial statements.
22
Notes to Consolidated Financial Statements
In July 2015, the FASB issued ASUNo. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory”. The amendments require an entity to measure in scope inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The amendments do not apply to inventory that is measured usinglast-in,first-out (LIFO) or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured usingfirst-in,first-out (FIFO) or average cost. The amendments in this update are effective for public companies for fiscal years beginning after December 15, 2016. The Company adopted this ASU in the quarter ended February 3, 2018 and it did not have a material impact on its consolidated financial statements.
In May 2014, the FASB issued ASUNo. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (ASU2014-09), which requires an entity to recognize revenue from the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services together with subsequent updates, the guidance addresses, in particular, contracts with more than one performance obligation, as well as the accounting for some costs to obtain or fulfill a contract with a customer; and provides for additional disclosures with respect to revenues and cash flows arising from contracts with customers. With respect to public entities, this update, together with subsequent amendments, is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017 and early adoption is not permitted.
The core principal of ASU2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Using this principle, a comprehensive framework was established for determining how much revenue to recognize and when it should be recognized. To be consistent with this core principle, an entity is required to apply the following five-step approach:
1. Identify the contract(s) with a customer;
2. Identify each performance obligation in the contract;
3. Determine the transaction price;
4. Allocate the transaction price to each performance obligation; and
5. Recognize revenue when or as each performance obligation is satisfied.
The Company’s revenue comes substantially from the sale of manufactured housing, modular housing and park models, along with freight billed to customers, parts sold and aftermarket services.
The impact of the Company’s initial adoption of ASU 2014-09 using the modified retrospective method did not have a material impact on its consolidated financial statements and disclosures.
November 2, 2019 | ||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||
Equity securities in a public company | $ | 167,930 | $ | 353,353 | $ | — | $ | 521,283 | ||||||||
|
|
|
|
|
|
|
|
23
November 6, 2021 | ||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||
Equity securities in a public company | $ | 167,930 | $ | 453,998 | $ | 0 | $ | 621,928 | ||||||||
Notes to Consolidated Financial Statements
November 3, 2018 | ||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||
Equity securities in a public company | $ | 167,930 | $ | 369,837 | $ | — | $ | 537,767 | ||||||||
|
|
|
|
|
|
|
|
October 31, 2020 | ||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||
Equity securities in a public company | $ | 167,930 | $ | 191,030 | $ | 0 | $ | 358,960 | ||||||||
November 2, 2019 | ||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||
Equity securities in a public company | $ | 521,283 | $ | — | $ | — | ||||||
|
|
|
|
|
|
November 3, 2018 | ||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||
Equity securities in a public company | $ | 537,767 | $ | — | $ | — | ||||||
|
|
|
|
|
|
November 6, 2021 | ||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||
Equity securities in a public company | $ | 621,928 | $ | 0— | $ | 0— | ||||||
October 31, 2020 | ||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||
Equity securities in a public company | $ | 358,960 | $ | 0— | $ | 0— | ||||||
Walden Woods South - On October 30, 2019, the Company sold its 31.3% investment interest in Walden Woods South LLC, which owns the Walden Woods South retirement community, to certain related parties and existing owners. Prior to the sale, the Company’s President directly owned 59.43% of Walden Woods South LLC. After the sale, the Company’s President and Executive Vice President directly own 59.43% and 23.04%, respectively, of Walden Woods South LLC.
24
Notes to Consolidated Financial Statements
June 2019,July 2021, the Company repurchased 100,000 shares of common stock from our President at $21.95$34.68 per share.
2020.
Investment in Retirement Community Limited Partnerships –On October 30, 2019, the Company sold its 31.3% investment interest in Walden Woods South to certain related parties and existing owners, including the Company’s Executive Vice President, who purchased the majority of the 31.3% interest. The transaction value was based on a 3rd party appraisal, and the Company received $1,510,000 in cash. The Company’s investment historically was accounted for under the equity method, which was suspended when the carrying amount was reduced to $nil due to continued losses.
