Item 8. Financial Statements and Supplementary Data
Item 8.
Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting FirmDaszkal Bolton LLP
13
Consolidated Balance Sheets
14
Consolidated Statements of Comprehensive Income
15
Consolidated Statements of Changes in Stockholders Equity
16
Consolidated Statements of Cash Flows
17
Notes to Consolidated Financial Statements
18
12
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
Nobility Homes,
Inc.
Ocala, Florida
Opinion on the Financial
Statements
We have audited the accompanying consolidated balance sheet of Nobility Homes, Inc. (the Company) at October 31, 2020,
and November 2, 2019, and the related consolidated statements of comprehensive income, changes in stockholders equity, and cash flows for each of the years in the two-year period ended
October 31, 2020, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company
and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial
statements are the responsibility of the Companys management. Our responsibility is to express an opinion on the Companys consolidated financial statements based on our audits. We are a public accounting firm registered with the Public
Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal
control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe
that our audits provide a reasonable basis for our opinion.
/s/ Daszkal Bolton LLP
We have served as the Companys auditor since 2018.
Jupiter, Florida
January 29, 2021
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Nobility Homes, Inc.
Consolidated Balance Sheets
October 31, 2020 and November 2, 2019
October 31,
2020
November 2,
2019
Assets
Current assets:
Cash and cash equivalents
$
30,305,902
$
22,533,965
Certificates of deposit
4,602,307
10,153,575
Short-term investments
358,960
521,283
Accounts receivabletrade
790,046
1,351,838
Note receivable
35,997
83,231
Mortgage notes receivable
20,162
17,896
Income taxes receivable
105,676
Inventories
9,294,677
10,616,778
Pre-owned homes, net
441,937
331,103
Prepaid expenses and other current assets
1,014,849
1,217,762
Total current assets
46,970,513
46,827,431
Property, plant and equipment, net
5,142,714
5,005,644
Pre-owned homes, net
1,077,240
808,128
Note receivable, less current portion
6,573
43,769
Mortgage notes receivable, less current portion
227,509
232,148
Other investments
1,729,364
1,649,273
Deferred income taxes
3,598
80,405
Operating lease right of use asset
715,368
0
Cash surrender value of life insurance
3,795,902
3,617,974
Other assets
156,287
156,287
Total assets
$
59,825,068
$
58,421,059
Liabilities and Stockholders Equity
Current liabilities:
Accounts payable
$
928,095
$
1,111,216
Accrued compensation
670,520
748,626
Accrued expenses and other current liabilities
1,383,833
2,055,952
Income taxes payable
2,016,132
Operating lease obligation
24,192
Customer deposits
5,098,633
3,022,818
Total current liabilities
8,105,273
8,954,744
Operating lease obligation, less current portion
778,519
Total liabilities
8,883,792
8,954,744
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, 3,631,196 and
3,664,070 outstanding, respectively
536,491
536,491
Additional paid in capital
10,694,554
10,687,662
Retained earnings
57,976,051
55,298,750
Accumulated other comprehensive income
389,164
Less treasury stock at cost, 1,733,711 shares in 2020 and 1,700,837 shares in 2019
(18,265,820
)
(17,445,752
)
Total stockholders equity
50,941,276
49,466,315
Total liabilities and stockholders equity
$
59,825,068
$
58,421,059
The accompanying notes are an integral part of these financial statements.
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Nobility Homes, Inc.
Consolidated Statements of Comprehensive Income
For the years ended October 31, 2020 and November 2, 2019
Year Ended
October 31,
2020
November 2,
2019
Net sales
$
41,612,307
$
46,347,931
Cost of sales
(29,481,820
)
(32,694,931
)
Gross profit
12,130,487
13,653,000
Selling, general and administrative expenses
(4,984,318
)
(5,352,319
)
Operating income
7,146,169
8,300,681
Other income (loss):
Interest income
286,897
556,142
Undistributed earnings in joint ventureMajestic 21
80,091
78,107
Proceeds received under escrow arrangement
421,099
379,104
Gain on sale of investment in retirement community
1,510,000
Decrease in fair value of equity investment
(155,406
)
Gain on sale of assets
32,041
880,129
Miscellaneous
58,194
75,366
Total other income
722,916
3,478,848
Income before provision for income taxes
7,869,085
11,779,529
Income tax expense
(1,885,387
)
(2,969,109
)
Net income
5,983,698
8,810,420
Other comprehensive loss
Unrealized investment loss, net of tax effect
(1,243
)
Comprehensive income
$
5,983,698
$
8,809,177
Weighted average number of shares outstanding:
Basic
3,638,592
3,803,400
Diluted
3,639,950
3,804,673
Net income per share:
Basic
$
1.64
$
2.32
Diluted
$
1.64
$
2.32
The accompanying notes are an integral part of these financial statements.
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Nobility Homes, Inc.
