UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended November 5, 2005
Commission file number 0-6506
NOBILITY HOMES, INC.
(Name of issuer in its charter)
Florida 59-1166102
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3741 S.W. 7th Street
Ocala, Florida 34474
(Address of principal executive offices) (Zip Code)
(352) 732-5157
(Issuer's telephone number, including
area code)
Securities registered under Section 12(b) of the Act:
Title of each class Name of each exchange
------------------- on which registered
None -------------------
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $.10 par value
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes _____ No X
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes _____ No X
Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the past 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 _________
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
Indicate by checkmark whether the registrant is an accelerated filer (as defined
in Rule 12b-2 of the Act). Yes _____ No X
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes ____ No X
State the aggregate market value of the voting stock held by non-affiliates of
the registrant on May 6, 2005, the last business day of the registrant's most
recently completed second fiscal quarter, computed by reference to the average
high and low prices on that date: $36,133,609.
(APPLICABLE ONLY TO CORPORATE ISSUERS)
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of January 27, 2006: 4,058,725 shares of common stock.
DOCUMENTS INCORPORATED BY REFERENCE Incorporated at
----------------------------------- ---------------
Nobility Homes, Inc. Proxy Statement Part III, Items 10,
for the 2006 Annual Meeting of 11, 12 and 13
Shareholders
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PART I
Item 1. Description of Business
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Nobility Homes, Inc., a Florida corporation incorporated in 1967, designs,
manufactures and sells a broad line of manufactured homes through a network of
its own retail sales centers throughout Florida. Nobility also sells its
manufactured homes on a wholesale basis to independent manufactured home retail
dealers and manufactured home communities.
Manufactured Homes
- ------------------
Nobility's homes are available in approximately 100 active models sold under the
trade names "Kingswood," "Richwood," "Springwood," "Springwood Special," "Tropic
Isle Special," "Regency Manor Special," and "Special Edition." The homes,
ranging in size from 672 to 2,650 square feet and containing from one to five
bedrooms, are available in
o single-wide widths of 14 and 16 feet ranging from 48 to 72 feet in
length;
o double-wide widths of 24, 26, 28 and 32 feet ranging from 32 to 76
feet in length; and
o triple-wide widths of 36, 38 and 42 feet ranging from 46 to 72 feet
in length.
o Quad-unit 2 sections 28 feet long by 48 feet long and 2 sections 28
feet long by 52 feet long
Nobility's homes are sold primarily as unfurnished dwellings ready for permanent
occupancy. Interiors are designed and color coordinated in a range of decors.
Depending on the size of the unit and quality of appliances and other
appointments, retail prices for Nobility's homes typically range from
approximately $25,000 to $100,000. Most of the prices of Nobility's homes are
considered by it to be within the low to medium price range of the industry.
Both of Nobility's manufacturing plants utilize assembly line techniques in
manufactured home production. Both plants manufacture and assemble the floors,
sidewalls, end walls, roofs and interior cabinets for their homes. Nobility
purchases from outside suppliers various other components that are built into
its homes including the axles, frames, tires, doors, windows, pre-finished
sidings, plywood, ceiling panels, lumber, rafters, insulation, gypsum board,
appliances, lighting and plumbing fixtures, carpeting and drapes. Nobility is
not dependent upon any one particular supplier for its raw materials or
component parts, and is not required to carry significant amounts of inventory
to assure itself of a continuous allotment of goods from suppliers.
Nobility's two manufacturing plants operated at an average of approximately 65%
of their single shift capacity in fiscal 2005 and 60% in 2004 and 50% in 2003,
respectively.
Nobility generally does not manufacture its homes to be held by it as inventory
(except for model home inventory of its wholly-owned retail network subsidiary,
Prestige Home Centers, Inc.), but, rather, manufactures its homes after receipt
of orders. Although Nobility attempts to maintain a consistent level of
production of homes throughout the fiscal year, seasonal fluctuations do occur,
with sales of homes generally lower during the first fiscal quarter due to the
holiday season.
The sales area for a manufactured home manufacturer is limited by substantial
delivery costs of the finished product. Nobility's homes are delivered by
outside trucking companies. Nobility estimates that it can compete effectively
within a range of approximately 350 miles from its manufacturing plants. During
the last three fiscal years, substantially all of Nobility's sales were made in
Florida.
Retail Sales
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Prestige Home Centers, Inc. operates 19 retail sales centers in north and
central Florida. Its principal executive offices are located at Nobility's
headquarters in Ocala, Florida. Sales by Prestige accounted for 82.7%, 72.1% and
74.7% of Nobility's sales during fiscal 2005, 2004 and 2003, respectively.
3
Each of Prestige's retail sales centers is located within 350 miles of
Nobility's two manufacturing facilities. Prestige owns the land at four of its
retail sales centers and leases the remaining 15 retail sales centers from
unaffiliated parties under leases with terms of between one and three years with
renewal options.
The primary customers of Prestige are homebuyers who generally purchase
manufactured homes to place on their own home sites. Prestige operates its
retail sales centers with a model home concept. Each of the homes displayed at
its retail sales centers is furnished and decorated as a model home. Although
the model homes may be purchased from Prestige's model home inventory,
generally, customers order homes which are shipped directly from the factory to
their home site. Prestige sales generally are to purchasers living within a
radius of approximately 100 miles from the selling retail lot.
In fiscal 1997, Nobility entered into a joint venture agreement with 21st
Century Mortgage Corporation to provide financing to retail customers purchasing
homes from Prestige. Additionally, financing for home purchases is provided by
eight other independent sources that specialize in manufactured housing lending
and numerous banks that finance manufactured home purchases. Prestige and
Nobility are not required to sign any recourse agreements with any of these
retail financing sources, nor does Prestige itself finance customers' new home
purchases.
The retail sale of manufactured homes is a highly competitive business. Because
of the large number of retail sales centers located throughout Nobility's market
area, potential customers typically can find several sales centers within a 100
mile radius of their present home. Prestige competes with over 100 other
retailers in its primary market area, some of which may have greater financial
resources than Prestige. In addition, manufactured homes offered by Prestige
compete with conventional site-built housing.
Prestige's wholly-owned subsidiary, Mountain Financial, Inc., an independent
insurance agent and mortgage broker, provides mortgage brokerage services,
automobile, extended warranty coverage and property and casualty insurance to
Prestige customers in connection with their purchase and financing of
manufactured homes. Mountain Financial, Inc., receives a mortgage brokerage fee
at the time a loan is originated and a commission on the insurance premium
collected at the time an insurance policy is written and in future years if the
homeowner renews the policy. Its revenues were approximately $479,000, $329,000
and $311,000 in fiscal 2005, 2004 and 2003, respectively.
Wholesale Sales to Manufactured Home Communities
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Nobility currently sells its homes on a wholesale basis exclusively through four
full-time salespersons to approximately 60 manufactured home communities.
Nobility continues to seek new opportunities in the areas in which it operates,
as there is ongoing turnover in the manufactured home communities as they
achieve full occupancy levels. As is common in the industry, most of Nobility's
customers other than its subsidiary, Prestige, sell homes produced by several
manufacturers. No customer accounted for more than 10% of Nobility's total sales
in fiscal 2005, and no customer other than Mobile Home Lifestyles accounted for
more than 10% of Nobility's total sales in fiscal 2004. Mobile Home Lifestyles,
which operates multiple manufactured home communities, accounted for
approximately $6.7 million or 13% of Nobility's total sales in fiscal 2004.