The Company acquired a significant amount of repossessedpre-owned (Buy Back) inventory in 2011. Otherpre-owned homes are periodically acquired (Repossessions) as a convenience to the Company’s joint venture partner.Pre-owned homes are also taken astrade-ins on new home sales(Trade-Ins). This inventory consists of individual homes and homes on a real estate parcel. The Company continually monitors this inventory and records a valuation allowance where necessary on a unit specific basis which management believes results in inventory being valued at market. The Company could experience additional losses on the disposition of these homes beyond the level of the reserve recorded by the Company.
25
Notes to Consolidated Financial Statements
A breakdown of the elements of inventory at November 2, 20196, 2021 and November 3, 2018October 31, 2020 is as follows:
November 2, 2019 | November 3, 2018 | |||||||
Raw materials | $ | 941,206 | $ | 904,399 | ||||
Work-in-process | 125,371 | 113,220 | ||||||
Inventory consigned to affiliated entities | 1,540,949 | 1,140,982 | ||||||
Finished homes | 7,888,879 | 4,998,004 | ||||||
Model home furniture | 120,372 | 113,946 | ||||||
|
|
|
| |||||
Inventories | $ | 10,616,778 | $ | 7,270,550 | ||||
|
|
|
| |||||
Pre-owned homes * | $ | 1,311,626 | $ | 1,956,265 | ||||
Inventory impairment reserve ** | (172,395 | ) | (549,434 | ) | ||||
|
|
|
| |||||
1,139,231 | 1,406,831 | |||||||
Less homes expected to sell in 12 months | (331,103 | ) | (933,640 | ) | ||||
|
|
|
| |||||
Pre-owned homes, long-term | $ | 808,128 | $ | 473,191 | ||||
|
|
|
|
|
Buy Back | Repossessions | Trade-Ins | Total | |||||||||||||
Balance at November 4, 2017 | 1,412,902 | 1,263,927 | 60,117 | 2,736,946 | ||||||||||||
Additions | — | 498,831 | 95,428 | 594,259 | ||||||||||||
Sales | (697,154 | ) | (607,115 | ) | (70,671 | ) | (1,374,940 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Balance at November 3, 2018 | 715,748 | 1,155,643 | 84,874 | 1,956,265 | ||||||||||||
Additions | — | 253,600 | 18,860 | 272,460 | ||||||||||||
Sales | (573,353 | ) | (316,496 | ) | (27,250 | ) | (917,099 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Balance at November 2, 2019 | $ | 142,395 | $ | 1,092,747 | $ | 76,484 | $ | 1,311,626 | ||||||||
|
|
|
|
|
|
|
|
|
November 2, 2019 | November 3, 2018 | |||||||
Balance at beginning of year | $ | 549,434 | $ | 779,725 | ||||
Less: Reductions for homes sold | (207,180 | ) | (253,314 | ) | ||||
Inventory holding costs | (36,232 | ) | (81,977 | ) | ||||
Additions (reduction) to impairment reserve | (133,627 | ) | 105,000 | |||||
|
|
|
| |||||
Balance at end of year | $ | 172,395 | $ | 549,434 | ||||
|
|
|
|
NOTE 7 Property Held for Sale
On June 28, 2019 the Company sold its former Pace retail sales center property located in Pace, Florida for total net proceeds
November 6, 2021 | October 31, 2020 | |||||||
Raw materials | $ | 2,225,532 | $ | 1,203,282 | ||||
Work-in-process | 97,021 | 107,651 | ||||||
Inventory consigned to affiliated entities | 794,766 | 1,277,681 | ||||||
Finished homes | 7,140,880 | 6,543,861 | ||||||
Model home furniture | 136,089 | 162,202 | ||||||
Inventories | $ | 10,394,288 | $ | 9,294,677 | ||||
Pre-owned homes | $ | 1,297,475 | $ | 1,686,373 | ||||
Less homes expected to sell in 12 months | (542,081 | ) | (441,937 | ) | ||||
Pre-owned homes, long-term | $ | 755,394 | $ | 1,077,240 | ||||
In April 2018, Nobility sold its Belleview facility that had been vacant since June 2015 for $635,000.
