What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-09-19 compared with 2022-06-21 · 40 added, 40 removed, 46 unchanged (63% of the section changed)

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Results of Operations

Total net sales in second quarter of 2022 was $10,645,046 compared to $14,742,900 in second quarter of 2021.

Total net sales for the first six months of 2022 was $21,453,316 compared to $23,814,411 for the first six months of 2021.

The Company reported net income of $1,456,826 in second quarter of 2022, compared to a net income of $1,724,938 in second quarter 2021.

Net income for the first six months of 2022 was $2,613,860 compared to $2,790,703 for the first six months of 2021.

According to the Florida Manufactured Housing Association, shipments for the industry in Florida for the period from November 2021 through April 2022 were up approximately 23% from the same period last year.

Net sales decreased during the three and six months ended May 7, 2022 as compared to the same period last year.

We continue to experience the negative impact of limitations being placed on certain key production materials from suppliers, the delay or lack of key components from vendors as well as back orders, delayed shipments, price increases and labor shortages.

These supply chain issues has caused delays in completion of the homes at the manufacturing facility and the set up process of retail homes in the field, resulting in decreased net sales due to our inability to timely complete and deliver homes to customers.

Total net sales in third quarter of 2022 were up 18% to $13,846,698 compared to $11,778,120 in third quarter of 2021.

Total net sales for the first nine months of 2022 was $35,300,014 compared to $35,592,531 for the first nine months of 2021.

The Company reported net income of $1,884,759 in third quarter of 2022, compared to a net income of $1,050,746 in third quarter 2021.

Net income for the first nine months of 2022 was $4,498,619 compared to $3,841,449 for the first nine months of 2021.

According to the Florida Manufactured Housing Association, shipments for the industry in Florida for the period from November 2021 through July 2022 were up approximately 22% from the same period last year.

Although net sales increased during the three months ended August 6, 2022 as compared to the same period last year, we continued to experience the negative impact of limitations being placed on certain key production materials from suppliers, the delay or lack of key components from vendors as well as back orders, delayed shipments, price increases and labor shortages.

These supply chain issues have caused delays in completion of the homes at the manufacturing facility and the set up process of retail homes in the field, resulting in decreased net sales due to our inability to timely deliver and setup homes to customers.

We expect that these challenges will continue for the remainder of fiscal year 2022 and potentially beyond until the industry supply chain normalizes.

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Three Months Ended

Six Months Ended

Nine Months Ended

New homes sold through Company owned sales centers

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With multiple retail sales centers in Florida for over 31 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 2022 were $77,500 compared to $82,643 in the second quarter of 2021.

Total insurance agent commission revenues for the first six months of 2022 were $144,487 compared to $148,614 for the first six months of 2021.

Insurance agent commission revenues in the third quarter of 2022 were $77,911 compared to $68,294 in the third quarter of 2021.

Total insurance agent commission revenues for the first nine months of 2022 were $222,398 compared to $216,908 for the first nine months of 2021.

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 7, 2022 and November 6, 2021.

Gross profit as a percentage of net sales was 28% in the second quarter of 2022 compared to 25% for the second quarter of 2021 and was 27% for the first six months of 2022 compared to 26% for the first six months of 2021.

The gross profit in the second quarter of 2022 was $3,021,918 compared to $3,612,685 in the second quarter of 2021 and was $5,750,146 for the first six months of 2022 compared to $6,110,132 for the first six months of 2021.

In the opinion of management, no reserve was deemed necessary for policy cancellations at August 6, 2022 and November 6, 2021.

Gross profit as a percentage of net sales was 28% in the third quarter of 2022 compared to 21% for the third quarter of 2021 and was 27% for the first nine months of 2022 compared to 24% for the first nine months of 2021.

The gross profit in the third quarter of 2022 was $3,898,060 compared to $2,512,744 in the third quarter of 2021 and was $9,648,206 for the first nine months of 2022 compared to $8,622,876 for the first nine months of 2021.

