10-Q
1
d186700d10q.htm
10-Q
10-Q
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 1, 2021
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
(Registrants 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 registrants classes of common stock, as of the latest practicable date.
Title of Class
Shares Outstanding
on June 15, 2021
Common Stock
3,632,100
NOBILITY HOMES, INC.
INDEX
Page
Number
PART I.
Financial Information
Item 1.
Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of May
1, 2021 (Unaudited) and October 31, 2020
2
Condensed Consolidated Statements of Income for the three and six months ended
May 1, 2021 (Unaudited) and May 2, 2020 (Unaudited)
3
Condensed Consolidated Statements of Changes in Stockholders Equity for the
three and six months ended May 1, 2021 (Unaudited) and May 2, 2020 (Unaudited)
4
Condensed Consolidated Statements of Cash Flows for the six months ended May 1,
2021 (Unaudited) and May 2, 2020 (Unaudited)
5
Notes to Condensed Consolidated Financial Statements
(Unaudited)
6
Item 2.
Managements Discussion and Analysis of Financial Condition and Results of
Operations
11
Item 4.
Controls and Procedures
14
PART II.
Other Information
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
15
Item 6.
Exhibits
15
Signatures
16
1
NOBILITY HOMES, INC.
Condensed Consolidated Balance Sheets
May 1, 2021
October 31, 2020
(Unaudited)
Assets
Current assets:
Cash and cash equivalents
$
33,227,818
$
30,305,902
Certificates of Deposit
2,088,805
4,602,307
Short-term investments
562,719
358,960
Accounts receivabletrade
1,817,588
790,046
Note receivable
29,110
35,997
Mortgage notes receivable
23,752
20,162
Income taxes receivable
105,676
Inventories
10,179,102
9,294,677
Pre-owned homes, net
552,375
441,937
Prepaid expenses and other current assets
1,637,504
1,014,849
Total current assets
50,118,773
46,970,513
Property, plant and equipment, net
6,918,792
5,142,714
Pre-owned homes, net
1,036,596
1,077,240
Note receivable, less current portion
6,573
Mortgage notes receivable, less current portion
222,556
227,509
Mobile home park note receivable
2,481
Other investments
1,755,121
1,729,364
Deferred income taxes
3,598
Operating lease right of use assets
694,629
715,368
Cash surrender value of life insurance
3,885,002
3,795,902
Other assets
156,287
156,287
Total assets
$
64,790,237
$
59,825,068
Liabilities and Stockholders Equity
Current liabilities:
Accounts payable
$
1,285,506
$
928,095
Accrued compensation
706,736
670,520
Accrued expenses and other current liabilities
1,484,542
1,383,833
Income taxes payable
219,456
Operating lease obligation
30,078
24,192
Customer deposits
10,145,824
5,098,633
Total current liabilities
13,872,142
8,105,273
Deferred income taxes
15,584
Operating lease obligation, less current portion
761,130
778,519
Total liabilities
14,648,856
8,883,792
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; 3,632,100 and
3,631,196 outstanding, respectively
536,491
536,491
Additional paid in capital
10,733,434
10,694,554
Retained earnings
57,134,654
57,976,051
Less treasury stock at cost, 1,732,807 shares in 2021 and 1,733,711 shares in 2020
(18,263,198
)
(18,265,820
)
Total stockholders equity
50,141,381
50,941,276
Total liabilities and stockholders equity
$
64,790,237
$
59,825,068
The accompanying notes are an integral part of these condensed consolidated financial statements
2
NOBILITY HOMES, INC.
Condensed Consolidated Statements of Income
(Unaudited)
Three Months Ended
Six Months Ended
May 1,
May 2,
May 1,
May 2,
2021
2020
2021
2020
Net sales
$
14,742,900
$
10,202,502
$
23,814,411
$
19,646,354
Cost of sales
(11,130,215
)
(7,065,007
)
(17,704,279
)
(13,619,010
)
Gross profit
3,612,685
3,137,495
6,110,132
6,027,344
Selling, general and administrative expenses
(1,550,513
)
(1,222,628
)
(2,823,894
)
(2,478,772
)
Operating income
2,062,172
1,914,867
3,286,238
3,548,572
Other income (loss):
Interest income
52,474
84,273
83,130
186,156
Undistributed earnings in joint venture - Majestic 21
12,049
20,398
25,757
40,270
Proceeds received under escrow arrangement
189,285
45,868
272,394
Increase (decrease) in fair value of equity investment
123,803
(176,733
)
203,759
(180,526
)
Miscellaneous
17,945
8,649
25,265
19,594
Total other income
206,271
125,872
383,779
337,888
Income before provision for income taxes
2,268,443
2,040,739
3,670,017
3,886,460
Income tax expense
(543,505
)
(490,735
)
(879,314
)
(936,315
)
Net income
$
1,724,938
$
1,550,004
$
2,790,703
$
2,950,145
Weighted average number of shares outstanding:
Basic
3,632,195
3,632,614
3,632,060
3,646,000
Diluted
3,642,501
3,633,933
3,638,140
3,647,329
Net income per share:
Basic
$
0.47
$
0.43
$
0.77
$
0.81
Diluted
$
0.47
$
0.43
$
0.77
$
0.81
The accompanying notes are an integral part of these condensed consolidated financial statements
3
NOBILITY HOMES, INC.
Condensed Consolidated Statements of Changes in Stockholders Equity
For the six months ended May 1, 2021 and May 2, 2020
(Unaudited)
Accumulated
Other
Common
Common
Additional
Retained
Comprehensive
Treasury
Stock Shares
Stock
Paid-in-Capital
Earnings
Income
Stock
Total
Balance at October 31, 2020
3,631,196
$
536,491
$
10,694,554
$
57,976,051
$
$
(18,265,820
)
$
50,941,276
Stock-based compensation
20,521
20,521
Exercise of employee stock options
1,250
1,950
13,175
15,125
Net income
1,065,765
1,065,765
Balance at January 30, 2021
3,632,446
536,491
10,717,025
59,041,816
(18,252,645
)
52,042,687
Cash dividend
(3,632,100
)
(3,632,100
)
Purchase of treasury stock
(346
)
(10,553
)
(10,553
)
Stock-based compensation
16,409
16,409
Net income
1,724,938
1,724,938
Balance at May 1, 2021
3,632,100
$
536,491
$
10,733,434
$
57,134,654
$
$
(18,263,198
)
$
50,141,381
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 2016-1
389,164
(389,164
)
Adoption of ASU 2016-1
(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
Purchase of treasury stock
(14,400
)
(345,600
)
(345,600
)
Stock-based compensation
906
906
Net income
1,400,141
1,400,141
Balance at February 1, 2020
3,649,670
536,491
10,688,568
57,023,464
(17,791,352
)
50,457,171
Cash dividend
(3,630,970
)
(3,630,970
)
Purchase of treasury stock
(18,700
)
(476,850
)
(476,850
)
Stock-based compensation
906
906
Net income
1,550,004
1,550,005
Balance at May 2, 2020
3,630,970
$
536,491
$
10,689,474
$
54,942,498
$
$
(18,268,202
)
$
47,900,261
The accompanying notes are an integral part of these condensed consolidated financial statements
4
NOBILITY HOMES, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended
May 1,
May 2,
2021
2020
Cash flows from operating activities:
Net income
$
2,790,703
$
2,950,145
Adjustments to reconcile net income to net cash provide by operating activities:
Depreciation
94,815
78,906
Deferred income taxes
19,182
33,794
Undistributed earnings in joint ventureMajestic 21
(25,757
)
(40,270
)
(Increase) Decrease in fair market value of equity investments
(203,759
)
180,526
Stock-based compensation
36,930
1,812
Amortization of operating lease right of use assets
20,739
17,840
Decrease (increase) in:
Accounts receivabletrade
(1,027,542
)
857,602
Inventories
(884,425
)
44,142
Pre-owned homes
(69,794
)
(363,729
)
Prepaid expenses and other current assets
(622,655
)
143,771
Interest receivable
(14,118
)
(93,420
)
Income tax receivables
105,676
(Decrease) increase in:
Accounts payable
357,411
(357,779
)
Accrued compensation
36,216
(226,639
)
Accrued expenses and other current liabilities
100,709
(688,836
)
Income taxes payable
219,456
(1,983,950
)
Customer deposits
5,047,191
(1,373,367
)
Net cash provide by (used in) operating activities
5,980,978
(819,452
)
Cash flows from investing activities:
Purchase of property, plant and equipment
(1,870,893
)
(248,655
)
Purchase of certificates of deposit
(20,000
)
Proceeds from certicates of deposit
2,496,000
Collections on interest receivable
31,620
50,998
Collections on mortgage notes receivable
1,363
1,308
Collections on equipment and other notes receivable
13,460
33,986
Issuance of mobile home park note receivable
(2,481
)
Increase in cash surrender value of life insurance
(89,100
)
(96,000
)
Net cash provided by (used in) investing activities
579,969
