UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form
10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended November 2, 2019

6, 2021

TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from
to
.

Commission file number
000-06506

NOBILITY HOMES, INC.

(Exact name of registrant as specified in its charter)

Florida
 
59-1166102

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

3741 S.W. 7th Street

Ocala, Florida

 
34474
(Address of principal executive offices)
 
(Zip Code)

(352)
732-5157

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Title of Each Class

 

Trading
Symbol(s)

 

Name of ea/Exchange
on

Which Registered

Common Stock, $0.10 Par Value
 
NOBH
 
OTCQX

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☐    No  ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ☐    No  ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of
Regulation S-T
during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    ☒  Yes    ☐  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”, and “emerging growth company” in Rule
12b-2
of the Exchange Act.

Large accelerated filer   Accelerated filer 
Non-accelerated
filer
   Smaller reporting company 
Emerging growth company    

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act).    Yes  ☐    No  ☒

AUDITOR FIRM PCAOB ID: 
229
    AUDITOR NAME: 
DASZKAL BOLOTON LLP
    AUDITOR LOCATION CITY STATE: 
JUPITER FLORIDA
The aggregate market value of the common stock held by
non-affiliates
of the registrant (684,697)(645,004) shares), based on the closing price on the
over-the-counter
market on May 3, 2019April 30, 2021 (the last business day of the second quarter of fiscal 2019)2021), was approximately $15.6
$21.2 million.

The number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date:

Title of Class

 

Shares Outstanding on January 31, 2020

February 4, 2022
Common Stock
 3,649,670
3,532,796
DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENTS INCORPORATED BY REFERENCE

Title

 

Form
10-K

Definitive proxy statement for Annual Meeting of

Shareholders to be held February 28, 2020

March 4, 2022
 
Part III, Items
10-14


Table of Contents

TABLE OF CONTENTS

     Form

10-K
 
   
Item 1. 

   2 
Item 1A. 

   4 
Item 1B. 

   4 
Item 2. 

   54 
Item 3. 

   5 
Item 4. 

   5 
 PART II
 
Item 5. 

   6 
Item 6. 

   6 
Item 7. 

   7 
Item 7A. 

   11 
Item 8. 

   12 
 

   12 
 

   13 
 

   14 
 

   15 
 

   16 
 

   17 
 

   18 
Item 9. 

   3230 
Item 9A. 

   3230 
Item 9B. 

   3230 
Item 9C. PART III  30
Item 10. 

   3331 
Item 11. 

   3331 
Item 12. 

   3331 
Item 13. 

31
Item 14.31
Item 15.32
32
32
Item 16.   33 
Item 14.

33
PART IV
Item 15.

Exhibits and Financial Statement Schedules

   34 
1

Table of Contents


PART I

Item 1.

Business

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

10-K
to “Nobility,” “Company,” “we,” “us,” or “our” refer to Nobility Homes, Inc. and its consolidated subsidiaries unless the context otherwise suggests.

Manufactured Homes

Nobility’s homes are available in approximately 100 active models sold under the trade names “Kingswood,” “Richwood,” “Tropic Isle,” “Regency Manor,” and “Special Edition.“Tropic Manor.” The homes, ranging in size from 431464 to 2,6502,800 square feet and containing from one to five bedrooms, are available in:

Single-wide widths of 14 and 16 feet ranging from 35 to 72 feet in length;

Double-wide widths of 20, 24, 26, 28 and 32 feet ranging from 32 to 72 feet in length;

Triple-wide widths of 42 feet ranging from 60 to 72 feet in length; and

Quad-unit with 2 sections 28 feet wide byfrom 40 to 48 feet long and 2 sections 28 feet wide by 52 feet long.

Our floor plans can be built as an
on-frame
modular home. We have been approved to build A.N.S.I. (American National Standards Institute) Park models less than 400 square feet and exposure D homes.

Nobility’s homes are sold primarily as unfurnished dwellings ready for permanent occupancy. Interiors are designed and color coordinated in a range of decors. Depending on the size of the unit and quality of appliances and other appointments, retail prices for Nobility’s homes typically range from approximately $30,000$54,000 to $130,000.$189,000. Most of the prices of Nobility’s homes are considered by it to be within the low to medium price range of the industry.

Nobility’s manufacturing plant utilizes assembly line techniques in manufactured home production. The plant manufactures and assembles the floors, sidewalls, end walls, roofs and interior cabinets for their homes. Nobility purchases, from outside suppliers, various other components that are built into its homes including the axles, frames, tires, doors, windows,
pre-finished
sidings, plywood, ceiling panels, lumber, rafters, insulation, gypsum board, appliances, lighting and plumbing fixtures, carpeting and draperies. Nobility is not dependent upon any one particular supplier for its raw materials or component parts, and is not required to carry significant amounts of inventory to assure itself of a continuous allotment of goods from suppliers.

Nobility generally does not manufacture its homes to be held by it as inventory (except for model home inventory of its wholly-owned retail network subsidiary, Prestige Home Centers, Inc.), but, rather, manufactures its homes after receipt of orders. Although Nobility attempts to maintain a consistent level of production of homes throughout the fiscal year, seasonal fluctuations do occur, with sales of homes generally lower during the first fiscal quarter due to the holiday season.

The sales area for a manufactured home manufacturer is limited by substantial delivery costs of the finished product. Nobility’s homes are delivered by outside trucking companies. Nobility estimates that it can compete effectively within a range of approximately 350 miles from its manufacturing plant in Ocala, Florida. Substantially all of Nobility’s sales are made in Florida.

Retail Sales

Prestige Home Centers, Inc., our wholly-owned subsidiary, operates ten retail sales centers in north and central Florida. Its principal executive offices are located at Nobility’s headquarters in Ocala, Florida. Sales by Prestige accounted for 83%87% and 76%79% of Nobility’s sales during fiscal years 20192021 and 2018,2020, respectively.

Each of Prestige’s retail sales centers are located within 350 miles of Nobility’s Ocala manufacturing facility. Prestige owns the land at sixeight of its retail sales centers and leases the remaining fourtwo retail sales centers from unaffiliated parties under leases with terms between one and three years with renewal options.

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

parties.


The primary customers of Prestige are homebuyers who generally purchase manufactured homes to place on their own home sites. Prestige operates its retail sales centers with a model home concept. Each of the homes displayed at its retail sales centers is furnished and decorated as a model home. Although the model homes may be purchased from Prestige’s model home inventory, generally, customers order homes which are shipped directly from the factory to their home site. Prestige sales generally are to purchasers living within a radius of approximately 100 miles from the selling retail lot. The Company’s internet-based marketing program generates numerous leads which are directed to the Prestige retail sales centers to assist a potential buyer in purchasing a home.

2

Table of Contents
The retail sale of manufactured homes is a highly competitive business. Because of the number of retail sales centers located throughout Nobility’s market area, potential customers typically can find several sales centers within a 100 mile radius of their present home. Prestige competes with over 10080 other retailers in its primary market area, some of which may have greater financial resources than Prestige. In addition, manufactured homes offered by Prestige compete with site-built housing.

Prestige does not itself finance customers’ new home purchases. Financing for home purchases has historically been available from other independent sources that specialize in manufactured housing lending and banks that finance manufactured home purchases. Prestige and Nobility are not required to sign any recourse agreements with any of these retail financing sources.

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).    

Insurance and Financial Services

Mountain Financial, Inc., a wholly-owned subsidiary of Prestige Home Centers, Inc., is an independent insurance agent and licensed mortgage loan originator. Its principal activity is providing retail insurance services, which involves placing various types of insurance, including property and casualty, automobile and extended home warranty coverage, with insurance underwriters on behalf of its Prestige customers in connection with their purchase and financing of manufactured homes. As agent, we solely assist our customers in obtaining various types of insurance and extended warranty coverage with insurance underwriters. As such, we have no agreements with homeowners and/or third party insurance companies other than agency agreements with various insurance carriers. The Company provides appropriate reserves for policy cancellations based on numerous factors, including past transaction history with customers, historical experience and other information, which is periodically evaluated and adjusted as deemed necessary. In the opinion of management, no reserve was deemed necessary for policy cancellations for fiscal years 20192021 and 2018.

2020.

Wholesale Sales to Manufactured Home Communities

Nobility also sells its homes on a wholesale basis through two full-time salespersons to approximately 4036 manufactured home communities and independent dealers. Nobility continues to seek new opportunities in the areas in which it operates, as there is ongoing turnover in the manufactured home communities as they achieve full occupancy levels. As is common in the industry, most of Nobility’s independent dealers sell homes produced by several manufacturers.

Nobility does not generally offer consigned inventory programs or other credit terms to its independent dealers and ordinarily receives payment for its homes within 15 to 30 days of delivery. However, Nobility may offer extended terms to park dealers who do a high volume of business with Nobility. In order to stimulate sales, Nobility sells homes for display to related party manufactured home communities on extended terms and recognizes revenue when the homes are sold to the end users. The high visibility of Nobility’s homes in such communities generates additional sales of its homes through such dealers.

3


Regulation

The manufacture, distribution and sale of homes are subject to governmental regulation at the federal, state and local levels. The Department of Housing and Urban Development (HUD) has adopted national construction and safety standards that preempt state standards. In addition, HUD regulations require that manufactured homes be constructed to more stringent wind load and thermal standards. Compliance with these standards involves approval by a HUD approved engineering firm of engineering plans and specifications on all models. HUD has also promulgated rules requiring producers of manufactured homes to utilize wood products certified by their suppliers to meet HUD’s established limits on formaldehyde emissions and to place in each home written notice to prospective purchasers of possible adverse reaction from airborne formaldehyde in homes.emissions. HUD’s standards also require periodic inspection by state or other third party inspectors of plant facilities and construction procedures, as well as inspection of manufactured home units during construction. In addition, some components of manufactured homes may also be subject to Consumer Product Safety Commission standards and recall requirements. Modular homes manufactured by Nobility are required to comply with the Florida Building Code established by the Florida Department of Business and Professional Regulations.

Nobility estimates that compliance with federal, state and local environmental protection laws will have no material effect upon capital expenditures for plant or equipment modifications or earnings for the next fiscal year.

The transportation of manufactured homes is subject to state regulation. Generally, special permits must be obtained to transport the home over public highways and restrictions are imposed to promote travel safety including restrictions relating to routes, travel periods, speed limits, safety equipment and size.

Nobility’s homes are subject to the requirements of the Magnuson-Moss Warranty Act and Federal Trade Commission rulings which regulate warranties on consumer products. Nobility provides a limited warranty of one year on the structural components of its homes.

3

Table of Contents
The coronavirus
(“COVID-19”)
pandemic has resulted in government authorities implementing numerous measures to try to contain the virus. We were labeled an essential business and never closed our manufacturing plant or retail sales centers. The government measures as well as the public reaction to
COVID-19
and the various variants had a negative impact on customer traffic (and corresponding sales) within our centers and the operations of our business partners. While our manufacturing operations have continued, an outbreak in our manufacturing facility would impact our ability to produce new homes. There is considerable uncertainty regarding the impact, and expected duration, of such measures and potential future measures, which could cause disruptions to our business in the future. In addition, whether caused by
COVID-19
or other factors, we have experienced unprecedented inflation and shortages in many material products, and difficulty in hiring additional and retaining production workers, with no immediate relief in sight that have resulted in increases to our material and labor costs. The Company is monitoring these issues and has adjusted our selling prices accordingly to help offset the higher costs.
Competition

The manufactured home industry is highly competitive. The initial investment required for entry into the business of manufacturing homes is not unduly large. State bonding requirements for entry in the business vary from state to state. The bond requirement for Florida is $50,000. Nobility competes directly with other manufacturers, some of whom are both considerably larger and possess greater financial resources than Nobility. Nobility estimates that of the 20 manufacturers selling in the state, approximately 10 manufacture homes of the same type as Nobility and compete in the same market area. Nobility believes that it is generally competitive with most of those manufacturers in terms of price, service, warranties and product performance.

Employees

As of January 10, 2020,7, 2022, the Company had 139131 full-time employees, including 3233 employed by Prestige. Approximately 8174 employees are factory personnel compared to approximately 8678 in such positions a year ago and 5857 are in management, administrative, supervisory, sales and clerical positions (including 29 management and sales personnel employed by Prestige) compared to approximately 6369 a year ago. In addition, Nobility employs part-time employees when necessary.

The Company has managerial, administrative, supervisory, sales and manufacturing employees. We have a focus on safety and being drug free in our manufacturing operations.
Historically, we have had low turnover rates with our employees, other than with respect to our manufacturing employees. It is currently difficult for us to attract long-term quality employees for our manufacturing operations. We have experienced disruption in production as a result of our inability to find labor. We are working on developing programs designed to cause less turnover, although have not been successful to date.     
Nobility makes contributions toward employees’ group health and life insurance. Nobility, which is not subject to any collective bargaining agreements, has not experienced any work stoppage or labor disputes and considers its relationship with employees to be generally satisfactory.

Item 1A.

Risk Factors

As a smaller reporting company, we are not required to provide the information required by this item.

Item 1B.

Unresolved Staff Comments

None.

4


Item 2.

Properties

As of January 31, 2020,February 4, 2022, Nobility owned one manufacturing plant:

plant as follows:

Location

  Approximate Size

3741 SW 7th7th Street

Ocala, Florida

  72,000 sq. ft.

Nobility’s Ocala facility is located on approximately 35.5 acres of land on which an additional
two-story
structure adjoining the plant serves as Nobility’s corporate offices. The plant, which is of metal construction, is in good condition and requires little maintenance.

In April 2018, Nobility sold its Belleview facility that had been vacant since June 2015 for $635,000.

4

Table of Contents
Prestige owns the properties on which it’s Ocala South, Ocala North, Auburndale, Inverness, Tavares, Panama City, Yulee and Punta Gorda, Florida retail sales centers are located. Prestige leases the property for its other 4two retail sales centers. The Company purchased the land for the Tavares retail sales center in January 2021 for $245,000, land in Ocala for a future retail sales center in February 2021 for $1,040,000 and the land for the Ocala South retail sales center in March 2021 for $500,000. In December 2017 Prestige executed a lease to open an eleventh retail sales center in north Florida and hasdid not yet openedopen the retail sales center due to the difficulty in obtaining homes from the manufacturing facility and the hiring staff for theof a sales center. On June 28, 2019 the Company sold its former Pace retail sales center property locatedstaff. This lease expired in Pace, Florida for total net proceeds of $1,078,325 and was included on the balance sheet in property held for sale(non-current asset) for $213,437 in fiscal year 2018.

December 2021.
Item 3.

Legal Proceedings

We are a party to various legal proceedings that arise in the ordinary course of our business. We are not currently involved in any litigation nor to our knowledge, is any litigation threatened against us, the outcome of which would, in our judgment based on information currently available to us, have a material adverse effect on our financial position or results of operations.

The Company does not maintain casualty insurance on some of its property, including the inventory at its retail centers, its plant machinery and plant equipment and is at risk for those types of losses.

Item 4.

Mine Safety Disclosures

None.

5


Table of Contents

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

The Company’s common stock currently trades under the symbol NOBH on the OTCQX market. Any
over-the-counter
market quotations reflect inter-dealer prices, without retail
mark-up,
mark-down or commission and may not necessarily represent actual transactions.

Holders

At January 31, 2020,2022 the approximate number of holders on record of common stock was 9589 (not including individual participants in security position listings).

Dividends

The Board of Directors declared a
one-time
cash dividend of $1.00 per common share infor fiscal 2019year 2020 paid to stockholders of record as of March 29, 2019 and aone-time cash dividend of $0.20 per common share in fiscal 2018 paid to stockholders of record as of March 26, 2018.12, 2021. Any future determination to pay dividends will be at the discretion of our Board of Directors.

Securities Authorized for Issuance Underunder Equity Compensation Plans

The following table displays equity compensation plan information as of the end of the fiscal year ended November 2, 20196. 2021 (see Note 13 to the Company’s financial statement included herein).

   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.
Recent Sales of Unregistered Securities

None.

Issuer Repurchases of Equity Securities

The following table represents information with respect to purchases by the Company did not repurchase any shares of its common stock during the threefourth quarter ended November 6. 2021.
In September 2021, the Company’s Board of Directors authorized management to repurchase up to 200,000 shares of the Company’s common stock for fiscal year 2022 in the open market.
In September 2020 the Company’s Board of Directors authorized 200,000 share to be repurchased during fiscal year 2021 in the open market. During the twelve months ended November 2, 2019.

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

6, 2021 management repurchased an aggregate of 100,346 share of common stock.
*
Item 6.

In March 2019 the Company’s Board of Directors authorized management to repurchase up to 200,000 shares of the Company’s common stock or less each fiscal year in the open market. During the twelve months ended November 2, 2019, management has repurchased an aggregate of 212,396 shares of common stock. In December 2019 the Company’s Board of Directors authorized an additional 200,000 shares.

Reserved

Item 6.

Selected Financial Data

As a smaller reporting company, we are not required to provide the information required by this item.

6


Table of Contents
Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

Nobility focuses on home buyers who generally purchase their manufactured homes from retail sales centers to locate on property they own. Nobility has aggressively pursued this market through its Prestige retail sales centers. While Nobility actively seeks to make wholesale sales to independent retail dealers, its presence as a competitor limits potential sales to dealers located in the same geographic areas serviced by its Prestige retail sales centers.

Nobility has aggressively targeted the retirement community market, which is made up of retirees moving to Florida and typically purchasing or renting homes to be located on sites leased from park communities offering a variety of amenities. Sales are not limited by the presence of the Company’s Prestige retail sales centers in this type of arrangement, as the retirement community sells homes only within their community.

Nobility has a product line of approximately 100 active models. Although market demand can fluctuate on a fairly short-term basis, the manufacturing process is such that Nobility can alter its product mix relatively quickly in response to changes in the market. During fiscal years 20192021 and 2018,2020, Nobility continued to experience increased consumer demand for affordable manufactured homes in Florida. Our three, four and five bedroom manufactured homes are favored by families, compared with the one, two and three-bedroom homes that typically appeal to the retirement buyers who reside in the manufactured housing communities.

In an effort to make manufactured homes more competitive with site-built housing, financing packages are available through third-party lenders to provide
(1) 30-year
financing, (2) an interest rate reduction program
(buy-down),
(3) combination land/manufactured home loans, and (4) a 5% down payment program for qualified buyers.

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.

Prestige maintains several other outside financing sources that provide financing to retail homebuyers for its manufactured homes. The Company continually tries to develop relationships with new lenders, since established lenders will occasionally leave manufactured home lending.

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.

Prestige’s wholly-owned subsidiary, Mountain Financial, Inc., is an independent insurance agent and licensed loan originator. Mountain Financial provides automobile insurance, extended warranty coverage and property and casualty insurance to Prestige customers in connection with their purchase and financing of manufactured homes.

The
COVID-19
pandemic’s future impact on the housing market, production work force, supply of certain building products and the operations of the Company is difficult to forecast. We were deemed an essential business and never closed our manufacturing plant or retail sales centers. We implemented the recommended protocols to limit the exposure and transmission of
COVID-19,
but it has had a negative impact on customer traffic (and corresponding sales) within our sales centers, operations of the manufacturing facility and our business partners during the third and fourth quarters of fiscal 2021. We expect
COVID-19
to continue to negatively impact the Company and its retail customers during fiscal 2022.
The Company’s fiscal year ends on the first Saturday on or after October 31. The year ended November 2, 20196, 2021 (fiscal year 2019)2021) consisted of a fifty-three week period and the year ended November 3, 2018October 31, 2020 (fiscal year 2018) each2020) consisted of a
fifty-two
week period.

7

Table of Contents
Results of Operations

Total net sales in fiscal year 2019 were $46,347,9312021 increased 8% to $45,062,558 compared to $41,878,186$41,612,307 in fiscal year 2018.2020. The Company reported net income of $8,810,420$5,398,808 in fiscal year 2019,2021, compared to a net income of $4,963,632$5,983,698 during fiscal year 2018.

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

COVID-19
quarantine. Production has incurred shortages in many building products which has limited production and delayed the completion of the homes both at the manufacturing plant and the set up process in the field. The Company has continued to experience inflation in most building products resulting in increases to our material and labor costs and a corresponding decrease in gross profits.
The following table summarizes certain key sales statistics and percent of gross profit as of and for fiscal years ended November 2, 20196, 2021 and November 3, 2018.

   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
Maintaining our strong financial position is vital for future growth and success. Because of very challenging business conditions during economic recessions in our market area, management will continue to evaluate all expenses and react in a manner consistent with maintaining our strong financial position, while exploring opportunities to expand our distribution and manufacturing operations.

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.

On June 5, 2019 the Company2021 we celebrated its 52nd our 54
th
anniversary in business specializing in the design and production of quality, affordable manufactured and modular homes. With multiple retail sales centers in Florida for over 31 years and an insurance agency subsidiary, and an investment in a retirement manufactured home community, we are the only vertically integrated manufactured home company headquartered in Florida.

Insurance agent commissions in fiscal year 20192021 were $272,366$283,154 compared to $273,747$283,999 in fiscal year 2018.2020. We have established appropriate reserves for policy cancellations based on numerous factors, including past transaction history with customers, historical experience and other information, which is periodically evaluated and adjusted as deemed necessary. In the opinion of management, no reserve was deemed necessary for policy cancellations at November 2, 20196, 2021 and November 3, 2018.

October 31, 2020.

Cost of goods sold at our manufacturing facilities include: materials, direct and indirect labor and manufacturing expenses (which consists of factory occupancy, salary and salary related, delivery costs, manufactured home service costs and other manufacturing expenses). Cost of goods sold at our retail sales centers include: appliances, air conditioners, electrical and plumbing
hook-ups,
furniture, insurance, impact and permit fees, land and home fees, manufactured home, service warranty, setup contractor, interior drywall finish, setup display, skirting, steps, well, septic tank and other expenses.

Gross profit as a percentage of net sales was 25% in fiscal year 2021 compared to 29% in fiscal year 2019 compared to 25% in fiscal year 2018.2020. Our gross profit of $13,653,000was $11,432,196 for 2019 increased 28%fiscal year 2021 compared to $10,680,027$12,130,487 for 2018.fiscal year 2020. The increasegross profit is dependent on the sales mix of wholesale and retail homes and number of
pre-owned
homes sold. The decrease in gross profit as a percentage of net sales is primarily due to the increasecontinued inflation, shortages in certain building products and factory workers to work on the average retail and wholesale selling price on each home sold.

production line to build homes.

Selling, general and administrative expenses at our manufacturing facility include salaries, professional services, advertising and promotions, corporate expense, employee benefits, office equipment and supplies and utilities. Selling, general and administrative expenses at our retail sales center include: advertising, retail sales centers expenses, salary and salary related, professional fees, corporate expense, employee benefit, office equipment and supplies, utilities and travel. Selling, general and administrative expenses at the insurance company include: advertising, professional fees and office supplies.

As

Selling, general and administrative expenses as a percent of net sales selling,was 12% in fiscal year 2021 and in fiscal year 2020. Selling, general and administrative expenses was 11% inwere $5,286,172 for fiscal year 20192021 compared to 12% in fiscal 2018, which increased $395,118 from$4,984,318 for fiscal year 2018 to 2019.2020. The dollar increase in selling, general and administrative expenses in 2019 resulted from2021 were due to the increase in variable expenses which were a direct result of employee benefits compensation expenses directly relateddue to our increasedthe increase in sales.

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The Company earned interest in the amount of $556,142$180,635 in fiscal year 20192021 compared to $362,121$286,897 in fiscal year 2018.2020. Interest income is dependent on our cash balance and available rates of return. The increasedecrease during 2021 is primarily due to the increasedecline in the balancesinvestment rates and the interest ratedecrease in the money market accounts and certificates of deposit.

monies invested.

The Company earned $78,107$59,072 from its joint venture, Majestic 21, in fiscal year 20192021 compared to $100,137$80,091 in fiscal year 2018.2020. The earnings from Majestic 21 represent the allocation of profit and losses which are owned 50% by 21st Mortgage Corporation and 50% by the Company.

The earnings from the Majestic 21 loan portfolio will continue to decrease due to the amortization, maturity and payoff of the loans.

We received $379,104$246,216 in fiscal year 20192021 and $172,911$421,099 in fiscal year 20182020 under an escrow arrangement related to a Finance Revenue Sharing Agreement (FRSA) between 21
st
Mortgage Corporation and the Company. The distributions from the escrow account, related to certain loans financed by 21
st
Mortgage Corporation, are recorded in income by the Company as received, which has been the Company’s past practice.

The earnings from the FRSA loan portfolio will continue to decrease due to the amortization and payoff of the loans.

The Company realized
pre-tax
income of $11,779,529$7,118,733 in fiscal year 20192021 compared to a
pre-tax
income of $6,605,462$7,869,085 in fiscal year 2018.

8

2020.


The Company recorded an income tax expense of $2,969,109$1,719,925 in fiscal year 20192021 compared to $1,641,830$1,885,387 in fiscal year 2018.

2020.

Net income in fiscal year 20192021 was $8,810,420$5,398,808 or $2.32$1.50 per basic and diluted share and net income in fiscal year 20182020 was $4,963,632$5,983,698 or $1.27$1.64 per basic and diluted share.

Liquidity and Capital Resources

Cash and cash equivalents were $22,533,965$36,126,059 at November 2, 20196, 2021 compared to $28,364,861$30,305,902 at November 3, 2018.October 31, 2020. Certificates of deposit were $10,153,575$2,093,015 at November 2, 20196, 2021 compared to $6,034,093$4,602,307 at November 3, 2018.October 31, 2020. Short-term investments were $521,283$621,928 at November 2, 20196, 2021 compared to $537,767$358,960 at November 3, 2018.October 31, 2020. Working capital was $37,872,687at$35,563,355 at November 2, 2019 as6, 2021 compared to $38,128,057$38,865,240 at November 3, 2018.October 31, 2020. A cash dividend was paid from our cash reserves in March 2021 in the amount of $1.00 per share ($3,632,100). During fiscal 2019,2021, the Company repurchased an aggregate of 212,396100,346 shares of its common stock for an aggregate of $4,585,861. In June 2019,$3,478,553. The Company purchased the Company sold its former Paceland for the Tavares retail sales center propertyin January 2021 for net proceeds of $1,078,325. On October 30, 2019,$245,000, land in Ocala for a future retail sales center in February 2021 for $1,040,000 and land for the Ocala South retail sales center in March 2021 for $500,000. During fiscal 2020, the Company soldrepurchased an aggregate of 33,100 shares of its 31.3% investment interest in Walden Woods South LLCcommon stock for $1,510,000 in cash.an aggregate of $822,450. A cash dividend was paid from the Company’s cash reserves in March 20192020 in the amount of $3,864,216$1.00 per share ($3,630,970)
.
We own the entire inventory for our Prestige retail sales centers which includes new,
pre-owned
and repossessed or foreclosed homes and do not incur any third party floor plan financing expenses. TheIn December 2021, the Company has no material commitmentsbroke ground to build an 11,900 square foot frame shop at a cost of approximately $1.1 million to manufacture the steel frames for capital expenditures.

our homes, on our current manufacturing plant property in Ocala Florida.

