What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-03-17 compared with 2024-09-16 · 38 added, 48 removed, 35 unchanged (71% of the section changed)

1 unchanged sentence

Results of Operations

Total net sales in the third quarter of 2024 were $13,803,340 compared to $14,654,789 in the third quarter of 2023.

Total net sales for the first nine months of 2024 were $40,099,316 compared to $48,599,139 for the first nine months of 2023.

Net sales decreased in the first nine months of 2024 as compared to last year because of the decrease in the number of retail homes sold and manufactured.

In addition, we are building and selling lower-priced homes due to the higher interest rates on mortgages that we believe are negatively impacting sales as compared to the prior years.

Total net sales in the first quarter of 2025 were $12,241,742 compared to $14,767,998 in the first quarter of 2024.

The Company reported net income of $1,980,422 in the first quarter of 2025, compared to a net income of $2,338,437 in the first quarter of 2024.

Net sales decreased in first quarter of 2025 as compared to the prior year because of the decrease in the number of retail homes sold and manufactured.

We believe the higher interest rates on mortgages are negatively impacting sales as compared to the prior year.

There also remain delays in the receipt of certain key production materials from suppliers, back orders, price increases and labor shortages which continue to cause delays in the completion of the homes at our manufacturing facility and the set-up process of retail homes in the field.

Our inability to timely deliver and set up homes to customers has negatively impacted sales and earnings.

We expect these challenges will continue throughout fiscal year 2024 and potentially into 2025.

The Company also 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.

We expect these challenges will continue into fiscal year 2025.

The Company also continues to experience inflation in several building products resulting in increases in our material and labor costs which may increase the wholesale and retail selling prices of our homes.

We believe that potential customers have delayed or deferred purchasing decisions when considering the interest rate environment .

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has slowed due to the interest rate environment and increased costs associated with mortgages.

According to the Florida Manufactured Housing Association, shipments for the industry in Florida for the period from November 2023 through July 2024 declined by approximately 3% from the same period last year.

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

According to the Florida Manufactured Housing Association, shipments for the industry in Florida for the period from November 2024 through January 2025 declined by approximately 15% from the same period last year.

The following table summarizes certain key sales statistics and percentage of gross profit for the three months ended February 1, 2025 and February 3, 2024.

Three Months Ended

Nine Months Ended

New homes sold through Company owned sales centers

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Management remains convinced that our specific geographic market is one of the best long-term growth areas in the country.

On June 5, 2024, the Company celebrated its 57 th anniversary in business specializing in the design and production of quality, affordable manufactured homes.

On June 5, 2024, we celebrated our 57 th anniversary in business specializing in the design and production of quality, affordable manufactured and modular homes.

With multiple retail sales centers in Florida for over 34 years and an insurance agency subsidiary, we are the only vertically integrated manufactured home company headquartered in Florida.

Insurance agent commission revenues in the third quarter of 2024 were $88,703 compared to $86,255 in the third quarter of 2023.

Total insurance agent commission revenues for the first nine months of 2024 were $259,883 compared to $255,052 for the first nine months of 2023.

Revenues are generated by new and renewal policies being written which affects agent commission earned.

Insurance agent commission revenues in the first quarter of 2025 were $58,374 compared to $77,283 in the first quarter of 2024.

Revenues are generated by new and renewal policies being written which affect 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, 2024 and November 4, 2023.

Gross profit as a percentage of net sales was 33% in the third quarter of 2024 compared to 35% for the third quarter of 2023 and was 34% for the first nine months of 2024 compared to 35% for the first nine months of 2023.

The gross profit in the third quarter of 2024 was $4,606,600 compared to $5,114,390 in the third quarter of 2023 and was $13,509,340 for the first nine months of 2024 compared to $16,939,297 for the first nine months of 2023.

In the opinion of management, no reserve was deemed necessary for policy cancellations at February 1, 2025 and November 2, 2024.

Gross profit as a percentage of net sales was 32% in the first quarter of 2025 and in the first quarter of 2024.

The gross profit in the first quarter of 2025 was $3,970,785 compared to $4,734,346 in the first quarter of 2024.

The gross profit is dependent on the sales mix of wholesale and retail homes and number of pre-owned homes sold.

Higher inflation costs of building products and labor cost on each home, manufacturing

lower-costs homes and the decrease in the number of homes manufactured and sold at our retail sales centers has negatively impacted our gross profit.

Selling, general and administrative expenses as a percent of net sales was 15% in the third quarter of 2024 compared to 14% for the third quarter of 2023 and was 15% for the first nine months of 2024 compared to 13% for the first nine months of 2023.

Selling, general and administrative expenses in the third quarter of 2024 was $2,032,973 compared to $1,987,782 in the third quarter of 2023 and was $5,976,683 for the first nine months of 2024 compared to $6,238,457 for the first nine months of 2023.

Selling, general and administrative expenses as a percent of net sales increased due to additional costs incurred from the resignation of the Company's auditors, the decrease in sales at the manufacturing plant and retail sales centers and the fixed costs associated with many of the expenses.

We earned interest income of $318,253 for the third quarter of 2024 compared to $203,972 for the third quarter of 2023.

For the first nine months of 2024, interest income was $836,113 compared to $513,987 in the first nine months of 2023.

The increase in interest income for the three and nine months of 2024 is primarily due to an increase in the monies invested.

Our earnings from Majestic 21 in the third quarter of 2024 were $24,914 compared to $27,828, for the third quarter of 2023.