26
Range of Lives in Years | November 2, 2019 | November 3, 2018 | ||||||||||
Land | — | $ | 3,092,463 | $ | 3,092,463 | |||||||
Land improvements | 10-20 | 908,439 | 743,956 | |||||||||
Buildings and improvements | 15-40 | 2,461,040 | 2,449,095 | |||||||||
Machinery and equipment | 3-10 | 932,040 | 904,312 | |||||||||
Furniture and fixtures | 3-10 | 294,113 | 277,386 | |||||||||
Construction in progress | — | 181,765 | — | |||||||||
|
|
|
| |||||||||
7,869,860 | 7,479,947 | |||||||||||
Less accumulated depreciation | (2,864,216 | ) | (2,716,381 | ) | ||||||||
|
|
|
| |||||||||
$ | 5,005,644 | $ | 4,763,566 | |||||||||
|
|
|
|
Range of Lives in Years | November 6, 2021 | October 31, 2020 | ||||||||
Land | 00— | $ | 4,880,416 | $ | 3,092,463 | |||||
Land improvements | 10-20 | 1,245,975 | 1,245,975 | |||||||
Buildings and improvements | 15-40 | 2,579,772 | 2,529,048 | |||||||
Machinery and equipment | 3-10 | 1,038,455 | 985,746 | |||||||
Furniture and fixtures | 3-10 | 301,889 | 301,889 | |||||||
Construction in progress | 00— | 0— | 0— | |||||||
10,046,507 | 8,155,121 | |||||||||
Less accumulated depreciation | (3,198,727 | ) | (3,012,407 | ) | ||||||
$ | 6,847,780 | $ | 5,142,714 | |||||||
November 2, 2019 | November 3, 2018 | |||||||
Accrued warranty expense | $ | 125,000 | $ | 125,000 | ||||
Accrued property and sales taxes | 398,877 | 450,742 | ||||||
Other accrued expenses | 1,532,090 | 773,639 | ||||||
|
|
|
| |||||
Total accrued expenses and other current liabilities | $ | 2,055,967 | $ | 1,349,381 | ||||
|
|
|
|
November 6, 2021 | October 31, 2020 | |||||||
Accrued warranty expense | $ | 125,000 | $ | 125,000 | ||||
Accrued property and sales taxes | 351,784 | 370,694 | ||||||
Other accrued expenses | 1,037,183 | 888,139 | ||||||
Total accrued expenses and other current liabilities | $ | 1,513,967 | $ | 1,383,833 | ||||
27
Notes to Consolidated Financial Statements
November 2, 2019 | November 3, 2018 | |||||||
Current tax expense: | ||||||||
Federal | $ | 2,338,619 | $ | 1,681,641 | ||||
State | 655,498 | 403,874 | ||||||
|
|
|
| |||||
2,085,515 | ||||||||
Deferred tax (benefit) | ( 25,007 | ) | (443,685 | ) | ||||
|
|
|
| |||||
Provision for income taxes | $ | 2,969,109 | $ | 1,641,830 | ||||
|
|
|
|
November 6, 2021 | October 31, 2020 | |||||||
Current tax expense: | ||||||||
Federal | $ | 1,327,166 | $ | 1,524,703 | ||||
State | 289,593 | 283,877 | ||||||
Deferred tax (benefit) | 103,166 | 76,807 | ||||||
Provision for income taxes | $ | 1,719,925 | $ | 1,885,387 | ||||
November 2, 2019 | November 3, 2018 | |||||||
Provision—federal statutory tax rate | $ | 2,473,701 | $ | 1,541,697 | ||||
Increase (decrease) resulting from: | ||||||||
State taxes, net of federal tax benefit | 511,821 | 278,507 | ||||||
Permanent differences: | ||||||||
Stock option expirations | 160 | (178 | ) | |||||
Decrease in federal tax rate | — | (171,248 | ) | |||||
Other comprehensive income | (3,462 | ) | 86,882 | |||||
Other | (13,112 | ) | (93,830 | ) | ||||
|
|
|
| |||||
Income tax expense | $ | 2,969,109 | $ | 1,641,830 | ||||
|
|
|
|
November 6, 2021 | October 31, 2020 | |||||||
Provision—federal statutory tax rate | $ | 1,494,934 | $ | 1,652,508 | ||||
Increase (decrease) resulting from: | ||||||||
State taxes, net of federal tax benefit | 250,708 | 277,135 | ||||||