(278,363
)
Cash flows from financing activities:
Payment of cash dividend
(3,632,100
)
(3,630,970
)
Proceeds from excerise of employee stock option
15,125
Purchase of treasury stock
(10,553
)
(822,450
)
Reduction of operating lease obligation
(11,503
)
(6,270
)
Net cash used in financing activities
(3,639,031
)
(4,459,690
)
Increase (decrease) in cash and cash equivalents
2,921,916
(5,557,505
)
Cash and cash equivalents at beginning of year
30,305,902
22,533,965
Cash and cash equivalents at end of period
$
33,227,818
$
16,976,460
Supplemental disclosure of cash flows information:
Income taxes paid
$
535,000
$
2,965,000
The accompanying notes are an integral part of these condensed consolidated financial statements
5
Nobility Homes, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 Basis of Presentation and
Accounting Policies
The accompanying unaudited condensed financial statements for the three and six months ended May 1, 2021 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 1, 2021 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 Companys Annual Report on Form 10-K for the fiscal year ended October 31, 2020.
Note 2
Inventories
New home inventory is carried at the lower of cost or net realizable value. The cost of finished home inventories determined on the specific
identification method is removed from inventories and recorded as a component of cost of sales at the time revenue is recognized. In addition, an allocation of depreciation and amortization is included in cost of goods sold. Under the specific
identification method, if finished home inventory can be sold for a profit there is no basis to write down the inventory below the lower of cost or net realizable value.
The Company acquired certain repossessed pre-owned inventory (Buy Back Inventory) in 2011 as part of an Amendment of
the Finance Revenue Sharing Agreement with 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.
Other pre-owned homes are acquired
(Repossessions Inventory) as a convenience to the Companys joint venture partner, 21st 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.
6
Inventory held at consignment locations by affiliated entities is included in the Companys inventory
on the Companys condensed consolidated balance sheets. Consigned inventory was $1,052,059 and $1,277,681 as of May 1, 2021 and October 31, 2020, 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. A breakdown of the elements of inventory is as follows:
May 1,
October 31,
2021
2020
Raw materials
$
1,415,876
$
1,203,282
Work-in-process
97,879
107,651
Inventory consigned to affiliated entities
1,052,060
1,277,681
Finished homes
7,465,306
6,543,861
Model home furniture
147,981
162,202
Inventories
$
10,179,102
$
9,294,677
Pre-owned homes
$
1,728,206
$
1,686,373
Inventory impairment reserve
(139,235
)
(167,196
)
1,588,972
1,519,177
Less homes expected to sell in 12 months
(552,375
)
(441,937
)
Pre-owned homes, long-term
$
1,036,596
$
1,077,240
Note 3 Short-term Investments
The following is a summary of short-term investments (available for sale):
May 1, 2021
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
Equity securities in a public company
$
167,930
$
394,789
$
$
562,719
October 31, 2020
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Estimated
Fair Value
Equity securities in a public company
$
167,930
$
191,030
$
$
358,960
The fair values were estimated based on quoted market prices in active markets at each respective period end.
7
Note 4 Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, accounts and notes receivable, accounts payable and accrued expenses approximates fair value because of the
short maturity of those instruments.
The Company accounts for the fair value of financial investments in accordance with FASB Accounting Standards
Codification (ASC) No. 820 Fair Value Measurements (ASC 820).
ASC 820 defines fair value as the price that would be received upon the
sale of an asset or paid to transfer a liability (i.e. exit price) in an orderly transaction between market participants at the measurement date. ASC 820 requires disclosures that categorize assets and liabilities measured at fair value into one of
three different levels depending on the assumptions (i.e. inputs) used in the valuation. Financial assets and liabilities are classified in their entirety based on the lowest level of input significant to the fair value measurement. The ASC 820 fair
value hierarchy is defined as follows:
Level 1 - Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2 - Valuations are based on quoted prices for similar assets or liabilities in active markets, or quoted
prices in markets that are not active for which significant inputs are observable, either directly or indirectly.
Level 3 - Valuations are based on prices or valuation techniques that require inputs that are both unobservable
and significant to the overall fair value measurement. Inputs reflect managements best estimate of what market participants would use in valuing the asset or liability at the measurement date.
The following tables represent the Companys financial assets and liabilities which are carried at fair value.
May 1, 2021
Level 1
Level 2
Level 3
Equity securities in a public company
$
562,719
$
$
October 31, 2020
Level 1
Level 2
Level 3
Equity securities in a public company
$
358,960
$
$
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. The Company considers there to be revenue concentration risks for distribution of its products where net product revenues exceed 10% of consolidated net
product revenues. The concentration of the Companys distribution net product revenues below may have a material adverse effect on the Companys revenues and results of operations if sales in the respective distribution channels experience
difficulties.
8
Revenues by net sales from manufactured housing, pre-owned homes and
insurance agent commissions are as follows:
Three Months Ended
Six Months Ended
May 1,
May 2,
May 1,
May 2,
2021
2020
2021
2020
Manufactured housing
Homes sold through Company owned sales centers
$
12,361,377
$
7,863,318
$
19,904,559
$
14,621,849
Homes sold to independent dealers
1,624,113
2,108,226
2,827,849
4,261,548
Homes sold through manufactured home parks
431,210
105,017
649,645
464,759
$
14,416,700
$
10,076,561
$
23,382,053
$
19,348,156
Pre-owned homes
243,557
53,169
283,744
158,678
Insurance agent commissions
82,643
72,772
148,614
139,520
Total net sales
$
14,742,900
$
10,202,502
$
23,814,411
$
19,646,354
Note 7 Operating Leases
The
Company leases the property for several Prestige retail sales centers from various unrelated entities under operating lease agreements expiring through December 2021. The Company also leases certain equipment under unrelated operating leases. These
leases have varying renewal options. To offset expiring leases, the Company purchased the land for the Ocala South retail sales center in March 2021 for $500,000 and the Tavares retail sales center in January 2021 for $245,000.
Right of use assets are included as a non-current asset in the amount of $694,629, net of amortization in the
consolidated Balance Sheet as of May 1, 2021.
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 8.65 years and 2.94%, 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 $98,162 for the six months ended May 1, 2021.
The amount of future minimum lease payments under
operating leases are as follows:
9
Operating Lease
Undiscounted future minimum lease payments:
2021 (6 months remaining)
$
31,776
2022
68,401
2023
74,322
2024
80,955
2025
88,388
Thereafter
458,175
Total
802,017
Amount representing imputed interest
(10,809
)
Total operating lease liability
791,208
Current portion of operating lease liability
30,078
Operating lease liability, non-current
$
761,130
10
Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
Total revenues in the second quarter of 2021 increased 45% to $14,742,900 compared to $10,202,502 in the second quarter of 2020. Total net sales for the first
six months of 2021 increased 21% to $23,814,411 compared to $19,646,354 for the first six months of 2020. The Company reported net income of $1,724,938 in the second quarter of 2021, compared to a net income of $1,550,004 during the second quarter
of 2020. Net income for the first six months of 2021 was $2,790,703 compared to a net income of $2,950,145 for the first six months of 2020. According to the Florida Manufactured Housing Association, shipments for the industry in Florida for the
period from November 2020 through May 2021 were up approximately 6% from the same period last year. In addition, the lack of lenders in our industry, partly as a result of an increase in government regulations, still adversely affects our results by
limiting many affordable manufactured housing buyers from purchasing homes. Since May of 2020, the Company has experienced unprecedented inflation in most building products, with no immediate relief in sight resulting in significant increases to our
material costs and a corresponding decrease in gross profits.
The following table summarizes certain key sales statistics and percent of gross profit.
Three Months Ended
Six Months Ended
May 1,
May 2,
May 1,
May 2,
2021
2020
2021
2020
New homes sold through Company owned sales centers
132
90
214
162
Pre-owned homes sold through Company owned sales
centers
5
2
6
4
Homes sold to independent dealers
49
52
89
108
Total new factory built homes produced
178
143
328
266
Average new manufactured home priceretail
$
91,217
$
89,135
$
90,080
$
91,915
Average new manufactured home pricewholesale
$
47,578
$
42,985
$
47,549
$
43,724
As a percent of net sales:
Gross profit from the Company owned retail sales centers
15
%
20
%
15
%
20
%
Gross profit from the manufacturing facilities - including intercompany sales
18
%
22
%
18
%
24
%
Maintaining our strong financial position is vital for future growth and success. Because of very challenging business
conditions during economic recessions in our market area, management will continue to evaluate all expenses and react in a manner consistent with maintaining our strong financial position, while exploring opportunities to expand our distribution and
manufacturing operations.
Our many years of experience in the Florida market, combined with home buyers increased need for more affordable housing,
should serve the Company well in the coming years. Management remains convinced that our specific geographic market is one of the best long-term growth areas in the country.
On June 5, 2021 the Company celebrated its 54th anniversary in business specializing in the design and production of quality, affordable manufactured
homes. With multiple retail sales centers in Florida for over 30 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 2021 were $82,643 compared to $72,772 in the second quarter of 2020. Total insurance agent
commission revenues for the first six months of 2021 were $148,614 compared to $139,520 for the first six months of 2020. The increase in insurance agent commissions in the first six months of 2020 were due to more new policies and renewals
generated which affects agent commission earned. The Company establishes appropriate reserves for policy cancellations based on numerous factors, including past transaction history with customers, historical experience and other information, which
is periodically evaluated and adjusted as deemed necessary. In the opinion of management, no reserve was deemed necessary for policy cancellations at May 1, 2021and October 31, 2020.
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Gross profit as a percentage of net sales was 25% in the second quarter of 2021 compared to 31% for the
second quarter of 2020 and was 26% for the first six months of 2021 compared to 31% for the first six months of 2020. The gross profit in the second quarter of 2021 was $3,612,685 compared to $3,137,495 in the second quarter of 2020 and was
$6,110,132 for the first six months of 2021 compared to $6,027,344 for the first six months of 2020. The gross profit is dependent on the sales mix of wholesale and retail homes and number of pre-owned homes
sold. The decrease in gross profit as a percentage of net sales is primarily due to the unprecedented inflation in most building products which increased the material cost of each home manufactured in first and second quarter 2021. We are monitoring
this situation and will continue to adjust our selling prices to help offset the higher costs on each home.
Selling, general and administrative expenses
as a percent of net sales was 11% in second quarter of 2021 compared to 12% in the second quarter of 2020 and was 12% for the first six months of 2021 compared to 13% for the first six months of 2020. Selling, general and administrative expenses in
second quarter of 2021 was $1,550,513 compared to $1,222,628 in the second quarter of 2020 and was $2,823,894 for the first six months of 2021 compared to $2,478,772 for the first six months of 2020. The increase in expenses in 2021 were due to the
increase in variable expenses which were a direct result of employee benefits compensation due to the increase in sales.
We
earned interest income of $52,474 for the second quarter of 2021 compared to $84,273 for the second quarter of 2020. For the first six months of 2021, interest income was $83,130 compared to $186,156 in the first six months of 2020. The decrease is
primarily due to the decline in the investment rates and the decrease in the monies invested.
Our earnings from Majestic 21 in the second quarter of 2021
were $12,049 compared to $20,398, for the second quarter of 2020. Earnings from Majestic 21 for the first six months of 2021 were $25,757 compared to $40,270 for the first six months of 2020. 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 will continue to decrease due to the amortization, maturity and payoff of the loans.
We received no distributions in the second quarter of 2021 compared to $189,285 in the second quarter of 2020 and $45,868 for the first six months of 2021
compared to $272,394 for the first six months of 2020. 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, relates 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 continue to decrease due to the amortization and payoff of the loans.
The Company realized
pre-tax income in the second quarter of 2021 of $2,268,443 as compared to $2,040,739 in the second quarter of 2020. The pre-tax income for the first six months of 2021
was $3,670,017 as compared to $3,886,460 in first six months of 2020.
The Company recorded an income tax expense in the amount of $543,505 in the second
quarter of 2021 as compared to $490,735 in second quarter 2020. Income tax expense for the six months of 2021 was $879,314 compared to $936,315 for the six months of 2020.