Dealers generally obtain inventory financing from financial institutions
(usually banks and finance companies) on a "floor plan" basis where the
financial institution obtains a security interest in all or part of the dealer's
manufactured home inventory. Nobility from time to time enters into repurchase
agreements with the lending institutions which provide that, in the event of a
dealer's default, Nobility will, at the lender's request, repurchase the home
provided that Nobility's liability will not exceed the manufacturer's invoice
price and that the repurchased home is new and unused. Generally, the repurchase
agreement expires within one year after a home is sold to the dealer, and the
repurchase price is limited to between 70% to 100% of the original invoice price
to the dealer, depending on the length of time that has expired since the
original sale. Generally, repurchase is conditioned upon the dealer's
insolvency. Any losses incurred as a result of such repurchases would be limited
to the difference between the repurchase price and the subsequent resale value
of the home repurchased. Nobility was not required to repurchase any homes
during fiscal 2005, 2004 or 2003. For additional information, see "Notes to
Consolidated Financial Statements." Nobility does not finance retail sales of
new homes for customers of its independent dealers.
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Nobility does not generally offer consigned inventory programs or other credit
terms to its customers and ordinarily receives payment for its homes within 15
to 30 days of delivery. However, Nobility may offer extended terms to unrelated
park dealers who do a high volume of business with Nobility. In order to
stimulate sales, Nobility sells homes for display to selected manufactured home
communities on special terms. The high visibility of Nobility's homes in such
communities generates additional sales of its homes through such dealers.
Regulation
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The manufacture, distribution and sale of homes is subject to governmental
regulation at the federal, state and local levels. The Department of Housing and
Urban Development has adopted national construction and safety standards that
have priority over existing state standards. In addition, HUD regulations
require that manufactured homes be constructed to more stringent wind load and
thermal standards. Compliance with these standards involves approval by a HUD
approved engineering firm of engineering plans and specifications on all models.
HUD's standards also require periodic inspection by state or other third party
inspectors of plant facilities and construction procedures, as well as
inspection of manufactured home units during construction. In addition, some
components of manufactured homes may also be subject to Consumer Product Safety
Commission standards and recall requirements. Nobility also manufactures modular
homes which are required to comply with the standard building code established
by the Florida Department of Community Affairs.
Nobility estimates that compliance with federal, state and local environmental
protection laws will have no material effect upon capital expenditures for plant
or equipment modifications or earnings for the next fiscal year.
The transportation of manufactured homes is subject to state regulation.
Generally, special permits must be obtained to transport the home over public
highways, and restrictions are imposed to promote travel safety including those
relating to routes, travel periods, speed limits, safety equipment and size.
Nobility's homes are subject to the requirements of the Magnuson-Moss Warranty
Act and Federal Trade Commission rulings which regulate warranties on consumer
products. Nobility provides a limited warranty of one year on the structural
components of its homes.
Competition
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The manufactured home industry is highly competitive. The initial investment
required for entry into the business of manufacturing homes is not unduly large.
State bonding requirements for entry in the business vary from state to state.
The bond requirement for Florida is $50,000. Nobility competes directly with
other manufacturers, some of whom are both considerably larger and possess
greater financial resources than Nobility. Based on number of units sold,
Nobility ranks 5th in the state of Florida out of the top 45 manufacturers
selling manufactured homes in the state. Nobility estimates that of those 45
manufacturers approximately 15 manufacture homes of the same type as Nobility
and compete in the same market area. Nobility believes that it is generally
competitive with most of those manufacturers in terms of price, service,
warranty and product performance.
According to statistics compiled by Statistical Surveys, Inc. from records on
file with the State of Florida, Prestige has been one of the largest retail
dealers of multi-section manufactured homes in Florida since 1994, based on
number of home sales.
Employees
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As of January 6, 2006, Nobility had 261 full-time employees, including 81
employed by Prestige. Approximately 139 employees are factory personnel compared
to approximately 122 in such positions a year ago, and 116 are in management,
administrative, supervisory, sales and clerical positions (including 75
management and sales personnel employed by Prestige) compared to approximately
106 a year ago. In addition, Nobility employs part-time employees when
necessary.
5
Nobility makes contributions toward employees' group health and life insurance
and to the Nobility 401(k) plan. Nobility, which is not subject to any
collective bargaining agreements, has not experienced any work stoppage or labor
disputes and considers its relationship with employees to be generally
satisfactory.
Item 1A. Risk Factors
_______ ____________
COMPANY RISK FACTORS
The ownership of our common stock involves a number of risks and uncertainties.
You should carefully consider the following risks, together with the information
provided elsewhere in our 10-K and Annual Report. The risks described below are
not the only ones facing us. Additional risks that are currently unknown to us
or that we currently consider to be immaterial may also impair our business or
adversely affect our financial condition or results of operations.
MANUFACTURED HOUSING INDUSTRY IS HIGHLY CYCLICAL
The manufactured and modular housing industry is highly cyclical and seasonal
and has experienced wide fluctuations in aggregate sales in the past. We are
subject to volatility in operating results due to external factors beyond our
control such as:
o availability of retail financing;
o the level and stability of interest rates;
o unemployment trends;
o impact of hurricanes or seasonal weather conditions;
o the availability of wholesale financing;
o housing supply and demand;
o defaults by retail customers resulting in repossessions;
o industry level of used or repossessed manufactured homes;
o international tensions and hostilities;
o levels of consumer confidence;
o inventory levels;
o regulatory and zoning matters;
o access to capital markets;
o changes in general economic conditions; and
o commodity prices
Sales in our market area are also seasonal in nature, with sales of homes
traditionally being stronger in the summer and fall months. The cyclical and
seasonal nature of our business causes our revenues and operating results to
fluctuate and makes it difficult for management to forecast sales and profits in
uncertain times. As a result of seasonal and cyclical downturns, results from
any quarter should not be relied upon as being indicative of performance in
future quarters.
MANUFACTURED HOUSING INDUSTRY EXPERIENCING A SIGNIFICANT DOWNTURN
Since mid-1999, the manufactured housing industry has experienced a prolonged
and significant downturn. Annual shipments have declined from approximately
350,000 to 132,000 in 2005. This downturn has resulted in part from the fact
that, beginning in 1999, consumer lenders in the sector began to tighten
underwriting standards and curtail credit availability in response to higher
than anticipated rates of loan defaults and significant losses upon the
repossession and resale of homes securing defaulted loans. Other causes of the
downturn include a reduced number of consumer lenders in the traditional chattel
(home-only) lending sector, higher interest rates on home-only loans and
generally unfavorable economic conditions. These factors have resulted in
declining wholesale shipments, excess manufacturing and retail locations and
surplus inventory.
6
As a result of the foregoing factors, based on industry data, we estimate that
approximately 54% of all industry retail locations have closed since 1999 and
that industry manufacturers have closed 120 manufacturing facilities,
representing 36% of the industry's manufacturing facilities.
It is possible that the current industry downturn is likely to continue, at
least in the near term. The availability of consumer financing for the purchase
of manufactured homes continues to be constrained. In addition, the number of
repossessed homes being offered for sale continues to have an adverse impact on
demand for new manufactured homes. Although it is difficult to predict future
industry conditions, these factors tend to indicate that a sustained recovery in
the manufactured housing industry is unlikely to occur in the near term.
If the current industry downturn gets materially worse, we may incur operating
and net income reductions, and may be required to take steps in an attempt to
mitigate the effect of unfavorable industry conditions, such as the closure of
facilities, retail sales centers, or consolidation of existing operations. These
steps could impair our ability to conduct our business in a manner consistent
with past practice and could make it more difficult for us to expand our
operations if and when industry conditions improve. Furthermore, some of these
steps could lead to fixed asset impairment charges and goodwill impairment
charges.
MANUFACTURED HOUSING INDUSTRY IS VERY COMPETITIVE
The manufactured and modular housing industry is highly competitive and some of
our competitors are larger and have stronger balance sheets and cash flow, as
well as greater access to capital, than we do. Competition at both the
manufacturing and retail levels is based upon several factors, including price,
product features, reputation for service and quality, merchandising, terms of
retailer promotional programs and the terms of retail customer financing.
Numerous companies produce manufactured homes in our market. In addition, our
homes compete with repossessed homes that are offered for sale in our market. A
number of our manufacturing competitors also have their own retail distribution
systems and consumer finance and insurance operations. The ability to offer
consumer finance and insurance products may provide some larger competitors with
an advantage. Based on retail sales, the ten largest manufacturers accounted for
approximately 80 percent of the retail manufactured housing market. In addition,
there are many independent manufactured housing retail locations in most areas
where we have retail operations. Because barriers to entry for manufactured
housing retailers are low, we believe that where wholesale floor plan financing
is available, it is relatively easy for new retailers to enter into our market
as competitors. In addition, our products compete with other forms of low to
moderate-cost housing, including new and existing site-built homes, apartments,
townhouses and condominiums. If we are unable to compete effectively in this
environment, our retail sales, wholesale shipments and operating results could
be reduced. As a result, our growth could be limited.
REDUCED AVAILABILITY OF CONSUMER FINANCING
The reduced availability of financing for our retail customers could continue to
affect our sales volume. Our retailers, as well as retail buyers of our
products, generally secure financing from third party lenders, which, in the
case of manufactured housing, have been negatively affected by adverse loan
experience. For example, Conseco, Associate, Chase and GreenPoint, which have
been very important lenders for customers of ours and of our dealers in the
1990's, have withdrawn from the manufactured housing finance business. A
consumer seeking to finance the purchase of a manufactured home without land
will generally pay a higher interest rate and have a shorter loan maturity than
a consumer seeking to finance the purchase of land and the home. In addition,
home-only financing is at times more difficult to obtain than the financing for
site-built homes. Reduced availability of such financing, tightened underwriting
standards, and high interest rates are currently having an adverse effect on the
manufactured housing business and our housing sales. In addition,
quasi-governmental agencies such as Fannie Mae and Freddie Mac, which are
important purchasers of loans from financial institutions, have tightened
standards relating to the manufactured housing loans that they will buy. There
can be no assurance that affordable retail financing for manufactured or modular
homes will be available on a widespread basis. If third party financing were to
become unavailable or were to be further restricted, this could have a material
adverse effect on our results of operations.
7
Availability of financing is dependent on the lending practices of financial
institutions, financial markets, governmental policies and economic conditions,
all of which are largely beyond our control. For example, since 1999 floor plan
lenders have tightened credit availability and Conseco Finance and Deutsche
Financial Services, which accounted for approximately 45% of wholesale floor
plan financing, have exited that business in the manufactured housing industry
and Transamerica and Bombardier's manufactured housing wholesale finance
businesses have been acquired by General Electric Corp. There are currently
three national lending institutions that specialize in providing wholesale floor
plan financing to manufactured housing retailers. Reduced availability of floor
plan lending may affect the inventory levels of our independent retailers, their
number of retail sales centers and related wholesale demand.
INCREASE IN PRICES AND UNAVAILABILITY OF RAW MATERIALS
Our results of operations can be affected by the pricing and availability of raw
materials. In our last two fiscal years, for example, we experienced an increase
in prices of our raw materials of approximately 8% to 10% per year. Although we
attempt to increase the sales prices of our homes in response to higher
materials costs, such increases typically lag behind the escalation of materials
costs. Three of the most important raw materials used in our operations, lumber,
gypsum wallboard and insulation, have experienced significant price fluctuations
in the past fiscal year. Sudden increases in demand for these construction
materials, as has recently occurred, caused by natural disasters or other market
forces, can greatly increase the costs of materials or limit the availability of
such materials. Although we have not experienced any shortage of such building
materials today, there can be no assurance that sufficient supplies of lumber,
gypsum wallboard and insulation, as well as other materials, will continue to be
available to us on terms we regard as satisfactory.
GEOGRAPHIC CONCENTRATION
We are concentrated geographically in Florida which could adversely affect our
business. In fiscal year 2005, approximately 100% of our revenues were generated
in Florida. A decline in the demand for manufactured housing in Florida, a
decline in the economy of Florida, and the impact of hurricanes in Florida or
other adverse conditions could have a material adverse affect on our results of
operations.
ZONING REGULATIONS FOR OUR HOMES
If the factory-built housing industry is not able to secure favorable local
zoning ordinances, or if there are changes in zoning regulations, our sales
could decline and our operating results could suffer. Any limitation on the
growth of the number of sites available for manufactured or modular homes, or on
the operation or starting new of manufactured housing communities, could
adversely affect our sales. In addition, new product opportunities that we may
wish to pursue for our manufactured or modular housing business could cause us
to encounter new zoning regulations and affect the potential market for these
new products. Manufactured housing communities and individual home placements
are subject to local zoning ordinances and other local regulations relating to
utility service and construction of roadways. In the past, there has been
resistance by property owners to the adoption of zoning ordinances permitting
the location of manufactured or modular homes in residential areas, and we
believe that this resistance has adversely affected the growth of the industry.
The inability of the manufactured home industry to affect change in these zoning
ordinances could have an adverse effect on our results of operations and we
cannot be certain that manufactured homes will receive more widespread
acceptance or that additional localities will adopt zoning ordinances permitting
the location of manufactured homes.
CONTINGENT LIABILITIES
We have, and will continue to have, contingent wholesale repurchase obligations
which could become actual obligations that we must satisfy. We may incur losses
under these wholesale repurchase obligations or be required to fund these or
other contingent obligations that would reduce our earnings. In connection with
a floor plan arrangement for our home shipments to independent retailers, the
financial institution that provides the retailer financing customarily requires
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us to enter into a separate repurchase agreement with the financial institution.
Under this separate agreement, generally for a period 12 to 18 months from the
date of our sale to the retailer, upon default by the retailer and repossession
of the home by the financial institution, we are generally obligated to purchase
from the lender the related floor plan loan or the home at a price equal to the
unpaid principal amount of the loan, plus certain administrative and handling
expenses, reduced by the cost of any damage to the home and any missing parts or
accessories. The difference between the gross repurchase price and the price at
which the repurchased manufactured home can then be resold, which is typically
at a discount to the original sale price, is an expense to us. Thus, if we were
obligated to repurchase a large number of manufactured homes in the future, this
would increase our costs, which could have a negative effect on our earnings.
During fiscal 2005 and 2004, there were no losses incurred under these
repurchase agreements. We estimate that our potential obligations under such
repurchase agreements were approximately $617,000 in 2005 and $1,363,000 in
2004. We may be required to honor contingent repurchase obligations in the
future and may incur additional expense as a consequence of these repurchase
agreements.
Tightened credit standards by lenders and more aggressive attempts to accelerate
collection of outstanding accounts with retailers could result in defaults by
retailers and consequently repurchase obligations on our part may be higher than
has historically been the case.
DEPENDENCE UPON INDEPENDENT RETAILERS
If we are unable to establish or maintain relationships with independent
retailers who sell our homes, our sales could decline and our operating results
could suffer. During fiscal 2005, approximately 25% of our wholesale shipments
of manufactured homes were made to independent retail locations in Florida. As
is common in the industry, independent retailers may sell manufactured homes
produced by competing manufacturers. We may not be able to establish
relationships with new independent retailers or maintain good relationships with
independent retailers that sell our homes. Even if we do establish and maintain
relationships with independent retailers, these retailers are not obligated to
sell our manufactured homes exclusively, and may choose to sell our competitors'
homes instead. The independent retailers with whom we have relationships can
cancel these relationships on short notice. In addition, these retailers may not
remain financially solvent as they are subject to industry, economic,
demographic and seasonal trends similar to the ones we face. If we do not
establish and maintain relationships with solvent independent retailers in our
market, sales could decline.
DEPENDENCE UPON MAJESTIC 21
During fiscal 1997, we contributed $250,000 for a 50% interest in a joint
venture with 21st Mortgage, to provide mortgage financing on our manufactured
homes sold by our retail division. As a 50% partner we do not have any legal
authority to manage or control this partnership's operations. During fiscal 2004
we transferred $250,000 from our existing joint venture in Majestic 21 in order
to participate in a new finance revenue sharing agreement with 21st Mortgage.
This revenue sharing agreement will continue to provide mortgage financing to
customers who qualify for such mortgage financing, and who purchase homes
through our Prestige Homes retail sales centers. The management of 21st Mortgage
has industry experience in managing, servicing and collecting loan portfolios;
however, many borrowers require notices and reminders to keep their loans
current and to prevent delinquencies and foreclosures. A substantial increase in
the delinquency rate that results from improper servicing or mortgage loan
performance in general could adversely affect the profitability and cash flow
from the loan portfolio for Majestic 21. Majestic 21 makes loans to borrowers
that it believes are credit worthy based on its credit guidelines. However, the
ability of these customers to repay their loans may be affected by a number of
factors, including, but not limited to national, regional and local economic
conditions; changes or continued weakness in specific industry segments; natural
hazard risks affecting the region in which the borrower resides; and employment,
financial or life circumstances. Therefore, if Majestic 21's operations are not
financially successful, our results may also be adversely affected, and we could
lose some or all of our investment in Majestic 21.
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DEPENDENCE UPON PRESTIGE HOME CENTERS
During fiscal 2005 approximately 75% of our wholesale shipments of manufactured
homes were sold through Prestige Home Centers, our own retail distribution
network. If Prestige's retail sales are adversely affected by changes in
conditions such as economic, demographics, weather, repossessions, unemployment
trends, interest rates, availability of retail financing, personnel, and housing
demand, our revenue and operating results could decline.
DEPENDENCE UPON TWO EXECUTIVE OFFICERS
We are dependent to a significant extent upon the efforts of our two principal
executive officers, Terry Trexler, Chairman of the Board and Chief Executive
Officer and Tom Trexler, Executive Vice President and President of Prestige Home
Centers, our retail distribution network. Tom Trexler is also responsible for
the operations of the mortgage and insurance divisions. The loss or the
prolonged absence of the services of either or both principal executive officers
could have a material adverse effect upon our business, financial condition and
results of operations. Our continued growth is also dependent upon our ability
to attract and retain additional skilled management personnel.
CONTROLLED BY TWO SHAREHOLDERS
Approximately 64% of our outstanding common stock is beneficially owned or
controlled by our Chairman and CEO, Terry Trexler and our Executive Vice
President and President of Prestige Home Centers, Tom Trexler. As a result,
these shareholders, acting together, are able to determine the outcome of
elections of our directors and thereby control the management of our business.
VOLATILITY OF STOCK PRICE
Our common stock price has been volatile and may continue to be volatile. The
price of our common stock may fluctuate widely, depending upon a number of
factors, many of which are beyond our control. These factors include the
perceived prospects of our business and the manufactured housing industry as a
whole; differences between our actual financial and operating results and those
expected by investors and analysts; changes in analysts' recommendations or
projections; changes affecting the availability of financing in the wholesale
and consumer lending markets; future issuances of our common stock for stock
options or acquisitions; actions or announcements by competitors; lack of
liquidity in our stock; changes in the regulatory environment in which we
operate; and changes in general economic or market conditions. In addition,
stock markets generally experience significant price and volume volatility from
time to time which may adversely affect the market price of our common stock for
reasons unrelated to our performance. All of these factors may adversely impact
the market prices of our common stock in the future.
GOVERNMENT REGULATIONS
Our manufactured housing business is subject to extensive federal and state
regulations, including construction and safety standards for manufactured homes.
Amendments to any of these regulations and the implementation of new regulations
could significantly increase the costs of manufacturing, purchasing, operating
or selling our products and could have an adverse effect on our results of
operations. Our failure to comply with present or future regulations could
result in fines, potential civil and criminal liability, suspension of sales or
production, or cessation of operations. In addition, a major product recall
could have an adverse effect on our results of operations.
Our operations are subject to a variety of Federal and state environmental
regulations relating to noise pollution and the use, generation, storage,
treatment, emission and disposal of hazardous materials and wastes. Although we
believe that we are currently in material compliance with applicable
environmental regulations, our failure to comply with present or future
regulations could result in fines, potential civil and criminal liability,
suspension of production or operations, alterations to the manufacturing
process, costly cleanup or capital expenditures.
10
GOODWILL IMPAIRMENT
A portion of our total assets at fiscal year end 2005 consisted of goodwill, all
of which is attributable to our retail operations. Effective in fiscal 2002, we
adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other
Intangible Assets. As a result, we no longer amortize goodwill. Instead, we
review goodwill at least annually to determine whether it has become impaired.
If goodwill has become impaired, we charge the impairment as an expense in the
period in which the impairment occurred. Our goodwill could be impaired if
developments affecting the acquired locations of our retail operations, lead us
to conclude that the earnings we expect to derive from the acquired locations of
our retail operations will be substantially reduced. A write off of all or part
of our goodwill could adversely affect our results of operations and financial
condition.
WARRANTY CLAIMS
We are subject to warranty claims in the ordinary course of our business.
Although we maintain reserves for such claims, which to date have been adequate,
there can be no assurance that warranty expense levels will remain at current
levels or that such reserves will continue to be adequate. A large number of
warranty claims exceeding our current warranty expense levels could have an
adverse effect on our results of operations.
SARBANES-OXLEY - SECTION 404
By fiscal year end 2007, we must comply with Section 404 of the Sarbanes-Oxley
Act which requires us to evaluate annually the effectiveness of our internal
controls over financial reporting as of the end of each fiscal year and to
include a management report assessing the effectiveness of our internal controls
over financial reporting in our annual report. Section 404 also requires our
independent registered public accounting firm to attest to, and report on,
management's assessment of our internal controls over financial reporting. If we
fail to meet our deadline for adoption or we fail to maintain the adequacy of
our internal controls, as such standards are modified, supplemented or amended
from time to time, we cannot assure you that we will be able to conclude in the
future that we have effective internal controls over financial reporting in
accordance with Section 404. If we fail to maintain a system of effective
internal controls, it could have an adverse effect on our business and stock
price.
