Company Quick10K Filing
Quick10K
Nobility Homes
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$23.00 4 $88
10-Q 2019-08-03 Quarter: 2019-08-03
10-Q 2019-05-04 Quarter: 2019-05-04
10-Q 2019-02-02 Quarter: 2019-02-02
10-K 2018-11-03 Annual: 2018-11-03
10-Q 2018-08-04 Quarter: 2018-08-04
10-Q 2018-05-05 Quarter: 2018-05-05
10-Q 2018-02-03 Quarter: 2018-02-03
10-K 2017-11-04 Annual: 2017-11-04
10-Q 2017-08-05 Quarter: 2017-08-05
10-Q 2017-05-06 Quarter: 2017-05-06
10-Q 2017-02-04 Quarter: 2017-02-04
10-K 2016-11-05 Annual: 2016-11-05
10-Q 2016-07-30 Quarter: 2016-07-30
10-Q 2016-04-30 Quarter: 2016-04-30
10-Q 2016-01-30 Quarter: 2016-01-30
10-K 2015-10-31 Annual: 2015-10-31
10-Q 2015-08-01 Quarter: 2015-08-01
10-Q 2015-05-02 Quarter: 2015-05-02
10-Q 2015-01-31 Quarter: 2015-01-31
10-K 2014-11-01 Annual: 2014-11-01
10-Q 2014-08-02 Quarter: 2014-08-02
10-Q 2014-05-03 Quarter: 2014-05-03
10-Q 2014-02-01 Quarter: 2014-02-01
10-K 2013-11-02 Annual: 2013-11-02
8-K 2019-09-09 Earnings, Exhibits
8-K 2019-06-10 Earnings, Exhibits
8-K 2019-03-08 Earnings, Exhibits
8-K 2019-03-01 Shareholder Vote
8-K 2019-01-03 Earnings, Exhibits
8-K 2018-09-14 Earnings, Exhibits
8-K 2018-08-20 Accountant, Exhibits
8-K 2018-07-25 Officers
8-K 2018-06-15 Earnings, Exhibits
8-K 2018-03-16 Earnings, Exhibits
8-K 2018-03-02 Shareholder Vote
LEVI Levi Strauss 6,521
BNO United States Brent Oil Fund 86
INTZ Intrusion 57
PVOTF Pivot Pharmaceuticals 43
CLCN Creative Learning 2
ALKM Alkame Holdings 0
PCV Pismo Coast Village 0
TIGR UP Fintech 0
GAHR Griffin-American Healthcare REIT III 0
NRU National Rural Utilities Cooperative Finance 0
NOBH 2019-08-03
Note 1 Basis of Presentation and Accounting Policies
Note 2 Inventories
Note 3 Short-Term Investments
Note 4 Fair Value of Financial Instruments
Note 5 Sale of Property Held for Sale
Note 6 Investment in Retirement Community Limited Partnership
Note 7 Stockholders' Equity and Related Party Transaction
Note 8 Net Income per Share
Note 9 Revenues By Products and Service
Note 10 Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 4. Controls and Procedures
Part II. Other Information and Signatures
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 6. Exhibits
EX-31.A d770897dex31a.htm
EX-31.B d770897dex31b.htm
EX-32.A d770897dex32a.htm
EX-32.B d770897dex32b.htm

Nobility Homes Earnings 2019-08-03

NOBH 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 d770897d10q.htm FORM 10-Q Form 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

Quarterly Report Pursuant to Section 13 or 15 (d)

of the Securities Exchange Act of 1934

For the quarterly period ended August 3, 2019

Commission File number 000-06506

 

 

NOBILITY HOMES, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Florida   59-1166102

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

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)

Securities registered pursuant to Section 12(b) of the Act: None

 

 

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  ☒ ;    No  ☐.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒ ;    No  ☐.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer      Smaller reporting company  
     Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐ ;    No  ☒.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

 

Title of Class

 

Shares Outstanding on

September 13, 2019

Common Stock   3,664,070

 

 

 


Table of Contents

NOBILITY HOMES, INC.

INDEX

 

         Page
Number
 
PART I.   Financial Information   
    Item 1.   Financial Statements (Unaudited)   
  Condensed Consolidated Balance Sheets as of August 3, 2019 (Unaudited) and November 3, 2018      3  
  Condensed Consolidated Statements of Income and Comprehensive Income for the three and nine months ended August 3, 2019 (Unaudited) and August 4, 2018 (Unaudited)      4  
  Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended August 3, 2019 (Unaudited) and August 4, 2018 (Unaudited)      5  
  Condensed Consolidated Statements of Cash Flows for the nine months ended August 3, 2019 (Unaudited) and August 4, 2018 (Unaudited)      6  
  Notes to Condensed Consolidated Financial Statements (Unaudited)      7  
    Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations      13  
    Item 4.   Controls and Procedures      17  
PART II.   Other Information   
    Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds      18  
    Item 6.   Exhibits      18  
Signatures      19  

 

2


Table of Contents

NOBILITY HOMES, INC.