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We reported net income of $1,724,938 for the second quarter of 2021 or $0.47 per share, compared to
$1,550,004 or $0.43 per share, for the second quarter of 2020. For the first six months of 2021 net income was $2,790,703 or $0.77 per share, compared to $2,950,145 or $0.81 per share, in the first six months of 2020.
Liquidity and Capital Resources
Cash and cash
equivalents were $33,227,818 at May 1, 2021 compared to $30,305,902 at October 31, 2020. Certificates of deposit were $2,088,805 at May 1, 2021 compared to $4,602,307 at October 31, 2020. Short-term investments were $562,719 at
May 1, 2021 compared to $358,960 at October 31, 2020. Working capital was $36,246,631 at May 1, 2021 as compared to $38,865,240 at October 31, 2020. The Company purchased the land for the Ocala South retail sales center in March
2021 for $500,000, the Tavares retail sales center in January 2021 for $245,000 and land in Ocala for a future retail sales center in February 2021 for $1,040,000. The Company paid a one-time cash dividend of
$1.00 per common share in March 2021 for $3,632,100. We own the entire inventory for our Prestige retail sales centers which includes new, pre-owned, repossessed or foreclosed homes and do not incur any third
party floor plan financing expenses. We have a material commitment for a significant capital expenditure. Depending upon when the Company receives the building permit, we plan to build an 11,900 square foot frame shop to manufacture our frames on
our current manufacturing plant property.
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 $3.8 million of cash surrender value of life insurance which it may be able to access as an additional source of liquidity though the Company has not currently viewed
this to be necessary. As of May 1, 2021, the Company continued to report a strong balance sheet which included total assets of approximately $65 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 by the
COVID-19 pandemic or other health pandemic, competitive pricing pressures at both the wholesale and retail levels, increasing material costs (including forest based products) or availability of materials due
to potential supply chain interruptions (such as current inflation with forest products and supply issues with vinyl siding and PVC piping), changes in market demand, changes in interest rates, availability of financing for retail and wholesale
purchasers, consumer confidence, adverse weather conditions that reduce sales at retail centers, the risk of manufacturing plant shutdowns due to storms or other factors, the impact of marketing and cost-management programs, reliance 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, managements ability to attract and retain executive officers and key personnel, increased global tensions, market disruptions resulting from terrorist or other attack, any armed
conflict involving the United States and the impact of inflation.
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Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures . The Companys Chief Executive Officer (principal executive
officer) and Chief Financial Officer (principal financial officer) have evaluated the effectiveness of the Companys disclosure controls and procedures
(as such term is defined in Rules 13a15(e) and 15d15(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 Companys disclosure controls and procedures were effective as of May 1, 2021.
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 2021 that have materially affected, or are reasonably likely to materially affect, the Companys internal controls over financial reporting.
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Part II. OTHER INFORMATION AND SIGNATURES
There were no reportable events for Item 1 and Items 3 through 5.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
The following table represents information with respect to purchases by the Company of its common stock during the three months ended May 1, 2021.
Period
Total
number of
shares
purchased
Average
price paid
per share
Total number of shares
purchased as part of
publicly announced plans
or programs*
Maximum number of
shares that may yet be
purchased under the plans
or programs*
Jan 31 Feb 27, 2021
346
$
30.50
346
199,654
Feb 28 Mar 27, 2021
199,654
Mar 28 May 1, 2021
199,654
*
In September 2020 the Companys Board of Directors authorized 200,000 shares to be repurchased during
fiscal year 2021 in the open market. During the first six months ended May 1, 2021 management has repurchased an aggregate of 346 shares of common stock and is authorized to purchase up to an additional 199,654 shares.
Item 6. Exhibits
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
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NOBILITY HOMES, INC.
DATE: June 15, 2021
By:
/s/ Terry E. Trexler
Terry E. Trexler, Chairman,
President and Chief Executive Officer
DATE: June 15, 2021
By:
/s/ Thomas W. Trexler
Thomas W. Trexler, Executive Vice President,
and Chief Financial Officer
DATE: June 15, 2021
By:
/s/ Lynn J. Cramer, Jr.
Lynn J. Cramer, Jr., Treasurer
and
Principal Accounting Officer
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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.