10-Q 1 ck0000072205-20230805.htm 10-Q 10-Q
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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 5, 2023

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 19, 2023

Common Stock

 

3,269,075

 

 


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 5, 2023 (Unaudited) and November 5, 2022

3

 

 

 

 

Condensed Consolidated Statements of Income for the three and nine months ended August 5, 2023 (Unaudited) and August 6, 2022 (Unaudited)

4

 

 

 

 

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended August 5, 2023 (Unaudited) and August 6, 2022 (Unaudited)

5

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the nine months ended August 5, 2023 (Unaudited) and August 6, 2022 (Unaudited)

6

 

 

 

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

7

 

 

 

Item 2.

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

10

 

 

 

Item 4.

Controls and Procedures

12

 

 

 

PART II.

Other Information

 

13

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

13

 

 

 

 

 

 

 

Item 5.

 

Other Information

 

 

13

 

 

 

 

 

 

 

 

Item 6.

Exhibits

13

 

 

Signatures

14

 

 

2


Table of Contents

 

NOBILITY HOMES, INC.

Condensed Consolidated Balance Sheets

 

 

August 5,
2023

 

 

November 5,
2022

 

 

(Unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

12,973,685

 

 

$

16,653,449

 

Certificates of deposit

 

 

7,347,913

 

 

 

3,903,888

 

Short-term investments

 

 

541,132

 

 

 

589,071

 

Accounts receivable - trade

 

 

2,596,300

 

 

 

1,288,645

 

Note receivable

 

 

 

 

 

23,905

 

Mortgage notes receivable

 

 

4,411

 

 

 

16,191

 

Income taxes receivable

 

 

157,827

 

 

 

 

Inventories

 

 

22,743,349

 

 

 

23,457,493

 

Prepaid expenses and other current assets

 

 

1,820,579

 

 

 

2,172,675

 

Total current assets

 

 

48,185,196

 

 

 

48,105,317

 

Property, plant and equipment, net

 

 

8,307,867

 

 

 

7,915,695

 

Note receivable, less current portion

 

 

 

 

 

16,599

 

Mortgage notes receivable, less current portion

 

 

142,969

 

 

 

131,514

 

Other investments

 

 

1,925,169

 

 

 

1,848,893

 

Property held for resale

 

 

26,590

 

 

 

 

Deferred income taxes

 

 

38,159

 

 

 

43,778

 

Cash surrender value of life insurance

 

 

4,275,110

 

 

 

4,143,035

 

Other assets

 

 

156,287

 

 

 

156,287

 

Total assets

 

$

63,057,347

 

 

$

62,361,118

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

1,144,548

 

 

$

1,119,188

 

Accrued compensation

 

 

982,112

 

 

 

1,132,423

 

Accrued expenses and other current liabilities

 

 

1,410,429

 

 

 

1,742,696

 

Income taxes payable

 

 

 

 

 

229,200

 

Customer deposits

 

 

9,146,699

 

 

 

10,214,078

 

Total current liabilities

 

 

12,683,788

 

 

 

14,437,585

 

Commitments and contingencies

 

 

 

 

 

 

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;
3,269,075 and 3,370,912 shares outstanding, respectively

 

 

536,491

 

 

 

536,491

 

Additional paid in capital

 

 

10,938,966

 

 

 

10,849,687

 

Retained earnings

 

 

68,653,044

 

 

 

63,441,812

 

Less treasury stock at cost, 2,095,832 and 1,993,995 shares, respectively

 

 

(29,754,942

)

 

 

(26,904,457

)

Total stockholders’ equity

 

 

50,373,559

 

 

 

47,923,533

 

Total liabilities and stockholders’ equity

 

$

63,057,347

 

 

$

62,361,118

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

3


Table of Contents

 

NOBILITY HOMES, INC.

