FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended February 5, 2000
Commission File number 0-6506
NOBILITY HOMES, INC.
(Exact name of registrant as specified in its charter)
Florida 59-1166102
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
3741 S.W. 7th Street
Ocala, Florida 34474
(Address of principal executive offices) (Zip Code)
(352) 732-5157
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X ; No _____.
The number of shares outstanding of each of the issuer's classes of common
equity as of March 16, 2000 was 4,672,138.
NOBILITY HOMES, INC.
INDEX
Page
Number
PART I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of February 5, 2000
and November 6, 1999 3
Consolidated Statements of Income for the three months
ended February 5, 2000 and January 30, 1949 4
Consolidated Statements of Cash Flows for three
months ended February 5, 2000 and January 30, 1959 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Conditions 8
PART II. Other Information and Signatures 10
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits
Page 2
PART I. FINANCIAL INFORMATION
NOBILITY HOMES, INC.
CONSOLIDATED BALANCE SHEETS
February 5, 2000 November 6, 1999
------------------ -------------------
ASSETS (Unaudited)
Current Assets:
Cash and cash equivalents $ 7,511,478 $ 7,973,241
Accounts receivable - trade 493,228 167,764
Inventories 8,393,054 9,149,924
Deferred income taxes 179,900 179,900
Prepaid expenses and other current assets 378,771 310,642
----------- -----------
Total current assets 16,956,431 17,781,471
Property, plant and equipment, net 1,920,737 1,987,047
Investment in joint venture - Nobility 21 558,464 431,433
Deferred income taxes - noncurrent 665,400 665,400
Other assets 2,254,984 2,256,984
----------- -----------
Total assets $ 22,356,016 $ 23,122,335
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 735,487 $ 1,183,765
Accrued expenses and other current liabilities 530,559 974,286
Accrued compensation 232,692 428,343
Income taxes payable 347,150 99,150
----------- -----------
Total current liabilities 1,845,888 2,685,544
----------- -----------
Commitments and contingencies liabilities - -
Stockholders' equity:
Preferred stock, $.10 par value, 500,000
shares authorized, none issued - -
Common stock, $.10 par value, 10,000,000
shares authorized; 5,364,907 shares issued 536,491 536,491
Additional paid in capital 8,629,144 8,629,144
Retained earnings 14,939,874 14,540,965
Less treasury stock at cost, 692,769 and
633,069 shares, respectively, in 2000 and 1999 (3,595,381) (3,269,809)
----------- -----------
Total stockholders' equity 20,510,128 20,436,791
----------- -----------
Total liabilities and stockholders' equity $ 22,356,016 $ 23,122,335
=========== ===========
Page 3
NOBILITY HOMES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
February 5, January 30,
2000 1999
-------------------- -----------------
Net sales $ 6,130,268 $ 10,080,257
Net sales - related parties 25,245 26,645
---------- -----------
Total net sales 6,155,513 10,106,902
Cost of goods sold (4,671,316) (7,312,538)
---------- -----------
Gross profit 1,484,197 2,794,364
Selling, general and administrative expenses (1,342,125) (1,706,493)
----------- -----------
Impairment adjustment of goodwill (18,000) -
Operating income 124,072 1,087,871
---------- -----------
Other income:
Interest income 81,398 52,298
Undistributed earnings in joint venture - Nobility 21 127,031 21,592
Gain on recovery of TLT, Inc. note receivable 306,830 -
Miscellaneous income 7,578 3,484
---------- -----------
522,837 77,374
---------- -----------
Income before provision for income taxes 646,909 1,165,245
Provision for income taxes (248,000) (447,000)
---------- -----------
Net income $ 398,909 $ 718,245
========== ===========
Weighted average shares outstanding
Basic 4,695,685 4,863,039
Diluted 4,695,685 4,941,227
Earnings per share
Basic $ .08 $ .15
Diluted $ .08 $ .15
Page 4
NOBILITY HOMES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
February 5, January 30,
2000 1999
----------------- ---------------
Cash flows from operating activities:
Net income $ 398,909 $ 718,245
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 64,692 59,091
Impairment adjustment of goodwill 18,134 -
Gain on recovery of TLT, Inc. note receivable (306,830) -
Undistributed earnings in joint venture - Nobility 21 (127,031) (21,592)
(Increase) decrease in:
Accounts receivable - trade (325,464) (108,322)
Inventories 756,870 (882,466)
Prepaid expenses and other current assets (68,129) (30,338)
Increase (decrease) in:
Accounts payable (448,278) (565,820)