Permanent differences: | ||||||||
Stock option expirations | 0— | 0— | ||||||
Decrease in FL corporate tax rate | (135 | ) | (3,306 | ) | ||||
Other comprehensive income | 0— | 0— | ||||||
Other | (25,582 | ) | (40,950 | ) | ||||
Provision for income taxes | $ | 1,719,925 | $ | 1,885,387 | ||||
November 2, 2019 | November 3, 2018 | |||||||
Deferred tax assets: | ||||||||
Allowance for doubtful accounts | $ | 58,773 | $ | 58,773 | ||||
Inventories | 48,360 | 158,598 | ||||||
Accrued expenses | 158,171 | 144,814 | ||||||
Other Assets | 55,903 | — | ||||||
Stock-based compensation | 2,072 | 1,312 | ||||||
|
|
|
| |||||
Total deferred tax assets | 323,279 | 363,497 | ||||||
Deferred tax liabilities: | ||||||||
Depreciation | (78,553 | ) | (39,490 | ) | ||||
Carrying value of investments | (90,168 | ) | (221,600 | ) | ||||
Amortization | (39,611 | ) | (39,611 | ) | ||||
Prepaid expenses | (34,542 | ) | (22,640 | ) | ||||
|
|
|
| |||||
Net deferred tax assets (liabilities) | $ | 80,405 | $ | 40,156 | ||||
|
|
|
|
28
November 6, 2021 | October 31, 2020 | |||||||
Deferred tax assets: | ||||||||
Allowance for doubtful accounts | $ | 55,455 | $ | 56,864 | ||||
Inventories | 0— | 46,790 | ||||||
Prepaid Expenses | 14,295 | 0— | ||||||
Accrued expenses | 107,893 | 112,999 | ||||||
Other assets | 17,789 | 23,224 | ||||||
Lease right of use liability | 382 | 196,839 | ||||||
Stock-based compensation | 19,502 | 2,894 | ||||||
Total deferred tax assets | 215,316 | 439,610 | ||||||
Deferred tax liabilities: | ||||||||
Depreciation | (135,466 | ) | (141,270 | ) | ||||
Carrying value of investments | (109,146 | ) | (47,435 | ) | ||||
Amortization | (37,374 | ) | (38,324 | ) | ||||
Prepaid expenses | (32,516 | ) | (33,562 | ) | ||||
Lease right of use asset | (382 | ) | (175,421 | ) | ||||
Net deferred tax assets (liabilities) | $ | (99,568 | ) | $ | 3,598 | |||
Notes to Consolidated Financial Statements
November 2, 2019 | November 3, 2018 | |||||||
Current assets (liabilities): | ||||||||
Deferred tax assets | $ | — | $ | — | ||||
Deferred tax liabilities | — | — | ||||||
Net current deferred tax assets | — | — | ||||||
Non-current assets (liabilities): | ||||||||
Deferred tax assets | 323,279 | 363,498 | ||||||
Deferred tax liabilities | (242,874 | ) | (323,342 | ) | ||||
Netnon-current deferred tax (liabilities) | 80,405 | 40,156 | ||||||
|
|
|
| |||||
Net deferred tax assets (liabilities) | $ | 80,405 | $ | 40,156 | ||||
|
|
|
|
November 6, 2021 | October 31, 2020 | |||||||
Current assets (liabilities): | ||||||||
Deferred tax assets | $ | 0— | $ | 0— | ||||
Deferred tax liabilities | 0— | 0— | ||||||
Net current deferred tax assets | 0— | 0— | ||||||
Non-current assets (liabilities): | ||||||||
Deferred tax assets | 215,316 | 439,610 | ||||||
Deferred tax liabilities | (314,884 | ) | (436,012 | ) | ||||
Net non-current deferred taxassets (liabilities) | (99,568 | ) | 3,598 | |||||
Net deferred tax assets (liabilities) | $ | (99,568 | ) | $ | 3,598 | |||
On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (H.R. 1) (the “Act”). The Act includes a number of changes in existing tax law impacting businesses including, among other things, a permanent reduction in the corporate income tax rate from 34% to 21%. The rate reduction took effect on January 1, 2018.