Consolidated Statements of Changes in Stockholders Equity
For the years ended and October 31, 2020 and November 2, 2019
Common
Stock Shares
Common
Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income
Treasury
Stock
Total
Balance at November 2, 2019
3,664,070
$
536,491
$
10,687,662
$
55,298,750
$
389,164
$
(17,445,752
)
$
49,466,315
Adoption of ASU 2016-01
389,164
(389,164
)
Adoption of ASU 2016-02
(64,591
)
(64,591
)
Balance at November 2, 2019 as adjusted
3,664,070
536,491
10,687,662
55,623,323
(17,445,752
)
49,401,724
Cash dividend
(3,630,970
)
(3,630,970
)
Purchase of treasury stock
(33,100
)
(822,450
)
(822,450
)
Stock-based compensation
226
6,892
2,382
9,274
Net income
5,983,698
5,983,698
Balance at October 31, 2020
3,631,196
$
536,491
$
10,694,554
$
57,976,051
$
$
(18,265,820
)
$
50,941,276
Balance at November 3, 2018
3,873,731
$
536,491
$
10,670,848
$
50,352,546
$
390,407
$
(12,883,791
)
$
49,066,501
Cash dividend
(3,864,216
)
(3,864,216
)
Purchase of treasury stock
(212,396
)
(4,585,861
)
(4,585,861
)
Stock-based compensation
485
16,814
4,190
21,004
Unrealized investment loss, net of tax effect
(1,243
)
(1,243
)
Exercise of employee stock options
2,250
19,710
19,710
Net income
8,810,420
8,810,420
Balance at November 2, 2019
3,664,070
$
536,491
$
10,687,662
$
55,298,750
$
389,164
$
(17,445,752
)
$
49,466,315
The accompanying notes are an integral part of these financial statements.
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Table of Contents
Nobility Homes, Inc.
Consolidated Statements of Cash Flows
For the years ended October 31, 2020 and November 2, 2019
Year Ended
October 31,
2020
November 2,
2019
Cash flows from operating activities:
Net income
$
5,983,698
$
8,810,420
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation
180,047
163,077
Deferred income taxes
83,724
(25,008
)
Undistributed earnings in joint ventureMajestic 21
(80,091
)
(78,107
)
Gain on sale of investment in retirement community
(1,510,000
)
Gain on property held for sale
(864,887
)
Gain on disposal of property, plant and equipment
(32,041
)
(15,242
)
Decrease in fair value of equity investments
155,406
Stock-based compensation
9,274
21,004
Amortization of operating lease right of use assets
36,340
Decrease (increase) in:
Accounts receivabletrade
561,792
431,235
Inventories
1,322,101
(3,346,228
)
Pre-owned homes
(379,946
)
267,600
Prepaid expenses and other current assets
202,913
(127,610
)
Interest receivable
(150,459
)
(73,517
)
Income taxes receivable
(105,676
)
(Decrease) increase in:
Accounts payable
(183,121
)
26,121
Accrued compensation
(78,106
)
(121,031
)
Accrued expenses and other current liabilities
(672,119
)
706,572
Income taxes payable
(2,016,132
)
1,436,346
Customer deposits
2,075,815
(1,041,450
)
Net cash provided by operating activities
6,913,419
4,659,295
Cash flows from investing activities:
Purchase of property, plant and equipment
(318,215
)
(447,413
)
Purchase of certificates of deposit
(20,000
)
(4,080,058
)
Proceeds from certificates of deposit
5,574,124
Proceeds from property held for resale
1,078,324
Proceeds from sale of investment in retirement community
1,510,000
Proceeds from disposal of property, plant and equipment
33,139
Collections on interest receivable
147,603
34,093
Collections on mortgage notes receivable
2,373
2,022
Collections on equipment and other notes receivable
84,430
62,977
Issuance of equipment and other notes receivable
(39,768
)
Increase in cash surrender value of life insurance
(177,928
)
(180,001
)
Net cash provided by (used in) investing activities
5,325,526
(2,059,824
)
Cash flows from financing activities:
Payment of cash dividend
(3,630,970
)
(3,864,216
)
Proceeds from exercise of employee stock options
19,710
Proceeds from paycheck protection program
1,449,700
Return of proceeds from paycheck protection program
(1,449,700
)
Purchase of treasury stock
(822,450
)
(4,585,861
)
Reduction of operating lease obligation
(13,588
)
Net cash used in financing activities
(4,467,008
)
(8,430,367
)
Increase (decrease) in cash and cash equivalents
7,771,937
(5,830,896
)
Cash and cash equivalents at beginning of year
22,533,965
28,364,861
Cash and cash equivalents at end of year
$
30,305,902
$
22,533,965
Supplemental disclosure of cash flow information:
Income taxes paid
$
4,002,000
$
1,550,000
The accompanying notes are an integral part of these financial statements.
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Notes to Consolidated Financial Statements
NOTE 1 Reporting Entity and Significant Accounting Policies
Description of Business and Principles of Consolidation The consolidated financial statements include the accounts of Nobility Homes, Inc.
(Nobility), its wholly-owned subsidiaries, Prestige Home Centers, Inc. (Prestige), and Prestiges wholly-owned subsidiaries, Mountain Financial, Inc., an independent insurance agency and licensed mortgage loan originator
and Majestic Homes, Inc., (collectively the Company). The Company is engaged in the manufacture and sale of manufactured and modular homes to various dealerships, including its own retail sales centers, and manufactured housing
communities throughout Florida. The Company has one manufacturing plant in operation that is located in Ocala, Florida. At October 31, 2020 Prestige operated ten Florida retail sales centers: Ocala (2), Chiefland, Auburndale, Inverness, Hudson,
Tavares, Yulee, Panama City and Punta Gorda. In December 2017 Prestige executed a lease to open an eleventh retail sales center in north Florida and has not yet opened the retail sales center due to backlog at the manufacturing facility and
difficulty in hiring staff.
All intercompany accounts and transactions have been eliminated in consolidation. The consolidated financial statements are
prepared in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP).