The earnings for the first nine months of 2024 were $67,623 compared to $76,276 for the first nine months of 2023.

The gross profit as a percentage of net sales remained consistent 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 percentage of net sales was 14% in the first quarter of 2025 and in the first quarter of 2024.

Selling, general and administrative expenses in the first quarter of 2025 were $1,676,650 compared to $2,032,330 in the first quarter of 2024.

The Company earned interest income of $285,278 for the first quarter of 2025 compared to $297,999 for the first quarter of 2024.

The decrease in interest income for the first three months of 2025 is primarily due to the lower interest rates.

Our earnings from Majestic 21 in the first quarter of 2025 were $25,807 compared to $22,174 for the first quarter of 2024.

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 Company received a one-time distribution of approximately $1.6 million in first quarter of 2024, representing our 50% of the excess capital in the portfolio.

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 third quarter of 2024 of $47,339 compared to $115,641 in the third quarter of 2023 and $147,155 for the first nine months of 2024 compared to $209,806 for the first nine months of 2023.

We received a distribution from 21 st Mortgage Corporation in the first quarter of 2025 in the amount of $38,152 and no distribution in the first quarter if 2024.

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 earnings from the FRSA loan portfolio will vary quarter to quarter, but will continue to decrease due to the amortization, maturity and payoff of the loans.

The Company realized pre-tax income in the third quarter of 2024 of $2,927,213 as compared to $3,571,531 in the third quarter of 2023.

The pre-tax income for the first nine months of 2024 was $8,773,299 as compared to $11,495,736 in the first nine months of 2023.

The Company recorded an income tax expense in the amount of $741,901 in the third quarter of 2024 as compared to $905,203 in the third quarter of 2023.

Income tax expense for the nine months of 2024 was $2,223,591 compared to $2,913,592 for the nine months of 2023.

We reported net income of $2,185,312 for the third quarter of 2024 or $0.67 per share, compared to $2,666,328 or $0.80 per share, for the third quarter of 2023.

For the first nine months of 2024 net income was $6,549,708 or $2.00 per share compared to $8,582,144 or $2.56 per share in the first nine months of 2023.

The earnings from the FRSA loan portfolio will vary quarter to quarter but will continue to decrease due to the amortization and payoff of the loans.

The Company realized pre-tax income in the first quarter of 2025 of $2,649,213 as compared to $3,123,529 in the first quarter of 2024.

The Company recorded an income tax expense in the amount of $668,791 in the first quarter of 2025 as compared to $785,092 in the first quarter 2024.

We reported net income of $1,980,422 for the first quarter of 2025 or $0.61 per share ($0.60 diluted), compared to $2,338,437 or $0.72 per share ($0.71 diluted), for the first quarter of 2024.

Liquidity and Capital Resources

Cash and cash equivalents were $13,052,050 at August 3, 2024 compared to $13,879,358 at November 4, 2023.

Certificates of deposit were $12,888,834 at August 3, 2024 compared to $10,204,287 at November 4, 2023.

Short-term investments were $618,228 at August 3, 2024 compared to $527,899 at November 4, 2023.

Working capital was $40,807,632 at August 3, 2024 as compared to $37,871,552 at November 4, 2023.

A cash dividend was paid from our cash reserves in April 2024 in the amount of $1.50 per share ($4,903,243).

The Company received a one-time distribution of approximately $1.6 million in first quarter of 2024, from 21 st Mortgage Corporation, representing our 50% of the excess capital in the portfolio.

Prestige new home inventory was $17.7 million at August 3, 2024 compared to $19 million at November 4, 2023.

Prestige has sixty nine (69) ($5.6 million) new homes that are included in inventory and are in the field waiting to be completed and closed.

Cash and cash equivalents were $16,291,084 at February 1, 2025 compared to $13,521,296 at November 2, 2024.

Certificates of deposit were $12,648,261 at February 1, 2025 compared to $13,021,839 at November 2, 2024.

Short-term investments were $677,101 at February 1, 2025 compared to $680,017 at November 2, 2024.

Working capital was $44,796,398 at February 1, 2025 as compared to $42,927,149 at November 2, 2024.

The Company received approximately $1.6 million in the first quarter of 2024, from 21 st Mortgage Corporation, representing our 50% of the excess capital in the portfolio.

Prestige new home inventory was $17,586,945 at February 1, 2025 compared to $18,475,931 at November 2, 2024.

Prestige has sixty six (66) ($5.2 million) compared to first quarter last year of sixty (60) ($4.7 million) new homes 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 $4.5 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 August 3, 2024, the Company continued to report a strong balance sheet which included total assets of approximately $64.3 million which was funded primarily by stockholders’ equity of approximately $54.5 million.

The Company currently has no line of credit facility and no debt and does not believe that such a facility is currently necessary for its operations.

The Company also has approximately $4.6 million of cash surrender value of life insurance which it would be able to access as an additional source of liquidity though the Company has not currently viewed this to be necessary.

As of February 1, 2025, the Company continued to report a strong balance sheet which included total assets of approximately $67.3 million which was funded primarily by stockholders’ equity of approximately $58.6 million.

Critical Accounting Policies and Estimates

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Forward-Looking Statements

Certain statements in this report are forward-looking statements within the meaning of the federal securities laws.

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 by 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 insulation, shingles, 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.

other factors, the impact of marketing and cost-management programs, the impact of higher interest rates on mortgage financing, 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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis