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 5, 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 June 12, 2001 was 4,184,338.
NOBILITY HOMES, INC.
INDEX
Page
Number
PART I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of May 5, 2001
and November 4, 2000 3
Consolidated Statements of Income for the three
and six months ended May 5, 2001 and May 6, 2000 4
Consolidated Statements of Cash Flows for the
six months ended May 5, 2001 and May 6, 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 6. Exhibits
Page 2
PART I. FINANCIAL INFORMATION
NOBILITY HOMES, INC.
CONSOLIDATED BALANCE SHEETS
May 5, 2001 November 4, 2000
------------------- ----------------------
ASSETS (Unaudited)
- ------
Current Assets:
Cash and cash equivalents $ 8,995,997 $ 9,828,122
Accounts receivable 571,366 491,285
Inventories 7,356,143 7,037,495
Deferred income taxes 405,800 405,800
Prepaid expenses and other current assets 422,968 167,063
------------- -------------
Total current assets 17,752,274 17,929,765
Property, plant and equipment, net 2,570,061 2,580,176
Investment in joint venture - Majestic 21 738,737 624,641
Deferred income taxes - noncurrent 452,900 452,900
Other assets 2,290,962 2,256,001
------------- -------------
Total assets $ 23,804,934 $ 23,843,483
============= =============
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 879,740 $ 1,025,464
Accrued expenses and other current liabilities 1,431,660 1,241,617
Accrued compensation 415,355 523,881
Income taxes payable 538,548 27,550
------------- -------------
Total current liabilities 3,265,303 2,818,512
------------- -------------
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 17,769,396 16,809,068
Less treasury stock at cost, 1,180,569 and
942,969 shares, respectively, in 2001 and 2000 (6,395,400) (4,949,732)
------------- -------------
Total stockholders' equity 20,539,631 21,024,971
------------- -------------
Total liabilities and stockholders' equity $ 23,804,934 $ 23,843,483
============= =============
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 5, May 6, May 5, May 6,
2001 2000 2001 2000
---------------- ---------------- ---------------- --------------
Net sales $ 7,238,206 $ 6,989,326 $ 13,023,768 $ 13,119,594
Net sales - related parties 8,895 - 8,895 25,245
------------ ----------- ----------- -----------
Total net sales 7,247,101 6,989,326 13,032,663 13,144,839
Cost of goods sold (5,179,257) (5,120,341) (9,376,356) (9,791,657)
----------- ----------- ------------ -----------
Gross profit 2,067,844 1,868,985 3,656,307 3,353,182
Selling, general and administrative expenses (1,284,037) (1,335,896) (2,575,046) (2,678,021)
Revaluation adjustment of goodwill - - - (18,000)
------------ ----------- ----------- -----------
Operating income 783,807 533,089 1,081,261 657,161
------------ ----------- ----------- -----------
Other income:
Interest income 77,382 81,722 208,916 163,120
Undistributed earnings in joint venture -
Majestic 21 40,015 82,932 114,096 209,963
Gain on recovery of TLT, Inc. note receivable - 108,376 100,000 415,209
Miscellaneous (251) 25,006 12,055 32,584
------------ ----------- ----------- -----------
117,146 298,036 435,067 820,876
------------ ----------- ----------- -----------
Income before provision for income taxes 900,953 831,125 1,516,328 1,478,037
Provision for income taxes (322,000) (319,000) (556,000) (567,000)
--------- ----------- ----------- -----------
Net income $ 578,953 $ 512,125 $ 960,328 $ 911,037
============ =========== =========== ===========
Weighted average shares outstanding
Basic 4,208,096 4,666,506 4,220,222 4,677,703
Diluted 4,208,096 4,666,506 4,220,222 4,677,703
Earnings per share
Basic $ .14 $ .11 $ .23 $ .19
Diluted $ .14 $ .11 $ .23 $ .19
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 5, May 6,
2001 2000
--------------- ---------------
Cash flows from operating activities:
Net income $ 960,328 $ 911,037
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 109,560 129,392
Impairment adjustment of goodwill - 18,000
Gain on recovery of TLT, Inc. note receivable (100,000) (415,206)
Undistributed earnings in joint venture - Majestic 21 (114,096) (209,963)
Increase in cash surrender value of life insurance (50,000) (50,000)
(Increase) decrease in:
Accounts receivable (80,081) (186,074)
Inventories (318,648) 938,332
Prepaid expenses and other current assets (255,905) (83,484)
Increase (decrease) in:
Accounts payable (145,724) (10,866)
Accrued expenses and other current liabilities 190,043 76,399
Accrued compensation (108,526) (71,242)
Income taxes payable 510,998 93,000
---------- ----------
Net cash provided by operating activities 597,949 1,139,325
---------- =---------
Cash flows from investing activities:
Purchase of property and equipment (84,406) (660,052)
---------- ----------
Net cash used in investing activities (84,406) (660,052)
---------- ----------
Cash flows from financing activities:
Purchase of treasury stock (1,445,668) (400,635)
Collection of TLT,Inc. note receivable 100,000 415,206
---------- ----------
Net cash (used in) provided by financing activities (1,345,668) 14,571
----------- ----------
(Decrease) Increase in cash and cash equivalents (832,125) 493,844
Cash and cash equivalents at beginning of year 9,828,122 7,973,241
---------- ----------
Cash and cash equivalents at end of quarter $ 8,995,997 $ 8,467,085
========== ==========
Supplemental disclosure of cash flow information
Interest Paid $ - $ -
========== ==========
Income taxes paid $ 45,000 $ 474,000
========== ==========
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 5, 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 May 5, 2001 and November 4, 2000 are summarized as follows:
May 5, November 4,
2001 2000
----------------- -----------------
Raw Materials $ 490,339 $ 478,039
Work-in-process 99,638 122,377
Finished homes 6,206,868 5,734,138
Pre-owned manufactured homes 279,218 320,895
Model home furniture and other 280,080 382,046
----------------- -----------------
$ 7,356,143 $ 7,037,495
================= =================
3. Reclassifications
-----------------
Certain amounts shown in the 2000 quarterly consolidated financial
statements have been reclassified to conform with the 2001 presentation.