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying disclosures. These
estimates and assumptions are based upon managements best knowledge of current events and actions that the Company may take in the future. The Company is subject to uncertainties such as the impact of future events, economic, environmental and
political factors and changes in the Companys business environment; therefore, actual results could differ from these estimates. Accordingly, the accounting estimates used in the preparation of the Companys consolidated financial
statements will change as new events occur, as more experience is acquired, as additional information is obtained and as the Companys operating environment changes. Changes in estimates are made when circumstances warrant. Such changes in
estimates and refinements in estimation methodologies are reflected in the reported financial condition and results of operations; if material, the effects of changes in estimates are disclosed in the notes to the consolidated financial statements.
Significant estimates and assumptions by management affect: valuation of pre-owned homes, the allowance for doubtful accounts, the carrying value of long-lived assets, the provision for income taxes and
related deferred tax accounts, certain accrued expenses and contingencies, warranty reserve and stock-based compensation.
Fiscal Year
The Companys fiscal year ends on the first Saturday on or after October 31. The year ended October 31, 2020 (fiscal year 2020) and the year ended November 2, 2019 (fiscal year 2019) each consisted of a fifty-two week period.
Revenue Recognition The Companys revenue comes substantially from the
sale of manufactured housing, modular housing and park models, along with freight billed to customers, parts sold and aftermarket services.
The Company
recognizes revenue following the comprehensive framework of Financial Accounting Standards Board ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09), which established a methodology for
determining how much revenue to recognize and when it should be recognized through application of the following five-step approach:
1.
Identify the contract(s) with a customer;
2.
Identify each performance obligation in the contract;
3.
Determine the transaction price;
4.
Allocate the transaction price to each performance obligation; and
5.
Recognize revenue when or as each performance obligation is satisfied.
The Company recognizes revenue from its retail sales of new manufactured homes upon the occurrence of the following:
Its receipt of a down payment,
Construction of the home is complete,
Home has been delivered and set up at the retail home buyers site, and title has been transferred to the
retail home buyer,
Remaining funds have been released by the finance company (financed sales transaction), remaining funds have been
committed by the finance company by an agreement with respect to financing obtained by the customer, usually in the form of a written approval for permanent home financing received from a lending institution, (financed construction sales
transaction) or cash has been received from the home buyer (cash sales transaction), and
Completion of any other significant obligations.
The Company recognizes revenue from the sale of the repurchased homes upon transfer of title to the new purchaser.
The Company recognizes revenues from its independent dealers upon receiving wholesale floor plan financing or establishing retail credit approval for terms,
shipping of the home, and transferring title and risk of loss to the independent dealer. For wholesale shipments to independent dealers, the Company has no obligation to setup the home or to complete any other significant obligations.
18
Table of Contents
Notes to Consolidated Financial Statements
The Company recognizes revenues from its wholly-owned subsidiary, Mountain Financial, Inc., as follows:
commission income (and fees in lieu of commissions) is recorded as of the effective date of insurance coverage or the billing date, whichever is later. Commissions on premiums billed and collected directly by insurance companies are recorded as
revenue when received which, in many cases, is the Companys first notification of amounts earned due to the lack of policy and renewal information. Contingent commissions are recorded as revenue when received. Contingent commissions are
commissions paid by insurance underwriters and are based on the estimated profit and/or overall volume of business placed with the underwriter. The data necessary for the calculation of contingent commissions cannot be reasonably obtained prior to
the receipt of the commission which, in many cases, is the Companys first notification of amounts earned. The Company provides 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 October 31, 2020 or
November 2, 2019.
Sales of homes to affiliated entities that are subject to contingent payment terms are considered inventory consignment
arrangements. Revenue from such arrangements is recognized when the homes are sold to the end users and payment is collected by the affiliated entity.
See Note 4 Related Party Transactions.
Revenues by Products and Services Revenues by net sales from manufactured housing, pre-owned
homes, and insurance agent commissions for the years ended October 31, 2020 and November 2, 2019 are as follows:
2020
2019
Manufactured housing
$
40,775,887
$
45,583,022
Pre-owned homes
552,421
492,543
Insurance agent commissions
283,999
272,366
Total net sales
$
41,612,307
$
46,347,931
Cash and Cash Equivalents The Company considers all money market accounts and highly liquid debt
instruments purchased with an original maturity of three months or less to be cash equivalents.
Certificates of Deposit Certificates
of deposits are recorded at cost plus accrued interest and have maturities of twelve months or less.
Accounts Receivable Accounts
receivable are stated at net realizable value. An allowance for doubtful accounts is provided based on prior collection experiences and managements analysis of specific accounts. At October 31, 2020 or November 2, 2019, in the
opinion of management, all accounts were considered fully collectible and, accordingly, no allowance was deemed necessary.
Accounts receivable fluctuate
due to the number of homes sold to independent dealers. The Company recognizes revenues from its independent dealers upon receiving wholesale floor plan financing or establishing retail credit approval for terms, shipping of the home, and
transferring title and risk of loss to the independent dealer.
Investments The Companys investments consist of equity
securities of a public company. Investments with maturities of less than one year are classified as short-term investments. The Companys equity investment in a public company is classified as available-for-sale and carried at fair
value. Unrealized gains on the available-for-sale securities, net of taxes, were recorded in accumulated other comprehensive income. Upon the Companys adoption of ASU 2016-01, unrealized gains and losses on these available-for-sale securities,
are reflected in the statement of income and comprehensive income.
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 21 st Mortgage Corporation. This inventory is valued at the Companys 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 market.
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Notes to Consolidated Financial Statements
Other pre-owned homes are acquired (Repossessions Inventory) as a
convenience to the Companys joint venture partner, 21 st Mortgage Corporation. This inventory has been repossessed by 21 st Mortgage
Corporation or through mortgage foreclosure. The Company acquired 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 21 st Mortgage Corporation. This arrangement assists 21 st 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 st 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 21 st Mortgage. Any shortfall from the proceeds to cover these amounts is paid by 21 st Mortgage to
the Company. As the Company has no risk of loss on the sale, there is no valuation allowance necessary for this inventory.
Inventory held at consignment
locations by affiliated entities is included in the Companys inventory on the Companys consolidated balance sheets. Consigned inventory was $1,277,681 and $1,540,949 as of October 31, 2020 and November 2, 2019, 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 market.
Other inventory costs are determined on a first-in,
first-out basis.
See Note 6 Inventories.
Property, Plant and Equipment Property, plant and equipment are stated at cost and depreciated over their estimated useful lives using
the straight-line method. Routine maintenance and repairs are charged to expense when incurred. Major replacements and improvements are capitalized. Gains or losses are credited or charged to earnings upon disposition.
Investment in Majestic 21 Majestic 21 was formed in 1997 as a joint venture with our joint venture partner, an unrelated entity,
21 st Mortgage Corporation (21 st Mortgage). We have been allocated our share of net income and distributions on a 50/50 basis since
Majestic 21s formation. While Majestic 21 has been deemed to be a variable interest entity, the Company only holds a 50% interest in this entity and all allocations of profit and loss are on a 50/50 basis. Since all allocations are to be made
on a 50/50 basis and joint decisions with the joint venture partner are made which most significantly impact Majestic 21 economic performance therefore, the Company is not required to consolidate Majestic 21 with the accounts of Nobility Homes in
accordance with the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) No. 810, Consolidations (ASC 810). Management believes that the Companys maximum exposure to loss as a result of its
involvement with Majestic 21 is its investment in the joint venture. Based on managements evaluation, there was no impairment of this investment at October 31, 2020 or November 2, 2019.
The Company entered into an arrangement in 2002 with 21 st Mortgage to repurchase certain pre-owned homes. Under this arrangement or any other arrangement, the Company is not obligated to repurchase any foreclosed/repossessed units of Majestic 21 as it does not have a repurchase agreement or any other
guarantees with Majestic 21. However, the Company buys from 21 st Mortgage foreclosed/repossessed units from the Majestic 21 portfolio and acts as a remarketing agent. It resells those units
through the Companys network of retail centers which management believes benefits the historical loss experience of the joint venture. The only impact on the Companys operations from this arrangement are commissions earned on the resale
of these units and interest earned for the Companys carrying costs of the units while in inventory.
See Note 15 Commitments and Contingent
Liabilities.
Other Investments - In October 2019, the Company sold its 31.3% investment interest in Walden Woods South and the
Company received $1,510,000 in cash.
See Note 4 Related Party Transactions.
20
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Notes to Consolidated Financial Statements
Impairment of Long-Lived Assets In the event that facts and circumstances indicate that
the carrying value of a long-lived asset may be impaired, an evaluation of recoverability is performed by comparing the estimated future undiscounted cash flows associated with the asset to the assets carrying amount to determine if a
write-down is required. If such evaluations indicate that the future undiscounted cash flows of certain long-lived assets are not sufficient to recover the carrying value of such assets, the assets are adjusted to their fair values.
Customer Deposits A retail customer is required to make a down payment ranging from $500 to 35% of the retail contract price based upon
the credit worthiness of the customer. The retail customer receives the full down payment back when the Company is not able to obtain retail financing. If the retail customer receives retail financing and decides not to go through with the retail
sale, the Company can withhold 20% of the retail contract price. The Company does not typically receive any deposits from independent dealers.
Company Owned Life Insurance The Company has purchased life insurance policies on certain key executives. Company owned life insurance is
recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.
Warranty Costs The Company provides for a warranty as the manufactured homes are sold. Amounts related to these warranties for fiscal
years 2020 and 2019 are as follows:
2020
2019
Beginning accrued warranty expense
$
125,000
$
125,000
Less: reduction for payments
(419,731
)
(413,734
)
Plus: additions to accrual
419,731
413,734
Ending accrued warranty expense
$
125,000
$
125,000
The Companys limited warranty covers substantial defects in material or workmanship in specified components of the home
including structural elements, plumbing systems, electrical systems, and heating and cooling systems which are supplied by the Company that may occur under normal use and service during a period of twelve (12) months from the date of delivery
to the original homeowner, and applies to the original homeowner or any subsequent homeowner to whom this product is transferred during the duration of this twelve (12) month period.
The Company tracks the warranty claims per home. Based on the history of the warranty claims, the Company has determined that a majority of warranty claims
usually occur within the first three months after the home is sold. The Company determines its warranty accrual using the last three months of home sales. Accrued warranty costs are included in accrued expenses in the accompanying consolidated
balance sheets.
Accrued Home Setup Costs Accrued home setup costs represent amounts due to vendors and/or independent contractors
for various items related to the actual setup of the home on the retail home buyers site. These costs include appliances, air conditioners, electrical/plumbing hook-ups, furniture, insurance,
impact/permit fees, land/home fees, extended service plan, freight, skirting, steps, well, septic tanks and other setup costs and are included in accrued expenses in the accompanying consolidated balance sheets.
Stock-Based Compensation The Company has a stock incentive plan (the Plan) which authorizes the issuance of options to
purchase common stock. Stock-based compensation is measured at the grant date based on the fair value of the award and is recognized as expense over the period during which an employee is required to provide service in exchange for the award
(usually the vesting period).