The Company currently has no line of credit facility and no debt and does not believe that such a facility is currently necessary to its operations. The Company has no debt. The Company also has approximately $3.6$3.9 million of cash surrender value of life insurance which it may be able to access as an additional source of liquidity though the Company has not currently viewed this to be necessary. As of November 2, 2019,6, 2021, the Company continued to report a strong balance sheet which included total assets of approximately $58$66 million which was funded primarily by stockholders’ equity of approximately $49 million.

Looking ahead, the Company’s strong balance sheet and significant cash reserves accumulated in profitable years has allowed the Company to remain sufficiently liquid so as to allow the continuation of operations and should enable the Company to take advantage of any market opportunities when presented by an expected improvement in the overall and the industry specific economy in fiscal 2020 and beyond.opportunities. Management believes it has sufficient levels of liquidity as of the date of the filing of this Form
10-K
to allow the Company to operate into the foreseeable future.

Critical Accounting Policies and Estimates

The Company applies judgment and estimates, which may have a material effect in the eventual outcome of assets, liabilities, revenues and expenses, accounts receivable, inventory and goodwill. The following explains the basis and the procedure where judgment and estimates are applied.

9

Revenue Recognition

The Company recognizes revenue from its retail sales of new manufactured homes upon the occurrence of the following:

Its receipt of a down payment,

Construction of the home is complete,

Home has been delivered and set up at the retail home buyer’s site and title has been transferred to the retail home buyer,

Remaining funds have been released by the finance company (financed sales transaction), remaining funds have been committed by the finance company by an agreement with respect to financing obtained by the customer, usually in the form of a written approval for permanent home financing received from a lending institution, (financed construction sales transaction) or cash has been received from the home buyer (cash sales transaction), and

Completion of any other significant obligations.

The Company recognizes revenue from the sale of the repurchased homes upon transfer of title to the new purchaser.

The Company recognizes revenue from its independent dealers upon receiving wholesale floor plan financing or establishing retail credit approval for terms, shipping of the home and transferring title and risk of loss to the independent dealer. For wholesale shipments to independent dealers, the Company has no obligation to setup the home or to complete any other significant obligations.

Sales of homes to affiliated entities that are subject to contingent payment terms are considered inventory consignment arrangements. Revenue from such arrangements is recognized when the homes are sold to the end users and payment is collected by the affiliated entity.

See Note 4 “Related Party Transactions”.

9

to the Company’s financial statement included herein


The Company recognizes revenue from its wholly-owned subsidiary, Mountain Financial, Inc., as follows: commission income (and fees in lieu of commissions) is recorded as of the effective date of insurance coverage or the billing date, whichever is later. Commissions on premiums billed and collected directly by insurance companies are recorded as revenue when received which, in many cases, is the Company’s first notification of amounts earned due to the lack of policy and renewal information. Contingent commissions are recorded as revenue when received. Contingent commissions are commissions paid by insurance underwriters and are based on the estimated profit and/or overall volume of business placed with the underwriter. The data necessary for the calculation of contingent commissions cannot be reasonably obtained prior to the receipt of the commission which, in many cases, is the Company’s first notification of amounts earned. The Company provides appropriate reserves for policy cancellations based on numerous factors, including past transaction history with customers, historical experience and other information, which is periodically evaluated and adjusted as deemed necessary. In the opinion of management, no reserve was deemed necessary for policy cancellations at November 2, 20196, 2021 or November 3, 2018.

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

31, 2020.


Income Taxes

The Company accounts for income taxes utilizing the asset and liability method. This approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Rebate Program

The Company has a rebate program for some dealers, based upon the number and type of homes purchased, which pays rebates based upon sales volume to the dealers. Volume rebates are recorded as a reduction of sales in the accompanying consolidated financial statements. The rebate liability is calculated and recognized as eligible homes are sold based upon factors surrounding the activity and prior experience of specific dealers and is included in accrued expenses in the accompanying consolidated balance sheets.

Off-Balance
Sheet Arrangements

As part of our ongoing business, we generally do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or variable interest entities (“VIE’s”), which would have been established for the purpose of facilitating
off-balance
sheet arrangements or other contractually narrow or limited purposes.
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Table of Contents
As of November 2, 2019,6, 2021, we are not involved in any material unconsolidated entities (other than the Company’s investments in Majestic 21).

Forward Looking Statements

Certain statements in this report are unaudited or forward-looking statements within the meaning of the federal securities laws. Although Nobility believes that the amounts and expectations reflected in such forward-looking statements are based on reasonable assumptions, there are risks and uncertainties that may cause actual results to differ materially from expectations. These risks and uncertainties include, but are not limited to, the potential adverse impact on our business caused by the
COVID-19
pandemic or other health pandemics, competitive pricing pressures at both the wholesale and retail levels, inflation, increasing material costs uncertain economic conditions,(including forest based products) or availability of materials due to potential supply chain interruptions (such as current inflation with forest products and supply issues with vinyl siding and PVC piping), changes in market demand, changes in interest rates, availability of financing for retail and wholesale purchasers, consumer confidence, adverse weather conditions that reduce sales at retail centers, the risk of manufacturing plant shutdowns due to storms or other factors, the impact of marketing and cost-management programs, reliance on the Florida economy, possibleimpact of labor shortages, possibleshortage, impact of materials shortages,shortage, increasing labor cost, cyclical nature of the manufactured housing industry, impact of rising fuel costs, catastrophic events impacting insurance costs, availability of insurance coverage for various risks to Nobility, market demographics, management’s ability to attract and retain executive officers and key personnel, increased global tensions, impact of mandated tariffs on material prices, market disruptions resulting from terrorist or other attack, and any armed conflict involving the United States and the impact of inflation.

Item 7A.

Quantitative and Qualitative Disclosures about Market Risk

As a smaller reporting company, we are not required to provide the information required by this item.

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Table of Contents

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of

Nobility Homes, Inc.

Ocala, Florida

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Nobility Homes, Inc. (the “Company”) as ofat November 2, 2019,6, 2021 and November 3, 2018,October 31, 2020, and the related consolidated statements of comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the
two-year
period ended November 2, 2019,6, 2021, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters
Critical audit matters are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ Daszkal Bolton LLP

We have served as the Company’s auditor since 2018.

Jupiter, Florida

January 31, 2020

February 4, 2022
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Nobility Homes, Inc.

Consolidated Balance Sheets

November 2, 20196, 2021 and November 3, 2018

   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       
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 
          
The accompanying notes are an integral part of these financial statements.

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Nobility Homes, Inc.

Consolidated Statements of Comprehensive Income

For the years ended November 2, 20196, 2021 and November 3, 2018

   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 
The accompanying notes are an integral part of these financial statements.

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Nobility Homes, Inc.

Consolidated Statements of Changes in Stockholders’ Equity

For the years ended November 2, 20196, 2021 and November 3, 2018

   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 
                                
The accompanying notes are an integral part of these financial statements.

16


Nobility Homes, Inc.

Consolidated Statements of Cash Flows

For the years ended November 2, 20196, 2021 and November 3, 2018

   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 
          
The accompanying notes are an integral part of these financial statements.

17



Table of ContentsNotes to Consolidated Financial Statements


NOTE 1 Reporting Entity and Significant Accounting Policies

Description of Business and Principles of Consolidation –
The consolidated financial statements include the accounts of Nobility Homes, Inc. (“Nobility”), its wholly-owned subsidiaries, Prestige Home Centers, Inc. (“Prestige”), and Prestige’s wholly-owned subsidiaries, Mountain Financial, Inc., an independent insurance agency and licensed mortgage loan originator and Majestic Homes, Inc., (collectively the “Company”). The Company is engaged in the manufacture and sale of manufactured and modular homes to various dealerships, including its own retail sales centers, and manufactured housing communities throughout Florida. The Company has one1 manufacturing plant in operation that is located in Ocala, Florida. At November 2, 20196, 2021, Prestige operated ten10 Florida retail sales centers: Ocala (2), Chiefland, Auburndale, Inverness, Hudson, Tavares, Yulee, Panama City and Punta Gorda. 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 difficulty in hiring staff for the sales center.

All intercompany accounts and transactions have been eliminated in consolidation. The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP).

Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying disclosures. These estimates and assumptions are based upon management’s best knowledge of current events and actions that the Company may take in the future. The Company is subject to uncertainties such as the impact of future events, economic, environmental and political factors and changes in the Company’s business environment; therefore, actual results could differ from these estimates. Accordingly, the accounting estimates used in the preparation of the Company’s consolidated financial statements will change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes. Changes in estimates are made when circumstances warrant. Such changes in estimates and refinements in estimation methodologies are reflected in the reported financial condition and results of operations; if material, the effects of changes in estimates are disclosed in the notes to the consolidated financial statements. Significant estimates and assumptions by management affect: valuation of
pre-owned
homes, the allowance for doubtful accounts, the carrying value of long-lived assets, the provision for income taxes and related deferred tax accounts, certain accrued expenses and contingencies, warranty reserve and stock-based compensation.

Fiscal Year
The Company’s fiscal year ends on the first Saturday on or after October 31. The year ended November 2, 20196, 2021 (fiscal year 2019)2021) consisted of a fifty-three week period and the year ended November 3, 2018October 31, 2020 (fiscal year 2018) each2020) consisted of a
fifty-two
week period.

Reclassification-Certain amounts in

Revenue Recognition
The Company’s revenue comes substantially from the fiscal year 2018 consolidated financial statements have been reclassifiedsale of manufactured housing, modular housing and park models, along with freight billed to conformcustomers, parts sold and aftermarket services.
The Company recognizes revenue following the comprehensive framework of Financial Accounting Standards Board
ASU No. 2014-09, “Revenue
from Contracts with Customers (Topic 606)”
(ASU 2014-09),
which established a methodology for determining how much revenue to recognize and when it should be recognized through application of the current year presentation.

Revenue Recognitionfollowing 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 recognizes revenue from its retail sales of new manufactured homes upon the occurrence of the following:

Its receipt of a down payment,

Construction of the home is complete,

Home has been delivered and set up at the retail home buyer’s site, and title has been transferred to the retail home buyer,

Remaining funds have been released by the finance company (financed sales transaction), remaining funds have been committed by the finance company by an agreement with respect to financing obtained by the customer, usually in the form of a written approval for permanent home financing received from a lending institution, (financed construction sales transaction) or cash has been received from the home buyer (cash sales transaction), and

Completion of any other significant obligations.

The accompanying notes are an integral part of these financial statements.
18


The Company recognizes revenue from the sale of the repurchased homes upon transfer of title to the new purchaser.

The Company recognizes revenues from its independent dealers upon receiving wholesale floor plan financing or establishing retail credit approval for terms, shipping of the home, and transferring title and risk of loss to the independent dealer. For wholesale shipments to independent dealers, the Company has no obligation to setup the home or to complete any other significant obligations.

The Company recognizes revenues from its wholly-owned subsidiary, Mountain Financial, Inc., as follows: commission income (and fees in lieu of commissions) is recorded as of the effective date of insurance coverage or the billing date, whichever is later. Commissions on premiums billed and collected directly by insurance companies are recorded as revenue when received which, in many cases, is the Company’s first notification of amounts earned due to the lack of policy and renewal information. Contingent commissions are recorded as revenue when received. Contingent commissions are commissions paid by insurance underwriters and are based on the estimated profit and/or overall volume of business placed with the underwriter. The data necessary for the calculation of contingent commissions cannot be reasonably obtained prior to the receipt of the commission which, in many cases, is the Company’s first notification of amounts earned. The Company provides appropriate reserves for policy cancellations based on numerous factors, including past transaction history with customers, historical experience, and other information, which is periodically evaluated and adjusted as deemed necessary. In the opinion of management, no reserve was deemed necessary for policy cancellations at November 2, 2019 or November 3, 2018.

6, 2021 and October 31, 2020.

Sales of homes to affiliated entities that are subject to contingent payment terms are considered inventory consignment arrangements. Revenue from such arrangements is recognized when the homes are sold to the end users and payment is collected by the affiliated entity.

See Note 4 “Related Party Transactions”.

18


Notes to Consolidated Financial Statements

Revenues by Products and Services
– Revenues by net sales from manufactured housing,
pre-owned
homes, and insurance agent commissions for the years ended November 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 
           
Cash and Cash Equivalents
The Company considers all money market accounts and highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.

Certificates of Deposit
– Certificates of deposits are recorded at cost plus accrued interest and have maturities of twelve months or less.

Accounts Receivable –
Accounts receivable are stated at net realizable value. An allowance for doubtful accounts is provided based on prior collection experiences and management’s analysis of specific accounts. At November 2, 20196, 2021 or November 3, 2018,October 31, 2020, in the opinion of management, all accounts were considered fully collectible and, accordingly, no allowance was deemed necessary.

Accounts receivable fluctuate due to the number of homes sold to independent dealers. The Company recognizes revenues from its independent dealers upon receiving wholesale floor plan financing or establishing retail credit approval for terms, shipping of the home, and transferring title and risk of loss to the independent dealer.

Investments
The Company’s investments consist of equity securities of a public company. Investments with maturities of less than one year are classified as short-term investments. The Company’s equity investment in a public company is classified as
“available-for-sale”
and carried at fair value. Unrealized gains on the
available-for-sale
securities, net of taxes, arewere recorded in accumulated other comprehensive income.

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

2016-01,
unrealized gains and the amount of the write-down is includedlosses on these
available-for-sale
securities, are reflected in the accompanying consolidated statementsstatement of income and other comprehensive income.

Inventories –
New home inventory is carried at the lower of cost or marketnet realizable value. The cost of finished home inventories determined on the specific identification method is removed from inventories and recorded as a component of cost of sales at the time revenue is recognized. In addition, an allocation of depreciation and amortization is included in cost of goods sold. Under the specific identification method, if finished home inventory can be sold for a profit there is no basis to write down the inventory below the lower of cost or fair marketnet realizable value.

The Company acquired certain repossessedpre-owned inventory (Buy Back Inventory) in 2011 asaccompanying notes are an integral part of an Amendmentthese financial statements.
19

Other
pre-owned
homes are acquired (Repossessions Inventory) as a convenience to the Company’s joint venture partner, 21st Mortgage Corporation. This inventory has been repossessed by 21
st
Mortgage Corporation or through mortgage foreclosure. The Company acquired this inventory at the amount of the uncollected balance of the financing at the time of the foreclosure/repossessions by 21st Mortgage Corporation. The Company records this inventory at cost determined on the specific identification method. All of the refurbishment costs are paid by 21
st
Mortgage Corporation. This arrangement assists 21
st
Mortgage Corporation with liquidation of their repossessed inventory. The timing of these repurchases by the Company is unpredictable as it is based on the repossessions 21
st
Mortgage Corporation incurs in the portfolio. When the home is sold, the Company retains the cost of the home, an interest factor on the cost of the home and a sales commission, for the sale of the home, from the sales proceeds. Any additional proceeds are paid to 21
st
Mortgage. Any shortfall from the proceeds to cover these amounts is paid by 21
st
Mortgage to the Company. As the Company has no risk of loss on the sale, there is no valuation allowance necessary for this inventory.

Inventory held at consignment locations by affiliated entities is included in the Company’s inventory on the Company’s consolidated balance sheets. Consigned inventory was $1,540,949$794,766 and $1,140,982$1,277,681 as of November 2, 20196, 2021 and November 3, 2018,October 31, 2020, respectively.

19


Notes to Consolidated Financial Statements

Pre-owned
homes are also taken as
trade-ins
on new home sales
(Trade-in
Inventory). This inventory is recorded at estimated actual wholesale value, which is generally lower 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
Trade-in inventory
Inventory amount is reduced where necessary on a unit specific basis by a valuation reserve, which management believes results in inventory being valued at market.

Other inventory costs are determined on a
first-in,
first-out
basis.

See Note 6 “Inventories”.

Property, Plant and Equipment –
Property, plant and equipment are stated at cost and depreciated over their estimated useful lives using the straight-line method. Routine maintenance and repairs are charged to expense when incurred. Major replacements and improvements are capitalized. Gains or losses are credited or charged to earnings upon disposition.

Investment in Majestic 21
Majestic 21 was formed in 1997 as a joint venture with our joint venture partner, an unrelated entity, 21
st
Mortgage Corporation (“21
st
Mortgage”). We have been allocated our share of net income and distributions on a
50/50 basis
since Majestic 21’s formation. While Majestic 21 has been deemed to be a variable interest entity, the Company only holds a 50% interest in this entity and all allocations of profit and loss are on a 50/50 basis. Since all allocations are to be made on a 50/50 basis and joint decisions with the joint venture partner are made which most significantly impact Majestic 21 economic performance therefore, the Company is not required to consolidate Majestic 21 with the accounts of Nobility Homes in accordance with the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) No. 810, “Consolidations” (ASC 810). Management believes that the Company’s maximum exposure to loss as a result of its involvement with Majestic 21 is its investment in the joint venture. Based on management’s evaluation, there was no0 impairment of this investment at November 2, 20196, 2021 or November 3, 2018.

October 31, 2020.

The Company entered into an arrangement in 2002 with 21
st
Mortgage to repurchase certain
pre-owned
homes. Under this arrangement or any other arrangement, the Company is not obligated to repurchase any foreclosed/repossessed units of Majestic 21 as it does not have a repurchase agreement or any other guarantees with Majestic 21. However, the Company buys from 21
st
Mortgage foreclosed/repossessed units from the Majestic 21 portfolio and acts as a remarketing agent. It resells those units through the Company’s network of retail centers which management believes benefits the historical loss experience of the joint venture. The only impact on the Company’s operations from this arrangement are commissions earned on the resale of these units and interest earned for the Company’s carrying costs of the units while in inventory.

See Note 1514 “Commitments and Contingent Liabilities”.

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”.

Impairment of Long-Lived Assets –
In the event that facts and circumstances indicate that the carrying value of a long-lived asset may be impaired, an evaluation of recoverability is performed by comparing the estimated future undiscounted cash flows associated with the asset to the asset’s carrying amount to determine if a write-down is required. If such evaluations indicate that the future undiscounted cash flows of certain long-lived assets are not sufficient to recover the carrying value of such assets, the assets are adjusted to their fair values.

The accompanying notes are an integral part of these financial statements.
20


Customer Deposits –
A retail customer is required to make a down payment ranging from $500 to 35% of the retail contract price based upon the credit worthiness of the customer. The retail customer receives the full down payment back when the Company is not able to obtain retail financing. If the retail customer receives retail financing and decides not to go through with the retail sale, the Company can withhold 20% of the retail contract price. The Company does not typically receive any deposits from independent dealers.

20


Notes to Consolidated Financial Statements

Company Owned Life Insurance
– The Company has purchased life insurance policies on certain key executives. Company owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.

Warranty Costs –
The Company provides for a warranty as the manufactured homes are sold. Amounts related to these warranties for fiscal years 20192021 and 20182020 are as follows:

   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 
           
The Company’s limited warranty covers substantial defects in material or workmanship in specified components of the home including structural elements, plumbing systems, electrical systems, and heating and cooling systems which are supplied by the Company that may occur under normal use and service during a period of twelve (12) months from the date of delivery to the original homeowner, and applies to the original homeowner or any subsequent homeowner to whom this product is transferred during the duration of this twelve (12) month period.

The Company tracks the warranty claims per home. Based on the history of the warranty claims, the Company has determined that a majority of warranty claims usually occur within the first three months after the home is sold. The Company determines its warranty accrual using the last three months of home sales. Accrued warranty costs are included in accrued expenses in the accompanying consolidated balance sheets.

Accrued Home Setup Costs
– Accrued home setup costs represent amounts due to vendors and/or independent contractors for various items related to the actual setup of the home on the retail home buyers’ site. These costs include appliances, air conditioners, electrical/plumbing
hook-ups,
furniture, insurance, impact/permit fees, land/home fees, extended service plan, freight, skirting, steps, well, septic tanks and other setup costs and are included in accrued expenses in the accompanying consolidated balance sheets.

Stock-Based Compensation –
The Company has a stock incentive plan (the “Plan”) which authorizes the issuance of options to purchase common stock. Stock-based compensation is measured at the grant date based on the fair value of the award and is recognized as expense over the period during which an employee is required to provide service in exchange for the award (usually the vesting period).

Rebate Program –
The Company has a rebate program for some dealers based upon the number and type of home purchased, which pays rebates based upon sales volume to the dealers. Volume rebates are recorded as a reduction of sales in the accompanying consolidated financial statements. The rebate liability is calculated and recognized as eligible homes are sold based upon factors surrounding the activity and prior experience of specific dealers and is included in accrued expenses in the accompanying consolidated balance sheets. There were no0 rebates earned by dealers during fiscal years 20192021 and 2018.

2020.

Advertising –
Advertising for Prestige retail sales centers consists primarily of internet, newspaper, radio and television advertising. All costs are expensed as incurred. Advertising expense amounted to approximately $140,520$141,581 and $169,000$144,600 for fiscal years 20192021 and 2018,2020, respectively.

Income Taxes –
The Company accounts for income taxes utilizing the asset and liability method. This approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

The accompanying notes are an integral part of these financial statements.
21


Net Income per Share –
These financial statements include “basic” and “diluted” net income per share information for all periods presented. The basic net income per share is calculated by dividing net income by the weighted-average number of shares outstanding. The diluted net income per share is calculated by dividing net income by the weighted-average number of shares outstanding, adjusted for dilutive common shares.

21


Notes to Consolidated Financial Statements

Shipping and Handling Costs
Net sales include the revenue related to shipping and handling charges billed to customers. The related costs associated with shipping and handling is included as a component of cost of goods sold.

Comprehensive Income –
Comprehensive income includes net income as well as other comprehensive income or loss. The Company’s other comprehensive income or loss consists of unrealized gains or losses on
available-for-sale
securities, net of related taxes.

Segments –
The Company’s chief operating decision maker is its Chief Executive Officer, who reviews financial information on a company-wide or consolidated basis. Accordingly, the Company accounts for its operations in accordance with FASB ASC No. 280, “Segment Reporting.” No segment disclosures have been made as the Company considers its business activities as a single segment.

Major Customers
Sales to one publicly traded REIT (Real Estate Investment Trust), which owns multiple retirement communities in our market area
There were no
customers
that accounted for $1,308,500 or 2% of our total net sales in fiscal year 2019 and $2,097,200 or 5% of our total net sales in fiscal year 2018. Three other companies which own multiple retirement communities in our market area accounted for $2,629,605 or 6% of our total net sales in fiscal year 2019 and $4,026,060 ormore than 10% of our total net sales in fiscal year 2018. Accounts receivable due from these customers were $685,6712021 or 51% and $864,410 or 48% at November 2, 2019 and November 3, 2018, respectively.

2020.

Concentration of Credit Risk –
The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, short-term and long-term investments and accounts receivable. At times, the Company’s deposits may exceed federally insured limits. However, the Company has not experienced any losses in such accounts and management believes the Company is not exposed to any significant credit risk on these accounts. The majority of the Company’s sales are credit sales which are made primarily to customers whose ability to pay is dependent upon the industry economics prevailing in the areas where they operate; however, concentrations of credit risk with respect to accounts receivables is limited due to generally short payment terms. The Company also performs ongoing credit evaluations of its customers to help further reduce credit risk. The Company maintains reserves for potential credit losses when deemed necessary and such losses have historically been within management’s expectations.

Concentration of Retail Financing Sources
There are
two national lenders that service the manufactured housing industry with several others who specialize in government insured loans (Fannie, Freddie, FHA, VA, etc.). With only a few lenders dedicated to our industry, the loss of any of them could adversely affect our retail sales.

Recently Issued or Adopted Accounting Pronouncements –In November 2015, the FASB issued ASUNo. 2015-17 “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes” (ASU2015-17). ASU2015-17 simplifies the presentation of deferred income taxes by eliminating the separate classification of deferred income tax liabilities and assets into current and noncurrent amounts in the consolidated balance sheet statement of financial position. The amendments in the update require that all deferred tax liabilities and assets be classified as noncurrent in the consolidated balance sheet. The amendments in this update are effective for annual periods beginning after December 15, 2016, and interim periods there in and may be applied either prospectively or retrospectively to all periods presented. The Company prospectively adopted ASU2015-17 beginning with its February 3, 2018 consolidated financial statements. As such, deferred tax assets and liabilities for fiscal year 2018 have been presented as noncurrent.

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.

In January 2016, the FASB issued ASU
No. 2016-01, “Financial
“Financial Instruments–Overall: Recognition and Measurement of Financial Assets and Financial Liabilities”. The amendments require all equity investments to be measured at fair value with changes in the fair value recognized through net income (other than those accounted for under the equity method of accounting or those that result in consolidation of the investee). The amendments also require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. In addition, the amendments eliminate the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet. The amendmentsCompany adopted ASU
2016-01
resulting in this update are effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company expects the adoption of this amendment to recognizerecognition changes in the fair value of equity investment in earnings.

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.

NOTE 2 Investments

The following is a summary of short-term investments (available for sale):

   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 
                     
The accompanying notes are an integral part of these financial statements.
22

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 
  

 

 

   

 

 

   

 

 

   

 

 

 

Table of Contents

   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 
                     
The fair values were estimated based on unadjusted quoted prices at each respective period end.

​​​​​​​

NOTE 3 Fair Values of Financial Investments

The carrying amount of cash and cash equivalents, accounts and notes receivable, accounts payable and accrued expenses approximates fair value because of the short maturity of those instruments.

The Company accounts for the fair value of financial investments in accordance with FASB ASC No. 820, “Fair Value Measurements” (ASC 820).

ASC 820 defines fair value as the price that would be received upon the sale of an asset or paid to transfer a liability (i.e. exit price) in an orderly transaction between market participants at the measurement date. ASC 820 requires disclosures that categorize assets and liabilities measured at fair value into one of three different levels depending on the assumptions (i.e. inputs) used in the valuation. Financial assets and liabilities are classified in their entirety based on the lowest level of input significant to the fair value measurement. The ASC 820 fair value hierarchy is defined as follows:

Level 1—Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2—Valuations are based on quoted prices for similar assets or liabilities in active markets, or quoted prices in markets that are not active for which significant inputs are observable, either directly or indirectly.

Level 3—Valuations are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Inputs reflect management’s best estimate of what market participants would use in valuing the asset or liability at the measurement date. The following table represents the Company’s financial assets and liabilities which are carried at fair value at November 2, 20196, 2021 and November 3, 2018.

October 31, 2020.

   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— 
                

NOTE 4 Related Party Transactions

Affiliated Entities

TLT, Inc. –
Our President and Chairman of the Board of Directors (“President”) and the Executive Vice President each own 50% of the stock of TLT, Inc. TLT, Inc. is the general partner of limited partnerships which are developing manufactured housing communities in Central Florida (the “TLT Communities”). Our President owns between a 24.75% and a 49.5%56% direct and indirect interest in each of these limited partnerships. Our Executive Vice President owns between a 49.5%23.0% and a 57.75% direct and indirect interest in each of these limited partnerships. The TLT Communities have purchased manufactured homes exclusively from the Company since 1990. Sales to TLT Communities were not significant during fiscal years 20192021 and 2018.

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

2020.


Notes to Consolidated Financial Statements

Repurchase of Common Stock
– In June 2019,July 2021, the Company repurchased 100,000 shares of common stock from our President at $21.95$34.68 per share.

The accompanying notes are an integral part of these financial statements.
23

Table of Contents

NOTE 5 Other Investments

Investment in Joint Venture – Majestic 21
During fiscal 1997, the Company contributed $250,000 for a 50% interest in a joint venture engaged in providing mortgage financing on manufactured homes. This investment is accounted for under the equity method of accounting.

While Majestic 21 has been deemed to be a variable interest entity, the Company only holds a 50% interest in this entity and all allocations of profit and loss are on a
50/50 basis.basis
. Since all allocations are to be made on a 50/50 basis and the Company’s maximum exposure is limited to its investment in Majestic 21, management has concluded that the Company would not absorb a majority of Majestic 21’s expected losses nor receive a majority of Majestic 21’s expected residual returns; therefore, the Company is not required to consolidate Majestic 21 with the accounts of Nobility Homes in accordance with ASC 810.

See Note 1514 “Commitments and Contingent Liabilities”.

We received no0 distributions from the joint venture in fiscal year 20192021 or 2018.

2020.

With regard to our investment in Majestic 21, there are no differences between our investment balance and the amount of underlying equity in net assets owned by Majestic 21.

Investment in Retirement Community Limited PartnershipsOn 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.

NOTE 6 Inventories

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 
  

 

 

   

 

 

 

*

The following table summarizes a breakdown ofpre-owned homes inventory for fiscal years 2019 and 2018:

   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 
  

 

 

   

 

 

   

 

 

   

 

 

 

**

An analysis of thepre-owned home inventory impairment reserve at November 2, 2019 and November 3, 2018 is as follows:

   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 
           
The accompanying notes are an integral part of $1,078,325 and was included on the balance sheet in property held for sale(non-current asset) for $213,437.

In April 2018, Nobility sold its Belleview facility that had been vacant since June 2015 for $635,000.

26

these financial statements.

24

Notes to Consolidated Financial Statements

Table of Contents

NOTE 87 Property, Plant and Equipment

Property, plant and equipment, along with their estimated useful lives and related accumulated depreciation are summarized as follows:

   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 
              
Depreciation expense during the years ended November 2, 20196, 2021 and November 3, 2018October 31, 2020 totaled $163,097$186,320 and $148,204,$180,047, respectively.

NOTE 98 Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities are comprised of the following:

   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 
           

NOTE 109 Proceeds Received Under Escrow Arrangement

The Company received $379,104$246,216 in fiscal year 20192021 and $172,911$421,099 in fiscal year 20182020 under an escrow arrangement related to a Finance Revenue Sharing Agreement between 21
st
Mortgage Corporation and the Company. The distributions from the escrow account, related to certain loans financed by 21
st
Mortgage Corporation, are recorded in income by the Company when received, which has been the Company’s past practice.

NOTE 1110 Income Taxes

The Company computes income tax expense using the liability method. Under this method, deferred income taxes are provided, to the extent considered realizable by management, for basis differences of assets and liabilities for financial reporting and income tax purposes.

The Company follows guidance issued by the FASB with respect to accounting for uncertainty in income taxes. A tax position is recognized as a benefit only if it is
“more-likely-than-not”
that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the
“more-likely-than-not”
test, no0 tax benefit is recorded.

The Company and its subsidiaries are subject to U.S. federal income tax, as well as income tax of the state of Florida. The Company’s income tax returns for the past three years are subject to examination by tax authorities, and may change upon examination.

The Company recognizes interest and/or penalties related to income tax matters in income tax expense. The Company did not reflect any amounts for interest and penalties in its 20192021 or 20182020 statements of operations, nor are any amounts accrued for interest and penalties at November 2, 20196, 2021 and November 3, 2018.

27

October 31, 2020.

The accompanying notes are an integral part of these financial statements.
25

Notes to Consolidated Financial Statements

Table of Contents

The provision for income taxes for the years ended consists of the following:

   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 
           
The following table shows the reconciliation between the statutory federal income tax rate and the actual provision for income taxes for the years ended:

   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 
           
The types of temporary differences between the tax bases of assets and liabilities and their financial reporting amounts and the related deferred tax assets and deferred tax liabilities are as follows:

   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 
           
The accompanying notes are an integral part of these financial statements.


Notes to Consolidated Financial Statements

Table of Contents

These amounts are included in the accompanying consolidated balance sheets under the following captions:

   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 tax
assets 
(liabilities)
   (99,568)   3,598 
           
Net deferred tax assets (liabilities)  $(99,568)  $3,598 
           
In assessing the ability to realize a portion of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. For fiscal years 20192021 and 2018,2020, the Company determined that a valuation reserve for the Company’s deferred tax assets was not considered necessary as the deferred tax assets were fully realizable.

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.

NOTE 1211 Stockholders’ Equity

Authorized preferred stock may be issued in series with rights and preferences designated by the Board of Directors at the time it authorizes the issuance of such stock. The Company has never issued any preferred stock. Treasury stock is recorded at cost and is presented as a reduction of stockholders’ equity in the accompanying consolidated financial statements. The Company repurchased 212,396100,346 and 123,83833,100 shares of its common stock during fiscal years 20192021 and 2018,2020, respectively.

NOTE 1312 Stock Option Plan

In June 2011, the Company’s Board of Directors adopted and the Company’s shareholders later approved, the Nobility Homes, Inc. 2011 Stock Incentive Plan (the “Plan”), providing for the issuance of options to purchase shares of common stock, stock appreciation rights and other stock-based awards to employees and
non-employee
directors. A total
of 300,000
shares were reserved for issuance under the Plan, all of which may be issued pursuant to the exercise of incentive stock options. The Plan was amended by the Board of Directors to extend the termination date from June 2021 until June 1,
2026
. At November 2, 2019, 297,2506, 2021, 252,700 options were available for future grant under the planPlan and 2,75047,300 options were outstanding.

The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The cost is to be recognized over the period during which an employee is required to provide service in exchange for the award (usually the vesting period). The grant date fair value of employee share options and similar instruments will be estimated using option-pricing models adjusted for the unique characteristics of those instruments (unless observable market prices for the same or similar instruments are available). If an equity award is modified after the grant date, incremental compensation cost will be recognized in an amount equal to the excess of the fair value of the modified award over the fair value of the original award immediately before the modification. During fiscal years 20192021 and 2018,2020, the Company recognized compensation cost related to the vesting of stock options of approximately $21,000$69,750 and $1,600$3,624 respectively.

29

The accompanying notes are an integral part of these financial statements.
27

Notes to Consolidated Financial Statements

Table of Contents

A summary of information with respect to options granted is as follows:

   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 
                     
The aggregate intrinsic value in the table above represents total intrinsic value (of options in the money), which is the difference between the Company’s closing stock price on the last trading day of fiscal year 20192021 and the exercise price times the number of shares, that would have been received by the option holder had the option holder exercised their options on November 2, 2019.

6, 2021.

The following table summarizes information about the outstanding stock options at November 2, 2019:

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 
                            
The fair value of each option is determined using the Black-Scholes option-pricing model which values options based on the stock price at the grant date, the expected life of the option, the estimated volatility of the stock, expected dividend payments, and the risk-free interest rate over the expected life of the option. The dividend yield was calculated by dividing the current annualized dividend by the option exercise price for each grant. The expected volatility was determined considering the Company’s historical stock prices for the fiscal year the grant occurred and prior fiscal years for a period equal to the expected life of the option. The risk-free interest rate was the rate available on zero coupon U.S. government obligations with a term equal to the expected life of the option. The expected life of the option was estimated based on the exercise history from previous grants.

