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 3, 2001
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 15, 2001 was 4,231,338.
NOBILITY HOMES, INC.
INDEX
Page
Number
PART I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of February 3, 2001
and November 4, 2000 3
Consolidated Statements of Income for the three
months ended February 3, 2001 and February 5, 2000 4
Consolidated Statements of Cash Flows for three
months ended February 3, 2001 and February 5, 2000 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 3, 2001 November 4, 2000
------------------ -------------------
ASSETS (Unaudited)
- ------
Current Assets:
Cash and cash equivalents $ 7,860,363 $ 9,828,122
Accounts receivable - trade 942,244 491,285
Inventories 7,216,088 7,037,495
Deferred income taxes 405,800 405,800
Prepaid expenses and other current assets 344,283 167,063
------------ ------------
Total current assets 16,768,778 17,929,765
Property, plant and equipment, net 2,580,972 2,580,176
Investment in joint venture - Majestic 21 698,722 624,641
Deferred income taxes - noncurrent 452,900 452,900
Other assets 2,280,999 2,256,001
------------ ------------
Total assets $ 22,782,371 $ 23,843,483
============ ============
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 762,995 $ 1,025,464
Accrued expenses and other current liabilities 1,059,263 1,241,617
Accrued compensation 454,419 523,881
Income taxes payable 261,547 27,550
------------ ------------
Total current liabilities 2,538,224 2,818,512
------------ ------------
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 17,190,443 16,809,068
Less treasury stock at cost, 1,133,569 and
942,969 shares, respectively, in 2001 and 2000 (6,111,931) (4,949,732)
------------ ------------
Total stockholders' equity 20,244,147 21,024,971
------------ ------------
Total liabilities and stockholders' equity $ 22,782,371 $ 23,843,483
============ ============
Page 3
NOBILITY HOMES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
------------------
February 3, February 5,
2001 2000
-------------------- -------------------
Net sales $ 5,785,562 $ 6,130,268
Net sales - related parties - 25,245
------------ ------------
Total net sales 5,785,562 6,155,513
Cost of goods sold (4,197,099) (4,671,316)
------------ ------------
Gross profit 1,588,463 1,484,197
Selling, general and administrative expenses (1,291,009) (1,342,125)
------------ ------------
Impairment adjustment of goodwill - (18,000)
Operating income 297,454 124,072
------------ ------------
Other income:
Interest income 131,534 81,398
Undistributed earnings in joint venture - Majestic 21 74,081 127,031
Gain on recovery of TLT, Inc. note receivable 100,000 306,830
Miscellaneous income 12,306 7,578
------------ ------------
317,921 522,837
------------ ------------
Income before provision for income taxes 615,375 646,909
Provision for income taxes (234,000) (248,000)
------------ ------------
Net income $ 381,375 $ 398,909
============ ============
Average shares outstanding
Basic 4,232,358 4,695,685
Diluted 4,232,358 4,695,685
Earnings per share
Basic $ .09 $ .08
Diluted $ .09 $ .08
Page 4
NOBILITY HOMES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
------------------
February 3, February 5,
2001 2000
----------------- -----------------
Cash flows from operating activities:
Net income $ 381,375 $ 398,909
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization 47,261 64,692
Impairment adjustment of goodwill - 18,134
Gain on recovery of TLT, Inc. note receivable (100,000) (306,830)
Undistributed earnings in joint venture - Majestic 21 (74,081) (127,031)
Increase in cash surrender value of life insurance (25,000) (25,000)
(Increase) decrease in:
Accounts receivable - trade (450,959) (325,464)
Inventories (178,593) 756,870
Prepaid expenses and other current assets (177,220) (68,129)
Increase (decrease) in:
Accounts payable (262,469) (448,278)
Accrued expenses and other current liabilities (182,354) (443,727)
Accrued compensation (69,462) (195,651)
Income taxes payable 233,997 248,000
---------- ----------
Net cash used in operating activities (857,505) (453,505)
---------- ----------
Cash flows from investing activities:
Purchase of property, plant and equipment (48,055) (29,046)
Collection of TLT,Inc. note receivable 100,000 306,830
---------- ----------
Net cash used in investing activities 51,945 277,784
---------- ----------
Cash flows from financing activities:
Purchase of treasury stock (1,162,199) (325,572)
Other - 39,530
---------- ----------
Net cash (used in) provided by financing activities (1,162,199) (286,042)
---------- ----------
Decrease in cash and cash equivalents (1,967,759) (461,763)
Cash and cash equivalents at beginning of quarter 9,828,122 7,973,241
---------- ----------
Cash and cash equivalents at end of quarter $ 7,860,363 $ 7,511,478
========== ==========
Supplemental disclosure of cash flow information
Interest Paid $ - $ -
========== ==========
Income taxes paid $ - $ -
========== ==========
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 3, 2001 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 4, 2000 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 3, 2001 and November 4, 2000 are summarized as
follows:
February 3, November 4,
2001 2000
--------------- --------------
Raw materials $ 472,354 $ 478,039
Work-in-process 107,494 122,377
Finished homes 6,017,729 5,734,138
Pre-owned manufactured homes 283,226 320,895
Model home furniture and other 335,285 382,046
--------------- --------------
$ 7,216,088 $ 7,037,495
================ ==============
Page 6
NOBILITY HOMES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Three Months Ended
February 3, February 5,
2001 2000
----------------- -----------------
Net income $ 381,375 $ 398,909
================= =================
Weighted average shares outstanding:
Basic 4,232,358 4,695,685
Add: common stock equivalents - -
----------------- -----------------
Diluted 4,232,358 4,695,685
================= =================
Earnings per share:
Basic and Diluted $ 0.09 $ 0.08
================= =================
3. Affiliated Entities
In the first three months of 2001, TLT, Inc. paid $100,000 to the Company
for advances that are non-interest bearing and have been fully reserved
since 1991. The amount collected has been recorded as gain on recovery
of the TLT, Inc. note receivable in the accompanying consolidated financial
statements. The balance of the unpaid advances at February 3, 2001, which
are fully reserved total $652,654. While some collections have been made
against the previously reserved receivable, management believes a full
reserve against the remaining unpaid amounts is warranted because the
receivable is uncollateralized.
