| ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Which Registered OTCQX
| Large, accelerated filer | ☐ | Accelerated filer | ☐ | |||||||
Non-accelerated filer | ☐ | Smaller reporting company | ☒ | |||||||
| Emerging growth company | ☐ | |||||||||
Title of Class | Shares Outstanding on 1 , 2023 | |
Common Stock | 3,370,912 | |
DOCUMENTS INCORPORATED BY REFERENCE | ||
Title |
| |
Definitive proxy statement for Annual Meeting of Shareholders to be held | Part III, Items 10-14 | |
TABLE OF CONTENTS
| Form 10-K | ||||||||||
| PART I | ||||||||||
| Item 1. | 2 | |||||||||
| Item 1A. | 4 | |||||||||
| Item 1B. | 4 | |||||||||
| Item 2. | 4 | |||||||||
| Item 3. | 5 | |||||||||
| Item 4. | 5 | |||||||||
| PART II | ||||||||||
| Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of EquitySecurities | 6 | ||||||||
| Item 6. | 7 | |||||||||
| Item 7. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 7 | ||||||||
| Item 7A. | 11 | |||||||||
| Item 8. | 12 | |||||||||
| 12 | ||||||||||
Report of Independent Registered Public AccountingFirm-Daszkal Bolton LLP | 13 | |||||||||
| 14 | ||||||||||
| 15 | ||||||||||
| 16 | ||||||||||
| 17 | ||||||||||
| 18 | ||||||||||
| Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure | 30 | ||||||||
| Item 9A. | 30 | |||||||||
| Item 9B. | 30 | |||||||||
| Disclosure Regarding Foreign Jurisdictions that prevent Inspections | 30 | |||||||||
| PART III | ||||||||||
| Item 10. | 31 | |||||||||
| Item 11. | 31 | |||||||||
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 31 | ||||||||
| Item 13. | Certain Relationships and Related Transactions, and Director Independence | 31 | ||||||||
| Item 14. | 31 | |||||||||
| PART IV | ||||||||||
| Item 15. | 32 | |||||||||
| 32 | ||||||||||
| 32 | ||||||||||
| Item 16. | Form 10-K Summary | 33 | ||||||||
| Signatures | 34 | |||||||||
1
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 Form10-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;length.
Double-wide widths of 20, 24, 26, 28 and 32 feet ranging from 32 to 72 feet in length;length.
Triple-wide widths of 42 feet ranging from 60 to 72 feet in length; andlength.
Quad-unitQuad 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 anon-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$70,000 to $130,000.$220,000. 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-ownedwholly 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.(“Prestige”), our wholly-ownedwholly 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%95% and 76%87% of Nobility’s sales during fiscal years 20192022 and 2018,2021, 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.parties.
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
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
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 mile100-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-ownedwholly 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 partythird-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 20192022 and 2018.2021.
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 partythird-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
The government measures as well as the public reaction to COVID-19 and the various variants previously had a negative impact on customer traffic (and corresponding sales) within our centers and the operations of our business partners, which has since subsided. However, 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 corresponding 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 ininto 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, 2023, the Company had 139145 full-time employees, including 32 employed by Prestige. Approximately 8189 employees are factory personnel compared to approximately 8674 in such positions a year ago and 5856 are in management, administrative, supervisory, sales and clerical positions (including 29 management and sales personnel employed by Prestige) compared to approximately 6357 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 non-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 using different hiring practices such as work release programs and employment services to reduce the turnover. However, we are still experiencing a shortage of qualified factory production employees.
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 1, 2023, Nobility owned one manufacturing plant:plant as follows:
Location | Approximate Size | |||
3741 SW 7th Street Ocala, Florida | 72,000 sq. ft. | |||
Nobility’s Ocala facility is located on approximately 35.5 acres of land on which an additionaltwo-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 December 2021, the Company broke ground to build an 11,900 square foot frame shop constructed of concrete block and metal to manufacture steel frames for our homes, on our current manufacturing plant property in Ocala, Florida. It is anticipated that this project will be completed in fiscal year 2023.
In April 2018, Nobility sold its Belleview facility that had been vacant since June 2015 for $635,000.
4
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.centers located in Chiefland and Hudson Florida. The Company in April 2022 sold 4.38 acres of land frontage at the Inverness location for $96,970 to the Florida Department of Transportation for SR 41 road widening project. In December 2017 Prestige executedJanuary 2021 the Company purchased the land for the Tavares retail sales center for $245,000, land in Ocala for a lease to open an eleventhfuture retail sales center in north FloridaFebruary 2021 for $1,040,000 and has not yet opened the land for the Ocala South retail sales center due to difficulty in hiring staffMarch 2021 for the sales center. On June 28, 2019 the Company sold its former Pace retail sales center property located 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.$500,000.
| Item 3. | Legal Proceedings |
We are a party to various legal proceedings that ariseCertain claims and suits arising in the ordinary course of our business. Webusiness have been filed or are not currently involved in any litigation nor to our knowledge, is any litigation threatenedpending against us, the Company. In the opinion of management, the ultimate outcome of which would, in our judgment based on information currently available to us,these matters will not have a material adverse effect on ourthe Company’s financial position, or results of operations.operations or cash flows.
The Company does not maintain casualty insurance on some of itsour property, including the inventory at itsour retail centers, itsour plant machinery and plant equipment and is at risk for those types of losses.
| Item 4. | Mine Safety Disclosures |
None.
5
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. Anyover-the-counter market quotations reflect inter-dealer prices, without retailmark-up, mark-down or commission and may not necessarily represent actual transactions.
Holders
At January 31, 2020,2023 the approximate number of holders on record of common stock was 9586 (not including individual participants in security position listings).
Dividends
The Board of Directors declared aone-time cash dividend of $1.00 per common share infor fiscal 2019year 2021 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, 2018.22, 2022. 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, 20195, 2022 (see Note 13 to the Company’s financial statement included herein).
| Equity Compensation Plan Information | 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)) | 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 equity compensation plans (excluding securities reflected in column (a)) | |||||||||||||||||||
| (a) | (b) | (c) | (a) | (b) | (c) | |||||||||||||||||||
Equity compensation plans approved by security holders | 2,750 | $ | 12.10 | 297,250 | 66,200 | $ | 27.37 | N/A | ||||||||||||||||
Equity compensation plans not approved by security holders | N/A | N/A | N/A | N/A | N/A | 233,800 | ||||||||||||||||||
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| |||||||||||||||||||
Total | 2,750 | $ | 12.10 | 297,250 | 66,200 | $ | 27.37 | 233,800 | ||||||||||||||||
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 5. 2022.