Rebate Program The Company has a rebate program for some dealers based upon the number and type of
home purchased, which pays rebates based upon sales volume to the dealers. Volume rebates are recorded as a reduction of sales in the accompanying consolidated financial statements. The rebate liability is calculated and recognized as eligible homes
are sold based upon factors surrounding the activity and prior experience of specific dealers and is included in accrued expenses in the accompanying consolidated balance sheets. There were no rebates earned by dealers during fiscal years 2020 and
2019.
Advertising Advertising for Prestige retail sales centers consists primarily of internet, newspaper, radio and television
advertising. All costs are expensed as incurred. Advertising expense amounted to approximately $144,600 and $140,520 for fiscal years 2020 and 2019, respectively.
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Notes to Consolidated Financial Statements
Income Taxes The Company accounts for income taxes utilizing the asset and liability
method. This approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets and liabilities are adjusted for the effects of
changes in tax laws and rates on the date of enactment.
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.
Shipping and Handling
Costs Net sales include the revenue related to shipping and handling charges billed to customers. The related costs associated with shipping and handling is included as a component of cost of goods sold.
Comprehensive Income Comprehensive income includes net income as well as other comprehensive income or loss. The Companys other
comprehensive income or loss consists of unrealized gains or losses on available-for-sale securities, net of related taxes.
Segments The Companys chief operating decision maker is its Chief Executive Officer, who reviews financial information on a
company-wide or consolidated basis. Accordingly, the Company accounts for its operations in accordance with FASB ASC No. 280, Segment Reporting. No segment disclosures have been made as the Company considers its business activities
as a single segment.
Major Customers Two c ompanies which own multiple retirement communities in our market area
accounted for $3,497,285 or 8% and $2,579,380 or 6% respectively, of our total net sales in fiscal year 2020 compare to three companies which accounted for $2,536,870 or 5% of our total net sales in fiscal year 2019. Accounts receivable due from
these customers were $467,078 or 78% and $685,671 or 57% at October 31, 2020 and November 2, 2019, respectively.
Concentration of Credit
Risk The Companys financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, short-term and long-term investments and accounts receivable. At times, the Companys
deposits may exceed federally insured limits. However, the Company has not experienced any losses in such accounts and management believes the Company is not exposed to any significant credit risk on these accounts. The majority of the
Companys sales are credit sales which are made primarily to customers whose ability to pay is dependent upon the industry economics prevailing in the areas where they operate; however, concentrations of credit risk with respect to accounts
receivables is limited due to generally short payment terms. The Company also performs ongoing credit evaluations of its customers to help further reduce credit risk. The Company maintains reserves for potential credit losses when deemed necessary
and such losses have historically been within managements expectations.
Concentration of Retail Financing Sources
There are two national lenders that service the manufactured housing industry with several others who specialize in government insured loans (Fannie, Freddie, FHA, VA, etc.). With only a few lenders dedicated to
our industry, the loss of any of them could adversely affect our retail sales.
Recently Issued or Adopted Accounting Pronouncements
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 was effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within those fiscal
years. The Company adopted ASU 2016-02, on November 3 rd , 2019 which resulted in the recognition of the right-of-use assets and related obligations on its consolidated financial statements.
In January 2016, the FASB
issued ASU No. 2016-01, Financial InstrumentsOverall: Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments require all equity investments to be
measured at fair value with changes in the fair value recognized through net income (other than those accounted for under the equity method of accounting or those that result in consolidation of the investee). The amendments also require an entity
to present separately in other comprehensive income the portion
22
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Notes to Consolidated Financial Statements
of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in
accordance with the fair value option for financial instruments. In addition, the amendments eliminate the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for
financial instruments measured at amortized cost on the balance sheet. The Company adopted ASU 2016-01 resulting in recognition changes in the fair value of equity investment in earnings.
NOTE 2 Investments
The following is a summary of
short-term investments (available for sale):
October 31, 2020
Amortized Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated Fair
Value
Equity securities in a public company
$
167,930
$
191,030
$
$
358,960
November 2, 2019
Amortized Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated Fair
Value
Equity securities in a public company
$
167,930
$
353,353
$
$
521,283
The fair values were estimated based on unadjusted quoted prices at each respective period end.
NOTE 3 Fair Values of Financial Investments
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 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 1Valuations are based on unadjusted quoted prices in active markets for identical assets or
liabilities.
Level 2Valuations 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 3Valuations are based on prices or valuation techniques that require inputs that are both
unobservable and significant to the overall fair value measurement. Inputs reflect managements best estimate of what market participants would use in valuing the asset or liability at the measurement date. The following table represents the
Companys financial assets and liabilities which are carried at fair value at October 31, 2020 and November 2, 2019.
October 31, 2020
Level 1
Level 2
Level 3
Equity securities in a public company
$
358,960
$
$
November 2, 2019
Level 1
Level 2
Level 3
Equity securities in a public company
$
521,283
$
$
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Notes to Consolidated Financial Statements
NOTE 4 Related Party Transactions
Affiliated Entities
TLT, Inc. Our
President and Chairman of the Board of Directors (President) and the Executive Vice President each own 50% of the stock of TLT, Inc. TLT, Inc. is the general partner of limited partnerships which are developing manufactured housing
communities in Central Florida (the TLT Communities). Our President owns between a 24.75% and a 49.5% direct and indirect interest in each of these limited partnerships. Our Executive Vice President owns between a 49.5% and a 57.75%
direct and indirect interest in each of these limited partnerships. The TLT Communities have purchased manufactured homes exclusively from the Company since 1990. Sales to TLT Communities were not significant during fiscal years 2020 and 2019.
