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 May 6, 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 June 12, 2000 was 4,657,938
NOBILITY HOMES, INC.
INDEX
Page
Number
PART I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of May 6, 2000
and November 6, 1999 3
Consolidated Statements of Income for the
three and six months ended May 6, 2000 and May 1, 1999 4
Consolidated Statements of Cash Flows for the
three and six months ended May 6, 2000 and May 1, 1999 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 6. Exhibits
Page 2
PART I. FINANCIAL INFORMATION
NOBILITY HOMES, INC.
CONSOLIDATED BALANCE SHEETS
May 6, 2000 November 6, 1999
----------- ----------------
ASSETS (Unaudited)
- ------
Current Assets:
Cash and cash equivalents $ 8,467,079 $ 7,973,241
Accounts receivable 353,838 167,764
Inventories 8,211,592 9,149,924
Deferred income taxes 179,900 179,900
Prepaid expenses and other current assets 394,126 310,642
----------- -----------
Total current assets 17,606,535 17,781,471
Property, plant and equipment, net 2,535,575 1,987,047
Investment in joint venture - Majestic 21 641,396 431,433
Deferred income taxes - noncurrent 665,400 665,400
Other assets 2,271,119 2,256,984
----------- -----------
Total assets $ 23,720,025 $ 23,122,335
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
- ----------------------------------
Current liabilities:
Accounts payable $ 1,172,899 $ 1,183,765
Accrued expenses and other current liabilities 1,050,685 974,286
Accrued compensation 357,101 428,343
Income taxes payable 192,150 99,150
----------- -----------
Total current liabilities 2,772,835 2,685,544
----------- -----------
Commitments and contingencies
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 15,451,999 14,540,965
Less treasury stock at cost, 706,969 and
633,069 shares, respectively, in 2000 and 1999 (3,670,444) (3,269,809)
----------- -----------
Total stockholders' equity 20,947,190 20,436,791
----------- -----------
Total liabilities and stockholders' equity $ 23,720,025 $ 23,122,335
=========== ===========
The accompanying notes are an integral part of these financial statements
Page 3
NOBILITY HOMES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
May 6, May 1, May 6, May 1,
2000 1999 2000 1999
----------- ----------- ----------- ------------
Net sales $ 6,989,326 $ 10,866,904 $ 13,119,594 $ 20,947,161
Net sales - related parties - 58,930 25,245 85,575
----------- ----------- ----------- ------------
Total net sales 6,989,326 10,925,834 13,144,839 21,032,736
Cost of goods sold (5,120,341) (7,837,079) (9,791,657) (15,149,617)
----------- ----------- ----------- ------------
Gross profit 1,868,985 3,088,755 3,353,182 5,883,119
Selling, general and administrative expenses (1,335,896) (1,887,931) (2,678,021) (3,594,424)
Revaluation adjustment of goodwill - - (18,000) -
----------- ----------- ----------- ------------
Operating income 533,089 1,200,824 657,161 2,288,695
----------- ----------- ----------- ------------
Other income:
Interest income 81,722 42,320 163,120 94,618
Undistributed earnings in joint venture -
Majestic 21 82,932 173,392 209,963 194,985
Miscellaneous 133,382 5,681 447,790 9,164
----------- ----------- ----------- ------------
298,036 221,393 820,873 298,767
----------- ----------- ----------- ------------
Income before provision for income taxes 831,125 1,422,217 1,478,034 2,587,462
Provision for income taxes (319,000) (526,000) (567,000) (973,000)
----------- ----------- ----------- ------------
Net income $ 512,125 $ 896,217 $ 911,034 $ 1,614,462
=========== =========== =========== ============
Weighted average shares outstanding
Basic 4,666,506 4,863,039 4,677,703 4,855,746
Diluted 4,666,506 4,908,301 4,677,703 4,919,066
Earnings per share
Basic $ .11 $ .18 $ .19 $ .33
Diluted $ .11 $ .18 $ .19 $ .33
The accompanying notes are an integral part of these financial statements
Page 4
NOBILITY HOMES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
May 6, May 1,
2000 1999
---------- ----------
Cash flows from operating activities:
Net income $ 911,034 $ 1,614,462
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 129,392 123,846
Impairment adjustment of goodwill 18,000 -
Gain on recovery of TLT, inc. note receivable (415,206) -
Undistributed earnings in joint venture - Majestic 21 (209,963) (194,985)
(Increase) decrease in:
Accounts receivable (186,074) (78,212)
Inventories 938,332 (982,084)
Prepaid expenses and other current assets (83,484) (44,801)
Increase (decrease) in:
Accounts payable (10,866) (363,908)
Accrued expenses and other current liabilities 76,399 (153,076)
Accrued compensation (71,242) (222,069)
Income taxes payable 93,000 (16,000)
---------- ----------
Net cash provided by (used in) operating activities 1,189,322 (316,827)
---------- ----------
Cash flows from investing activities:
Purchase of property and equipment (660,052) (99,891)
Increase in receivable from officers for life
insurance premiums (50,000) -
---------- ----------
Net cash used in investing activities (710,052) (99,891)
Cash flows from financing activities:
Purchase of treasury stock (400,635) (427,664)
Collection of TLT,Inc. note receivable 415,206 -
---------- ----------
Net cash provided by (used in) financing activities 14,571 (427,664)
Increase (Decrease) in cash and cash equivalents 493,841 (844,382)
Cash and cash equivalents at beginning of year 7,973,241 5,891,994
---------- ----------
Cash and cash equivalents at end of quarter $ 8,467,082 $ 5,047,612
========== ==========
Supplemental disclosure of cash flow information
Income taxes paid $ 474,000 $ 1,135,000
========== ==========
The accompanying notes are an integral part of these financial statements
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 and six months ended May 6, 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 May 6, 2000 and November 6, 1999 are summarized as follows:
May 6, November 6,
2000 1999
---------- ----------
Raw Materials $ 595,142 $ 571,151
Work-in-process 102,500 114,733
Finished homes 6,655,453 7,425,884
Pre-owned manufactured homes 407,538 496,593
Model home furniture and other 450,959 541,563
---------- ----------
$ 8,211,592 $ 9,149,924
========== ==========
Page 6
NOBILITY HOMES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Three Months Ended Six Months Ended
May 6, May 1, May 6, May 1,
2000 1999 2000 1999
---------- ---------- ---------- ----------
Net Income $ 512,125 $ 896,217 $ 911,034 $ 1,614,462
---------- ---------- ---------- ----------
Weighted average shares outstanding:
Basic 4,666,506 4,863,039 4,677,703 4,855,746
Add: common stock equivalents - 45,262 - 63,320
---------- ---------- ---------- ----------
Diluted 4,666,506 4,908,301 4,677,703 4,919,066
========== ========== ========== ==========
Earnings per share:
Basic $ 0.11 $ 0.18 $ 0.19 $ 0.33
========== ========== ========== ==========
Diluted $ 0.11 $ 0.18 $ 0.19 $ 0.33
========== ========== ========== ==========
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.