Item 2. Properties
- ------ ----------
As of November 5, 2005, Nobility owned and operated two manufacturing plants:
Location Approximate Size
-------- ----------------
Belleview, Florida 33,500 sq. ft.
Ocala, Florida(1) 72,000 sq ft.
(1)Nobility's Ocala facility is a 72,000 square foot plant and is
located on approximately 35.5 acres of land on which an additional
two-story structure adjoining the plant serves as Nobility's corporate
offices.
Nobility's Belleview plant is of metal and concrete construction and
the Ocala plant is of metal construction. Both properties are in good
condition and require little maintenance.
Prestige has acquired the properties on which it's Pace, Panama City,
Yulee and Punta Gorda, Florida retail sales centers are located.
Prestige leases the property for its other 15 retail sales centers.
Item 3. Legal Proceedings
- ------ -----------------
Certain claims and suits arising in the ordinary course of business have been
filed or are pending against Nobility or Prestige. In the opinion of management,
any related liabilities that might arise would be covered under terms of
Nobility's liability insurance policies or would not have a material adverse
impact on Nobility's financial position, results of operations or cash flows.
11
Item 4. Submission of Matters to a Vote of Security Holders
- ------ ---------------------------------------------------
None
12
PART II
Item 5. Market for the Registrant's Common Equity and Related
- ------ -----------------------------------------------------
Stockholder Matters and Issuer Repurchases of Equity Securities
---------------------------------------------------------------
Market Information
- ------------------
Nobility's common stock is listed on the Nasdaq National Market under the symbol
NOBH. The following table shows the range of high and low sales prices for the
common stock for each fiscal quarter of 2005 and 2004.
Fiscal Year End
------------------------------------------------------------------------
Fiscal November 5, 2005 November 6, 2004
Quarter High Low High Low
------- ---- --- ---- ---
1st $ 23.99 $ 19.50 $ 11.77 $ 11.75
2nd 24.00 19.50 17.81 16.52
3rd 28.60 23.00 20.71 20.41
4th 35.50 22.21 22.20 19.95
Holders
- -------
At January 27, 2006, the approximate number of holders of record of common stock
was 203 (not including individual participants in security position listings).
Dividend
- --------
The Board of Directors declared an annual cash dividend of $0.30 per common
share for fiscal year 2005, paid January 13, 2006 to stockholders of record as
of January 3, 2006. The Company paid an annual cash dividend of $0.20 per common
share for fiscal year 2004, and paid an annual cash dividend of $0.10 per common
share for fiscal 2003. The payment of future cash dividends is within the
discretion of Nobility's board of directors and will depend, among other
factors, on Nobility's earnings, capital requirements and operating and
financial condition.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table displays equity compensation plan information as of the
fiscal year ended November 5, 2005. For further information, see Note 12 of
"Notes to Consolidated Financial Statements."
Equity Compensation Plan Information
Number of securities to be Weighted-average Number of securities remaining
issued upon exercise of exercise price of available for issuance under equity
outstanding options, outstanding options, compensation plans (excluding
warrants and rights warrants and rights securities reflected in column (a))
(a) (b) (c)
Equity compensation
plans approved by
security holders 165,915 $10.82 329,085
Equity compensation
plans not approved
by security holders None
----------------------------- ----------------------- ---------------------------------------
Total 165,915 $10.82 329,085
13
Issuer Purchases of Equity Securities
- -------------------------------------
Nobility repurchased in the open market 24,200 of its common stock during fiscal
2005.
Recent Sales of Unregistered Securities
- ---------------------------------------
Nobility has not sold any securities within the past three years which were not
registered under the Securities Act.
Item 6. Selected Financial Data
- ------ -----------------------
The following table sets forth Selected Financial Data for each of Nobility's
last five fiscal years. This information should be read in conjunction with
Nobility's consolidated financial statements (including the related notes
thereto) and Management's Discussion and Analysis of Financial Condition and
Results of Operations, each included elsewhere in this Form 10-K.
Years Ended(1)
- ----------------------------------------------------------------------------------------------------------------------
November 5, November 6, November 1, November 2, November 3,
2005 2004 2003 2002 2001
(in thousands except per share data)
----------------------------------------------------------------------------------------
Total net sales $56,711 $50,019 $39,229 $37,916 $30,288
Income from
operations 8,342 6,201 4,078 3,930 3,000
Other income 1,030 832 656 880 913
Net income 6,172 4,633 3,079 3,135 2,478
Weighted average shares
outstanding
Basic 4,043,394 4,016,797 3,996,424 4,107,748 4,200,863
Diluted 4,134,923 4,116,337 4,021,996 4,130,464 4,286,778
Earnings per share
Basic $1.53 $1.15 $ .77 $ .76 $ .59
Diluted 1.49 1.13 .77 .76 .58
Total assets 45,057 39,975 32,705 27,496 25,741
Long term
obligations -0- -0- -0- -0- -0-
Stockholders'
equity 37,069 31,374 26,816 23,779 21,724
Cash dividends
per common $0.20 $0.10 -0- -0- -0-
share
Item 7. Management's Discussion and Analysis of Financial Condition and
- ------ ---------------------------------------------------------------
Results of Operations
---------------------
General
- -------
Nobility's primary focus is homebuyers who generally purchase their manufactured
homes from retail sales centers to locate on property they own. Nobility has
aggressively pursued this market through its Prestige retail sales centers.
While Nobility actively seeks to make wholesale sales to independent retail
dealers, its presence as a competitor limits potential sales to dealers located
in the same geographic areas serviced by its Prestige retail sales centers.
Nobility has also aggressively targeted the retirement community market, which
is made up of retirees moving to Florida and typically purchasing homes to be
located on sites leased from park communities offering a variety of amenities.
14
Sales are not limited by the presence of the Company's Prestige retail sales
centers in this type of arrangement, as the retirement community sells homes
only within their community.
Nobility sold 1,044 homes in fiscal 2005, of which 259 homes, representing sales
of $7,593,725, were sold to independent dealers. Nobility sold 1,028 homes in
fiscal 2004, of which 435 homes, representing sales of $12,029,893, were sold to
independent dealers. Nobility sold 831 homes in fiscal 2003, of which 336 homes,
representing sales of $8,427,790, were sold to independent dealers. The balance
of Nobility sales in fiscal 2005, 2004 and 2003, representing 82.7%, 72.1% and
74.7% of net sales, respectively, were made on a retail basis through the
Company's retail sales centers.
Nobility has a product line of approximately 100 active models. Although market
demand can fluctuate on a fairly short-term basis, the manufacturing process is
such that Nobility can alter its product mix relatively quickly in response to
changes in the market. During fiscal 2005, 2004 and 2003, Nobility's product mix
was affected by the number of "Special Edition" homes marketed by Prestige and
by larger, more expensive multi-wide homes resulting from the availability of
varied types of financing at competitive rates. Most family buyers today
purchase three-, four- or five-bedroom manufactured homes, compared with the
two-bedroom home that typically appeals to the retirement buyers who reside in
the manufactured housing communities.
Majestic 21, Nobility's joint venture with 21st Mortgage Corporation provides
mortgage financing to retail customers who purchase Nobility's manufactured
homes at Prestige retail sales centers. This joint venture, which originates and
services loans, has given Prestige more control over the financing aspect of the
retail home sales process and allowed it to offer better services to its retail
customers. Management believes that the joint venture gives Prestige an
additional potential for profit by providing finance products to retail
customers. In addition, management believes that Prestige has more input in the
design of unique finance programs for prospective homebuyers, and that the joint
venture has resulted in more profitable sales at its Prestige retail sales
centers. In an effort to make manufactured homes more competitive with
site-built housing, financing packages are available to provide (1) 30-year
financing, (2) an interest rate reduction program, (3) combination
land/manufactured home loans, and (4) a 5% down payment program for qualified
buyers. Prestige also maintains eight outside financing sources that provide
financing to retail homebuyers for its manufactured homes.
Prestige's wholly-owned subsidiary, Mountain Financial, Inc., is an independent
insurance agent and mortgage broker, provides mortgage brokerage services,
automobile, extended warranty coverage and property and casualty insurance to
Prestige customers in connection with their purchase and financing of
manufactured homes.
The years ended November 5, 2005 and November 1, 2003 consisted of a fifty-two
(52) week period. The year ended November 6, 2004 consisted of a fifty-three
(53) week period.
Results of Operation
- --------------------
For fiscal years ended November 5, 2005, November 6, 2004 and November 1, 2003,
results of operations are as follows. Net sales in fiscal 2005 were $56,710,925
compared to $50,018,542 in fiscal 2004 and $39,229,156 in fiscal 2003. Net sales
increased 13.4% in fiscal 2005, 27.5% in fiscal 2004 and 3.5% in fiscal 2003 as
compared to the prior year net sales. The increased sales in fiscal 2005 was
primarily due to the 30.1% increase in sales from the Company's retail sales
centers. The increased sales in fiscal 2004 was primarily due to the 42.7%
increase in sales to outside dealers coupled with an increase of 23.2% in the
Company's retail sales centers same store revenues.
Management remains optimistic for fiscal year 2006, convinced that our specific
geographic market is one of the best long-term growth areas in the country and
because of the strong operating leverage inherent in the Company. With an
improving economy, declining unemployment claims, and increasing but still low
interest rates in 2006, management expects the demand for our homes to improve.
Increased demand should also result from building replacement homes due to the
hurricanes. We anticipate continued pressure on both sales and earnings
resulting from continuous price increases in lumber and oriented strand board
(OSB), sheetrock, steel and oil related products and services. Overall, most
construction materials, including materials used in the set-up of our homes,
have increased or fluctuated widely in price over the past year with little
price stability in sight.
15
Combined industry-wide shipment of multi-section and single-section homes for
the first ten months of calendar 2005 increased approximately 6% from the like
period last year and declined 2% in calendar 2004 and 23% in calendar 2003.
Florida combined industry shipments of multi-section homes and single-section
homes in the first ten months of calendar 2005 increased approximately 23% from
the like period last year and increased 9% in calendar 2004 and declined 6% in
calendar 2003. The increase in Florida shipments in 2005 was positively impacted
by both FEMA purchased temporary housing and customers replacing homes due to
the hurricanes in 2004. Approximately 99% of Nobility's home sales are
multi-section homes.
Gross profit as a percentage of net sales was 29.0% in fiscal 2005 compared to
26.0% in fiscal 2004 and 25.2% in fiscal 2003. The increase in gross profit, as
a percentage of sales, in fiscal year 2005 and 2004 was primarily due to an
increase in sales from the Company's retail sales centers and manufacturing
operations. The Company also increased the lumber surcharge to off-set higher
material costs, primarily in lumber and oriented strand board (OSB), sheetrock,
steel and oil-related products and services.
Selling, general and administrative expenses as a percent of net sales were
14.3% in fiscal 2005 compared to 13.6% in fiscal 2004 and 14.8% in fiscal 2003.
The increase in selling, general and administrative expenses, as a percent of
net sales, resulted from the increase in compensation expenses directly related
to the increased sales at the Company's retail sales centers.
The Company earned interest on cash equivalents and investments in the amount of
$598,904 for fiscal 2005, $376,753 for fiscal 2004 and $211,018 for fiscal 2003.
The increased interest income was primarily due to a change in the investment
portfolio to long-term marketable securities to obtain a higher yield.
The Company earned from Majestic 21 $373,481 in fiscal 2005, $342,509 in fiscal
2004 and $220,148 in fiscal 2003. Income reported for Majestic 21 results from
the Company's 50% share in the equity in the earnings of this joint venture.
Majestic 21 is a financing joint venture accounted for under the equity method
of accounting. Income for the joint venture fluctuates due to higher
amortization of prepaid finance charges on the portfolio. The Company believes
that its historical loss experience has been favorable impacted by its ability
to resell foreclosed/repossessed units through its network of retail sales
centers.
As a result of the factors discussed above, earnings for fiscal 2005 were
$6,172,217 or $1.49 per diluted share compared to $4,632,810 or $1.13 per
diluted share for fiscal 2004 and $3,078,479 or $.77 per diluted share for
fiscal 2003.
Liquidity and Capital Resources
- -------------------------------
Cash and cash equivalents were $14,368,183 at November 5, 2005 compared to
$14,588,332 at November 6, 2004. Short and long-term investments were
$12,247,591 at November 5, 2005 compared to $9,119,424 at November 6, 2004.
Working capital was $17,555,635 at November 5, 2005 compared to $16,483,939 at
November 6, 2004. Nobility owns the entire inventory for its Prestige retail
sales centers and does not incur any third party floor plan financing expenses.
Inventories increased to $9,549,486 at November 5, 2005 from $6,908,557 at
November 6, 2004 primarily due to a planned increase in the number of homes in
inventory at the Company's retail sales centers.
Nobility paid an annual cash dividend of $0.20 per common share for fiscal year
2004 on January 14, 2005 in the amount of $807,826 and paid an annual cash
dividend of $0.10 per common share for fiscal year 2003 on January 12, 2004 in
the amount of $401,100.
Nobility repurchased in the open market 24,200 shares of its common stock for
$494,925 during fiscal 2005 and did not repurchase any shares of its common
stock during the fiscal year 2004.
Nobility maintains a revolving credit agreement with a major bank providing for
borrowing up to $4,000,000. At November 5, 2005 and November 6, 2004, there were
no amounts outstanding under this agreement.
16
Consistent with normal practices, Nobility's operations are not expected to
require significant capital expenditures during fiscal year 2006. Working
capital requirements for any increase in the new home inventory for existing and
additional retail sales centers and any increase in manufacturing capacity will
be met with internal sources.
Critical Accounting Policies and Estimates
- ------------------------------------------
The Company applies judgment and estimates, which may have a material effect in
the eventual outcome of assets, liabilities, revenues and expenses, for accounts
receivable, inventory and goodwill. The following explains the basis and the
procedure for each asset account where judgment and estimates are applied.
Revenue Recognition
The Company recognizes revenue for the majority of its retail sales upon the
occurrence of the following:
o its receipt of a down payment (or with cash sales, its
receipt of total payments),
o construction of the home is complete,
o title having passed to the retail home buyer,
o funds having been deposited into the company's bank account,
o the home having been delivered and set up at the retail home
buyer's site, and
o completion of any other significant obligations.
The Company recognizes sales to independent dealers upon receiving wholesale
floor plan financing or establishing retail credit approval for terms, shipping
of the home, and transferring title and risk of loss to the independent dealer.