Condensed Consolidated Statements of Income

(Unaudited)

 

Three Months Ended

 

 

Nine Months Ended

 

August 5,
2023

 

 

August 6,
2022

 

 

August 5,
2023

 

 

August 6,
2022

 

Net sales

$

14,654,789

 

 

$

13,846,698

 

 

$

48,599,139

 

 

$

35,300,014

 

Cost of sales

 

(9,540,399

)

 

 

(9,948,638

)

 

 

(31,659,842

)

 

 

(25,651,808

)

Gross profit

 

5,114,390

 

 

 

3,898,060

 

 

 

16,939,297

 

 

 

9,648,206

 

Selling, general and administrative expenses

 

(1,987,782

)

 

 

(1,653,200

)

 

 

(6,238,457

)

 

 

(4,448,349

)

Operating income

 

3,126,608

 

 

 

2,244,860

 

 

 

10,700,840

 

 

 

5,199,857

 

Other income (loss):

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

203,972

 

 

 

62,449

 

 

 

513,987

 

 

 

176,706

 

Undistributed earnings in joint venture - Majestic 21

 

27,828

 

 

 

15,488

 

 

 

76,276

 

 

 

40,710

 

Proceeds received under escrow arrangement

 

115,641

 

 

 

52,140

 

 

 

209,806

 

 

 

285,639

 

Increase (decrease) in fair value of equity investment

 

81,078

 

 

 

(57,022

)

 

 

(47,939

)

 

 

(80,796

)

Gain on disposal of property, plant and equipment

 

 

 

 

 

 

 

 

 

 

88,936

 

Miscellaneous

 

16,404

 

 

 

161,157

 

 

 

42,766

 

 

 

187,065

 

Total other income

 

444,923

 

 

 

234,212

 

 

 

794,896

 

 

 

698,260

 

Income before provision for income taxes

 

3,571,531

 

 

 

2,479,072

 

 

 

11,495,736

 

 

 

5,898,117

 

Income tax expense

 

(905,203

)

 

 

(594,313

)

 

 

(2,913,592

)

 

 

(1,399,498

)

Net income

$

2,666,328

 

 

$

1,884,759

 

 

$

8,582,144

 

 

$

4,498,619

 

Weighted average number of shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

3,323,874

 

 

 

3,370,912

 

 

 

3,354,981

 

 

 

3,460,074

 

Diluted

 

3,328,875

 

 

 

3,376,771

 

 

 

3,357,424

 

 

 

3,469,769

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.80

 

 

$

0.56

 

 

$

2.56

 

 

$

1.30

 

Diluted

$

0.80

 

 

$

0.56

 

 

$

2.56

 

 

$

1.30

 

 

The accompanying notes are an integral part of these condensed consolidated 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 5, 2023 and August 6, 2022

(Unaudited)

 

 

Common
Stock Shares

 

 

Common
Stock

 

 

Additional
Paid-in-Capital

 

 

Retained
Earnings

 

 

Treasury
Stock

 

 

Total

 

Balance at November 5, 2022

 

 

3,370,912

 

 

$

536,491

 

 

$

10,849,687

 

 

$

63,441,812

 

 

$

(26,904,457

)

 

$

47,923,533

 

Stock-based compensation

 

 

 

 

 

 

 

 

34,989

 

 

 

 

 

 

 

 

 

34,989

 

Net income

 

 

 

 

 

 

 

 

 

 

 

3,056,967

 

 

 

 

 

 

3,056,967

 

Balance at February 4, 2023

 

 

3,370,912

 

 

 

536,491

 

 

 

10,884,676

 

 

 

66,498,779

 

 

 

(26,904,457

)

 

 

51,015,489

 

Cash dividend

 

 

 

 

 

 

 

 

 

 

 

(3,370,912

)

 

 

 

 

 

(3,370,912

)

Purchase of treasury stock

 

 

(2,083

)

 

 

 

 

 

 

 

 

 

 

 

(56,241

)

 

 

(56,241

)

Stock-based compensation

 

 

 

 

 

 

 

 

21,637

 

 

 

 

 

 

 

 

 

21,637

 

Net income

 

 

 

 

 

 

 

 

 

 

 

2,858,849

 

 

 

 

 

 

2,858,849

 

Balance at May 6, 2023

 

 

3,368,829

 

 

$

536,491

 

 

$

10,906,313

 

 

$

65,986,716

 

 

$

(26,960,698

)

 

$

50,468,822

 

Purchase of treasury stock

 

 

(100,000

)

 

 

 

 

 

 

 

 

 

 

 

(2,797,740

)

 

 

(2,797,740

)

Stock-based compensation

 

 

246

 

 

 

 

 

 

32,653

 

 

 

 

 

 

3,496

 

 

 

36,149

 

Net income

 

 

 

 

 

 

 

 

 

 

 

2,666,328

 

 

 

 

 

 

2,666,328

 

Balance at August 5, 2023

 

 

3,269,075

 

 

$

536,491

 

 

$

10,938,966

 

 

$

68,653,044

 

 

$

(29,754,942

)

 

$

50,373,559

 

 

 

Common
Stock Shares

 

 

Common
Stock

 

 

Additional
Paid-in-Capital

 

 

Retained
Earnings

 

 

Treasury
Stock

 

 

Total

 

Balance at November 6, 2021

 

 

3,532,100

 

 

$

536,491

 

 

$

10,766,253

 

 

$

59,742,759

 

 

$

(21,731,198

)

 

$

49,314,305

 

Stock-based compensation

 

 

180

 

 

 

 

 

 

33,218

 

 

 

 

 

 

2,135

 

 

 

35,353

 

Exercise of employee stock
   options

 

 

966

 

 

 

 

 

 

(17,452

)

 

 

 

 

 

17,452

 

 

 

 

Treasury stock purchase

 

 

(270

)

 

 

 

 

 

 

 

 

 

 

 

(9,197

)

 

 

(9,197

)

Net income

 

 

 

 

 

 

 

 

 

 

 

1,157,034

 

 

 

 

 

 

1,157,034

 

Balance at February 5, 2022

 

 

3,532,976

 

 

 

536,491

 

 

 

10,782,019

 

 

 

60,899,793

 

 

 

(21,720,808

)

 

 

50,497,495

 

Cash dividend

 

 

 

 

 

 

 

 

 

 

 

(3,532,976

)

 

 

 

 

 

(3,532,976

)

Purchase of treasury stock

 

 

(162,300

)

 

 

 

 

 

 

 

 

 

 

 

(5,186,070

)

 

 

(5,186,070

)

Stock-based compensation

 

 

236

 

 

 

 

 

 

24,904

 

 

 

 

 

 

2,421

 

 

 

27,325

 

Net income

 

 

 

 

 

 

 

 

 

 

 

1,456,826

 

 

 

 

 

 

1,456,826

 

Balance at May 7, 2022

 

 

3,370,912

 

 

 

536,491

 

 

 

10,806,923

 

 

 

58,823,643

 

 

 

(26,904,457

)

 

 

43,262,600

 

Stock-based compensation

 

 

 

 

 

 

 

 

21,382

 

 

 

 

 

 

 

 

 

21,382

 

Net income

 

 

 

 

 

 

 

 

 

 

 

1,884,759

 

 

 

 

 

 

1,884,759

 

Balance at August 6, 2022

 

 

3,370,912

 

 

$

536,491

 

 

$

10,828,305

 

 

$

60,708,402

 

 

$

(26,904,457

)

 

$

45,168,741

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

5


Table of Contents

 

NOBILITY HOMES, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

Nine Months Ended

 

 

August 5,
2023

 

 

August 6,
2022

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

8,582,144

 

 

$

4,498,619

 

Adjustments to reconcile net income to net cash provided by operating
   (used in) activities:

 

 

 

 

 

 

Depreciation

 

 

117,837

 

 

 

129,681

 

Deferred income taxes

 

 

5,619

 

 

 

(34,072

)

Undistributed earnings in joint venture - Majestic 21

 

 

(76,276

)

 

 

(40,710

)

Gain on disposal of property, plant and equipment

 

 

 

 

 

(88,936

)

Decrease in fair market value of equity investments

 

 

47,939

 

 

 

80,796

 

Stock-based compensation

 

 

92,775

 

 

 

84,060

 

Amortization of operating lease right of use assets

 

 

 

 

 

1,597

 

Decrease (increase) in:

 

 

 

 

 

 

Accounts receivable - trade

 

 

(1,307,655

)

 

 

(95,368

)

Inventories

 

 

714,144

 

 

 

(9,991,334

)

Pre-owned homes

 

 

 

 

 

635,022

 

Prepaid expenses and other current assets

 

 

352,096

 

 

 

(493,273

)

Interest receivable

 

 

(168,333

)

 

 

(2,429

)

Income tax receivable

 

 

(157,827

)

 

 

 

(Decrease) increase in:

 

 

 

 

 

 