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

The increase in gross profit as a percentage of net sales is primarily due to increases in our selling prices to offset the higher inflation costs of building products and labor on each home.

The decrease in gross profit dollar amount is primarily due to the decrease in sales due to shortages in many building products, which has limited production and delayed the completion of the homes both at the manufacturing plant and the set up process in the field, resulting in decreased net sale due to our inability to timely complete and deliver homes to customers.

Selling, general and administrative expenses as a percent of net sales was 13% in second quarter of 2022 compared to 11% in the second quarter of 2021 and was 13% for the first six months of 2022 compared to 12% for the first six months of 2021.

Selling, general and administrative expenses in second quarter of 2022 was $1,378,606 compared to $1,550,513 in the second quarter of 2021 and was $2,795,149 for the first six months of 2022 compared to $2,823,894 for the first six months of 2021.

The dollar decrease in expenses in the three and six months of 2022 compared to the same period last year were due to reduction of the variable expenses related to the decreased sales.

We earned interest income of $39,577 for the second quarter of 2022 compared to $52,474 for the second quarter of 2021.

For the first six months of 2022, interest income was $114,257 compared to $83,130 in the first six months of 2021.

The increase in interest income for the first six months of 2022 is primarily due to the interest earned from the sale of pre-owned

The increase in gross profit as a percentage of net sales is primarily due to increases in our selling prices to offset the higher inflation costs of building products and labor on each home and increase in the average gross profit at our retail sales centers.

Selling, general and administrative expenses as a percent of net sales was 12% in third quarter of 2022 compared to 11% in the third quarter of 2021 and was 13% for the first nine months of 2022 compared to 12% for the first nine months of 2021.

Selling, general and administrative expenses in third quarter of 2022 was $1,653,200 compared to $1,320,456 in the third quarter of 2021 and was $4,448,349 for the first nine months of 2022 compared to $4,144,350 for the first nine months of 2021.

The dollar increase in expenses in the three and nine months of 2022 compared to the same period last year were due to employee compensation expenses associated with increased sales at the retail sales centers.

We earned interest income of $62,449 for the third quarter of 2022 compared to $62,491 for the third quarter of 2021.

For the first nine months of 2022, interest income was $176,706 compared to $145,621 in the first nine months of 2021.

The increase in interest income for the first nine months of 2022 is primarily due to the interest earned from the sale of pre-owned

(repossessed) inventory acquired from the Company’s joint venture partner, 21st Mortgage Corporation in the first quarter of 2022.

Our earnings from Majestic 21 in the second quarter of 2022 were $12,665 compared to $12,049, for the second quarter of 2021.

Earnings from Majestic 21 for the first six months of 2022 were $25,222 compared to $25,757 for the first six months of 2021.

Our earnings from Majestic 21 in the third quarter of 2022 were $15,488 compared to $20,202, for the third quarter of 2021.

Earnings from Majestic 21 for the first nine months of 2022 were $40,710 compared to $45,959 for the first nine months of 2021.

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 distributions in the second quarter of 2022 of $115,454 compared to no distributions in the second quarter of 2021 and $233,499 for the first six months of 2022 compared to $45,868 for the first six months of 2021.

The increase in distributions in the first six months of 2022 is due to the timing of the reserve balances.

We received distributions from 21 st

Mortgage Corporation in the third quarter of 2022 of $52,140 compared to $75,156 in the third quarter of 2021 and $285,639 for the first nine months of 2022 compared to $121,024 for the first nine months of 2021.

The distributions are from an escrow arrangement related to a Finance Revenue Sharing Agreement (FRSA) between 21 st

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Mortgage Corporation, are recorded as income by the Company when received.

The increase in distributions in the first nine months of 2022 is due to the timing of the reserve balances.

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 2022 of $1,892,615 as compared to $2,268,443 in the second quarter of 2021.

income for the first six months of 2022 was $3,419,045 as compared to $3,670,017 in first six months of 2021.

The Company recorded an income tax expense in the amount of $435,789 in the second quarter of 2022 as compared to $543,505 in second quarter 2021.

Income tax expense for the six months of 2022 was $805,185 compared to $879,314 for the six months of 2021.

We reported net income of $1,456,826 for the second quarter of 2022 or $0.42 per share, compared to $1,724,938 or $0.47 per share, for the second quarter of 2021.

For the first six months of 2022 net income was $2,613,860 or $0.75 per share ($0.74 diluted), compared to $2,790,703 or $0.77 per share, in the first six months of 2021.

income in the third quarter of 2022 of $2,479,072 as compared to $1,397,857 in the third quarter of 2021.

income for the first nine months of 2022 was $5,898,117 as compared to $5,067,874 in first nine months of 2021.

The Company recorded an income tax expense in the amount of $594,313 in the third quarter of 2022 as compared to $347,111 in third quarter 2021.

Income tax expense for the nine months of 2022 was $1,399,498 compared to $1,226,425 for the nine months of 2021.

We reported net income of $1,884,759 for the third quarter of 2022 or $0.54 per share, compared to $1,050,746 or $0.29 per share, for the third quarter of 2021.

For the first nine months of 2022 net income was $4,498,619 or $1.30 per share compared to $3,841,449 or $1.06 per share, in the first nine months of 2021.

Liquidity and Capital Resources

Cash and cash equivalents were $26,530,111 at May 7, 2022 compared to $36,126,059 at November 6, 2021.

Certificates of deposit were $0 at May 7, 2022 compared to $2,093,015 at November 6, 2021.

Short-term investments were $598,154 at May 7, 2022 compared to $621,928 at November 6, 2021.

Working capital was $29,601,962 at May 7, 2022 as compared to $35,563,355 at November 6, 2021.

During the first six months of 2022, the Company repurchased an aggregate of 162,300 shares of its common stock for an aggregate of $5,186,070.

Cash and cash equivalents were $20,437,309 at August 6, 2022 compared to $36,126,059 at November 6, 2021, with the reduction primarily due to increases in inventory.

Certificates of deposit were $1,946,429 at August 6, 2022 compared to $2,093,015 at November 6, 2021.

Short-term investments were $541,132 at August 6, 2022 compared to $621,928 at November 6, 2021.

Working capital was $31,228,311 at August 6, 2022 as compared to $35,563,355 at November 6, 2021.

During the first nine months of 2022, the Company repurchased an aggregate of 162,300 shares of its common stock for an aggregate of $5,186,070.

A cash dividend was paid from our cash reserves in April 2022 in the amount of $1.00 per share ($3,532,976).

The Company purchased $4.6 million of new homes from two independent home manufactures for the Prestige retail sales centers during third quarter of 2022.

We own the entire inventory for our Prestige retail sales centers, which includes new and pre-owned

homes, and do not incur any third party floor plan financing expenses.

As of May 7, 2022 the Company has incurred approximately $531,906 of the estimated construction cost of the approximately $1.1 allocated to build an 11,900 square foot frame shop on the Company’s property in Ocala, Florida.

As of August 6, 2022 the Company has incurred approximately $834,269 of the estimated construction cost of the approximately $1.1 allocated to build an 11,900 square foot frame shop on the Company’s property in Ocala, Florida.

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

The Company also has approximately 4.1 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 7, 2022, the Company continued to report a strong balance sheet which included total assets of approximately $60.8 million which was funded primarily by stockholders’ equity of approximately 43.3 million.

The Company also has approximately $4.1 million of cash surrender value of life insurance which it can be accessed as an additional source of liquidity though the Company has not currently viewed this to be necessary.

As of August 6, 2022, the Company continued to report a strong balance sheet which included total assets of approximately $61.1 million which was funded primarily by stockholders’ equity of approximately $45.2 million.

Critical Accounting Policies and Estimates

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis