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 August 4, 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 September 15, 2001 was 4,184,338.
NOBILITY HOMES, INC.
INDEX
Page
Number
PART I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of August 4, 2001
and November 4, 2000 3
Consolidated Statements of Income for the three
and nine months ended August 4, 2001 and
August 4, 2000 4
Consolidated Statements of Cash Flows for the
nine months ended August 4, 2001 and August 5, 2005 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
August 4, 2001 November 4, 2000
------------------- --------------------
ASSETS (Unaudited)
------
Current Assets:
Cash and cash equivalents $ 10,184,676 $ 9,828,122
Accounts receivable 1,026,349 491,285
Inventories 6,869,562 7,037,495
Deferred income taxes 405,800 405,800
Prepaid expenses and other current assets 353,764 167,063
----------- -----------
Total current assets 18,840,151 17,929,765
Property, plant and equipment, net 2,630,698 2,580,176
Investment in joint venture - Majestic 21 796,545 624,641
Deferred income taxes - noncurrent 452,900 452,900
Other assets 2,308,443 2,256,001
----------- -----------
Total assets $ 25,028,737 $ 23,843,483
=========== ===========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,052,344 $ 1,025,464
Accrued expenses and other current liabilities 1,699,241 1,241,617
Accrued compensation 462,426 523,881
Income taxes payable 574,543 27,550
----------- -----------
Total current liabilities 3,788,554 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 18,469,948 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 21,240,183 21,024,971
----------- -----------
Total liabilities and stockholders' equity $ 25,028,737 $ 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 Nine Months Ended
------------------ -----------------
August 4, August 5, August 4, August 5,
2001 2000 2001 2000
---------------- ---------------- ---------------- ---------------
Net sales $ 8,827,065 $ 7,638,698 $ 21,850,833 $ 20,758,292
Net sales - related parties - - 8,895 25,245
----------- ----------- ------------ ------------
Total net sales 8,827,065 7,638,698 21,859,728 20,783,537
Cost of goods sold (6,451,892) (5,727,020) (15,828,248) (15,518,677)
----------- ----------- ------------ ------------
Gross profit 2,375,173 1,911,678 6,031,480 5,264,860
Selling, general and administrative expenses (1,419,329) (1,373,974) (3,994,375) (4,051,995)
Revaluation adjustment of goodwill - - - (18,000)
----------- ----------- ------------ ------------
Operating income 955,844 537,704 2,037,105 1,194,865
----------- ----------- ------------ ------------
Other income:
Interest income 79,245 101,432 288,161 264,552
Undistributed earnings in joint venture -
Majestic 21 57,808 56,469 171,904 266,432
Gain on recovery of TLT, Inc. note receivable - 250,894 100,000 666,100
Miscellaneous 36,655 21,827 48,710 54,411
----------- ----------- ------------ ------------
173,708 430,622 608,775 1,251,495
----------- ----------- ------------ ------------
Income before provision for income taxes 1,129,552 968,326 2,645,880 2,446,360
Provision for income taxes (429,000) (363,000) (985,000) (930,000)
----------- ----------- ------------ ------------
Net income $ 700,552 $ 605,326 $ 1,660,880 $ 1,516,360
=========== =========== ============ ============
Weighted average shares outstanding
Basic 4,184,338 4,603,412 4,210,691 4,652,835
Diluted 4,184,338 4,603,412 4,210,691 4,652,835
Earnings per share
Basic $ .17 $ .13 $ .39 $ .33
Diluted $ .17 $ .13 $ .39 $ .33
The accompanying notes are an integral part of these financial statements
Page 4
NOBILITY HOMES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
-----------------
August 4, August 5,
2001 2000
--------------- ---------------
Cash flows from operating activities:
Net income $ 1,660,880 $ 1,516,360
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 164,336 190,693
Impairment adjustment of goodwill - 18,000
Gain on recovery of TLT, Inc. note receivable (100,000) (666,099)
Undistributed earnings in joint venture - Majestic 21 (171,904) (266,432)
Increase in cash surrender value of life insurance (74,997) (74,997)
(Increase) decrease in:
Accounts receivable (535,064) 36,133
Inventories 167,933 1,501,168
Prepaid expenses and other current assets (186,701) (36,353)
Increase (decrease) in:
Accounts payable 26,880 (260,813)
Accrued expenses and other current liabilities 457,624 402,242
Accrued compensation (61,455) (59,679)
Income taxes payable 546,993 16,000
----------- -----------
Net cash provided by operating activities 1,894,525 2,316,223
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (192,303) (708,540)
----------- -----------
Net cash used in investing activities (192,303) (708,540)
----------- -----------
Cash flows from financing activities:
Purchase of treasury stock (1,445,668) (1,170,429)
Collection of TLT,Inc. note receivable 100,000 666,099
----------- -----------
Net cash used in financing activities (1,345,668) (504,330)
----------- -----------
Increase in cash and cash equivalents 356,554 1,103,353
Cash and cash equivalents at beginning of year 9,828,122 7,973,241
----------- -----------
Cash and cash equivalents at end of quarter $ 10,184,676 $ 9,076,594
=========== ===========
Supplemental disclosure of cash flow information
Interest Paid $ - $ -
=========== ===========
Income taxes paid $ 438,000 $ 914,000
=========== ===========
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 nine months ended August 4, 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 August 4, 2001 and November 4, 2000 are summarized as
follows:
August 4, November 4,
2001 2000
------------- -------------
Raw Materials $ 536,477 $ 478,039
Work-in-process 107,029 122,377
Finished homes 5,683,166 5,734,138
Pre-owned manufactured homes 316,580 320,895
Model home furniture and other 226,310 382,046
---------- ----------
$ 6,869,562 $ 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.
4. Affiliated Entities
-------------------
In the first nine 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 August 4,
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 6
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 August 4, 2001 increased 15.6
percent to $8,827,065 from $7,638,698 for the same period last year. Net sales
for the nine months were $21,859,728 compared to $20,783,537 a year ago.
Although, third quarter of 2001 net sales increased 52.6 and 21.8 percent over
first and second quarters of 2001 respectively, 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 26.9 percent in the
third quarter of 2001 compared to 25.0 percent for the same period last year.
For the nine months gross profit, as a percentage of net sales, was 27.6 percent
compared to 25.3 percent for the same nine 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 and improved
operations at the retail lots.
Selling, general and administrative expenses, as a percentage of net
sales, was 16.1 percent in the third quarter of 2001 compared to 18.0 percent
for the same period last year. For the nine months selling, general and
administrative expenses, as a percentage of net sales, was 18.3 percent compared
to 19.5 percent for the same nine month period last year. The decrease in
selling, general and administrative expenses, as a percent of net sales, was due
to the fixed overhead cost assoicated with the higher sales volume.
Other income for third quarter 2001 was $173,708 of which $79,245 was
from interest on cash equivalents and $57,808 was undistributed earnings from
the Company's financing joint venture, Majestic 21. Other income for third
quarter 2000 was $430,622, of which was from interest on cash equivalents,
$56,469 was undistributed earnings from the Company's financing joint venture
Majestic 21, and $250,894 was received from TLT, Inc. For the first nine months
of 2001 other income was $608,775 of which $288,161 was from interest on cash
equivalents and $171,904 was undistributed earnings from the Company's financing
joint venture, Majestic 21. For the first nine months of 2001 the Company
received from TLT, Inc. a $100,000 payment as compared to a $666,100 payment for
the same period a year ago.
As a result of the factors discussed above, net income for the third
quarter of 2001 was $700,552 or $.17 per share, compared to $605,326 or $.13 per
share in the third quarter of 2000. For the nine months ended August 4, 2001 net
income was $1,660,880 or $.39 per share, compared to $1,516,360 or $.33 per
share as of August 5, 2000. The increase in earnings per share is in part a
result of a strategic plan to buy back the Company's common stock.
Liquidity and Capital Resources
-------------------------------
Cash and cash equivalents were $10,184,676 at August 4, 2001 compared to
$9,828,122 as of November 4, 2000. Working capital was $15,051,597 at August 4,
2001 compared to $15,111,253 at November 4, 2000. Inventories were $6,869,562
at the end of the third quarter of 2001 compared to $7,037,495 at the end of
fourth quarter of 2000. Accounts receivable increased to $1,026,349 due to
increased sales to outside dealers from a low receivable of $491,285 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 nine months of 2001 for $1,445,668.
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 August 4, 2001 and November 4, 2000, there were no amounts
outstanding under this agreement.
Page 7
NOBILITY HOMES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION (Continued)
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.
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 8
Part II. OTHER INFORMATION AND SIGNATURES
Item 1. There were no reportable events for Item 1 through Item 5
Item 6. Exhibits
None
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: September 18, 2001 By: /s/ Terry E. Trexler
---------------------------------
Terry E. Trexler, Chairman,
President and Chief
Executive Officer
DATE: September 18, 2001 By: /s/ Thomas W. Trexler
---------------------------------
Thomas W. Trexler, Executive
Vice President, Chief Financial
Officer
DATE: September 18, 2001 By: /s/ Lynn J. Cramer, Jr.
---------------------------------
Lynn J. Cramer, Jr., Treasurer
and Principal Accounting Officer