Condensed Consolidated Balance Sheets

 

     August 3,
2019
    November 3,
2018
 
     (Unaudited)        

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 21,146,880     $ 28,364,861  

Certificates of Deposit

     10,118,833       6,034,093  

Short-term investments

     496,556       537,767  

Accounts receivable - trade

     1,993,058       1,783,073  

Note receivable

     67,899       46,444  

Mortgage notes receivable

     17,317       15,664  

Inventories

     9,070,508       7,270,550  

Pre-owned homes, net

     499,463       933,640  

Prepaid expenses and other current assets

     1,238,456       1,090,152  
  

 

 

   

 

 

 

Total current assets

     44,648,970       46,076,244  

Property, plant and equipment, net

     4,900,716       4,763,566  

Pre-owned homes, net

     793,671       473,191  

Note receivable, less current portion

     42,047       46,265  

Mortgage notes receivable, less current portion

     233,247       236,402  

Other investments

     1,631,721       1,571,166  

Property held for sale

     —         213,437  

Deferred income taxes

     —         40,156  

Cash surrender value of life insurance

     3,572,974       3,437,974  

Other assets

     156,287       156,287  
  

 

 

   

 

 

 

Total assets

   $ 55,979,633     $ 57,014,688  
  

 

 

   

 

 

 

Liabilities and Stockholders’ Equity

    

Current liabilities:

    

Accounts payable

   $ 933,587     $ 1,085,095  

Accrued compensation

     768,825       869,657  

Accrued expenses and other current liabilities

     1,943,653       1,349,381  

Income taxes payable

     852,236       579,786  

Customer deposits

     3,107,855       4,064,268  
  

 

 

   

 

 

 

Total current liabilities

     7,606,156       7,948,187  

Deferred income taxes

     126,617       —    
  

 

 

   

 

 

 

Total liabilities

     7,732,773       7,948,187  
  

 

 

   

 

 

 

Commitments and contingent liabilities

    

Stockholders’ equity:

    

Preferred stock, $.10 par value, 500,000 shares authorized; none issued and outstanding

     —         —    

Common stock, $.10 par value, 10,000,000 shares authorized; 5,364,907 shares issued; 3,746,570 and 3,873,731 outstanding, respectively

     536,491       536,491  

Additional paid in capital

     10,686,657       10,670,848  

Retained earnings

     52,386,965       50,352,546  

Accumulated other comprehensive income

     349,999       390,407  

Less treasury stock at cost, 1,618,337 shares in 2019 and 1,491,176 shares in 2018

     (15,713,252     (12,883,791
  

 

 

   

 

 

 

Total stockholders’ equity

     48,246,860       49,066,501  
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 55,979,633     $ 57,014,688  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these financial statements

 

3


Table of Contents

NOBILITY HOMES, INC.

Condensed Consolidated Statements of Income and Comprehensive Income

(Unaudited)

 

     Three Months Ended     Nine Months Ended  
     August 3,
2019
    August 4,
2018
    August 3,
2019
    August 4,
2018
 

Net sales

   $ 11,785,366     $ 11,447,636     $ 35,567,828     $ 30,015,718  

Cost of sales

     (8,139,910     (8,705,847     (25,506,957     (22,745,684
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     3,645,456       2,741,789       10,060,871       7,270,034  

Selling, general and administrative expenses

     (1,352,315     (1,279,397     (3,860,173     (3,525,538
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     2,293,141       1,462,392       6,200,698       3,744,496  
  

 

 

   

 

 

   

 

 

   

 

 

 

Other income:

        

Interest income

     134,526       99,594       431,995       216,977  

Undistributed earnings in joint venture - Majestic 21

     19,800       28,602       60,555       78,917  

Proceeds received under escrow arrangement

     76,734       117,271       289,341       172,911  

Gain on sale of assets

     864,887       —         880,129       203,512  

Miscellaneous

     10,834       10,083       33,714       22,667  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other income

     1,106,781       255,550       1,695,734       694,984  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before provision for income taxes

     3,399,922       1,717,942       7,896,432       4,439,480  

Income tax expense

     (856,818     (469,858     (1,997,797     (1,039,555
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     2,543,104       1,248,084       5,898,635       3,399,925  

Other comprehensive loss

        

Unrealized investment loss, net of tax effect

     (96,120     (5,046     (40,408     (50,556
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

   $ 2,446,984     $ 1,243,038     $ 5,858,227     $ 3,349,369  
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of shares outstanding:

        

Basic

     3,807,357       3,873,746       3,848,936       3,925,007  

Diluted

     3,808,617       3,875,897       3,850,169       3,927,066  

Net income per share:

        

Basic

   $ 0.67     $ 0.32     $ 1.53     $ 0.87  

Diluted

   $ 0.67     $ 0.32     $ 1.53     $ 0.87  

The accompanying notes are an integral part of these financial statements

 

4


Table of Contents

NOBILITY HOMES, INC.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the three and nine months ended August 3, 2019 and August 4, 2018

(Unaudited)

 