29
Notes to Consolidated Financial Statements
Number of Shares | Stock Option Price Range | Weighted Average Exercise Price | Aggregate Intrinsic Value | |||||||||||||
Outstanding at November 4, 2017 | 5,000 | $ | 12.10 | $ | 12.10 | |||||||||||
|
|
|
|
|
| |||||||||||
Granted | — | — | — | |||||||||||||
Exercised | — | — | — | |||||||||||||
Canceled | — | — | — | |||||||||||||
|
|
|
|
|
| |||||||||||
Outstanding at November 3, 2018 | 5,000 | $ | 12.10 | $ | 12.10 | |||||||||||
|
|
|
|
|
| |||||||||||
Granted | — | — | — | |||||||||||||
Exercised | 2,250 | 12.10 | 12.10 | |||||||||||||
Canceled | — | — | — | |||||||||||||
|
|
|
|
|
|
|
| |||||||||
Outstanding at November 2, 2019 | 2,750 | $ | 12.10 | $ | 12.10 | $ | 34,788 | |||||||||
|
|
|
|
|
|
|
|
Number of Shares | Stock Option Price Range | Weighted Average Exercise Price | Aggregate Intrinsic Value | |||||||||||||
Outstanding at November 2, 2019 | 2,750 | $ | 12.10 | $ | 12.10 | |||||||||||
Granted | 24,550 | 24.00 | 24.00 | |||||||||||||
Exercised | 0 | 0 | 0 | |||||||||||||
Canceled | 0 | 0 | 0 | |||||||||||||
Outstanding at October 3 1, 2020 | 27,300 | $ | 12.10 - 24.00 | 23.36 | ||||||||||||
Granted | 21,250 | 25.75 | 25.75 | |||||||||||||
Exercised | 1,250 | 12.10 | 12.10 | |||||||||||||
Canceled | 0 | 0 | 0 | |||||||||||||
Outstanding at November 6, 2021 | 47,300 | $ | 12.10 - 25.75 | $ | 24.41 | $ | 453,662 | |||||||||
6, 2021.