In September 2022, the Company’s Board of Directors authorized the Company to repurchase up to 200,000 shares of the Company’s common stock during fiscal year 2023 on the open market.
The Company’s Board of Directors in September 2021 authorized 200,000 and in June 2022 authorized 62,300 shares to be repurchased during fiscal year 2022 on the open market. During the twelve months ended November 2, 2019.5, 2022 the Company repurchased an aggregate of 162,570 shares of common stock.
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 | |||||||
|
|
As a smaller reporting company, we are not requiredIn April 2022, the Company repurchased 100,000 shares of common stock from its president (see note 4) to provide the information required by this item.Company’s financial statements included herein.
6
| Item 6. | Reserved |
| 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 20192022 and 2018,2021, Nobility continued to experience increased consumer demand for affordable manufactured homes in Florida. Our three, fourthree-, four- and five bedroomfive-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. In addition, rising interest rates have slowed the demand for retail homebuyers.
Prestige’s wholly-ownedwholly 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 rising interest rate environment’s future impact on the housing market as well as the continued negative impact from COVID-19 and other factors on the Company’s production work force, supply of certain building products and the operations of the Company are difficult to forecast for fiscal year 2023. These factors have had a negative impact on customer traffic (and corresponding sales) within our sales centers, operations of the manufacturing facility and our business partners through the most part of fiscal year 2022 and during the third and fourth quarters of fiscal 2021.
In fiscal year 2022 Prestige purchased from other manufacturers 153 ($12,595,593) new homes to help eliminate the large backlog from Nobility. Prestige has 99 ($8,198,040) new homes from Nobility and outside manufacturers that are included in inventory and are in the field waiting to be completed and closed.
Nobility believes that being located in Florida offers a number of advantages such as an increasing population and a low-tax and business friendly state government. However, Nobility is also aware of climate-related risks such as hurricanes, tornados, sea-level rise, flooding and wildfires which are prone to occur in Florida. To date, management does not believe these climate-related risks have adversely impacted the Company. However, management believes if such climate-related events impacted the Company’s manufacturing or sales facilities, then the Company would be adversely impacted. If such climate-related events should deter future population growth in Florida, then the Company would be adversely impacted. If climate-related disclosures are required in the future by the Securities and Exchange Commission or if customary business practices should change to require greater climate-risk mitigation, then the Company would face increased compliance costs and costs of doing business. Such costs are not currently quantifiable.
The Company’s fiscal year ends on the first Saturday on or after October 31. The year ended November 2, 20195, 2022 (fiscal year 2019)2022) consisted of a fifty-two-week period and the year ended November 3, 20186, 2021 (fiscal year 2018) each2021) consisted of afifty-two week fifty-three-week period.
7
Results of Operations
Total net sales in fiscal year 2019 were $46,347,9312022 increased 14% to $51,522,054 compared to $41,878,186$45,062,558 in fiscal year 2018.2021. The Company reported net income of $8,810,420$7,232,029 in fiscal year 2019,2022, an increase of 34% compared to a net income of $4,963,632$5,398,808 during fiscal year 2018.2021. The demand for affordable manufactured housing in Florida and the U.S. is slowing as a result of the increased interest rate environment driven by the Federal Reserve. Although net sales increased during the twelve months ended November 5, 2022 as compared to the same period last year, we continued to experience the negative impact of limitations being placed on certain key production materials from suppliers, the delay or lack of key components from vendors as well as back orders, delayed shipments, price increases and labor shortages. These supply chain issues have caused delays in the completion of the homes at the manufacturing facility and the set-up process of retail homes in the field, resulting in decreased net sales due to our inability to timely deliver and setup homes to customers. Certainly, the COVID-19 pandemic has had an impact on each of these areas. We expect that these challenges will continue for the first six months of fiscal year 2023 or until the industry supply chain normalizes. The Company has continued to experience inflation in most building products resulting in increases to our material and labor costs which has increased the wholesale and retail selling prices of our homes. In addition, potential customers may delay or defer purchasing decisions in light of the rising interest rate environment. According to the Florida Manufactured Housing Association, shipments for the industry in Florida for the period from November 2021 through October 2022 were up approximately 23% from the same period last year.
The following table summarizes certain key sales statistics and percent of gross profit as of and for fiscal years ended November 2, 20192022 and November 3, 2018.2021.
| 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.
| 2022 | 2021 | |||||||
New homes sold through Company owned sales centers | 371 | 394 | ||||||
Pre-owned homes sold through Company owned sales centers | 13 | 15 | ||||||
Homes sold to independent dealers | 43 | 139 | ||||||
Total new factory built homes produced | 423 | 557 | ||||||
Average new manufactured home price—retail | $ | 126,438 | $ | 93,824 | ||||
Average new manufactured home price—wholesale | $ | 72,983 | $ | 50,183 | ||||
As a percent of net sales: | ||||||||
Gross profit from the Company owned retail sales centers | 20 | % | 17 | % | ||||
Gross profit from the manufacturing facilities—including intercompany sales | 16 | % | 15 | % | ||||
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 Company2022, we celebrated its 52nd our 55th 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 32 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 20192022 were $272,366$299,672 compared to $273,747$283,154 in fiscal year 2018.2021. 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, 20195, 2022 and November 3, 2018.6, 2021.
Cost of goods sold at our manufacturing facilities include: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:include appliances, air conditioners, electrical and plumbinghook-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 29% in fiscal year 20192022 compared to 25% in fiscal year 2018.2021. Our gross profit of $13,653,000was $14,903,438 for 2019 increased 28%fiscal year 2022 compared to $10,680,027$11,432,196 for 2018.fiscal year 2021. The gross profit is dependent on the sales mix of wholesale and retail homes and number of pre-owned homes sold. The increase in gross profit as a percentage of net sales is primarily due to the increase in the averagewholesale and retail and wholesale selling price on each home sold.prices of our homes.
Selling, general and administrative expenses at our manufacturing facility include salaries, professional services, advertising and promotions, corporate expense,expenses, employee benefits, office equipment and supplies and utilities. Selling, general and administrative expenses at our retail sales center include: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:include advertising, professional fees and office supplies.
As a percent of net sales, selling,
8
Selling, general and administrative expenses as a percentage of net sales was 11%13% in fiscal year 20192022 compared to 12% in fiscal 2018, which increased $395,118 from fiscal year 2018 to 2019. The increase in selling,2021. Selling, general and administrative expenses were $6,477,988 for fiscal year 2022 compared to $5,286,172 for fiscal year 2021. The dollar increases in 2019 resulted fromexpenses in 2022 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.
