NOBILITY HOMES INC 10-Q

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 May 6, 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 June 9, 2023 Common Stock 3,368,829 Table of Contents NOBILITY HOMES, INC. IND EX Page Number PART I. Financial Information Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets as of May 6, 2023 (Unaudited) and November 5, 2022 3 Condensed Consolidated Statements of Income for the three and six months ended May 6, 2023 (Unaudited) and May 7, 2022 (Unaudited) 4 Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended May 6, 2023 (Unaudited) and May 7, 2022 (Unaudited) 5 Condensed Consolidated Statements of Cash Flows for the three and six months ended May 6, 2023 (Unaudited) and May 7, 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 6. Exhibits 13 Signatures 14 2 Table of Contents NOBILITY HOMES, INC. Condensed Consolid ated Balance Sheets May 6, 2023 November 5, 2022 (Unaudited) Assets Current assets: Cash and cash equivalents $ 15,167,269 $ 16,653,449 Certificates of deposit 7,861,355 3,903,888 Short-term investments 460,054 589,071 Accounts receivable - trade 988,570 1,288,645 Note receivable 23,905 23,905 Mortgage notes receivable 4,286 16,191 Inventories 23,329,664 23,457,493 Prepaid expenses and other current assets 1,723,686 2,172,675 Total current assets 49,558,789 48,105,317 Property, plant and equipment, net 8,236,805 7,915,695 Note receivable, less current portion 5,181 16,599 Mortgage notes receivable, less current portion 143,142 131,514 Other investments 1,897,341 1,848,893 Property held for resale 26,590 — Deferred income taxes 126,475 43,778 Cash surrender value of life insurance 4,231,085 4,143,035 Other assets 156,287 156,287 Total assets $ 64,381,695 $ 62,361,118 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 1,234,033 $ 1,119,188 Accrued compensation 1,235,691 1,132,423 Accrued expenses and other current liabilities 1,674,052 1,742,696 Income taxes payable 995,286 229,200 Customer deposits 8,773,811 10,214,078 Total current liabilities 13,912,873 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; 3,368,829 and 3,370,912 shares outstanding, respectively 536,491 536,491 Additional paid in capital 10,906,313 10,849,687 Retained earnings 65,986,716 63,441,812 Less treasury stock at cost, 1,996,078 and 1,993,995 shares, respectively ( 26,960,698 ) ( 26,904,457 ) Total stockholders’ equity 50,468,822 47,923,533 Total liabilities and stockholders’ equity $ 64,381,695 $ 62,361,118 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 Table of Contents NOBILITY HOMES, INC. Condensed Con solidated Statements of Income (Unaudited) Three Months Ended Six Month Ended May 6, 2023 May 7, 2022 May 6, 2023 May 7, 2022 Net sales $ 16,779,597 $ 10,645,046 $ 33,944,350 $ 21,453,316 Cost of sales ( 10,826,286 ) ( 7,623,128 ) ( 22,119,443 ) ( 15,703,170 ) Gross profit 5,953,311 3,021,918 11,824,907 5,750,146 Selling, general and administrative expenses ( 2,215,198 ) ( 1,378,606 ) ( 4,250,675 ) ( 2,795,149 ) Operating income 3,738,113 1,643,312 7,574,232 2,954,997 Other income (loss): Interest income 169,982 39,577 310,015 114,257 Undistributed earnings in joint venture - Majestic 21 25,622 12,665 48,448 25,222 Proceeds received under escrow arrangement 94,165 115,454 94,165 233,499 Decrease in fair value of equity investment ( 111,075 ) ( 19,681 ) ( 129,017 ) ( 23,774 ) Gain on disposal of property, plant and equipment — 88,936 — 88,936 Miscellaneous 18,590 12,352 26,362 25,908 Total other income 197,284 249,303 349,973 464,048 Income before provision for income taxes 3,935,397 1,892,615 7,924,205 3,419,045 Income tax expense ( 1,076,548 ) ( 435,789 ) ( 2,008,389 ) ( 805,185 ) Net income $ 2,858,849 $ 1,456,826 $ 5,915,816 $ 2,613,860 Weighted average number of shares outstanding: Basic 3,370,157 3,476,508 3,370,534 3,504,655 Diluted 3,373,036 3,487,516 3,372,417 3,515,994 Net income per share: Basic $ 0.85 $ 0.42 $ 1.76 $ 0.75 Diluted $ 0.85 $ 0.42 $ 1.75 $ 0.74 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 Stockhol ders’ Equity For the three and six months ended May 6, 2023 and May 7, 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 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 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 Table of Contents NOBILITY HOMES, INC. Condensed Consolidated St atements of Cash Flows (Unaudited) Six Months Ended May 6, 2023 May 7, 2022 Cash flows from operating activities: Net income $ 