Options Outstanding | Options Exercisable | |||||||||||||||||||
Exercise Price | Shares Outstanding | Weighted Average Remaining Contractual Life (years) | Weighted Average Exercise Price | Number Exercisable | Weighted Average Exercise Price | |||||||||||||||
$ 12.10 | 2,750 | 2 | $ | 12.10 | 2,750 | $ | 12.10 | |||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
2,750 | 2 | $ | 12.10 | 2,750 | $ | 12.10 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
6, 2021:
Options Outstanding | Options Exercisable | |||||||||||||||||||||
Exercise Price | Shares Outstanding | Weighted Average Remaining Contractual Life (years) | Weighted Average Exercise Price | Number Exercisable | Weighted Average Exercise Price | |||||||||||||||||
$ | 12.10 | 1,500 | 1 | $ | 12.10 | 1,500 | $ | 12.10 | ||||||||||||||
$ | 24.00 | 24,550 | 4 | 24.00 | 24,550 | 24.00 | ||||||||||||||||
$ | 25.75 | 21,250 | 5 | 25.75 | 21,250 | 25.75 | ||||||||||||||||
47,300 | 4.35 | $ | 24.41 | 47,300 | $ | 24.41 | ||||||||||||||||
30
Notes to Consolidated Financial Statements
Future minimum payments by year andRight of use assets are included as a
2020 | 49,944 | |||
2021 | 3,000 | |||
|
| |||
Total minimum payments required | $ | 52,944 | ||
|
|
Majestic 21 – On May 20, 2009, the Company became a 50% guarantor on a $5 million note payable entered into by Majestic 21, a joint venture in which the Company owns a 50% interest. The outstanding principal balance of $94,694 on the note was repaid on February 1, 2019, at which time the Company was relieved of its guarantee obligation.
twelve months ended November 6, 2021.
31
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
Item 9A. | Controls and Procedures |
2, 20196, 2021 based on criteria established in Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and determined that its internal controls were effective.20192021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.
32
Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. |
Item 10. | Directors, Executive Officers and Corporate Governance |
Terry E. Trexler | Chairman of the Board and President of Nobility since 1967; Mr. Trexler is also President of TLT, Inc. | |
Thomas W. Trexler | Executive Vice President and Chief Financial Officer of Nobility since December 1994; President of Prestige Home Centers, Inc. since June 1995; Director of Prestige since 1993 and Vice President from 1991 to June 1995; President of Mountain Financial, Inc. since August 1992; Vice President of TLT, Inc. since September 1991. | |
Jean Etheredge | Secretary since 1967. | |
Lynn J. Cramer, Jr. | Treasurer since 1980. |
Item 11. | Executive Compensation |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
Item 13. | Certain Relationships and Related Transactions, and Director Independence |
Item 14. | Principal Accounting Fees and Services |
33
Item 15. | Exhibits and Financial Statement Schedules |
(a) | Consolidated Financial Statements and Schedules |
October 31, 2020
October 31, 2020
October 31, 2020
October 31, 2020
(b) | Exhibits: |
3.(a) | Nobility’s Articles of Incorporation, as amended (filed as an exhibit to Nobility’s Form 10-K for the fiscal year ended November 1, 1997 and incorporated herein by reference).(P) |
(b) | Bylaws, as amended March 28, 1994 (filed as an exhibit to Nobility’s Form 10-KSB for the fiscal year ended October 29, 1994 and incorporated herein by reference.) (P) |
4.1 |
10.(a) | Joint Venture Agreement with 21st Century Mortgage Corporation (filed as an exhibit to Nobility’s For 10-K for the fiscal year ended November 1, 1997 and incorporated herein by reference).(P) |
(b) |
(c) |
(d) |
(e) |
34
(f) |
21.1 |
23.1 |
31.(a) |
(b) |
32.(a) |
(b) |
101. | Interactive data filing formatted in XBRL. |
35
Item 16. | Form 10-K Summary |
DATE: | By: /s/ Terry E. Trexler | |||||
Terry E. Trexler, Chairman, | ||||||
President and Chief Executive Officer (Principal Executive Officer) | ||||||
DATE: | By: /s/ Thomas W. Trexler | |||||
Thomas W. Trexler, Executive Vice President | ||||||
and Chief Financial Officer (Principal Financial Officer) | ||||||
DATE: | By: /s/ Lynn J. Cramer, Jr. | |||||
Lynn J. Cramer, Jr., Treasurer | ||||||
and Principal Accounting Officer |
DATE: | By: /s/ Terry E. Trexler | |||||
Terry E. Trexler, Director | ||||||
DATE: | By: /s/ | |||||
DATE: | By: /s/ Robert P. Saltsman | |||||
Robert P. Saltsman, Director | ||||||
DATE: | By: /s/ | |||||
36