Goodwill
Between 1995 and 1998 the Company acquired retail sales centers using the
purchase method of accounting. As a result, goodwill is reflected on the
consolidated balance sheets. A valuation was performed by the Company and it was
determined that the estimated fair value of the goodwill in the accounts
exceeded its book value. There is no assurance that the value of the acquired
sales centers will not decrease in the future due to changing business
conditions.
Vendor Volume Rebates
The Company receives volume rebates from its vendors based upon reaching a
certain level of purchased materials during a specified period of time. Volume
rebates are estimated based upon annual purchases, and are adjusted quarterly if
the accrued volume rebate is applicable.
Dealer Volume Rebate
The Company pays a volume rebate to independent dealers based upon the dollar
volume of homes purchased and paid for by the dealer in excess of a certain
specific dollar amount during a specific time period. Dealer volume rebates are
accrued when sales are recognized.
Off-Balance Sheet Arrangements
- ------------------------------
As part of our ongoing business, we do not participate in transactions that
generate relationships with unconsolidated entities or financial partnerships,
such as entities often referred to as structured finance or special purpose
entities ("SPE's"), which would have been established for the purpose of
facilitating off-balance sheet arrangements or other contractually narrow or
limited purposes. As of November 5, 2005, we are not involved in any material
unconsolidated SPE transactions.
17
Contractual Obligations
- -----------------------
The impact of our contractual obligations as of November 5, 2005 is expected to
have on our liquidity and cash flow in future periods is as follows:
Payments Due By Period
-------------------------------------------
Total Less Than 1-3 Years
1 Year
-------------- -------------- -------------
Operating lease obligations $362,019 $244,140 $117,879
Forward Looking Statements
- --------------------------
Certain statements in this report are forward-looking statements within the
meaning of the federal securities laws, including our statement that working
capital requirements will be met with internal sources. Although Nobility
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, increasing material costs, continued
excess retail inventory, increase in repossessions, changes in market demand,
changes in interest rates, availability of financing for retail and wholesale
purchasers, consumer confidence, adverse weather conditions that reduce sales at
retail centers, the risk of manufacturing plant shutdowns due to storms or other
factors, the impact of marketing and cost-management programs, reliance on the
Florida economy, impact of labor shortage, impact of materials shortage,
increasing labor cost, cyclical nature of the manufactured housing industry,
impact of rising fuel costs, catastrophic events impacting insurance costs,
availability of insurance coverage for various risks to Nobility, market
demographics, management's ability to attract and retain executive officers and
key personnel, increased global tensions, market disruptions resulting from
terrorist or other attack and any armed conflict involving the United States and
the impact of inflation.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
- ------- ----------------------------------------------------------
Certain of the Company's financial instruments are subject to market risk,
including interest rate and equity price risks; however, due to the makeup of
our investment portfolio this market risk is considered minimal. The Company
manages its exposure to these risks through its regular operating and financing
activities.
We do not engage in investing in or trading market risk sensitive financial
instruments. We also do not purchase for investing, hedging, or for purposes
"other than trading" financial instruments that are likely to expose us to
significant market risk, whether interest rate, foreign currency, commodity
price, or equity price risk. The Company's financial instruments are not
currently subject to foreign currency or commodity risk. The Company has no
financial instrument held for trading purposes.
We do not have any indebtedness as of November 5, 2005. If we were to borrow
from our revolving credit agreement, we would be exposed to changes in interest
rates. Under our current policies, we do not use interest rate derivative
instruments to manage exposure to interest rate changes.
Item 8. Consolidated Financial Statements and Supplementary Data
Financial statements incorporated herein from Nobility's 2005 Annual Report to
Shareholders are attached as Exhibit 13 and are listed at Part IV, Item 15(a),
"Consolidated Financial Statements and Schedules."
Item 9. Changes in and Disagreements with Accountants on Accounting and
- ------ ---------------------------------------------------------------
Financial Disclosure
--------------------
As previously reported in our report on Form 8-K filed July 22, 2003, on July
15, 2003, we dismissed our auditors, PricewaterhouseCoopers LLP and appointed
Tedder, James, Worden & Associates, P.A. as our new independent auditors,
effective July 15, 2003.
18
Item 9A. Controls and Procedures
- ------- -----------------------
Evaluation of Disclosure Controls and Procedures. The Company's Chief Executive
Officer and Chief Financial Officer have evaluated the effectiveness of the
Company's disclosure controls and procedures (as such term is defined in Rules
13a - 14c and 15d - 14(c) under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") as of the end of the period covered by this report (the
"Evaluation Date"). Based on such evaluation such officers have concluded that,
as of the Evaluation Date, the Company's disclosure controls and procedures are
effective in alerting them on a timely basis to material information relating to
the Company (including its consolidated subsidiaries) required to be included in
the Company's reports filed or submitted under the Exchange Act. There were no
significant changes in our internal controls or in other factors that could
significantly affect these controls subsequent to the date of the evaluation.
PART III
Item 10. Directors and Executive Officers of the Registrant
- ------- --------------------------------------------------
Information concerning Nobility's directors is incorporated by reference
pursuant to Instruction G of Form 10-K from its definitive proxy statement for
the 2006 annual meeting of shareholders to be filed with the Commission pursuant
to Regulation 14A on or before March 5, 2006.
The following table provides the names, ages and business experience for the
past five years for each of Nobility's executive officers. Executive officers
are each elected for one year terms.
Executive Officers
Terry E. Trexler (66) Chairman of the Board and President of Nobility
for more than five years; Mr. Trexler is also
President of TLT, Inc.
Thomas W. Trexler (42) Executive Vice President and Chief Financial
Officer of Nobility since December 1994; President
of Prestige Home Centers, Inc. since June 1995;
Director of Prestige since 1993 and Vice President
from 1991 to June 1995; President of Mountain
Financial, Inc. since August 1992; Vice President
of TLT, Inc. since September 1991.
Jean Etheredge (60) Secretary.
Lynn J. Cramer, Jr. (60) Treasurer.
Thomas W. Trexler, Executive Vice President, Chief Financial Officer and a
director, is the son of Terry E. Trexler, Nobility's President and Chairman of
the Board. There are no other family relationships between any directors or
executive officers.
Section 16(a) Beneficial Ownership Reporting Compliance
- -------------------------------------------------------
Under Section 16(a) of the Securities Exchange Act, a Form 4 reporting the
acquisition or disposition of Company securities by an officer, director or 10%
shareholder must be filed with the Securities and Exchange Commission no later
than the second business day after the date on which the transaction occurred
unless certain exceptions apply. Most transactions not reported on Form 4 must
be reported on Form 5 within 45 days after the end of Nobility's fiscal year.
Based on information provided by Nobility's directors and executive officers,
during the fiscal year ended November 5, 2005, all required reports were filed
when due.
19
Code of Ethics
- --------------
We have adopted a code of ethics that applies to the principal executive
officer, principal financial officer, executive vice presidents and controller.
The code has been designed in accordance with provisions of the Sarbanes-Oxley
Act of 2002, to promote honest and ethical conduct. The code is included as an
exhibit to this annual report.
Our code of ethics is available on our website at www.nobilityhomes.com. You may
also obtain a copy of the Nobility Homes, Inc. Code of Ethics, at no cost, by
forwarding a written request to the Secretary of Nobility at Post Office Box
1659, Ocala, Florida 34478.
Item 11. Executive Compensation
Information concerning executive compensation is incorporated by reference
pursuant to Instruction G of Form 10-K from Nobility's definitive proxy
statement for the 2006 annual meeting of shareholders to be filed with the
Commission pursuant to Regulation 14A on or before March 5, 2006.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- ------- --------------------------------------------------------------
Information concerning security ownership of certain beneficial owners and
management is incorporated by reference pursuant to Instruction G of Form 10-K
from Nobility's definitive proxy statement for the 2006 annual meeting of
shareholders to be filed with the Commission pursuant to Regulation 14A on or
before March 5, 2006.
Item 13. Certain Relationships and Related Transactions
- ------- ----------------------------------------------
Information concerning certain relationships and related transactions is
incorporated by reference pursuant to Instruction G of Form 10-K from Nobility's
definitive proxy statement for the 2006 annual meeting of shareholders to be
filed with the Commission pursuant to Regulation 14A on or before March 5, 2006.
Item 14. Principal Accountant Fees and Services
- ------- --------------------------------------
Information concerning principal accountant fees and services is incorporated by
reference pursuant to Instruction G of Form 10-K from Nobility's definitive
proxy statement for the 2006 annual meeting of shareholders to be filed with the
Commission pursuant to Regulation 14A on or before March 5, 2006.
20
PART IV
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K
- ------- ---------------------------------------------------------------
(a) Consolidated Financial Statements and Schedules:
Report of Tedder, James, Worden & Associates, P.A.
Consolidated Balance Sheets at November 5, 2005 and November 6,
2004
Consolidated Statements of Income and Comprehensive Income for
the Years Ended November 5, 2005, November 6, 2004 and November
1, 2003
Consolidated Statements of Changes in Stockholders' Equity for
the Years Ended November 5, 2005, November 6, 2004 and November
1, 2003
Consolidated Statements of Cash Flows for the Years Ended
November 5, 2005, November 6, 2004 and November 1, 2003
Notes to Consolidated Financial Statements
(b) Reports on Form 8-K:
None
(c) Exhibits:
3. (a) Nobility's Articles of Incorporation, as amended
(filed as an exhibit to Nobility's Form 10-K for the
fiscal year ended November 1, 1997 and incorporated
herein by reference).
(b) Bylaws, as amended March 28, 1994, (filed as an
exhibit to Nobility's Form 10-KSB for the fiscal year
ended October 29, 1994 and incorporated herein by
reference.)
10. (a) Joint Venture Agreement with 21st Century Mortgage
Corporation (filed as an exhibit to Nobility's Form
10-K for the fiscal year ended November 1, 1997 and
incorporated herein by reference).
(b) Stock Incentive Plan (filed as an exhibit to
Nobility's registration statement on Form S-8,
registration no. 333-44769, and incorporated herein
by reference).
(c) Revolving Credit Agreement dated April 18, 2001 with
SunTrust Bank, a Georgia state-chartered bank (filed
as an exhibit to Nobility's Form 10-K for the fiscal
year ended November 3, 2001 and incorporated herein
by reference).
(d) Agreement dated September 7, 2001 between Nobility
and Terry E. Trexler relating to use of life
insurance proceeds (filed as an exhibit to Nobility's
Form 10-K for the fiscal year ended November 3, 2001
and incorporated herein by reference).
13. Consolidated Financial Statements from 2005 Annual Report to
Shareholders.
14. Code of Ethics
21. Subsidiaries of Nobility.
23. Consent of Tedder, James, Worden & Associates, P.A.
31. (a) Written Statement of Chief Executive Officer pursuant
to Section 302 of the Sarbanes-Oxley Act and Rule
13a-14(a)or 15d-14(a) under the Securities Exchange
Act of 1934.
21
(b) Written Statement of Chief Executive Officer pursuant
to Section 302 of the Sarbanes-Oxley Act and Rule
13a-14(a)or 15d-14(a) under the Securities Exchange
Act of 1934.
32. (a) Written Statement of Chief Executive Officer pursuant
to 18 U.S.C. ss.1350.
(b) Written Statement of Chief Financial Officer pursuant
to 18 U.S.C. ss.1350.
22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: January 30, 2006 By: /s/ Terry E. Trexler
----------------------------------------
Terry E. Trexler, Chairman,
President and Chief Executive Officer
DATE: January 30, 2006 By: /s/ Thomas W. Trexler
----------------------------------------
Thomas W. Trexler, Executive Vice
President, and Chief Financial Officer
DATE: January 30, 2006 By: /s/ Lynn J. Cramer, Jr.
----------------------------------------
Lynn J. Cramer, Jr., Treasurer
and Principal Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:
DATE: January 30, 2006 By: /s/ Terry E. Trexler
----------------------------------------
Terry E. Trexler, Director
DATE: January 30, 2006 By: /s/ Richard C. Barberie
----------------------------------------
Richard C. Barberie, Director
DATE: January 30, 2006 By: /s/ Robert Holliday
----------------------------------------
Robert Holiday, Director
DATE: January 30, 2006 By: /s/ Robert P. Saltsman
----------------------------------------
Robert P. Saltsman, Director
DATE: January 30, 2006 By: /s/ Thomas W. Trexler
----------------------------------------
Thomas W. Trexler, Director
23
EXHIBIT INDEX
3. (a) Nobility's Articles of Incorporation, as amended
(filed as an exhibit to Nobility's Form 10-K for the
fiscal year ended November 1, 1997 and incorporated
herein by reference).
(b) Bylaws, as amended March 28, 1994, (filed as an
exhibit to Nobility's Form 10-KSB for the fiscal year
ended October 29, 1994 and incorporated herein by
reference.)
10. (a) Joint Venture Agreement with 21st Century Mortgage
Corporation (filed as an exhibit to Nobility's Form
10-K for the fiscal year ended November 1, 1997 and
incorporated herein by reference).
*(b) Stock Incentive Plan (filed as an exhibit to
Nobility's registration statement on Form S-8,
registration no. 333-44769, and incorporated herein
by reference).
(c) Revolving Credit Agreement dated April 18, 2001 with
SunTrust Bank, a Georgia state-chartered bank (filed
as an exhibit to Nobility's Form 10-K for the fiscal
year ended November 3, 2001 and incorporated herein
by reference).
(d) Agreement dated September 7, 2001 between Nobility
and Terry E. Trexler relating to use of life
insurance proceeds (filed as an exhibit to Nobility's
Form 10-K for the fiscal year ended November 3, 2001
and incorporated herein by reference).
13. Consolidated Financial Statements from 2004 Annual Report
to Shareholders.
14. Code of Ethics
21. Subsidiaries of Nobility.
23. Consent of Tedder, James, Worden & Associates, P.A.
31. (a) Written Statement of Chief Executive Officer pursuant
to Section 302 of the Sarbanes-Oxley Act and Rule
13a-14(a)or 15d-14(a) under the Securities Exchange
Act of 1934.
(b) Written Statement of Chief Executive Officer pursuant
to Section 302 of the Sarbanes-Oxley Act and Rule
13a-14(a)or 15d-14(a) under the Securities Exchange
Act of 1934.
32. (a) Written Statement of Chief Executive Officer pursuant
to 18 U.S.C. ss.1350.
(b) Written Statement of Chief Financial Officer pursuant
to 18 U.S.C. ss.1350.
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*Management Remuneration Plan.
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