The Company earned interest in the amount of $556,142$234,804 in fiscal year 20192022 compared to $362,121$180,635 in fiscal year 2018.2021. Interest income is dependent on our cash balance and available rates of return. The increase during 2022 is primarily due to the increase in the balances and the interest rate in the money market accounts and certificates of deposit.rates.
The Company earned $78,107$60,457 from its joint venture, Majestic 21, in fiscal year 20192022 compared to $100,137$59,072 in fiscal year 2018.2021. 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 could vary year to year, but overall, the earnings will continue to decrease due to the amortization, maturity and payoff of the loans.
We received $379,104$364,520 in fiscal year 20192022 and $172,911$246,216 in fiscal year 20182021 under an escrow arrangement related to a Finance Revenue Sharing Agreement (FRSA) between 21st Mortgage Corporation and the Company. The distributions from the escrow account, related to certain loans financed by 21st Mortgage Corporation, are recorded in income by the Company as received, which has been the Company’s past practice. The increase in earnings is primarily due to the four distributions received in fiscal year 2022 compared to three distributions received fiscal year 2021. The earnings overall from the FRSA loan portfolio will continue to decrease due to the amortization and payoff of the loans.
The Company realizedpre-tax income of $11,779,529$9,436,534 in fiscal year 20192022 compared to apre-tax income of $6,605,462$7,118,733 in fiscal year 2018.2021.
8
The Company recorded an income tax expense of $2,969,109$2,204,505 in fiscal year 20192022 compared to $1,641,830$1,719,925 in fiscal year 2018.2021.
Net income in fiscal year 20192022 was $8,810,420$7,232,029 or $2.32$2.10 per basic and diluted share and net income in fiscal year 20182021 was $4,963,632$5,398,808 or $1.27$1.50 per basic and diluted share.
Liquidity and Capital Resources
Cash and cash equivalents were $22,533,965$16,653,449 at November 2, 20195, 2022 compared to $28,364,861$36,126,059 at November 3, 2018.6, 2021. Certificates of deposit were $10,153,575$3,903,888 at November 2, 20195, 2022 compared to $6,034,093$2,093,015 at November 3, 2018.6, 2021. Short-term investments were $521,283$589,071 at November 2, 20195, 2022 compared to $537,767$621,928 at November 3, 2018.6, 2021. Working capital was $37,872,687at$33,667,732 at November 2, 2019 as5, 2022 compared to $38,128,057$35,563,355 at November 3, 2018.6, 2021. A cash dividend was paid from our cash reserves in April 2022 in the amount of $1.00 per share ($3,532,976). During fiscal 2019,2022, the Company repurchased an aggregate 162,570 of 212,396 shares of its common stock for an aggregate of $4,585,861. In June 2019,$5,195,267 and Prestige purchased from other manufacturers 153 ($12,595,593) new homes to help eliminate the Company sold its former Pace retail sales center property for net proceeds of $1,078,325. On October 30, 2019,large backlog from Nobility. Prestige new home inventory was $20,016,093 at November 5, 2022 compared to $7,140,880 at November 6, 2021. The increase in Prestige new home inventory was due to the Company sold its 31.3% investment interest121 ($10,432,998) new homes in Walden Woods South LLC for $1,510,000inventory that were purchased from other manufacturers. Prestige has 99 ($8,198,040) new homes from Nobility and other manufacturers that are included in cash. A cash dividend was paid from the Company’s cash reserves in March 2019inventory and are in the amount of $3,864,216.field waiting to be completed and closed. 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 partythird-party floor plan financing expenses. The Company has no material commitmentsincurred $1.1 million in fiscal year 2022 in building an 11,900 square foot frame shop to manufacture steel frames for capital expenditures.our homes. In April 2022 Prestige sold 4.38 acres of land frontage at the Inverness location for $96,970 to the Florida Department of Transportation for SR 41 road widening project. 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 2021, the Company repurchased an aggregate of 100,346 shares of its common stock for an aggregate of $3,478,553. In January 2021 the Company purchased the land for the Tavares retail sales center for $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.
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$4.1 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, 2019,5, 2022, the Company continued to report a strong balance sheet which included total assets of approximately $58$62.4 million which was funded primarily by stockholders’ equity of approximately $49$47.9 million.
9
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 Form10-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.
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 setupset up 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”. to the Company’s financial statement included herein
9
The Company recognizes revenue from its wholly-ownedwholly 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 aton November 2, 20195, 2022 or November 3, 2018.6, 2021.
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
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.
10
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 facilitatingoff-balance sheet arrangements or other contractually narrow or limited purposes. As of November 2, 2019,5, 2022, 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 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 supply chain interruptions (such as current inflation with forest products and supply issues with vinyl siding and PVC piping), changes in market demand, changesincrease 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.
11
January 31, 2020
| November 2, 2019 | November 3, 2018 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 22,533,965 | $ | 28,364,861 | ||||
Certificates of deposit | 10,153,575 | 6,034,093 | ||||||
Short-term investments | 521,283 | 537,767 | ||||||
Accounts receivable—trade | 1,351,838 | 1,783,073 | ||||||
Note receivable | 83,231 | 46,444 | ||||||
Mortgage notes receivable | 17,896 | 15,664 | ||||||
Inventories | 10,616,778 | 7,270,550 | ||||||
Pre-owned homes, net | 331,103 | 933,640 | ||||||
Prepaid expenses and other current assets | 1,217,762 | 1,090,152 | ||||||
|
|
|
| |||||