5,915,816 $ 2,613,860 Adjustments to reconcile net income to net cash provided by operating (used in) activities: Depreciation 78,558 86,454 Deferred income taxes ( 82,697 ) ( 48,541 ) Undistributed earnings in joint venture - Majestic 21 ( 48,448 ) ( 25,222 ) Gain on disposal of property, plant and equipment — ( 88,936 ) Decrease in fair market value of equity investments 129,017 23,774 Stock-based compensation 56,626 62,678 Amortization of operating lease right of use assets — 1,597 Decrease (increase) in: Accounts receivable - trade 300,075 ( 126,969 ) Inventories 127,829 ( 5,604,739 ) Pre-owned homes — 495,327 Prepaid expenses and other current assets 448,989 ( 462,387 ) Interest receivable ( 95,399 ) — Income tax receivable — ( 42,792 ) (Decrease) increase in: Accounts payable 114,845 879,293 Accrued compensation 103,268 222,427 Accrued expenses and other current liabilities ( 68,644 ) 104,120 Income taxes payable 766,086 ( 89,083 ) Customer deposits ( 1,440,267 ) ( 385,965 ) Net cash provided by (used in) operating activities 6,305,654 ( 2,385,104 ) Cash flows from investing activities: Purchase of property, plant and equipment ( 399,668 ) ( 551,841 ) Purchase of certificates of deposit ( 4,360,000 ) — Purchase of property held for resale ( 26,590 ) — Proceeds from certificates of deposit 486,000 2,087,936 Proceeds disposal pf property, plant and equipment — 96,970 Collections on interest receivable 11,932 5,079 Collections on mortgage notes receivable 277 985 Collections on equipment and other notes receivable 11,418 19,966 Issuance of mobile home park note receivable — ( 63,778 ) Increase in cash surrender value of life insurance ( 88,050 ) ( 85,518 ) Net cash (used in) provided by investing activities ( 4,364,681 ) 1,509,799 Cash flows from financing activities: Payment of cash dividend ( 3,370,912 ) ( 3,532,976 ) Purchase of treasury stock ( 56,241 ) ( 5,186,070 ) Reduction of operating lease obligation — ( 1,597 ) Net cash (used in) financing activities ( 3,427,153 ) ( 8,720,643 ) Decrease in cash and cash equivalents ( 1,486,180 ) ( 9,595,948 ) Cash and cash equivalents at beginning of period 16,653,449 36,126,059 Cash and cash equivalents at end of period $ 15,167,269 $ 26,530,111 Supplemental financing activity: Income taxes paid $ 1,325,000 $ — 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 Co nsolidated Financial Statements (Unaudited) Note 1 Basis of Presentation and Accounting Policies The accompanying unaudited condensed financial statements for the three and six months ended May 6, 2023 and May 7, 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 six months ended May 6, 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 21 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 21 Mortgage Corporation. This arrangement assists 21 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 21 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 $ 21,143 and $ 318,590 as of May 6, 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 May 6, 2023 and November 5, 2022 is as follows: May 6, November 5, 2023 2022 (unaudited) Raw materials $ 1,153,175 $ 2,119,372 Work-in-process 152,607 135,513 Inventory consigned to affiliated entities 21,143 318,590 Finished homes - Nobility 11,140,307 9,583,095 Finished homes - Other 9,860,115 10,432,998 Pre-owned homes 769,272 682,254 Model home furniture 233,045 185,671 Inventories $ 23,329,664 $ 23,457,493 Note 3 Short-term Investments The following is a summary of short-term investments (available for sale): May 6, 2023 (unaudited) Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Equity securities in a public company $ 167,930 $ 292,124 $ — $ 460,054 November 5, 2022 Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value Equity securities in a public company $ 167,930 $ 421,141 $ — $ 589,071 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 approximate 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 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 observable 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. 