Walden Woods South In October 2019, the Company sold its 31.3% investment interest in Walden Woods South LLC, which owns the Walden Woods South
retirement community, to certain related parties and existing owners. Prior to the sale, the Companys President directly owned 59.43% of Walden Woods South LLC. After the sale, the Companys President and Executive Vice President directly
own 59.43% and 23.04%, respectively, of Walden Woods South LLC.
Repurchase of Common Stock In June 2019, the Company repurchased 100,000
shares of common stock from our President at $21.95 per share.
NOTE 5 Other Investments
Investment in Joint Venture Majestic 21 During fiscal 1997, the Company contributed $250,000 for a 50% interest in a joint
venture engaged in providing mortgage financing on manufactured homes. This investment is accounted for under the equity method of accounting.
While
Majestic 21 has been deemed to be a variable interest entity, the Company only holds a 50% interest in this entity and all allocations of profit and loss are on a 50/50 basis. Since all allocations are to be made on a 50/50 basis and the
Companys maximum exposure is limited to its investment in Majestic 21, management has concluded that the Company would not absorb a majority of Majestic 21s expected losses nor receive a majority of Majestic 21s expected residual
returns; therefore, the Company is not required to consolidate Majestic 21 with the accounts of Nobility Homes in accordance with ASC 810.
See Note 15
Commitments and Contingent Liabilities.
We received no distributions from the joint venture in fiscal year 2020 or 2019.
With regard to our investment in Majestic 21, there are no differences between our investment balance and the amount of underlying equity in net assets owned
by Majestic 21.
Investment in Retirement Community Limited Partnerships In October 2019, the Company sold its 31.3% investment
interest in Walden Woods South and the Company received $1,510,000 in cash.
NOTE 6 Inventories
The Company acquired a significant amount of repossessed pre-owned (Buy Back) inventory in 2011. Other pre-owned homes are periodically acquired (Repossessions) as a convenience to the Companys joint venture partner. Pre-owned homes are also taken as trade-ins on new home sales (Trade-Ins). This inventory consists of individual homes and homes on a real estate parcel. The Company continually monitors this inventory and
records a valuation allowance where necessary on a unit specific basis which management believes results in inventory being valued at market. The Company could experience additional losses on the disposition of these homes beyond the level of the
reserve recorded by the Company.
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Notes to Consolidated Financial Statements
A breakdown of the elements of inventory at October 31, 2020 and November 2, 2019 is as follows:
October 31, 2020
November 2, 2019
Raw materials
$
1,203,282
$
941,206
Work-in-process
107,651
125,371
Inventory consigned to affiliated entities
1,277,681
1,540,949
Finished homes
6,543,861
7,888,880
Model home furniture
162,202
120,372
Inventories
$
9,294,677
$
10,616,778
Pre-owned homes *
$
1,686,373
$
1,311,626
Inventory impairment reserve **
(167,196
)
(172,395
)
1,519,177
1,139,231
Less homes expected to sell in 12 months
(441,937
)
(331,103
)
Pre-owned homes, long-term
$
1,077,240
$
808,128
*
The following table summarizes a breakdown of pre-owned homes inventory
for fiscal years 2020 and 2019:
Buy Back
Repossessions
Trade-Ins
Total
Balance at November 3, 2018
$
715,748
$
1,155,643
$
84,874
$
1,956,265
Additions
253,600
18,860
272,460
Sales
(573,353
)
(316,496
)
(27,250
)
(917,099
)
Balance at November 2, 2019
142,395
1,092,747
76,484
1,311,626
Additions
707,821
12,132
719,953
Sales
(328,600
)
(16,606
)
(345,206
)
Balance at October 31, 2020
$
142,395
$
1,471,968
$
72,010
$
1,686,373
**
An analysis of the pre-owned home inventory impairment reserve at
October 31, 2020 and November 2, 2019 is as follows:
October 31, 2020
November 2, 2019
Balance at beginning of year
$
172,395
$
549,434
Less: Reductions for homes sold
(207,180
)
Inventory holding costs
(5,199
)
(36,232
)
Additions (reduction) to impairment reserve
(133,627
)
Balance at end of year
$
167,196
$
172,395
NOTE 7 Property Held for Sale
In June 2019 the Company sold its former Pace, Florida retail sales center property for total net proceeds of $1,078,325.
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Notes to Consolidated Financial Statements
NOTE 8 Property, Plant and Equipment
Property, plant and equipment, along with their estimated useful lives and related accumulated depreciation are summarized as follows:
Range of Lives in Years
October 31, 2020
November 2, 2019
Land
$
3,092,463
$
3,092,463
Land improvements
10-20
1,245,975
908,439
Buildings and improvements
15-40
2,529,048
2,461,040
Machinery and equipment
3-10
985,746
932,040
Furniture and fixtures
3-10
301,889
294,113
Construction in progress
181,765
8,155,121
7,869,860
Less accumulated depreciation
(3,012,407
)
(2,864,216
)
$
5,142,714
$
5,005,644
Depreciation expense during the years ended October 31, 2020 and November 2, 2019 totaled $180,047 and $163,097,
respectively.
NOTE 9 Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities are comprised of the following:
October 31. 2020
November 2, 2019
Accrued warranty expense
$
125,000
$
125,000
Accrued property and sales taxes
370,694
398,877
Other accrued expenses
888,139
1,532,090
Total accrued expenses and other current liabilities
$
1,383,833
$
2,055,967
NOTE 10 Proceeds Received Under Escrow Arrangement
The Company received $421,099 in fiscal year 2020 and $379,104 in fiscal year 2019 under an escrow arrangement related to a Finance Revenue Sharing Agreement
between 21 st Mortgage Corporation and the Company. The distributions from the escrow account, related to certain loans financed by 21 st
Mortgage Corporation, are recorded in income by the Company when received, which has been the Companys past practice.