    Common
Stock Shares
    Common
Stock
    Additional
Paid-in-Capital
    Retained
Earnings
    Accumulated
Other
Comprehensive
Income
    Treasury
Stock
    Total  

Balance at November 3, 2018

    3,873,731     $ 536,491     $ 10,670,848     $ 50,352,546     $ 390,407     $ (12,883,791   $ 49,066,501  

Stock-based compensation

    —         —         750       —         —         —         750  

Unrealized investment loss, net of tax effect

    —         —         —         —         (16,540     —         (16,540

Net income

    —         —         —         1,535,806       —         —         1,535,806  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at February 2, 2019

    3,873,731       536,491       10,671,598       51,888,351       373,867       (12,883,791     50,586,516  

Cash dividend

    —         —         —         (3,864,216     —         —         (3,864,216

Purchase of treasury stock

    (13,703     —         —         —         —         (302,115     (302,115

Stock-based compensation

    485       —         6,539       —         —         4,190       10,729  

Unrealized investment gain, net of tax effect

    —         —         —         —         72,252       —         72,252  

Net income

    —         —         —         1,819,725       —         —         1,819,725  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at May 4, 2019

    3,860,513     $ 536,491     $ 10,678,137     $ 49,843,861     $ 446,119     $ (13,181,716   $ 48,322,893  

Purchase of treasury stock

    (116,193     —         —         —         —         (2,551,246     (2,551,246

Stock-based compensation

    —         —         1,005       —         —         —         1,005  

Unrealized investment loss, net of tax effect

    —         —         —         —         (96,120     —         (96,120

Exercise of employee stock options

    2,250       —         7,515       —         —         19,710       27,225  

Net income

    —         —         —         2,543,103       —         —         2,543,103  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at August 3, 2019

    3,746,570     $ 536,491     $ 10,686,657     $ 52,386,965     $ 349,999     $ (15,713,252   $ 48,246,860  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at November 4, 2017

    3,997,569     $ 536,491     $ 10,669,231     $ 46,167,528     $ 412,233     $ (10,371,186   $ 47,414,297  

Purchase of treasury stock

    (4,500     —         —         —         —         (94,500     (94,500

Stock-based compensation

    —         —         441       —         —         —         441  

Unrealized investment gain, net of tax effect

    —         —         —         —         22,347       —         22,347  

Net income

    —         —         —         1,016,236       —         —         1,016,236  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at February 3, 2018

    3,993,069       536,491       10,669,672       47,183,764       434,580       (10,465,686     48,358,821  

Cash dividend

    —         —         —         (778,614     —         —         (778,614

Purchase of treasury stock

    (119,000     —         —         —         —         (2,410,500     (2,410,500

Stock-based compensation

    —         —         441       —         —         —         441  

Unrealized investment loss, net of tax effect

    —         —         —         —         (67,856     —         (67,856

Net income

    —         —         —         1,135,605       —         —         1,135,605  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at May 5, 2018

    3,874,069     $ 536,491     $ 10,670,113     $ 47,540,755     $ 366,724     $ (12,876,186   $ 46,237,897  

Purchase of treasury stock

    (338     —         —         —         —         (7,605     (7,605

Stock-based compensation

    —         —         294       —         —         —         294  

Unrealized investment loss, net of tax effect

    —         —         —         —         (5,047     —         (5,047

Net income

    —         —         —         1,248,084       —         —         1,248,084  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at August 4, 2018

    3,873,731     $ 536,491     $ 10,670,407     $ 48,788,839     $ 361,677     $ (12,883,791   $ 47,473,623  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these financial statements

 

5


Table of Contents

NOBILITY HOMES, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

     Nine Months Ended  
     August 3,
2019
    August 4,
2018
 

Cash flows from operating activities:

    

Net income

   $ 5,898,635     $ 3,399,925  

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation

     109,016       88,764  

Deferred income taxes

     167,576       (456,292

Undistributed earnings in joint venture - Majestic 21

     (60,555     (78,917

Gain on property held for sale

     (864,887     (203,512

Gain on disposal of property, plant and equipment

     (15,242     —    

Inventory impairment

     —         105,000  

Stock-based compensation

     19,999       1,176  

Decrease (increase) in:

    

Accounts receivable

     (209,985     1,289,309  

Inventories

     (1,799,958     374,815  

Pre-owned homes

     113,697       258,471  

Prepaid expenses and other current assets

     (148,304     (292,675

Interest receivable

     (84,740     (6,436

(Decrease) increase in:

    

Accounts payable

     (151,508     (86,022

Accrued compensation

     (100,832     111,774  

Accrued expenses and other current liabilities

     594,271       (63,577

Income taxes payable

     272,450       265,847  

Customer deposits

     (956,413     1,665,728  
  

 

 

   

 

 

 

Net cash provided by operating activities

     2,783,220       6,373,378  
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchase of property, plant and equipment