Total current assets | 46,827,431 | 46,076,244 | ||||||
Property, plant and equipment, net | 5,005,644 | 4,763,566 | ||||||
Pre-owned homes, net | 808,128 | 473,191 | ||||||
Note receivable, less current portion | 43,769 | 46,265 | ||||||
Mortgage notes receivable, less current portion | 232,148 | 236,402 | ||||||
Other investments | 1,649,273 | 1,571,166 | ||||||
Property held for sale | — | 213,437 | ||||||
Deferred income taxes | 80,405 | 40,156 | ||||||
Cash surrender value of life insurance | 3,617,974 | 3,437,974 | ||||||
Other assets | 156,287 | 156,287 | ||||||
|
|
|
| |||||
Total assets | $ | 58,421,059 | $ | 57,014,688 | ||||
|
|
|
| |||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 1,111,216 | $ | 1,085,095 | ||||
Accrued compensation | 748,626 | 869,657 | ||||||
Accrued expenses and other current liabilities | 2,055,952 | 1,349,381 | ||||||
Income taxes payable | 2,016,132 | 579,786 | ||||||
Customer deposits | 3,022,818 | 4,064,268 | ||||||
|
|
|
| |||||
Total current liabilities | 8,954,744 | 7,948,187 | ||||||
|
|
|
| |||||
Total liabilities | 8,954,744 | 7,948,187 | ||||||
|
|
|
| |||||
Commitments and contingent liabilities | ||||||||
Stockholders’ equity: | ||||||||
Preferred stock, $.10 par value, 500,000 shares authorized; none issued and outstanding | — | — | ||||||
Common stock, $.10 par value, 10,000,000 shares authorized; 5,364,907 shares issued 3,664,070 and 3,873,731 outstanding, respectively | 536,491 | 536,491 | ||||||
Additional paid in capital | 10,687,662 | 10,670,848 | ||||||
Retained earnings | 55,298,750 | 50,352,546 | ||||||
Accumulated other comprehensive income | 389,164 | 390,407 | ||||||
Less treasury stock at cost, 1,700,837 shares in 2019 and 1,491,176 shares in 2018 | (17,445,752 | ) | (12,883,791 | ) | ||||
|
|
|
| |||||
Total stockholders’ equity | 49,466,315 | 49,066,501 | ||||||
|
|
|
| |||||
Total liabilities and stockholders’ equity | $ | 58,421,059 | $ | 57,014,688 | ||||
|
|
|
| |||||
6, 2021
| November 5, | November 6, | |||||||
| 2022 | 2021 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 16,653,449 | $ | 36,126,059 | ||||
Certificates of deposit | 3,903,888 | 2,093,015 | ||||||
Short-term investments | 589,071 | 621,928 | ||||||
Accounts receivable - trade | 1,288,645 | 680,228 | ||||||
Note receivable | 23,905 | 32,825 | ||||||
Mortgage notes receivable | 16,191 | 22,589 | ||||||
Inventories | 22,775,239 | 10,394,288 | ||||||
Pre-owned homes, net | 682,254 | 542,081 | ||||||
Prepaid expenses and other current assets | 2,172,675 | 1,821,267 | ||||||
Total current assets | 48,105,317 | 52,334,280 | ||||||
Property, plant and equipment, net | 7,915,695 | 6,847,780 | ||||||
Pre-owned homes, net | — | 755,394 | ||||||
Note receivable, less current portion | 16,599 | 38,895 | ||||||
Mortgage notes receivable, less current portion | 131,514 | 222,459 | ||||||
Mobile home park note receivable | — | 72,731 | ||||||
Other investments | 1,848,893 | 1,788,436 | ||||||
Deferred income taxes | 43,778 | — | ||||||
Operating lease right of use assets | — | 1,597 | ||||||
Cash surrender value of life insurance | 4,143,035 | 3,966,939 | ||||||
Other assets | 156,287 | 156,287 | ||||||
Total assets | $ | 62,361,118 | $ | 66,184,798 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 1,119,188 | $ | 939,964 | ||||
Accrued compensation | 1,132,423 | 555,222 | ||||||
Accrued expenses and other current liabilities | 1,742,696 | 1,513,967 | ||||||
Income taxes payable | 229,200 | 89,083 | ||||||
Operating lease obligation | — | 1,597 | ||||||
Customer deposits | 10,214,078 | 13,671,092 | ||||||
Total current liabilities | 14,437,585 | 16,770,925 | ||||||
Deferred income taxes | — | 99,568 | ||||||
Total liabilities | 14,437,585 | 16,870,493 | ||||||
Commitments and contingencies | ||||||||
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; 3,370,912 and 3,532,100 shares outstanding, respectively | 536,491 | 536,491 | ||||||
Additional paid in capital | 10,849,687 | 10,766,253 | ||||||
Retained earnings | 63,441,812 | 59,742,759 | ||||||
Less treasury stock at cost, 1,993,995 and 1,832,807 shares, respectively | (26,904,457 | ) | (21,731,198 | ) | ||||
Total stockholders’ equity | 47,923,533 | 49,314,305 | ||||||
Total liabilities and stockholders’ equity | $ | 62,361,118 | $ | 66,184,798 | ||||
| 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 | ||||
6, 2021
| Year Ended | ||||||||
| November 5, | November 6, | |||||||
| 2022 | 2021 | |||||||
Net sales | $ | 51,522,054 | $ | 45,062,558 | ||||
Cost of sales | (36,618,616 | ) | (33,630,362 | ) | ||||
Gross profit | 14,903,438 | 11,432,196 | ||||||
Selling, general and administrative expenses | (6,477,988 | ) | (5,286,172 | ) | ||||
Operating income | 8,425,450 | 6,146,024 | ||||||
Other income (loss): | ||||||||
Interest income | 234,804 | 180,635 | ||||||
Undistributed earnings in joint venture - Majestic 21 | 60,457 | 59,072 | ||||||
Proceeds received under escrow arrangement | 364,520 | 246,216 | ||||||
(Decrease) increase in fair value of equity investment | (32,857 | ) | 262,968 | |||||
Gain on disposal of property, plant and equipment | 88,936 | — | ||||||
Miscellaneous | 295,224 | 223,818 | ||||||
Total other income | 1,011,084 | 972,709 | ||||||
Income before provision for income taxes | 9,436,534 | 7,118,733 | ||||||
Income tax expense | (2,204,505 | ) | (1,719,925 | ) | ||||
Net income | $ | 7,232,029 | $ | 5,398,808 | ||||
Weighted average number of shares outstanding: | ||||||||
Basic | 3,437,784 | 3,597,756 | ||||||
Diluted | 3,445,498 | 3,607,448 | ||||||
Net income per share: | $ | 2.10 | $ | 1.50 | ||||
Basic | $ | 2.10 | $ | 1.50 | ||||
Diluted | ||||||||
| 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 | |||||||||||||||||||||
|
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|
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|
|
|
|
|
|
|
|
|
| |||||||||||||||
Balance at November 2, 2019 | 3,664,070 | $ | 536,491 | $ | 10,687,662 | $ | 55,298,750 | $ | 389,164 | $ | (17,445,752 | ) | $ | 49,466,315 | ||||||||||||||
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| |||||||||||||||
6, 2021
| Common | Common | Additional | Retained | Treasury | ||||||||||||||||||||
| Stock Shares | Stock | Paid-in-Capital | Earnings | Stock | Total | |||||||||||||||||||
Balance at November 6, 2021 | 3,532,100 | $ | 536,491 | $ | 10,766,253 | $ | 59,742,759 | $ | (21,731,198 | ) | $ | 49,314,305 | ||||||||||||