NOTE 11 Income Taxes
The Company computes income tax expense using the liability method. Under this method, deferred income taxes are provided, to the extent
considered realizable by management, for basis differences of assets and liabilities for financial reporting and income tax purposes.
The Company follows
guidance issued by the FASB with respect to accounting for uncertainty in income taxes. A tax position is recognized as a benefit only if it is more-likely-than-not that the tax position would
be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting
the more-likely-than-not test, no tax benefit is recorded.
The Company and its subsidiaries are
subject to U.S. federal income tax, as well as income tax of the state of Florida. The Companys income tax returns for the past three years are subject to examination by tax authorities, and may change upon examination.
The Company recognizes interest and/or penalties related to income tax matters in income tax expense. The Company did not reflect any amounts for interest and
penalties in its 2020 or 2019 statements of operations, nor are any amounts accrued for interest and penalties at October 31, 2020 and November 2, 2019.
26
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Notes to Consolidated Financial Statements
The provision for income taxes for the years ended consists of the following:
October 31, 2020
November 2, 2019
Current tax expense:
Federal
$
1,524,703
$
2,338,619
State
283,877
655,498
Deferred tax (benefit)
76,807
(25,007
)
Provision for income taxes
$
1,885,387
$
2,969,109
The following table shows the reconciliation between the statutory federal income tax rate and the actual provision for income
taxes for the years ended:
October 31, 2020
November 2, 2019
Provisionfederal statutory tax rate
$
1,652,508
$
2,473,701
Increase (decrease) resulting from:
State taxes, net of federal tax benefit
277,135
511,822
Permanent differences:
Stock option expirations
160
Decrease in FL corporate tax rate
(3,306
)
Other comprehensive income
(3,462
)
Other
(40,950
)
(13,112
)
Provision for income taxes
$
1,885,387
$
2,969,109
The types of temporary differences between the tax bases of assets and liabilities and their financial reporting amounts and
the related deferred tax assets and deferred tax liabilities are as follows:
October 31, 2020
November 2, 2019
Deferred tax assets:
Allowance for doubtful accounts
$
56,864
$
58,773
Inventories
46,790
48,360
Accrued expenses
112,999
158,171
Other assets
23,224
55,903
Lease right of use liability
196,839
Stock-based compensation
2,894
2,072
Total deferred tax assets
439,610
323,279
Deferred tax liabilities:
Depreciation
(141,270
)
(78,553
)
Carrying value of investments
(47,435
)
(90,168
)
Amortization
(38,324
)
(39,611
)
Prepaid expenses
(33,562
)
(34,542
)
Lease right of use asset
(175,421
)
Net deferred tax assets (liabilities)
$
3,598
$
80,405
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Notes to Consolidated Financial Statements
These amounts are included in the accompanying consolidated balance sheets under the following captions:
October 31, 2020
November 2, 2019
Current assets (liabilities):
Deferred tax assets
$
$
Deferred tax liabilities
Net current deferred tax assets
Non-current assets (liabilities):
Deferred tax assets
439,610
323,279
Deferred tax liabilities
(436,012
)
(242,874
)
Net non-current deferred tax (liabilities)
3,598
80,405
Net deferred tax assets (liabilities)
$
3,598
$
80,405
In assessing the ability to realize a portion of the deferred tax assets, management considers whether it is more likely than
not that some portion or all of the deferred tax assets will not be realized. For fiscal years 2020 and 2019, the Company determined that a valuation reserve for the Companys deferred tax assets was not considered necessary as the deferred tax
assets were fully realizable.
NOTE 12 Stockholders Equity
Authorized preferred stock may be issued in series with rights and preferences designated by the Board of Directors at the time it authorizes the issuance of
such stock. The Company has never issued any preferred stock. Treasury stock is recorded at cost and is presented as a reduction of stockholders equity in the accompanying consolidated financial statements. The Company repurchased 33,100 and
212,396 shares of its common stock during fiscal years 2020 and 2019, respectively.
NOTE 13 Stock Option Plan
In June 2011, the Companys Board of Directors adopted and the Companys shareholders later approved, the Nobility Homes, Inc. 2011 Stock Incentive
Plan (the Plan), providing for the issuance of options to purchase shares of common stock, stock appreciation rights and other stock-based awards to employees and non-employee directors. A total of
300,000 shares were reserved for issuance under the Plan, all of which may be issued pursuant to the exercise of incentive stock options. At October 31, 2020, 272,700 options were available for future grant under the plan and 27,300 options
were outstanding.
The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair
value of the award. The cost is to be recognized over the period during which an employee is required to provide service in exchange for the award (usually the vesting period). The grant date fair value of employee share options and similar
instruments will be estimated using option-pricing models adjusted for the unique characteristics of those instruments (unless observable market prices for the same or similar instruments are available). If an equity award is modified after the
grant date, incremental compensation cost will be recognized in an amount equal to the excess of the fair value of the modified award over the fair value of the original award immediately before the modification. During fiscal years 2020 and 2019,
the Company recognized compensation cost related to the vesting of stock options of approximately $3,624 and $21,000 respectively.