8 Table of Contents The following tables represent the Company’s financial assets and liabilities which are carried at fair value. May 6, 2023 (unaudited) Level 1 Level 2 Level 3 Equity securities in a public company $ 460,054 $ — $ — November 5, 2022 Level 1 Level 2 Level 3 Equity securities in a public company $ 589,071 $ — $ — Note 5 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. Note 6 Revenues by Products and Service The Company operates in one business segment, which is manufactured housing and ancillary services. Revenues by net sales from manufactured housing homes and insurance agent commissions are as follows: (unaudited) (unaudited) Three Months Ended Six Months Ended May 6, May 7, May 6, May 7, 2023 2022 2023 2022 Manufactured housing Homes sold through Company owned sales centers $ 15,560,679 $ 9,821,418 $ 30,839,888 $ 19,661,062 Homes sold to independent dealers and through manufactured home parks, net 1,125,730 746,128 2,935,665 1,647,767 16,686,409 10,567,546 33,775,553 21,308,829 Insurance agent commissions 93,188 77,500 168,797 144,487 Total net sales $ 16,779,597 $ 10,645,046 $ 33,944,350 $ 21,453,316 9 Table of Contents Item 2. Management’s Discussion and Analysis of Fin ancial Condition and Results of Operations Results of Operations Total net sales in the second quarter of 2023 were up 58% to $16,779,597 compared to $10,645,046 in the second quarter of 2022. Total net sales for the first six months of 2023 were up 58% to $33,944,350 compared to $21,453,316 for the first six months of 2022. The Company reported a 96% increase in net income to $2,858,849 in the second quarter of 2023, compared to a net income of $1,456,826 in the second quarter 2022. Net income for the first six months of 2023 was up 126% to $5,915,816 compared to $2,613,860 for the first six months of 2022. The primary reason that sales and net income increased was due to the severe supply chain challenges experienced during the first six months of fiscal 2022 that impacted our ability to complete and deliver homes to customers. During the first six months of fiscal 2023, the supply chain challenges eased compared to the prior period and we were able to complete and deliver more retail customers homes, which included us selling thirty-nine (39) ($6,558,882) new homes during the first six months of 2023 from other manufacturers, to help reduce our long backlog. Although net sales increased during the three and six months ended May 6, 2023, as compared to the same period last year, we continue to experience limitations being placed on certain key production materials from suppliers, the delay or lack of key components from vendors as well as back orders, delayed shipments, price increases and labor shortages. These issues continue to cause delays in the completion of the homes at the manufacturing facility and the set-up process of retail homes in the field, resulting in decreased net sales due to our inability to timely deliver and set up homes to customers. We expect that these challenges will continue throughout 2023 and potentially beyond. The Company continues to experience inflation in some building products resulting in increases to our material and labor costs which may increase the wholesale and retail selling prices of our homes. Additionally, potential customers may delay or defer purchasing decisions considering the rising interest rate environment. The current demand for affordable manufactured housing in Florida and the U.S. is slowing because of the increased interest rate environment driven by the Federal Reserve. According to the Florida Manufactured Housing Association, shipments for the industry in Florida for the period from November 2022 through April 2023 were a decline of approximately 10% from the same period last year. The following table summarizes certain key sales statistics and percentage of gross profit. (unaudited) (unaudited) Three Months Ended Six Months Ended May 6, May 7, May 6, May 7, 2023 2022 2023 2022 New homes sold through Company owned sales centers 103 77 208 164 Pre-owned homes sold through Company owned sales centers 2 3 4 9 Homes sold to independent dealers 27 5 63 15 Total new factory built homes produced 136 113 253 205 Average new manufactured home price - retail $ 149,797 $ 124,855 $ 146,960 $ 115,533 Average new manufactured home price - wholesale $ 75,676 $ 73,561 $ 75,525 $ 69,172 As a percent of net sales: Gross profit from the Company owned retail sales centers 23 % 19 % 23 % 19 % Gross profit from the manufacturing facilities -including intercompany sales 22 % 13 % 24 % 13 % Maintaining our strong financial position is vital for future growth and success. 