Cash dividend | — | — | — | (3,532,976 | ) | — | (3,532,976 | ) | ||||||||||||||||
Purchase of treasury stock | (162,570 | ) | — | — | — | (5,195,267 | ) | (5,195,267 | ) | |||||||||||||||
Stock-based compensation | 416 | — | 100,886 | — | 4,556 | 105,442 | ||||||||||||||||||
Exercise of employee stock | ||||||||||||||||||||||||
options | 966 | — | (17,452 | ) | — | 17,452 | — | |||||||||||||||||
Net income | — | — | — | 7,232,029 | — | 7,232,029 | ||||||||||||||||||
Balance at November 5, 2022 | 3,370,912 | $ | 536,491 | $ | 10,849,687 | $ | 63,441,812 | $ | (26,904,457 | ) | $ | 47,923,533 | ||||||||||||
| Common | Common | Additional | Retained | Treasury | ||||||||||||||||||||
| Stock Shares | Stock | Paid-in-Capital | Earnings | 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 | ||||||||||||
| 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 | ||||
|
|
|
| |||||
6, 2021
| Year Ended | ||||||||
| November 5, | November 6, | |||||||
| 2022 | 2021 | |||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 7,232,029 | $ | 5,398,808 | ||||
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | ||||||||
Depreciation | 169,661 | 186,320 | ||||||
Deferred income taxes | (143,346 | ) | 103,166 | |||||
Undistributed earnings in joint venture - Majestic 21 | (60,457 | ) | (59,072 | ) | ||||
Gain on disposal of property, plant and equipment | (88,936 | ) | — | |||||
Decrease (increase) in fair market value of equity investments | 32,857 | (262,968 | ) | |||||
Stock-based compensation | 105,442 | 69,750 | ||||||
Amortization of operating lease right of use assets | 1,597 | 713,771 | ||||||
Decrease (increase) in: | ||||||||
Accounts receivable - trade | (608,417 | ) | 109,818 | |||||
Inventories | (12,380,951 | ) | (1,099,611 | ) | ||||
Pre-owned homes | 615,221 | 221,702 | ||||||
Prepaid expenses and other current assets | (351,408 | ) | (806,420 | ) | ||||
Interest receivable | (23,888 | ) | (18,328 | ) | ||||
(Decrease) increase in: | ||||||||
Accounts payable | 179,224 | 11,869 | ||||||
Accrued compensation | 577,201 | (115,298 | ) | |||||
Accrued expenses and other current liabilities | 228,729 | 130,135 | ||||||
Income taxes payable | 140,117 | 194,759 | ||||||
Customer deposits | (3,457,014 | ) | 8,572,459 | |||||
Net cash (used in) provided by operating activities | (7,832,339 | ) | 13,350,860 | |||||
Cash flows from investing activities: | ||||||||
Purchase of property, plant and equipment | (1,245,610 | ) | (1,891,386 | ) | ||||
Purchase certificates of deposit | (3,880,000 | ) | — | |||||
Proceeds from certificates of deposit | 2,087,936 | 2,496,000 | ||||||
Proceeds from disposal of property, plant and equipment | 96,970 | — | ||||||
Collections on interest receivable | 5,079 | 31,620 | ||||||
Collections on mortgage notes receivable | 97,343 | 2,623 | ||||||
Collections on equipment and other notes receivable | 31,216 | 39,350 | ||||||
| Collections of mobile park Note receivable | 201,464 | — | ||||||
Issuance of equipment note receivable | — | (68,500 | ) | |||||
Issuance of mobile home park note receivable | (128,733 | ) | (72,731 | ) | ||||
Increase in cash surrender value of life insurance | (176,096 | ) | (171,037 | ) | ||||
Net cash (used in) provided by investing activities | (2,910,431 | ) | 365,939 | |||||
Cash flows from financing activities: | ||||||||
Payment of cash dividend | (3,532,976 | ) | (3,632,100 | ) | ||||
Proceeds from exercise of employee stock option | — | 15,125 | ||||||
Purchase of treasury stock | (5,195,267 | ) | (3,478,553 | ) | ||||
Reduction of operating lease obligation | (1,597 | ) | (801,114 | ) | ||||
Net cash used in financing activities | (8,729,840 | ) | (7,896,642 | ) | ||||
(Decrease) increase in cash and cash equivalents | (19,472,610 | ) | 5,820,157 | |||||
Cash and cash equivalents at beginning of year | 36,126,059 | 30,305,902 | ||||||
Cash and cash equivalents at end of year | $ | 16,653,449 | $ | 36,126,059 | ||||
Supplemental disclosure of cash flows information: | ||||||||
Income taxes paid | $ | 2,262,000 | $ | 1,422,000 | ||||
Noncash exercise of employee stock options | $ | (9,197 | ) | $ | — | |||
Table of ContentsNotes to Consolidated Financial Statements
Reclassification-Certain amounts in the fiscal year 2018 consolidated financial statements have been reclassified to conform to the current year presentation.
| 1. | Identify the contract(s) with a customer. |
| 2. | Identify each performance obligation in the contract. |
| 3. | Determine the transaction price. |
| 4. | Allocate the transaction price to each performance obligation; and |
| 5. | Recognize revenue when or as each performance obligation is satisfied. |
6, 2021.
18
Notes to Consolidated Financial Statements
2, 20195, 2022 and November 3, 20186, 2021 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 | ||||
|
|
|
| |||||
| 202 2 | 2021 | |||||||
Manufactured housing | $ | 50,264,637 | $ | 43,963,239 | ||||
Pre-owned homes | 957,745 | 816,165 | ||||||
Insurance agent commissions | 299,672 | 283,154 | ||||||
Total net sales | $ | 51,522,054 | $ | 45,062,558 | ||||
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
The Company acquired certain repossessed
Otherpre-owned
19
Notes to Consolidated Financial Statements
net realizable value.
6, 2021.
Other Investments - On October 30, 2019, the Company sold its 31.3% investment interest in Walden Woods South to certain related parties and existing owners, including the Company’s Executive Vice President, who purchased the majority of the 31.3% interest. The transaction value was based on a 3rd party appraisal, and the Company received $1,510,000 in cash. The Company’s investment historically was accounted for under the equity method, which was suspended when the carrying amount was reduced to $nil due to continued losses.
See Note 4 “Related Party Transactions”.
20
Notes to Consolidated Financial Statements
onfor 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.
| 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 | ||||
|
|
|
| |||||
| 2022 | 2021 | |||||||
Beginning accrued warranty expense | $ | 125,000 | $ | 125,000 | ||||
Less: reduction for payments | (428,031 | ) | (465,549 | ) | ||||
Plus: additions to accrual | 428,031 | 465,549 | ||||||
Ending accrued warranty expense | $ | 125,000 | $ | 125,000 | ||||
2021.
21
Notes to Consolidated Financial Statements
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 onavailable-for-sale securities, net of related taxes.
2022.