28
Table of Contents
Notes to Consolidated Financial Statements
A summary of information with respect to options granted is as follows:
Number of
Shares
Stock Option Price
Range
Weighted
Average
Exercise
Price
Aggregate
Intrinsic
Value
Outstanding at November 3, 2018
5,000
$
12.10
$
12.10
Granted
Exercised
2,250
12.10
12.10
Canceled
Outstanding at November 2, 2019
2,750
12.10
12.10
Granted
24,550
24.00
24.00
Exercised
Canceled
Outstanding at October 31, 2020
27,300
$
12.10 24.00
$
23.36
$
30,663
The aggregate intrinsic value in the table above represents total intrinsic value (of options in the money), which is the
difference between the Companys closing stock price on the last trading day of fiscal year 2020 and the exercise price times the number of shares, that would have been received by the option holder had the option holder exercised their options
on October 31, 2020.
The following table summarizes information about the outstanding stock options at October 31, 2020:
Options Outstanding
Options Exercisable
Exercise Price
Shares
Outstanding
Weighted
Average
Remaining
Contractual
Life (years)
Weighted
Average
Exercise
Price
Number
Exercisable
Weighted
Average
Exercise Price
$ 12.10
2,750
1
$
12.10
2,750
$
12.10
$ 24.00
24,550
5
24.00
24,550
24.00
27,300
4.91
$
23.36
27,300
$
23.36
The fair value of each option is determined using the Black-Scholes option-pricing model which values options based on the
stock price at the grant date, the expected life of the option, the estimated volatility of the stock, expected dividend payments, and the risk-free interest rate over the expected life of the option. The dividend yield was calculated by dividing
the current annualized dividend by the option exercise price for each grant. The expected volatility was determined considering the Companys historical stock prices for the fiscal year the grant occurred and prior fiscal years for a period
equal to the expected life of the option. The risk-free interest rate was the rate available on zero coupon U.S. government obligations with a term equal to the expected life of the option. The expected life of the option was estimated based on the
exercise history from previous grants.
NOTE 14 Employee Benefit Plan
The Company has a defined contribution retirement plan (the Plan) qualifying under Section 401(k) of the Internal Revenue Code. The Plan
covers employees who have met certain service requirements. The Company makes a discretionary matching contribution, up to a maximum of 6% of an employees compensation. The contribution expense charged to operations amounted to approximately
$175,000 and $170,000 in fiscal years 2020 and 2019, respectively.
NOTE 15 Commitments and Contingent Liabilities
Operating Leases The Company leases the property for several Prestige retail sales centers from various unrelated entities under operating
lease agreements expiring through December 2020. The Company also leases certain equipment under unrelated operating leases. These leases have varying renewal options.
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Table of Contents
Notes to Consolidated Financial Statements
On November 3, 2019, the Company adopted ASC Topic 842 using the modified retrospective method applied
to leases that were in place as of November 3, 2019. Results for reporting periods beginning after November 3, 2019 are presented under Topic 842, while prior period amounts are not adjusted and continue to be reported in accordance with
our historic accounting under Topic 840.
The Company elected the package of practical expedients permitted under the transition guidance, which allows
for the historical lease classification to be carried forward, the Companys assessments on whether a contract is or contains a lease, and the Companys initial direct costs for any leases that exist prior to adoption of the new standard.
The Company also elected the short-term lease recognition exemption for all leases that qualify.
To determine the present value of minimum future lease
payments for operating leases at November 3, 2019, the Company was required to estimate a rate of interest that it would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar
economic environment (the incremental borrowing rate or IBR). The Company determined the appropriate IBR by identifying a reference rate and making adjustments that take into consideration financing options and certain
lease-specific circumstances. For the reference rate, the Company used mortgage interest rates for similar terms.
Right of use assets are included as a non-current asset in the amount of $715,368, net of amortization in the consolidated Balance Sheet as of October 31, 2020.
Based on the terms of the lease agreements, all of the Companys leases are classified as operating leases. The weighted average remaining lease term and
weighted average discount rate of the operating leases is 9.16 years and 3.0%, respectively.
Minimum rental payments under operating leases are
recognized on a straight-line basis over the term of the lease. Individual components of the total lease cost incurred by the Company in the amount of $209,273 for the twelve months ended October 31, 2020.
The amount of future minimum lease payments under operating are as follows:
Operating Lease
Undiscounted future minimum lease payments:
2021
$
63,117
2022
68,401
2023
74,322
2024
80,955
Thereafter
543,361
Total
830,156
Amount representing imputed interest
(27,445
)
Total operating lease liability
802,711
Current portion of operating lease liability
(24,192
)
Operating lease liability, non-current
$
778,519
Majestic 21 On May 20, 2009, the Company became a 50% guarantor on a $5 million note payable
entered into by Majestic 21, a joint venture in which the Company owns a 50% interest. The outstanding principal balance of $94,694 on the note was repaid in February 2019.
Other Contingent Liabilities Certain claims and suits arising in the ordinary course of business have been filed or are pending against
the Company. In the opinion of management, the ultimate outcome of these matters will not have a material adverse effect on the Companys financial position, results of operations or cash flows. Accordingly, the Company has not made any accrual
provisions for litigation in the accompanying consolidated financial statements.
The Company does not maintain casualty insurance on some of its
property, including the inventory at our retail centers, our plant machinery and plant equipment and is at risk for those types of losses.
NOTE 16
Paycheck Protection Program Loan
During the second quarter of 2020, the Company applied for and received funding in the amount of approximately
$1,750,000 under the CARES Act and the Paycheck Protection Program (the PPP). Upon receipt, the Company promptly returned the funds, as management determined that the loan was not necessary to support its ongoing operations.
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Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
There were no disagreements with accountants on accounting and financial disclosure matters.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.