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, 2023, the Company will celebrate its 56th anniversary in business specializing in the design and production of quality, affordable manufactured homes. With multiple retail sales centers in Florida for over 33 years and an insurance agency subsidiary, we are the only vertically integrated manufactured home company headquartered in Florida. Insurance agent commission revenues in the second quarter of 2023 were $93,188 compared to $77,500 in the second quarter of 2022. Total insurance agent commission revenues for the first six months of 2023 were $168,797 compared to $144,487 for the first six months of 2022. Revenues are generated by new and renewal policies being written 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 May 6, 2023, and November 5, 2022. 10 Table of Contents Gross profit as a percentage of net sales was 35% in the second quarter of 2023 compared to 28% for the second quarter of 2022 and was 35% for the first six months of 2022 compared to 27% for the first six months of 2022. The gross profit in the second quarter of 2023 was $5,953,311 compared to $3,021,918 in the second quarter of 2022 and was $11,824,907 for the first six months of 2023 compared to $5,750,146 for the first six months of 2022. 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 as a percentage of net sales is primarily due to increases in our selling prices to offset the higher inflation costs of building products and labor cost on each home and the increase in the average gross profit at our retail sales centers. Selling, general and administrative expenses as a percent of net sales was 13% in the second quarters of 2023 and 2022 and first six months of 2023 and 2022. Selling, general and administrative expenses in the second quarter of 2023 was $2,215,198 compared to $1,378,606 in the second quarter of 2022 and was $4,250,675 for the first six months of 2023 compared to $2,795,149 for the first six months of 2022. The dollar increases in expenses for the three and six months of 2023 were due to the increase in variable expenses which were a direct result of employee sales compensation due to the increase in sales. We earned interest income of $169,982 for the second quarter of 2023 compared to $39,577 for the second quarter of 2022. For the first six months of 2023, interest income was $310,015 compared to $114,257 in the first six months of 2022. The increase in interest income for the three and six months of 2023 is primarily due to the interest earned from the increase in the investment rates and the increase in the monies invested. Our earnings from Majestic 21 in the second quarter of 2023 were $25,622 compared to $12,665, for the second quarter of 2022. The earnings for the first six months of 2023 were $48,448 compared to $25,222 for the first six months of 2022. 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 earnings from the Majestic 21 loan portfolio vary quarter to quarter, but overall, the earnings will decrease due to the amortization, maturity and payoff of the loans. We received distributions from 21 st Mortgage Corporation in the second quarter of 2023 of $94,165 compared to $115,454 in the second quarter of 2022 and $94,165 for the first six months of 2023 compared to $233,499 for the first six months of 2022. We received no distributions in the first quarter of 2023. The distributions are from an escrow arrangement related to a Finance Revenue Sharing Agreement (FRSA) between 21 st Mortgage Corporation and the Company. The distributions from the escrow arrangement, relating to certain loans financed by 21 st Mortgage Corporation, are recorded as income by the Company when received. The decrease in distributions in the three and six months of 2023 is due to the timing of the reserve balances. The earnings from the FRSA loan portfolio will decrease due to the amortization and payoff of the loans. The Company realized pre-tax income in the second quarter of 2023 of $3,935,397 as compared to $1,892,615 in the second quarter of 2022. The pre-tax income for the first six months of 2023 was $7,924,205 as compared to $3,419,045 in the first six months of 2022. The Company recorded an income tax expense in the amount of $1,076,548 in the second quarter of 2023 as compared to $435,789 in second quarter 2022. Income tax expense for the six months of 2023 was $2,008,389 compared to $805,185 for the six months of 2022. We reported net income of $2,858,849 for the second quarter of 2023 or $0.85 per share, compared to $1,456,826 or $0.42 per share, for the second quarter of 2022. For the first six months of 2023 net income was $5,915,813 