Accounts payable

 

 

25,360

 

 

 

389,311

 

Accrued compensation

 

 

(150,311

)

 

 

277,410

 

Accrued expenses and other current liabilities

 

 

(332,267

)

 

 

57,384

 

Income taxes payable

 

 

(229,200

)

 

 

67,835

 

Customer deposits

 

 

(1,067,379

)

 

 

(1,687,027

)

Net cash provided by (used in) operating activities

 

 

6,448,666

 

 

 

(6,211,434

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchase of property, plant and equipment

 

 

(510,009

)

 

 

(859,321

)

Purchase of certificates of deposit

 

 

(5,782,000

)

 

 

(1,944,000

)

Purchase of property held for resale

 

 

(26,590

)

 

 

 

Proceeds from certificates of deposit

 

 

2,430,000

 

 

 

2,087,936

 

Proceeds disposal of property, plant and equipment

 

 

 

 

 

96,970

 

Collections on interest receivable

 

 

76,308

 

 

 

5,079

 

Collections on mortgage notes receivable

 

 

325

 

 

 

97,298

 

Collections on equipment and other notes receivable

 

 

40,504

 

 

 

25,572

 

Issuance of mobile home park note receivable

 

 

 

 

 

(128,733

)

Increase in cash surrender value of life insurance

 

 

(132,075

)

 

 

(128,277

)

Net cash used in investing activities

 

 

(3,903,537

)

 

 

(747,476

)

Cash flows from financing activities:

 

 

 

 

 

 

Payment of cash dividend

 

 

(3,370,912

)

 

 

(3,532,976

)

Purchase of treasury stock

 

 

(2,853,981

)

 

 

(5,195,267

)

Reduction of operating lease obligation

 

 

 

 

 

(1,597

)

Net cash (used in) financing activities

 

 

(6,224,893

)

 

 

(8,729,840

)

Decrease in cash and cash equivalents

 

 

(3,679,764

)

 

 

(15,688,750

)

Cash and cash equivalents at beginning of period

 

 

16,653,449

 

 

 

36,126,059

 

Cash and cash equivalents at end of period

 

$

12,973,685

 

 

$

20,437,309

 

Supplemental financing activity:

 

 

 

 

 

 

Income taxes paid

 

$

3,000,000

 

 

$

1,365,735

 

Noncash exercise of employee stock options

 

$

 

 

$

(9,197

)

 

The accompanying notes are an integral part of these condensed consolidated 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 financial statements for the three and nine months ended August 5, 2023 and August 6, 2022 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 5, 2023, 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 5, 2022.

Note 2 Inventories

New home inventory is carried at a 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 the 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.

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. The Company acquired this inventory at the amount of the uncollected balance of the financing at the time of the repossessions by 21st Mortgage Corporation. The Company records this inventory at a cost determined by the specific identification method. All of the refurbishment costs are paid by 21st Mortgage Corporation. This arrangement assists 21st Mortgage Corporation with liquidation of 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, 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 repossessions of inventory.

Inventory held at consignment locations by affiliated entities is included in the Company’s inventory on the Company’s condensed consolidated balance sheets. Consigned inventory was $0 and $318,590 as of August 5, 2023 and November 5, 2022, respectively.

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 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 net realizable value.

Other inventory costs are determined on a first-in, first-out basis.

 

7


Table of Contents

 

A breakdown of the elements of inventory at August 5, 2023 and November 5, 2022 is as follows:

 

 

August 5,

 

 

November 5,

 

 

2023

 

 

2022

 

 

(unaudited)

 

 

 

 

Raw materials

 

$

1,528,955

 

 

$

2,119,372

 

Work-in-process

 

 

141,037

 

 

 

135,513

 

Inventory consigned to affiliated entities

 

 

 

 

 

318,590

 

Finished homes - Nobility

 

 

10,599,312

 

 

 

9,583,095

 

Finished homes - Other

 

 

9,466,838

 

 

 

10,432,998

 

Pre-owned homes

 

 

756,697

 

 

 

682,254

 

Model home furniture

 

 

250,510

 

 

 

185,671

 

Inventories

 

$

22,743,349

 

 

$

23,457,493

 

 

Note 3 Short-term Investments

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

 

 

August 5, 2023

 

 

(unaudited)

 

 

Cost