NOTE 1413 Employee Benefit Plan

The Company has a defined contribution retirement plan (the “Plan”) qualifying under Section 401(k) of the Internal Revenue Code. The Plan covers employees who have met certain service requirements. The Company makes a discretionary matching contribution, up to a maximum of 6% of an employee’s compensation. The contribution expense charged to operations amounted to approximately $170,000$219,900 and $88,000$175,000 in fiscal years 20192021 and 2018,2020, respectively.

NOTE 1514 Commitments and Contingent Liabilities

Operating Leases –
The Company leases the property for several Prestige retail sales centers from various unrelated entities under operating lease agreements expiring through December 2020.2021. The Company also leases certain equipment under unrelated operating leases. These
The accompanying notes are an integral part of these financial statements.
28

On November 3, 2019, the Company adopted ASC Topic 842 using the modified retrospective method applied to leases have varying renewal options. Total rent expensethat were in place as of November 3, 2019. Results for reporting periods beginning after November 3, 2019 are presented under Topic 842, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 840.
The Company elected the package of practical expedients permitted under the transition guidance, which allows for the historical lease classification to be carried forward, the Company’s assessments on whether a contract is or contains a lease, and the Company’s initial direct costs for any leases that exist prior to adoption of the new standard. The Company also elected the short-term lease recognition exemption for all leases that qualify.
To determine the present value of minimum future lease payments for operating leases including those with termsat November 3, 2019, the Company was required to estimate a rate of less than one year, amountedinterest that it would have to $162,929pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment (the “incremental borrowing rate” or “IBR”). The Company determined the appropriate IBR by identifying a reference rate and $161,105 in fiscal year 2019making adjustments that take into consideration financing options and 2018, respectively.

30

certain lease-specific circumstances. For the reference rate, the Company used mortgage interest rates for similar terms.


Notes to Consolidated Financial Statements

Future minimum payments by year andRight of use assets are included as a

non-current
asset in the aggregate, underamount of $1,597, net of amortization in the aforementioned leases and othernon-cancelable operating leases with initial or remaining terms in excess of one year,consolidated Balance Sheet as of November 2, 20196, 2021.
Based on the terms of the lease agreements, all of the Company’s leases are classified as followsoperating leases. The weighted average remaining lease term and weighted average discount rate of the operating leases is .08 years and 3.0%, respectively.
Minimum rental payments under operating leases are recognized on a straight-line basis over the term of the lease. Individual components of the total lease cost incurred by the Company in the amount of $179,802 for the fiscal years ending:

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.

Other Contingent Liabilities –
Certain claims and suits arising in the ordinary course of business have been filed or are pending against the Company. In the opinion of management, the ultimate outcome of these matters will not have a material adverse effect on the Company’s financial position, results of operations or cash flows. Accordingly, the Company has not made any accrual provisions for litigation in the accompanying consolidated financial statements.

The Company does not maintain casualty insurance on some of its property, including the inventory at our retail centers, our plant machinery and plant equipment and is at risk for those types of losses.

31

The accompanying notes are an integral part of these financial statements.
29

Table of Contents
Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

There were no disagreements with accountants on accounting and financial disclosure matters.

Item 9A.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures
. The Company’s Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer) have evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a–15(e) and 15d–15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report (the “Evaluation Date”). Based on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of the Evaluation Date.

Management’s Annual Report on Internal Control over Financial Reporting.
The Company’s management is responsible for establishing and maintaining adequate and effective internal control over financial reporting in order to provide reasonable assurance of the reliability of the Company’s financial reporting and preparation of financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting involves policies and procedure that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and disposition of assets of the issuer; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made in accordance with authorizations of management and directors of the issuer; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer Company assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company’s management assessed the effectiveness of its internal control over financial reporting as of November 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.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.

Changes in internal control over financial reporting.
There were no changes in our internal controls over financial reporting that occurred during the fourth quarter of fiscal 20192021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

Item 9B.

Other Information

None.

32

Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
The accompanying notes are an integral part of these financial statements.
30

Table of Contents

PART III

Item 10.

Directors, Executive Officers and Corporate Governance

Information is incorporated by reference pursuant to Instruction G of Form
10-K
from its definitive proxy statement for the 20202022 annual meeting of shareholders.

The following table provides the names, ages and business experience for the past five years for each of Nobility’s executive officers. Executive officers are each elected for one year terms.

Executive Officers

Terry E. Trexler (80)

(82)
  Chairman of the Board and President of Nobility since 1967; Mr. Trexler is also President of TLT, Inc.

Thomas W. Trexler (56)

(58)
  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 (74)

(76)
  Secretary since 1967.

Lynn J. Cramer, Jr. (74)

(76)
  Treasurer since 1980.

Thomas W. Trexler, Executive Vice President, Chief Financial Officer and a director, is the son of Terry E. Trexler, Nobility’s President and Chairman of the Board. There are no other family relationships between any directors or executive officers.

Code of Ethics

We have adopted a code of ethics that applies to the principal executive officer, principal financial officer, executive vice presidents and controller. The code has been designed in accordance with provisions of the Sarbanes-Oxley Act of 2002, to promote honest and ethical conduct.

Our code of ethics is available on our website at www.nobilityhomes.com. You may also obtain a copy of the Nobility Homes, Inc. Code of Ethics, at no cost, by forwarding a written request to the Secretary, Nobility Homes, Inc., 3741 SW 7
th
Street, Ocala, Florida 34474.

Item 11.

Executive Compensation

Information concerning executive compensation is incorporated by reference pursuant to Instruction G of Form
10-K
from Nobility’s definitive proxy statement for the 20202022 annual meeting of shareholders.

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information concerning security ownership of certain beneficial owners and management is incorporated by reference pursuant to Instruction G of Form
10-K
from Nobility’s definitive proxy statement for the 20202022 annual meeting of shareholders.

Item 13.

Certain Relationships and Related Transactions, and Director Independence

Information concerning certain relationships and related transactions is incorporated by reference pursuant to Instruction G of Form
10-K
from Nobility’s definitive proxy statement for the 20202022 annual meeting of shareholders.

Item 14.

Principal Accounting Fees and Services

Information concerning principal accountant fees and services is incorporated by reference pursuant to Instruction G of Form
10-K
from Nobility’s definitive proxy statement for the 20202022 annual meeting of shareholders.

33

The accompanying notes are an integral part of these financial statements.
31

Table of Contents

PART IV

Item 15.

Exhibits and Financial Statement Schedules

 (a)

Consolidated Financial Statements and Schedules

Report of Daszkal Bolton LLP

Consolidated Balance Sheets at November 2, 20196, 2021 and November 3, 2018

October 31, 2020

Consolidated Statements of Comprehensive Income for the Years Ended November 2, 20196, 2021 and November 3, 2018

October 31, 2020

Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended November 2, 20196, 2021 and November 3, 2018

October 31, 2020

Consolidated Statements of Cash Flows for the Years Ended November 2, 20196, 2021 and November 3, 2018

October 31, 2020

Notes to Consolidated Financial Statements

 (b)

Exhibits:

In reviewing the agreements included as exhibits to this report, please remember they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about the Company, its subsidiaries or other parties to the agreements. The agreements contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:

should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;

have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;

may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and

were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about the Company may be found elsewhere in this report and the Company’s other public files, which are available without charge through the SEC’s website at http://www.sec.gov.

 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

The accompanying notes are an integral part of these financial statements.
32

Table of Contents

Item 16.
Form
10-K
Summary
None.
The accompanying notes are an integral part of these financial statements.
33

Table of Contents

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

NOBILITY HOMES, INC.

DATE: January 31, 2020February 4, 2022   

By: /s/ Terry E. Trexler

   Terry E. Trexler, Chairman,
   President and Chief Executive Officer (Principal Executive Officer)
DATE: January 31, 2020February 4, 2022   

By: /s/ Thomas W. Trexler

   Thomas W. Trexler, Executive Vice President
   and Chief Financial Officer (Principal Financial Officer)
DATE: January 31, 2020February 4, 2022   

By: /s/ Lynn J. Cramer, Jr.

   Lynn J. Cramer, Jr., Treasurer
   and Principal Accounting Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

DATE: January 31, 2020February 4, 2022   

By: /s/ Terry E. Trexler

   Terry E. Trexler, Director
DATE: January 31, 2020February 4, 2022   

By: /s/ Arthur L. Havener

Thomas W. Trexler
   Arthur L. Havener,Thomas W. Trexler, Director
DATE: January 31, 2020February 4, 2022   

By: /s/ Robert P. Saltsman

   Robert P. Saltsman, Director
DATE: January 31, 2020February 4, 2022   

By: /s/ Thomas W. Trexler

Arthur L. Havener
   Thomas W. Trexler,Arthur L. Havener, Director

36

The accompanying notes are an integral part of these financial statements.
34