Recently Issued or Adopted Accounting Pronouncements –In November 2015, the FASB issued ASUNo. 2015-17 “Income Taxes (Topic 740): Balance Sheet Classification
Notes to Consolidated Financial Statements
In July 2015, the FASB issued ASUNo. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory”. The amendments require an entity to measure in scope inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The amendments do not apply to inventory that is measured usinglast-in,first-out (LIFO) or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured usingfirst-in,first-out (FIFO) or average cost. The amendments in this update are effective for public companies for fiscal years beginning after December 15, 2016. The Company adopted this ASU in the quarter ended February 3, 2018 and it did not have a material impact on its consolidated financial statements.
In May 2014, the FASB issued ASUNo. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (ASU2014-09), which requires an entity to recognize revenue from the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services together with subsequent updates, the guidance addresses, in particular, contracts with more than one performance obligation, as well as the accounting for some costs to obtain or fulfill a contract with a customer; and provides for additional disclosures with respect to revenues and cash flows arising from contracts with customers. With respect to public entities, this update, together with subsequent amendments, is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017 and early adoption is not permitted.
The core principal of ASU2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Using this principle, a comprehensive framework was established for determining how much revenue to recognize and when it should be recognized. To be consistent with this core principle, an entity is required to apply the following five-step approach:
1. Identify the contract(s) with a customer;
2. Identify each performance obligation in the contract;
3. Determine the transaction price;
4. Allocate the transaction price to each performance obligation; and
5. Recognize revenue when or as each performance obligation is satisfied.
The Company’s revenue comes substantially from the sale of manufactured housing, modular housing and park models, along with freight billed to customers, parts sold and aftermarket services.
The impact of the Company’s initial adoption of ASU 2014-09 using the modified retrospective method did not have a material impact on its consolidated financial statements and disclosures.
| November 2, 2019 | ||||||||||||||||
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||
Equity securities in a public company | $ | 167,930 | $ | 353,353 | $ | — | $ | 521,283 | ||||||||
|
|
|
|
|
|
|
| |||||||||
23
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 | ||||||||
|
|
|
|
|
|
|
| |||||||||
| November 5, 2022 | ||||||||||||||||
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||
Equity securities in a public company | $ | 167,930 | $ | 421,141 | $ | — | $ | 589,071 | ||||||||
| November 6, 2021 | ||||||||||||||||
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Estimated Fair Value | |||||||||||||
Equity securities in a public company | $ | 167,930 | $ | 453,998 | $ | — | $ | 621,928 | ||||||||
| 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 5, 2022 | ||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||
Equity securities in a public company | $ | 589,071 | $ | — | $ | — | ||||||
| November 6, 2021 | ||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||
Equity securities in a public company | $ | 621,928 | $ | — | $ | — | ||||||
Walden Woods South - On October 30, 2019, the Company sold its 31.3% investment interest in Walden Woods South LLC, which owns the Walden Woods South retirement community, to certain related parties and existing owners. Prior to the sale, the Company’s President directly owned 59.43% of Walden Woods South LLC. After the sale, the Company’s President and Executive Vice President directly own 59.43% and 23.04%, respectively, of Walden Woods South LLC.
24
Notes to Consolidated Financial Statements
June 2019,April 2022, the Company repurchased 100,000 shares of common stock from our President at $21.95$32.61 per share.
2021.
Investment in Retirement Community Limited Partnerships –On October 30, 2019, the Company sold its 31.3% investment interest in Walden Woods South to certain related parties and existing owners, including the Company’s Executive Vice President, who purchased the majority of the 31.3% interest. The transaction value was based on a 3rd party appraisal, and the Company received $1,510,000 in cash. The Company’s investment historically was accounted for under the equity method, which was suspended when the carrying amount was reduced to $nil due to continued losses.
The Company acquired a significant amount of repossessedpre-owned (Buy Back) inventory in 2011. Otherpre-owned homes are periodically acquired (Repossessions) as a convenience to the Company’s joint venture partner.Pre-owned homes are also taken astrade-ins on new home sales(Trade-Ins). This inventory consists of individual homes and homes on a real estate parcel. The Company continually monitors this inventory and records a valuation allowance where necessary on a unit specific basis which management believes results in inventory being valued at market. The Company could experience additional losses on the disposition of these homes beyond the level of the reserve recorded by the Company.
25
Notes to Consolidated Financial Statements
| November 2, 2019 | November 3, 2018 | |||||||
Raw materials | $ | 941,206 | $ | 904,399 | ||||
Work-in-process | 125,371 | 113,220 | ||||||
Inventory consigned to affiliated entities | 1,540,949 | 1,140,982 | ||||||
Finished homes | 7,888,879 | 4,998,004 | ||||||
Model home furniture | 120,372 | 113,946 | ||||||
|
|
|
| |||||
Inventories | $ | 10,616,778 | $ | 7,270,550 | ||||
|
|
|
| |||||
Pre-owned homes * | $ | 1,311,626 | $ | 1,956,265 | ||||
Inventory impairment reserve ** | (172,395 | ) | (549,434 | ) | ||||
|
|
|
| |||||
| 1,139,231 | 1,406,831 | |||||||
Less homes expected to sell in 12 months | (331,103 | ) | (933,640 | ) | ||||
|
|
|
| |||||
Pre-owned homes, long-term | $ | 808,128 | $ | 473,191 | ||||
|
|
|
| |||||
|
| Buy Back | Repossessions | Trade-Ins | Total | |||||||||||||
Balance at November 4, 2017 | 1,412,902 | 1,263,927 | 60,117 | 2,736,946 | ||||||||||||
Additions | — | 498,831 | 95,428 | 594,259 | ||||||||||||
Sales | (697,154 | ) | (607,115 | ) | (70,671 | ) | (1,374,940 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Balance at November 3, 2018 | 715,748 | 1,155,643 | 84,874 | 1,956,265 | ||||||||||||
Additions | — | 253,600 | 18,860 | 272,460 | ||||||||||||
Sales | (573,353 | ) | (316,496 | ) | (27,250 | ) | (917,099 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Balance at November 2, 2019 | $ | 142,395 | $ | 1,092,747 | $ | 76,484 | $ | 1,311,626 | ||||||||
|
|
|
|
|
|
|
| |||||||||
|
| November 2, 2019 | November 3, 2018 | |||||||
Balance at beginning of year | $ | 549,434 | $ | 779,725 | ||||
Less: Reductions for homes sold | (207,180 | ) | (253,314 | ) | ||||
Inventory holding costs | (36,232 | ) | (81,977 | ) | ||||
Additions (reduction) to impairment reserve | (133,627 | ) | 105,000 | |||||
|
|
|
| |||||
Balance at end of year | $ | 172,395 | $ | 549,434 | ||||
|
|
|
| |||||
NOTE 7 Property Held for Sale
On June 28, 2019 the Company sold its former Pace retail sales center property located in Pace, Florida for total net proceeds
| November 5, 2022 | November 6, 2021 | |||||||
Raw materials | $ | 2,119,372 | $ | 2,225,532 | ||||
Work-in-process | 135,513 | 97,021 | ||||||
Inventory consigned to affiliated entities | 318,590 | 794,766 | ||||||
| Finished homes – Nobility | 9,583,095 | 7,140,880 | ||||||
| Finished homes – Other | 10,432,998 | — | ||||||
Model home furniture | 185,671 | 136,089 | ||||||
Inventories | $ | 22,775,239 | $ | 10,394,288 | ||||
Pre-owned homes | $ | 682,254 | $ | 1,297,475 | ||||
Less homes expected to sell in 12 months | (682,254 | ) | (542,081 | ) | ||||
Pre-owned homes, long-term | $ | — | $ | 755,394 | ||||
In April 2018, Nobility sold its Belleview facility that had been vacant since June 2015 for $635,000.