     (288,424     (595,880

Purchase of certificates of deposit

     (4,000,000     (2,000,000

Proceeds from property held for sale

     1,078,325       589,530  

Collections on note receivable

     —         1,530,000  

Collections on interest receivable

     —         101,301  

Collections on mortgage notes receivable

     1,502       1,288  

Collections on equipment notes receivable

     40,263       30,403  

Issurance of equipment note receivable

     —         (25,451

Increase in cash surrender value of life insurance

     (135,000     (135,000
  

 

 

   

 

 

 

Net cash used in investing activities

     (3,303,334     (503,809
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Payment of cash dividend

     (3,864,216     (778,614

Proceeds from excerise of employee stock options

     19,710       —    

Purchase of treasury stock

     (2,853,361     (2,512,605
  

 

 

   

 

 

 

Net cash used in financing activities

     (6,697,867     (3,291,219
  

 

 

   

 

 

 

(Decrease) increase in cash and cash equivalents

     (7,217,981     2,578,350  

Cash and cash equivalents at beginning of year

     28,364,861       27,910,504  
  

 

 

   

 

 

 

Cash and cash equivalents at end of quarter

   $ 21,146,880     $ 30,488,854  
  

 

 

   

 

 

 

Supplemental disclosure of cash flows information:

    

Income taxes paid

   $ 1,550,000     $ 1,230,000  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these financial statements

 

6


Table of Contents

Nobility Homes, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 1

Basis of Presentation and Accounting Policies

The accompanying unaudited condensed consolidated financial statements for the three and nine months ended August 3, 2019 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission for Form 10-Q. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.

The unaudited financial information included in this report includes all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary to reflect a fair statement of the results for the interim periods. The results of operations for the three and nine months ended August 3, 2019 are not necessarily indicative of the results of the full fiscal year.

The condensed consolidated financial statements included in this report should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended November 3, 2018.

Recently Issued or Adopted Accounting PronouncementsEffective November 4, 2018, the Company adopted the provisions of ASC 606 using the modified retrospective method. The adoption of the new revenue standards as of November 4, 2018 did not change our revenue recognition as the majority of our revenues continue to be recognized when the customer takes control of our product. As we did not identify any accounting changes that impacted the amount of reported revenues with respect to our product revenues, no adjustment to retained earnings was required upon adoption.

Under the new revenue standards, revenues are recognized when our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. We recognize revenues following the five step model prescribed under ASU No. 2014-09: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) we satisfy the performance obligation.

Product revenues

We sell our products to the end user or wholesale distributors.

Revenues from product sales are recognized when the customer obtains control of our product, which occurs at a point in time, typically upon delivery to the customer. We expense incremental costs of obtaining a contract as and when incurred if the expected amortization period of the asset that we would have recognized is one year or less or the amount is immaterial. We treat shipping and handling costs performed after a customer obtains control of the product as a fulfillment cost. We have identified one performance obligation in our contracts with customers which is the delivery of product to our customers. The transaction price is recognized in full when we deliver the product to our customer, which is the point at which we have satisfied our performance obligation.

 

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Reserves for Discounts and Allowances

Revenues from product sales are recorded net of reserves established for applicable discounts and allowances that are offered within contracts with our customers and distributors. Our process for estimating reserves established for these variable consideration components do not differ materially from our historical practices.

Product revenue reserves, which are classified as a reduction in product revenues, are generally characterized in the following categories: discounts, contractual adjustments and returns.

These reserves are based on estimates of the amounts earned or to be claimed on the related sales and are classified as reductions of accounts receivable (if the amount is payable to our customer) or a liability (if the amount is payable to a party other than our customer). Our estimates of reserves established for variable consideration typically utilize the most likely method and reflect our historical experience, current contractual and statutory requirements, specific known market events and trends, industry data and forecasted customer buying and payment patterns. The transaction price, which includes variable consideration reflecting the impact of options, discounts and allowances, may be subject to constraint and is included in the net sales price only to the extent that it is probable that a significant reversal of the amount of the cumulative revenues recognized will not occur in a future period. Actual amounts may ultimately differ from our estimates. If actual results vary, we adjust these estimates, which could have an effect on earnings in the period of adjustment.

For additional information on our revenues, please read Note 9, Revenues by Products and Services, to these condensed consolidated financial statements.

In February 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-02, “Leases” (ASU 2016-02). The core principle of ASU 2016-02 is that lessees should recognize on its balance sheet assets and liabilities arising from a lease. In accordance with that principle, ASU 2016-02 requires that a lessee recognize a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying leased asset for the lease term. Lessees shall classify all leases as finance or operating leases. This new accounting guidance is effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company expects the adoption of ASU 2016-02 will result in the recognition of the right-of-use assets and related obligations on its consolidated financial statements.

 

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Note 2

Inventories

New home inventory is carried at the lower of cost or net realizable value. The cost of finished home inventories determined on the specific identification method is removed from inventories and recorded as a component of cost of sales at the time revenue is recognized. In addition, an allocation of depreciation and amortization is included in cost of goods sold. Under the specific identification method, if finished home inventory can be sold for a profit there is no basis to write down the inventory below the lower of cost or net realizable value.