Accrued expenses and other current liabilities (443,727) (560,288)
Accrued compensation (195,651) (240,482)
Income taxes payable 248,000 438,000
---------- -----------
Net cash used in operating activities (428,505) (1,193,972)
---------- -----------
Cash flows from investing activities:
Purchase of property, plant and equipment (29,046) (73,498)
Increase in receivable from officers for life insurance premiums (25,000) -
---------- -----------
Net cash used in investing activities (54,046) (73,498)
---------- -----------
Cash flows from financing activities:
Purchase of treasury stock (325,572) (24,804)
Collection of TLT,Inc. note receivable 306,830 -
Other 39,530 -
---------- -----------
Net cash provided by (used in) financing activities 20,788 (24,804)
---------- -----------
Decrease in cash and cash equivalents (461,763) (1,292,274)
Cash and cash equivalents at beginning of quarter 7,973,241 5,891,994
---------- -----------
Cash and cash equivalents at end of quarter $ 7,511,478 $ 4,599,720
========== ===========
Supplemental disclosure of cash flow information
Income taxes paid $ - $ 155,000
========== ===========
Page 5
NOBILITY HOMES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The unaudited financial information included in this report includes all
adjustments which are, in the opinion of management, necessary to reflect a
fair statement of the results for the interim periods. The operations for
the three months ended February 5, 2000 are not necessarily indicative of
the results of the full fiscal year.
Certain information and footnote disclosure normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the Securities and
Exchange Commission rules and regulations governing Form 10-Q. The
condensed financial statements included in this report should be read in
conjunction with the financial statements and notes thereto included in the
Registrant's November 6, 1999 Form 10-K Annual Report.
2. Inventories
-----------
Inventories are carried at the lower of cost or market. Cost of finished
home inventories is determined on the specific identification method.
Other inventory costs are determined on a first-in, first-out basis.
Inventories at February 5, 2000 and November 6, 1999 are summarized as
follows:
February 5, November 6,
2000 1999
------------- -------------
Raw materials $ 557,742 $ 571,151
Work-in-process 91,826 114,733
Finished homes 6,792,902 7,425,884
Pre-owned manufactured homes 449,155 496,593
Model home furniture and other 501,429 541,563
---------- ----------
$ 8,393,054 $ 9,149,924
========== ==========
Page 6
NOBILITY HOMES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Three Months Ended
February 5, January 30,
2000 1999
------------- ------------
Net income $ 398,909 $ 718,245
========== ==========
Weighted average shares outstanding:
Basic 4,695,685 4,863,039
Add: common stock equivalents - 78,188
---------- ----------
Diluted 4,695,685 4,941,227
========== ==========
Earnings per share:
Basic and Diluted $ 0.08 $ 0.15
========== ==========
3. Stock Dividend
--------------
On December 15, 1998, the Company's Board of Directors declared a 10% stock
dividend which was paid on February 19, 1999 to stockholders of record on
January 15, 1999. This resulted in the issuance of 442,820 additional
shares of common stock. The dividend was charged to retained earnings in
the amount of approximately $6.5 million, which was based upon the fair
value of the Company's common stock. All references to weighted-average
shares outstanding and per share amounts included herein reflect the 10%
stock dividend and its retroactive effect.
Page 7
NOBILITY HOMES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Results of Operations
- ---------------------
Net sales in the first quarter of 2000 were $6,155,513 as compared to
$10,106,902 for the first quarter of 1999. The decrease in sales for the first
three months of 2000 was primarily due to a very competitive market caused by
the industry's excess retail inventory. This excess inventory has developed from
industry growth of new retail locations that has outpaced consumer demand.
Tighter credit standards, increasing mortgage interest rates and managements
decision not to discount homes just to
Gross profit in the first quarter of 2000 as a percentage of net sales
was 24.1 percent compared to 27.6 percent for the same period last year. The
decrease in gross profit in the first quarter of 2000 was primarily due the
lower sales volume at both the Nobility's manufacturing plants and Prestige
retail sales centers.
Selling, general and administrative expenses, as a percentage of net
sales, was 21.8 percent in the first quarter of 2000 compared to 16.9 percent
for the same period last year. The increase in first quarter of 2000 selling,
general and administrative expenses as a percent of net sales was due to the
fixed overhead cost associated with the lower sales volume. Selling, general
and administrative expenses declined approximately $364,000 in dollars,
primarily due to the closing of four retail sal
Other income for first quarter 2000 was $522,837 of which $81,398 was
from interest on short term investments and $127,031 was undistributed earnings
from the Company's financing joint venture, Nobility 21. Earnings from Nobility
21 increased versus a year ago first quarter due to the sale of loans in an
asset backed securitazation which occurred during the first quarter 2000. The
Company received a $306,830 payment from TLT Communities against $1,518,754 of
advances that are non-interest bearing and have been fully reserved since 1991.
This compares to $77,374 in the first quarter of fiscal 1999, of which $52,298
was from short term interest and $21,592 was undistributed earnings from
Nobility 21. There was no payment from TLT communities during the first quarter
of fiscal 1999.
As a result of the factors discussed above, net income for the first
quarter of 2000 was $398,909 or $.08 per share, compared to $718,245 or $.15 per
share in the first quarter of 1999.
Liquidity and Capital Resources
- -------------------------------
Cash and cash equivalents were $7,511,478 at February 5, 2000 compared to
$7,973,241 as of November 6, 1999. Working capital increased to $15,110,543 at
February 5, 2000 from $15,095,927 at November 6, 1999. Inventories decreased
to $8,393,054 in the first quarter of 2000 from $9,149,924 at the fourth quarter
of 1999, as a result of Prestige lowering the number of model homes in stock at
their retail sales centers.
The Company repurchased 59,700 shares of its common stock in the open market
during the first quarter of 2000 for $325,573.
The Company maintains a revolving credit agreement with a major bank providing
for borrowings up to $4.0 million. At February 5, 2000 and November 6, 1999,
there were no amounts outstanding under this agreement.
Prestige closed one of its sales centers in Chiefland, Florida in November 1999
and made an impairment adjustment to goodwill in the amount of $18,143.
Consistent with normal practice, the Company's operations are not expected to
require significant capital expenditures during fiscal year 2000. Working
capital requirements for the home inventory for new and existing sales centers
will be met with internal sources.
Page 8
NOBILITY HOMES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION (Continued)
Forward Looking Statements
- --------------------------
Certain statements in this report are forward-looking statements within the
meaning of the of the federal securities laws. Although the Company believes
that the 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, competitive pricing pressures at both the
wholesale and retail levels, changes in mar
Page 9
Part II. OTHER INFORMATION AND SIGNATURES
There were no reportable events for Item 1 through Item 3 and Item 5
Item 4. Submission of Matters to a Vote of Security Holders.
a) The Annual Meeting of the Shareholders was held on February 25, 2000
b) The vote to elect a board of five directors was as follows:
For Against Abstain Not Voted
--- ------- ------- ---------
Terry E. Trexler 4,398,819 0 14,621 258,698
Richard C. Barberie 4,397,439 0 16,001 258,698
Robert P. Holliday 4,400,519 0 12,921 258,698
Robert P. Saltsman 4,400,112 0 13,328 258,698
Thomas W. Trexler 4,400,519 0 12,921 258,698
Item 6. Exhibits
Exhibit 27 Financial Data Schedule
Page 10
Signatures
Pursuant to the requirements 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: March 8, 2000 By: /s/ Terry E. Trexler
-----------------------------------
Terry E. Trexler, Chairman,
President and Chief
Executive Officer
DATE: March 8, 2000 By: /s/ Thomas W. Trexler
-----------------------------------
Thomas W. Trexler, Executive
Vice President, Chief Financial
Officer
DATE: March 8, 2000 By: /s/ Lynn J. Cramer, Jr.
-----------------------------------
Lynn J. Cramer, Jr., Treasurer
and Principal Accounting Officer