26
Notes to Consolidated Financial Statements
| 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 5, 2022 | November 6, 2021 | ||||||||||
Land | — | $ | 4,872,382 | $ | 4,880,416 | |||||||
Land improvements | 10-20 | 1,253,025 | 1,245,975 | |||||||||
Buildings and improvements | 15-40 | 2,584,852 | 2,579,772 | |||||||||
Machinery and equipment | 3-10 | 1,059,377 | 1,038,455 | |||||||||
Furniture and fixtures | 3-10 | 301,889 | 301,889 | |||||||||
Construction in progress | — | 1,212,558 | — | |||||||||
| 11,284,083 | 10,046,507 | |||||||||||
Less accumulated depreciation | (3,368,388 | ) | (3,198,727 | ) | ||||||||
| $ | 7,915,695 | $ | 6,847,780 | |||||||||
| 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 5, 2022 | November 6, 2021 | |||||||
Accrued warranty expense | $ | 125,000 | $ | 125,000 | ||||
Accrued property and sales taxes | 407,968 | 351,784 | ||||||
Other accrued expenses | 1,209,728 | 1,037,183 | ||||||
Total accrued expenses and other current liabilities | $ | 1,742,696 | $ | 1,513,967 | ||||
27
Notes to Consolidated Financial Statements
| November 2, 2019 | November 3, 2018 | |||||||
Current tax expense: | ||||||||
Federal | $ | 2,338,619 | $ | 1,681,641 | ||||
State | 655,498 | 403,874 | ||||||
|
|
|
| |||||
| 2,085,515 | ||||||||
Deferred tax (benefit) | ( 25,007 | ) | (443,685 | ) | ||||
|
|
|
| |||||
Provision for income taxes | $ | 2,969,109 | $ | 1,641,830 | ||||
|
|
|
| |||||
| November 5, 2022 | November 6, 2021 | |||||||
Current tax expense: | ||||||||
Federal | $ | 2,009,567 | $ | 1,327,166 | ||||
State | 338,284 | 289,593 | ||||||
Deferred tax (benefit) | (143,346 | ) | 103,166 | |||||
Provision for income taxes | $ | 2,204,505 | $ | 1,719,925 | ||||
| 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 5, 2022 | November 6, 2021 | |||||||
Provision—federal statutory tax rate | $ | 1,981,672 | $ | 1,494,934 | ||||
Increase (decrease) resulting from: | ||||||||
State taxes, net of federal tax benefit | 263,528 | 250,708 | ||||||
Permanent differences: | ||||||||
Decrease in FL corporate tax rate | — | (135 | ) | |||||
Other | (40,695 | ) | (25,582 | ) | ||||
Provision for income taxes | $ | 2,204,505 | $ | 1,719,925 | ||||
| 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 5, 2022 | November 6, 2021 | |||||||
Deferred tax assets: | ||||||||
Allowance for doubtful accounts | $ | 58,173 | $ | 55,455 | ||||
Prepaid Expenses . | 14,995 | 14,295 | ||||||
Accrued expenses | 198,633 | 107,893 | ||||||
Other assets | 32,411 | 17,789 | ||||||
Lease right of use liability | — | 382 | ||||||
Stock-based compensation | 34,789 | 19,502 | ||||||
Total deferred tax assets | 339,001 | 215,316 | ||||||
Deferred tax liabilities: | ||||||||
Depreciation | (123,033 | ) | (135,466 | ) | ||||
Carrying value of investments | (106,253 | ) | (109,146 | ) | ||||
Amortization | (39,206 | ) | (37,374 | ) | ||||
Prepaid expenses | (26,731 | ) | (32,516 | ) | ||||
Lease right of use asset | — | (382 | ) | |||||
Net deferred tax assets (liabilities) | $ | 43,778 | $ | (99,568 | ) | |||
Notes to Consolidated Financial Statements
| November 2, 2019 | November 3, 2018 | |||||||
Current assets (liabilities): | ||||||||
Deferred tax assets | $ | — | $ | — | ||||
Deferred tax liabilities | — | — | ||||||
Net current deferred tax assets | — | — | ||||||
Non-current assets (liabilities): | ||||||||
Deferred tax assets | 323,279 | 363,498 | ||||||
Deferred tax liabilities | (242,874 | ) | (323,342 | ) | ||||
Netnon-current deferred tax (liabilities) | 80,405 | 40,156 | ||||||
|
|
|
| |||||
Net deferred tax assets (liabilities) | $ | 80,405 | $ | 40,156 | ||||
|
|
|
| |||||
| November 5, 2022 | November 6, 2021 | |||||||
Current assets (liabilities): | ||||||||
Deferred tax assets | $ | — | $ | — | ||||
Deferred tax liabilities | — | — | ||||||
Net current deferred tax assets | — | — | ||||||
Non-current assets (liabilities): | ||||||||
Deferred tax assets | 339,001 | 215,316 | ||||||
Deferred tax liabilities | (295,223 | ) | (314,884 | ) | ||||
Net non-current deferred tax assets (liabilities) | 43,778 | (99,568 | ) | |||||
Net deferred tax assets (liabilities) | $ | 43,778 | $ | (99,568 | ) | |||
On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (H.R. 1) (the “Act”). The Act includes a number of changes in existing tax law impacting businesses including, among other things, a permanent reduction in the corporate income tax rate from 34% to 21%. The rate reduction took effect on January 1, 2018.
29
Notes to Consolidated Financial Statements
| Number of Shares | Stock Option Price Range | Weighted Average Exercise Price | Aggregate Intrinsic Value | |||||||||||||
Outstanding at November 4, 2017 | 5,000 | $ | 12.10 | $ | 12.10 | |||||||||||
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| |||||||||||
Granted | — | — | — | |||||||||||||
Exercised | — | — | — | |||||||||||||
Canceled | — | — | — | |||||||||||||
|
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|
|
|
| |||||||||||
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 | |||||||||
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|
|
| |||||||||
| Number of Shares | Stock Oprtion Price Range | Weighted Average Exercies Price | Aggregate Intrinsic Value | |||||||||||||
Outstanding at October 31, 2020 | 27,300 | $ | 12.10 - 24.00 | $ | 23.36 | |||||||||||
Granted | 21,250 | 25.75 | 25.75 | |||||||||||||
Exercised | 1,250 | 12.10 | 12.10 | |||||||||||||
Canceled | — | — | — | |||||||||||||
Outstanding at November 6, 2021 | 47,300 | $ | 12.10 - 25.75 | $ | 24.41 | |||||||||||
Granted | 20,400 | 33.10 | 33.10 | |||||||||||||
Exercised | 1,500 | * | 12.10 | 12.10 | ||||||||||||
Canceled | — | — | — | |||||||||||||
Outstanding at November 5, 2022 | 66,200 | $ | 12.10 - 33.10 | $ | 27.37 | $ | — | |||||||||
| * | Options for the exercise of 1,500 shares were exercised on a cashless basis, resulting in the net issuance of 966 shares. |
5, 2022.
| 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 | |||||||||||||
|
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| |||||||||||
| 2,750 | 2 | $ | 12.10 | 2,750 | $ | 12.10 | ||||||||||||||
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|
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| |||||||||||
5, 2022:
Options Outstanding | Options Exercisable | |||||||||||||||||||
Exercise Price | Shares Outstanding | Weighted Average Remaining Contractual Life (years) | Weighted Average Exercise Price | Number Exercisable | Weighted Average Exercise Price | |||||||||||||||
$24.00 | 24,550 | 3 | $ | 24.00 | $ | 24,550 | $ | 24.00 | ||||||||||||
$25.75 | 21,250 | 4 | 25.75 | $ | 21,250 | 25.75 | ||||||||||||||
$33.10 | 20,400 | 5 | 33.10 | $ | 20,400 | 33.10 | ||||||||||||||
| 66,200 | 3.94 | $ | 27.37 | $ | 66,200 | $ | 27.37 | |||||||||||||
30
Notes to Consolidated Financial Statements
Future minimum payments by year and in the aggregate, under the aforementioned leases and othernon-cancelable operating leases with initial or remaining terms in excess of one year, as of November 2, 2019 are as follows 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.
not made anyan accrual provisionsprovision of $150,000 for litigation settlements in the accompanying consolidated financial statements.
31
| 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.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, 20195, 2022 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.reporting. There were no changes in our internal controls over financial reporting that occurred during the fourth quarter of fiscal 20192022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.
| Item 9B. | Other Information |
None.
| Item 9C. | Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. |
32Not applicable.
The accompanying notes are an integral part of these financial statements.
30
PART III
| Item 10. | Directors, Executive Officers and Corporate Governance |
Information is incorporated by reference pursuant to Instruction G of Form10-K from its definitive proxy statement for the 20202023 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 yearone-year terms.
Executive Officers
Terry E. Trexler | Chairman of the Board and President of Nobility since 1967; Mr. Trexler is also President of TLT, Inc. | |
Thomas W. Trexler | Executive Vice President and Chief Financial Officer of Nobility since December 1994; President of Prestige Home Centers, Inc. since June 1995; Director of Prestige since 1993 and Vice President from 1991 to June 1995; President of Mountain Financial, Inc. since August 1992; Vice President of TLT, Inc. since September 1991. | |
Jean Etheredge | Secretary since 1967. | |
Lynn J. Cramer, Jr. | Treasurer since 1980. | |
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 the 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 7th Street, Ocala, Florida 34474.
| Item 11. | Executive Compensation |
Information concerning executive compensation is incorporated by reference pursuant to Instruction G of Form10-K from Nobility’s definitive proxy statement for the 20202023 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 Form10-K from Nobility’s definitive proxy statement for the 20202023 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 Form10-K from Nobility’s definitive proxy statement for the 20202023 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 Form10-K from Nobility’s definitive proxy statement for the 20202023 annual meeting of shareholders.
33The accompanying notes are an integral part of these financial statements.
31
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, 20195, 2022 and November 3, 20186, 2021
Consolidated Statements of Comprehensive Income for the Years Ended November 2, 20195, 2022 and November 3, 20186, 2021
Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended November 2, 20195, 2022 and November 3, 20186, 2021
Consolidated Statements of Cash Flows for the Years Ended November 2, 20195, 2022 and November 3, 20186, 2021
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;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;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) | |||
(b) | |||
4.1 | ||
(c) | ||
(d) | ||
(e) | ||
34The accompanying notes are an integral part of these financial statements.
32
| 21.1 | |||
| 23.1 | |||
| 31.(a) | Written Statement of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act and Rule13a-14(a) or15d-14(a) under the Securities Exchange Act of 1934. | |
| (b) | |||
| 32.(a) | Written Statement of Chief Executive Officer pursuant to 18 U.S.C. §1350. | |
| (b) | Written Statement of Chief Financial Officer pursuant to 18 U.S.C. §1350. | ||
| 101. | Interactive data filing formatted in XBRL. | ||
| 104. | Cover Page Interactive Date File (formatted as inline XBRL and contained in Exhibit 101). | ||
| Item 16. | Form 10-K Summary |
None.
35
The accompanying notes are an integral part of these financial statements.
33
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: | February 1, 2023 | By: /s/ Terry E. Trexler | ||||
| Terry E. Trexler, Chairman, | ||||||
| President and Chief Executive Officer (Principal Executive Officer) | ||||||
| DATE: | February 1, 2023 | By: /s/ Thomas W. Trexler | ||||
| Thomas W. Trexler, Executive Vice President | ||||||
| and Chief Financial Officer (Principal Financial Officer) | ||||||
| DATE: | February 1, 2023 | 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: | February 1, 2023 | By: /s/ Terry E. Trexler | ||||
| Terry E. Trexler, Director | ||||||
| DATE: February 1, 2023 | By: /s/ Thomas W. Trexler | |||||
| Thomas W. Trexler, Director | ||||||
| DATE: | By: /s/ Robert P. Saltsman | |||||
| Robert P. Saltsman, Director | ||||||
| DATE: February 1, 2023 | By: /s/ Arthur L. Havener | |||||
| Arthur L. Havener, Director | ||||||
| ||||||
| ||||||
The accompanying notes are an integral part of these financial statements.
36
34