or $1.76 per share (diluted $1.75) compared to $2,613,860 or $0.75 per share ($0.74 diluted), in the first six months of 2022. Liquidity and Capital Resources Cash and cash equivalents were $15,167,269 at May 6, 2023 compared to $16,653,449 at November 5, 2022. Certificates of deposit were $7,861,355 at May 6, 2023 compared to $3,903,888 at November 5, 2022. Short-term investments were $460,054 at May 6, 2023 compared to $589,071 at November 5, 2022. Working capital was $35,645,916 at May 6, 2023 as compared to $33,667,732 at November 5, 2022. A cash dividend was paid from our cash reserves in April 2023 in the amount of $1.00 per share ($3,370,912). Prestige purchased thirty-one (31) ($3,082,705) new homes during the first six months of 2023 from other manufacturers to help eliminate the backlog from Nobility. Prestige new home inventory was $21,000,422 at May 6, 2023 compared to $20,016,093 at November 5, 2022. Prestige has one hundred and four (104) ($8,493,339) new homes from Nobility and other manufacturers that are included in inventory and are in the field waiting to be completed and closed. We own the entire inventory for our Prestige retail sales centers, which includes new and pre-owned homes, and do not incur any third-party floor plan financing expenses. The Company currently has no line of credit facility and no debt and does not believe that such a facility is currently necessary to its operations. The Company also has approximately $4.2 million of cash surrender value of life insurance which can be accessed as an additional source of liquidity though the Company has not currently viewed this to be necessary. As of May 6, 2023, the Company 11 Table of Contents continued to report a strong balance sheet which included total assets of approximately $64 million which was funded primarily by stockholders’ equity of approximately $50 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 amounts and 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, the potential adverse impact on our business caused competitive pricing pressures at both the wholesale and retail levels, inflation, increasing material costs (including forest based products) or availability of materials due to supply chain interruptions (such as current inflation with forest products and supply issues with vinyl siding and PVC piping), changes in market demand, increase 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 attacks, or other events such as a pandemic, any armed conflict involving the United States and the impact of inflation. 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 May 6, 2023. Changes in Internal Control over Financial Reporting. There were no changes in our internal controls over financial reporting that occurred during the second quarter of fiscal 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting. 12 Table of Contents Part II. OTHER INFORMATI ON AND SIGNATURES There were no reportable events for Item 1 and Items 3 through 5. Item 2. Unregistered Sales of Equity Sec urities 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 May 6, 2023. Total Average Total number of shares Maximum number of number of price purchased as part of shares that may yet be shares paid publicly announced plans purchased under the plans Period purchased per share or program* or programs* Feb 5 - Mar 4, 2023 — — — 200,000 Mar 5 - Apr 1, 2023 — — — 200,000 Apr 2 - May 6, 2023 2,083 $ 27 2,083 197,971 *In September 2022, the Company’s Board of Directors authorized the Company to repurchase up to 200,000 shares of the Company’s common stock during fiscal year 2023 on the open market. Item 6. Exhib its 31. (a) Certification 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) Certification of Chief Financial 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. §1350 (b) Written Statement of Chief Financial Officer Pursuant to 18 U.S.C. §1350 101. Interactive data filing formatted in XBRL 104. Cover Page Interactive Date File (formatted as inline XBRL and contained in Exhibit 101. 13 Table of Contents Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NOBILITY HOMES, INC. DATE: June 9, 2023 By: /s/ Terry E. Trexler Terry E. Trexler, Chairman, President and Chief Executive Officer DATE: June 9, 2023 By: /s/ Thomas W. Trexler Thomas W. Trexler, Executive Vice President, and Chief Financial Officer DATE: June 9, 2023 By: /s/ Lynn J. Cramer, Jr. Lynn J. Cramer, Jr., Treasurer and Principal Accounting Officer 14