The Company acquired certain repossessed pre-owned inventory (Buy Back Inventory) in 2011 as part of an Amendment of the Finance Revenue Sharing Agreement with 21st Mortgage Corporation. This inventory is valued at the Company’s cost to acquire determined on the specific identification method, plus refurbishment costs (any item on the home that needs to be repaired or replaced) incurred to date to bring the inventory to a more saleable state. The Buy Back inventory amount is reduced where necessary on a unit specific basis by a valuation reserve which management believes results in inventory being valued at net realizable value.

Other pre-owned homes are acquired (Repossessions Inventory) as a convenience to the Company’s joint venture partner, 21st Mortgage Corporation. This inventory has been repossessed by 21st Mortgage Corporation or through mortgage foreclosure. The Company acquires this inventory at the amount of the uncollected balance of the financing at the time of the foreclosure/repossessions by 21st Mortgage Corporation. The Company records this inventory at cost determined on the specific identification method. All of the refurbishment costs are paid by 21st Mortgage Corporation. This arrangement assists 21st Mortgage Corporation with liquidating their repossessed inventory. The timing of these repurchases by the Company is unpredictable as it is based on the repossessions 21st Mortgage Corporation incurs in the portfolio. When the home is sold, the Company retains the cost of the home, an interest factor on the cost of the home and a sales commission for the sale of the home, from the sales proceeds. Any additional proceeds are paid to 21st Mortgage. Any shortfall from the proceeds to cover these amounts is paid by 21st Mortgage to the Company. As the Company has no risk of loss on the sale, there is no valuation allowance necessary for this inventory.

Pre-owned homes are also taken as trade-ins on new home sales (Trade-in Inventory). This inventory is recorded at estimated actual wholesale value which is generally lower than its market value, determined on the specific identification method, plus refurbishment costs incurred to date to bring the inventory to a more saleable state. The Trade-in inventory amount is reduced where necessary on a unit specific basis by a valuation reserve which management believes results in inventory being valued at market.

 

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Other inventory costs are determined on a first-in, first-out basis. A breakdown of the elements of inventory is as follows:

 

     August 3,
2019
     November 3,
2018
 

Raw materials

   $ 877,248      $ 904,399  

Work-in-process

     112,013        113,220  

Finished homes

     7,964,647        6,138,985  

Model home furniture and others

     116,601        113,946  
  

 

 

    

 

 

 

Inventories

   $ 9,070,508      $ 7,270,550  
  

 

 

    

 

 

 

Pre-owned homes

     

Buy Back

   $ 439,142      $ 715,748  

Repossessions

     1,138,851        1,155,642  

Trade-in

     87,239        84,874  
  

 

 

    

 

 

 
     1,665,232        1,956,265  

Inventory impairment reserve

     (372,098      (549,434
  

 

 

    

 

 

 
     1,293,134        1,406,831  

Less homes expected to sell in 12 months

     (499,463      (933,640
  

 

 

    

 

 

 

Pre-owned homes, long-term

   $ 793,671      $ 473,191  
  

 

 

    

 

 

 

 

Note 3

Short-term Investments

The following is a summary of short-term investments (available for sale):

 

     August 3, 2019  
     Cost      Gross
Unrealized
Gains
     Gross
Unrealized
Losses
     Estimated
Fair Value
 

Equity securities in a public company

   $ 167,930      $ 328,626      $ —        $ 496,556  
  

 

 

    

 

 

    

 

 

    

 

 

 
     November 3, 2018  
     Cost      Gross
Unrealized
Gains
     Gross
Unrealized
Losses
     Estimated
Fair Value
 

Equity securities in a public company

   $ 167,930      $ 369,837      $ —        $ 537,767  
  

 

 

    

 

 

    

 

 

    

 

 

 

The fair values were estimated based on quoted market prices in active markets at each respective period end.

 

Note 4

Fair Value of Financial Instruments

The carrying amount of cash and cash equivalents, accounts and notes receivable, accounts payable and accrued expenses approximates fair value because of the short maturity of those instruments.

The Company accounts for the fair value of financial investments in accordance with FASB Accounting Standards Codification (ASC) No. 820 “Fair Value Measurements” (ASC 820).

ASC 820 defines fair value as the price that would be received upon the sale of an asset or paid to transfer a liability (i.e. exit price) in an orderly transaction between market participants at the measurement date. ASC 820 requires disclosures that categorize assets and liabilities measured at fair value into one of three different levels depending on the assumptions (i.e. inputs) used in the valuation. Financial assets and liabilities are classified in

 

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their entirety based on the lowest level of input significant to the fair value measurement. The ASC 820 fair value hierarchy is defined as follows:

 

   

Level 1 - Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities.

 

   

Level 2 - Valuations are based on quoted prices for similar assets or liabilities in active markets, or quoted prices in markets that are not active for which significant inputs are observable, either directly or indirectly.

 

   

Level 3 - Valuations are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Inputs reflect management’s best estimate of what market participants would use in valuing the asset or liability at the measurement date.

The following tables represent the Company’s financial assets and liabilities which are carried at fair value.

 

     August 3, 2019  
     Level 1      Level 2      Level 3  

Equity securities in a public company

   $ 496,556      $ —        $ —    
  

 

 

    

 

 

    

 

 

 
     November 3, 2018  
     Level 1      Level 2      Level 3  

Equity securities in a public company

   $ 537,767      $ —        $ —    
  

 

 

    

 

 

    

 

 

 

 

Note 5

Sale of Property Held for Sale

On June 28, 2019 the Company sold its former Pace retail sales center property located in Pace, Florida for total net proceeds of $1,078,325. The Company recognized a gain on the sale of this property of $864,887.

 

Note 6

Investment in Retirement Community Limited Partnership

The Company has a 31.3% limited partnership interest in Walden Woods South LLC (“Walden Woods”), which owns and operates a retirement community. The Company’s investment in Walden Woods is fully impaired at August 3, 2019 and November 3, 2018.

 

Note 7

Stockholders’ Equity and Related Party Transaction

During the nine months ended August 3, 2019, the Company repurchased 129,896 shares of its common stock for per share prices ranging from $21.50 - $22.50 for an aggregate total of $2,853,361. Of these repurchased shares, 100,000 were from a related party for which the Company paid $21.95 per share. During the nine months ended August 4, 2018, the Company repurchased 123,838 shares of its common stock for per share prices ranging from $20.22 - $21.00 for an aggregate total of $2,512,605. Of these repurchased shares, 100,000 were from a related party for which the Company paid $20.22 per share. Treasury stock is recorded at cost and is presented as a reduction of stockholders’ equity in the accompanying consolidated financial statements.

 

Note 8

Net Income per Share

These financial statements include “basic” and “diluted” net income per share information for all periods presented. The basic net income per share is calculated by dividing net income by the weighted-average number of shares outstanding. The diluted net income per share is calculated by dividing net income by the weighted-average number of shares outstanding, adjusted for dilutive common shares.

 

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Note 9

Revenues by Products and Service

The Company operates in one business segment, which is manufactured housing and ancillary services. The Company considers there to be revenue concentration risks for distribution of its products where net product revenues exceed 10% of consolidated net product revenues. The concentration of the Company’s distribution net product revenues below may have a material adverse effect on the Company’s revenues and results of operations if sales in the respective distribution channels experience difficulties. The Company adopted the requirements of ASC 606 on November 5, 2018 using the modified retrospective method. See Note 1 – Recently Issued or Adopted Accounting Pronouncements for additional discussion. Revenues by net sales from manufactured housing, pre-owned homes and insurance agent commissions are as follows:

 

     Three Months Ended      Nine Months Ended  
     August 3,
2019
     August 4,
2018
     August 3,
2019
     August 4,
2018
 

Manufactured housing

           

Homes sold through Company owned sales centers

   $ 9,807,719      $ 8,302,575      $ 28,142,636      $ 20,801,157  

Homes sold to independent dealers

     1,377,471        2,313,528        5,721,508        7,168,737  

Homes sold through manufactured home parks

     513,517        325,270        904,169        802,260  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 11,698,707      $ 10,941,373      $ 34,768,313      $ 28,772,154  

Pre-owned homes

     14,187        433,085        590,182        1,042,542  

Insurance agent commissions

     72,472        73,178        209,333        201,022  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total net sales

   $ 11,785,366      $ 11,447,636      $ 35,567,828      $ 30,015,718  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

Note 10

Subsequent Events

The Company repurchased 82,500 shares of its common stock in the open market on August 7, 2019 at a price of $21.00 per share for an aggregate of $1,732,500.

 

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Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

Total revenues in the third quarter of 2019 were $11,785,366 compared to $11,447,636 in the third quarter of 2018. Total net sales for the first nine months of 2019 were up 19% to $35,567,828 compared to $30,015,718 for the first nine months of 2018, driven primarily by an increase in new homes sold at the Company’s sales centers. Net income for the first nine months of 2019 was $5,898,635 compared to a net income of $3,399,925 for the first nine months of 2018. Homes sold to independent dealers continued to decline primarily due to the Company’s focus on building more homes for Prestige Home Centers (our owned retail sales centers) because of the increase in retail sales. In addition, the Company sold its former Pace retail sales center property resulting in a one-time gain of $864,887 during 2019.

The following table summarizes certain key sales statistics and percent of gross profit.