These reclassifications did not have any effect on total assets, total
liabilities, stockholders' equity or net income.
Page 6
NOBILITY HOMES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
4. Affiliated Entities
-------------------
In the first six 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 May 5, 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 May 5, 2001 increased to
$7,247,101 from $6,989,326 for the same period last year. Net sales for the six
months were $13,032,663 compared to $13,144,839 a year ago. Although, second
quarter of 2001 net sales increased 25.3 percent over first quarter of 2001, net
sales continued to be adversely impacted by 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. A
high repossession rate, tighter credit standards 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 28.5 percent in the
second quarter of 2001 compared to 26.7 percent for the same period last year.
For the six months gross profit, as a percentage of net sales, was 28.0 percent
compared to 25.5 percent for the same six month period last year. The increase
in gross profit was primarily a result of improvements in the gross margins at
the manufacturing plants as a result of lower material cost.
Selling, general and administrative expenses, as a percentage of net
sales, was 17.7 percent in the second quarter of 2001 compared to 19.1 percent
for the same period last year. For the six months selling, general and
administrative expenses, as a percentage of net sales, was 19.8 percent compared
to 20.4 percent for the same six month period last year. The decline in selling,
general and administrative expenses, as a percent of net sales, was due to a
reduction in these expenses at both the manufacturing plants and retail sales
centers.
Other income for second quarter 2001 was $117,146 of which $77,382 was
from interest on cash equivalents and $40,015 was undistributed earnings from
the Company's financing joint venture, Majestic 21. The Company received a
$108,376 payment from TLT, Inc. in second quarter of 2000. For the first six
months of 2001 other income was $435,067 of which $208,916 was from interest on
cash equivalents and $114,096 was undistributed earnings from the Company's
financing joint venture, Majestic 21. For the first six months of 2001 the
Company received from TLT, Inc. a $100,000 payment as compared to a $415,209
payment for the same period a year ago.
As a result of the factors discussed above, net income for the second
quarter of 2001 was $578,953 or $.14 per share, compared to $512,125 or $.11 per
share in the second quarter of 2000. For the six months ended May 5, 2001 net
income was $960,328 or $.23 per share, compared to $911,037 or $.19 per share as
of May 6, 2000. The increase in earnings per share is primarily a result of a
strategic plan to buy back the Company's common stock.
Liquidity and Capital Resources
- -------------------------------
Cash and cash equivalents were $8,995,997 at May 5, 2001 compared to $9,828,122
as of November 4, 2000. Working capital was $14,486,971 at May 5, 2001 compared
to $15,111,253 at November 4, 2000. Inventories increased to $7,356,143 at the
end of the second quarter of 2001 from a low inventory of $7,037,495 at the end
of fourth quarter of 2000.
The Company repurchased 237,600 shares of its common stock in the open market
during the first six months of 2001 for $1,445,669.
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 May 5, 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 retail 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, changing 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
Item 1. There were no reportable events for Item 1 through Item 5
Item 6. Exhibits
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 18, 2001 By: /s/ Terry E. Trexler
--------------------------------------
Terry E. Trexler, Chairman,
President and Chief
Executive Officer
DATE: June 18, 2001 By: /s/ Thomas W. Trexler
--------------------------------------
Thomas W. Trexler, Executive
Vice President, Chief Financial Officer
DATE: June 18, 2001 By: /s/ Lynn J. Cramer, Jr.
--------------------------------------
Lynn J. Cramer, Jr., Treasurer
and Principal Accounting Officer
Page 10