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 February 3, 2001 decreased to
$5,785,562 from $6,155,513 for the same period last year. The decrease in sales
for the first three months of 2001 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. In the near term, we anticipate continued
pressure on both sales and earnings resulting from these factors.
Gross profit as a percentage of net sales was 27.5% in the first
quarter of 2001 compared to 24.1% for the same period last year. The increase in
gross profit in the first quarter of 2001 was primarily due to increased gross
margins at the retail sales centers, caused by selling a mix of higher priced
homes.
Selling, general and administrative expenses, as a percentage of net
sales, was 22.3% in the first quarter of 2001 compared to 21.8% for the same
period last year. The increase in first quarter of 2001 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 first quarter 2001 was $317,921 of which $131,534 was
from interest on cash equivalents and $74,081 was from equity in earnings from
the Company's financing joint venture, Majestic 21. The Company received a
$100,000 payment from TLT, Inc. against $752,654 of advances that are
non-interest bearing and have been fully reserved since 1991. This compares to
other income of $522,837 in the first quarter of fiscal 2000, of which $81,398
was from interest on cash equivalents and $127,031 was from equity in earnings
from Majestic 21. Included in the equity in earnings from Majectic 21 in the
first quarter 2000 were proceeds from the sale of loans in an asset backed
securitization. The Company received a $306,830 payment from TLT, Inc. in first
quarter 2000.
As a result of the factors discussed above and the share repurchases
discussed below, net income for the first quarter of 2001 was $381,375 or $.09
per share, compared to $398,909 or $.08 per share in the first quarter of 2000.
Liquidity and Capital Resources
- -------------------------------
Cash and cash equivalents were $7,860,363 at February 3, 2001 compared to
$9,828,122 as of November 4, 2000. The decrease in cash and cash equivalents was
primarily due to the repurchase of 190,600 shares of the Company's common stock
in the open market during the first quarter of 2001 for $1,162,200, an increase
in accounts receivable of $450,959 from increased sales to outside dealers, a
$178,600 increase in inventories and a $177,200 increase in prepaid expenses.
The Company maintains a revolving credit agreement with a major bank providing
for borrowings up to $2,500,000 with an option to increase the line to
$4,000,000. At February 3, 2001 and November 4, 2000, 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 2001. Working
capital requirements for the home inventory for new 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, changes in interest
rates, adverse weather conditions that reduce sales at retail centers, 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
There were no reportable events for Item 1 through Item 3 and Item 5
Item 4. Submission of Matters to a Vote of Securtiy Holders.
a) The annual Meeting of the Shareholders was held on February 23, 2001.
The only matter to come before the meeting was the election of
directors.
b) The Vote to elect a board of five directors was as follows:
For Against Abstain Not Voted
--- ------- ------- ---------
Terry E. Trexler 3,301,852 0 330 926,656
Richard C. Barberie 3,301,852 0 330 926,656
Robert P. Holliday 3,301,852 0 330 926,656
Robert P. Saltsman 3,301,852 0 330 926,656
Thomas W. Trexler 3,301,852 0 330 926,656
Item 6. Exhibits
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 15, 2001 By: /s/ Terry E. Trexler
--------------------------------------
Terry E. Trexler, Chairman,
President and Chief
Executive Officer
DATE: March 15, 2001 By: /s/ Thomas W. Trexler
--------------------------------------
Thomas W. Trexler, Executive
Vice President, Chief Financial
Officer
DATE: March 15, 2001 By: /s/ Lynn J. Cramer, Jr.
--------------------------------------
Lynn J. Cramer, Jr., Treasurer
and Principal Accounting Officer
Page 11