 

     Three Months Ended     Nine Months Ended  
     August 3,     August 4,     August 3,     August 4,  
     2019     2018     2019     2018  

New homes sold through Company owned sales centers

     111       95       329       255  

Pre-owned homes sold through Company owned sales centers:

        

Buy Back

     0       0       2       6  

Repossessions

     0       6       6       10  

Trade-Ins

     1       2       2       4  

Homes sold to independent dealers

     32       55       123       176  

Total new factory built homes produced

     162       143       491       445  

Average new manufactured home price - retail

   $ 85,985     $ 84,332     $ 82,816     $ 78,789  

Average new manufactured home price - wholesale

   $ 46,559     $ 43,957     $ 45,087     $ 41,536  

As a percent of net sales:

        

Gross profit from the Company owned retail sales centers

     19     18     18     18

Gross profit from the manufacturing facilities - including intercompany sales

     22     18     21     17

The demand for affordable manufactured housing in Florida and the U.S. continues to improve. According to the Florida Manufactured Housing Association, shipments in Florida for the period from November 2018 through July 2019 were up approximately 19.4% from the same period last year. Constrained consumer credit and the lack of lenders in our industry, partly as a result of an increase in government regulations, still affects our results by limiting many affordable manufactured housing buyers from purchasing homes. However, legislation may help improve this situation in the future.

We understand that maintaining our strong financial position is vital for future growth and success. Because of very challenging business conditions during economic recessions in our market area, management will continue to evaluate all expenses and react in a manner consistent with maintaining our strong financial position, while exploring opportunities to expand our distribution and manufacturing operations.

Our many years of experience in the Florida market, combined with home buyers’ increased need for more affordable housing, should serve the Company well in the coming years. Management remains convinced that our specific geographic market is one of the best long-term growth areas in the country.

On June 5, 2019 the Company celebrated its 52nd anniversary in business specializing in the design and production of quality, affordable manufactured homes. With multiple retail sales centers, an insurance agency subsidiary, and an investment in a retirement manufactured home community, we are the only vertically integrated manufactured home company headquartered in Florida.

 

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Insurance agent commission revenues in the third quarter of 2019 were $72,472 compared to $73,178 in the third quarter of 2018. Total insurance agent commission revenues for the first nine months of 2019 were $209,333 compared to $201,022 for the first nine months of 2018. The increase in insurance agent commissions in the first nine months of 2019 were due to more new policies and renewals generated which affects agent commission earned. The Company establishes appropriate reserves for policy cancellations based on numerous factors, including past transaction history with customers, historical experience and other information, which is periodically evaluated and adjusted as deemed necessary. In the opinion of management, no reserve was deemed necessary for policy cancellations at August 3, 2019 and November 3, 2018.

Gross profit as a percentage of net sales was 31% in third quarter of 2019 compared to 24% for the third quarter of 2018 and was 28% for the first nine months of 2019 compared to 24% for the first nine months of 2018. The gross profit in the third quarter of 2019 was $3,645,456 compared to $2,741,789 in the third quarter of 2018 and was $10,060,871 for the first nine months of 2019 compared to $7,270,034 for the first nine months of 2018. The gross profit is dependent on the sales mix of wholesale and retail homes and number of pre-owned homes sold. The increase in gross profit for the nine months of 2019 is primarily due to the increase in the overall number of homes sold at the retail sales centers and an increase in the average new manufactured home price at both retail and wholesale due to the increased number of options in each home.

Selling, general and administrative expenses as a percent of net sales was 11% in third quarter of 2019 and 2018 and was 11% for the first nine months of 2019 compared to 12% for the first nine months of 2018. Selling, general and administrative expenses in third quarter of 2019 was $1,352,315 compared to $1,279,397 in the third quarter of 2018 and was $3,860,173 for the first nine months of 2019 compared to $3,525,538 for the first nine months of 2018. The dollar increase in expenses in 2019 resulted from the increase in variable and accrued compensation expenses which were direct results of increased sales.

Operating income as a percent of net sales was 19% in the third quarter of 2019 compared to 13% for the third quarter of 2018 and was 17% for the first nine months of 2019 compared to 12% for the first nine months of 2018. Operating income in third quarter of 2019 was $2,293,141 compared to $1,462,392 in the third quarter of 2018 and was $6,200,698 for the first nine months of 2019 compared to $3,744,496 for the first nine months of 2018.

We earned interest income of $134,526 for the third quarter of 2019 compared to $99,594 for the third quarter of 2018. For the first nine months of 2019, interest income was $431,995 compared to $216,977 in the first nine months of 2018. The increase is primarily due to higher interest rates in the money market accounts and certificates of deposit.

Our earnings from Majestic 21 in the third quarter of 2019 were $19,800 compared to $28,602, for the third quarter of 2018. Our earnings from Majestic 21 for the first nine months of 2019 were $60,555 compared to $78,917 for the first nine months of 2018. The earnings from Majestic 21 represent the allocation of profit and losses which are owned 50% by 21st Mortgage Corporation and 50% by the Company. The decrease in the earnings is primarily due to the reduction of the loan balances in the portfolio from loan payoffs and amortization.

We received distribution of $76,734 in the third quarter of 2019 compared to $117,271 in the third quarter of 2018 and $289,341 for the first nine months of 2019 compared to $172,911 for the same period in fiscal year 2018. The distributions are from an escrow arrangement related to a Finance Revenue Sharing Agreement between 21st Mortgage Corporation and the Company. The distributions from the escrow arrangement, relates to certain loans financed by 21st Mortgage Corporation, are recorded as income by the Company when received.

 

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The Company realized pre-tax income in the third quarter of 2019 of $3,399,922 as compared to $1,717,942 in the third quarter of 2018. The pre-tax income for the first nine months of 2019 was $7,896,432 as compared to $4,439,480 in first nine months of 2018. The pre-tax increase in 2019 was impacted by a one-time gain of $864,887 on the sale of our former Pace retail sales center property.

The Company recorded an income tax expense in the amount of $856,818 in the third quarter of 2019 as compared to $469,858 in third quarter 2018. Income tax expense for the nine months of 2019 was $1,997,797 compared to $1,039,555 for the nine months of 2018.

We reported net income of $2,543,104 for the third quarter of 2019 or $0.67 per share, compared to $1,248,084 or $0.32 per share, for the third quarter of 2018. For the first nine months of 2019 net income was $5,898,635 or $1.53 per share, compared to $3,399,925 or $0.87 per share, in the first nine months of 2018.

Liquidity and Capital Resources

Cash and cash equivalents were $21,146,880 at August 3, 2019 compared to $28,364,861 at November 3, 2018. Certificates of deposit were $10,118,833 at August 3, 2019 compared to $6,034,093 at November 3, 2018. Short-term investments were $496,556 at August 3, 2019 compared to $537,767 at November 3, 2018. Working capital was $37,042,814 at August 3, 2019 as compared to $38,128,057 at November 3, 2018. During the first nine months of 2019, the Company repurchased an aggregate of 129,896 shares of its common stock for an aggregate of $2,853,361. In June 2019, the Company sold its former Pace retail sales center property for net proceeds of $1,078,325. A cash dividend was paid from our cash reserves in March 2019 in the amount of $3,864,216. We own the entire inventory for our Prestige retail sales centers which includes new, pre-owned and repossessed or foreclosed homes and do not incur any third party floor plan financing expenses. The Company has no material commitments for capital expenditures.

We view our liquidity as our total cash and short term investments. We currently have no line of credit facility and we do not believe that such a facility is currently necessary for our operations. We have no debt. We also have approximately $3.6 million of cash surrender value of life insurance at August 3, 2019, which we could access as an additional source of liquidity though we have not currently viewed this to be necessary. As of August 3, 2019, the Company continued to report a strong balance sheet which included total assets of approximately $56 million and stockholders’ equity of approximately $48 million.

Critical Accounting Policies and Estimates

In Item 7 of our Form 10-K, under the heading “Critical Accounting Policies and Estimates,” we have provided a discussion of the critical accounting policies and estimates that management believes affect its more significant judgments and estimates used in the preparation of our Consolidated Financial Statements. No significant changes have occurred since that time.

Forward-Looking Statements

Certain statements in this report are unaudited or forward-looking statements within the meaning of the federal securities laws. 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, uncertain economic conditions, 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

 

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on the Florida economy, possible labor shortages, possible materials shortages, increasing labor cost, cyclical nature of the manufactured housing industry, impact of 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, impact of mandated tariffs on material prices, market disruptions resulting from terrorist or other attack and any armed conflict involving the United States and the impact of inflation.

 

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Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures. The Company’s Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer) have evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a–15(e) and 15d–15(e) 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 their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of August 3, 2019.

Changes in Internal Control over Financial Reporting. There were no changes in our internal controls over financial reporting that occurred during the third quarter of fiscal 2019 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

 

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Part II. OTHER INFORMATION AND SIGNATURES

There were no reportable events for Item 1 and Items 3 through 5.

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

The following table represents information with respect to purchases by the Company of its common stock during the three months ended August 3, 2019.

 

Period

   Total
number of
shares
purchased
     Average
price paid
per share
     Total number of shares
purchased as part of
publicly announced plans
or programs*
     Maximum number of
shares that may yet be
purchased under the plans
or programs*
 

May 5 – Jun 1, 2019

     16,193      $ 22.00        16,193        183,807  

Jun 2 – Jun 29, 2019

     100,000      $ 21.95        100,000        83,807  

Jun 30 – Aug 3, 2019

     0      $ 0.00        0        83,807  

 

*

In March 2019 the Company’s Board of Directors authorized management to repurchase up to 200,000 shares of the Company’s common stock or less each fiscal year in the open market. During the nine months ended August 3, 2019, management has repurchased an aggregate of 129,896 share of common stock and is authorized to purchase up to an additional 83,807 shares.

The Company repurchased 82,500 shares of its common stock in the open market on August 7, 2019 at a price of $21.00 per share for an aggregate of $1,732,500.

 

Item 6.

Exhibits

 

 

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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 13, 2019     By:  

/s/ Terry E. Trexler

      Terry E. Trexler, Chairman,
      President and Chief Executive Officer
DATE: September 13, 2019     By:  

/s/ Thomas W. Trexler

      Thomas W. Trexler, Executive Vice President,
      and Chief Financial Officer
DATE: September 13, 2019     By:  

/s/ Lynn J. Cramer, Jr.

      Lynn J. Cramer, Jr., Treasurer
      and Principal Accounting Officer

 

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