4. Affiliated Entities
-------------------
In the first six months of 2000, TLT paid $415,206 to the Company against
$1,519,000 of advances that are non-interest bearing and have been fully
reserved since 1991. This amount collected has been recorded as gain on
recovery ot TLT, Inc. note receivable in the accompanying consolidated
financial statements.
Page 7
NOBILITY HOMES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Results of Operations
- ---------------------
Net sales for the three months ended May 6, 2000 decreased to
$6,989,326 from $10,925,834 for the same period last year. Net sales for the six
months also decreased to $13,144,839 from $21,032,736 a year ago. Although,
second quarter of 2000 net sales increased 13.5 percent over first quarter of
2000, the decrease in sales from the comparable period in 1999 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 management's decision not to discount homes just to maintain
sales volume also adversely impacted sales.
Gross profit, as a percentage of net sales, was 26.7 percent in the
second quarter of 2000 compared to 28.3 percent for the same period last year.
For the six months gross profit, as a percentage of net sales, was 25.5 percent
compared to 28.0 percent for the same six month period last year. The decrease
in gross profit was primarily due to the lower sales volume at both the Nobility
manufacturing plants and Prestige retail sales centers.
Selling, general and administrative expenses, as a percentage of net
sales, was 19.1 percent in the second quarter of 2000 compared to 17.3 percent
for the same period last year. For the six months selling, general and
administrative expenses, as a percentage of net sales, was 20.4 percent compared
to 17.1 percent for the same six month period last year. The increase in
selling, general and administrative expenses, as a percent of net sales, was due
to the fixed overhead cost associated with the lower sales volume.
Other income for second quarter 2000 was $298,036 of which $81,722 was
from interest on short term investments and $82,932 was undistributed earnings
from the Company's financing joint venture, Majestic 21. The Company received a
$108,376 payment from TLT Communities against $1,211,923 of advances that are
non-interest bearing and have been fully reserved since 1991. For the six months
of 2000 other income was $820,873 of which $163,120 was from interest on short
term investments and $209,963 was undistributed earnings from the Company's
financing joint venture, Majestic 21. The Company received a $415,205 payment
from TLT Communities. For the same six month period in fiscal 1999 other income
was $298,767. There was no payment from TLT communities during the first six
months of 1999.
As a result of the factors discussed above, net income for the second
quarter of 2000 was $512,125 or $.11 per share, compared to $896,217 or $.18 per
share in the second quarter of 1999. For the six months ended May 6, 2000 net
income was $911,034 or $.19 per share, compared to $1,614,462 or $.33 per share
as of May 1, 1999.
Liquidity and Capital Resources
- -------------------------------
Cash and cash equivalents were $8,467,079 at May 6, 2000 compared to $7,973,241
as of November 6, 1999. Working capital was $14,833,703 at May 6, 2000 compared
to $15,095,927 at November 6, 1999. Inventories decreased to $8,211,592 in the
second 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.
Prestige purchased the land for two of its existing retail sales centers during
the second quarter of 2000 for $638,738. The Company leased the property from
unrelated entities under operating lease agreements.
The Company repurchased 73,900 shares of its common stock in the open market
during the first six months of 2000 for $400,635.
Prestige closed one of its sales centers in Chiefland, Florida in November 1999
and made an impairment adjustment to goodwill in the amount of $18,000.
The Company maintains a revolving credit agreement with a major bank providing
for borrowings up to $4.0 million. At May 6, 2000 and November 6, 1999, there
were no amounts outstanding under this agreement.
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 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 market demand, increasing interest
rates, adverse weather conditions that reduce sales at retail centers, price
increases in raw material costs, the risk of manufacturing plant shutdowns due
to storms or other factors, and the impact of marketing and cost-management
programs.
Page 9
Part II. OTHER INFORMATION AND SIGNATURES
Item 1. There were no reportable events for Item 1 through Item 5
Item 6. Exhibits
Exhibit 27 Financial Data Schedule
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: June 12, 1999 By: /s/ Terry E. Trexler
--------------------------------------
Terry E. Trexler, Chairman,
President and Chief
Executive Officer
DATE: June 12, 1999 By: /s/ Thomas W. Trexler
---------------------------------------
Thomas W. Trexler, Executive
Vice President, Chief Financial
Officer
DATE: June 12, 1999 By: /s/ Lynn J. Cramer, Jr.
---------------------------------------
Lynn J. Cramer, Jr., Treasurer
and Principal Accounting Officer
Page 10