NOBILITY HOMES INC
10-Ks and 10-Qs
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended
November 6
,
2021
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TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from
to
.
Commission file number
000-06506
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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(Address of principal executive offices)
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(Zip Code)
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(
352
)
732-5157
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
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Title of Each Class
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Trading
Symbol(s)
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Name of ea/Exchange
on Which Registered
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||
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
No
☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
No
☒
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
Yes
☐ No
Regulation S-T
during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒
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 | ☐ | |||
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Non-accelerated
filer
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☐ | Smaller reporting company |
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| Emerging growth company |
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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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule
☒
12b-2
of the Exchange Act). Yes ☐ No
AUDITOR FIRM PCAOB ID:
229
AUDITOR NAME:
DASZKAL BOLOTON LLP
AUDITOR LOCATION CITY STATE:
JUPITER FLORIDA
The aggregate market value of the common stock held by
market on April 30, 2021 (the last business day of the second quarter of fiscal 2021), was approximately
$
non-affiliates
of the registrant (645,004) shares), based on the closing price on the
over-the-counter
The number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date:
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Title of Class
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Shares Outstanding on February 4, 2022
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Common Stock
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DOCUMENTS INCORPORATED BY REFERENCE
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Title
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Form
10-K
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Definitive proxy statement for Annual Meeting of
Shareholders to be held March 4, 2022
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Part III, Items
10-14
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TABLE OF CONTENTS
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Form
10-K
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Item 1.
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2 | |||||
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Item 1A.
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4 | |||||
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Item 1B.
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4 | |||||
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Item 2.
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4 | |||||
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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Item 7.
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Item 7A.
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Item 8.
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Item 9.
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Item 9A.
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Item 9B.
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Item 9C.
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Item 10.
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Item 11.
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Item 12.
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Item 13.
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Item 14.
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Item 15.
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Item 16.
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1
PART I
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Item 1.
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Business
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Nobility Homes, Inc., a Florida corporation incorporated in 1967, designs, manufactures and sells a broad line of manufactured and modular homes through its own retail sales centers throughout Florida. Nobility also sells its manufactured homes on a wholesale basis to independent manufactured home retail dealers and manufactured home communities. All references in this annual report on Form
10-K
to “Nobility,” “Company,” “we,” “us,” or “our” refer to Nobility Homes, Inc. and its consolidated subsidiaries unless the context otherwise suggests.
Manufactured Homes
Nobility’s homes are available in approximately 100 active models sold under the trade names “Kingswood,” “Richwood,” “Tropic Isle,” “Regency Manor,” and “Tropic Manor.” The homes, ranging in size from 464 to 2,800 square feet and containing from one to five bedrooms, are available in:
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Single-wide widths of 14 and 16 feet ranging from 35 to 72 feet in length;
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Double-wide widths of 20, 24, 26, 28 and 32 feet ranging from 32 to 72 feet in length;
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Triple-wide widths of 42 feet ranging from 60 to 72 feet in length; and
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Quad-unit with 2 sections 28 feet wide from 40 to 48 feet long and 2 sections 28 feet wide by 52 feet long.
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Our floor plans can be built as an
on-frame
modular home. We have been approved to build A.N.S.I. (American National Standards Institute) Park models less than 400 square feet and exposure D homes.
Nobility’s homes are sold primarily as unfurnished dwellings ready for permanent occupancy. Interiors are designed and color coordinated in a range of decors. Depending on the size of the unit and quality of appliances and other appointments, retail prices for Nobility’s homes typically range from approximately $54,000 to $189,000. Most of the prices of Nobility’s homes are considered by it to be within the low to medium price range of the industry.
Nobility’s manufacturing plant utilizes assembly line techniques in manufactured home production. The plant manufactures and assembles the floors, sidewalls, end walls, roofs and interior cabinets for their homes. Nobility purchases, from outside suppliers, various other components that are built into its homes including the axles, frames, tires, doors, windows,
pre-finished
sidings, plywood, ceiling panels, lumber, rafters, insulation, gypsum board, appliances, lighting and plumbing fixtures, carpeting and draperies. Nobility is not dependent upon any one particular supplier for its raw materials or component parts, and is not required to carry significant amounts of inventory to assure itself of a continuous allotment of goods from suppliers.
Nobility generally does not manufacture its homes to be held by it as inventory (except for model home inventory of its wholly-owned retail network subsidiary, Prestige Home Centers, Inc.), but, rather, manufactures its homes after receipt of orders. Although Nobility attempts to maintain a consistent level of production of homes throughout the fiscal year, seasonal fluctuations do occur, with sales of homes generally lower during the first fiscal quarter due to the holiday season.
The sales area for a manufactured home manufacturer is limited by substantial delivery costs of the finished product. Nobility’s homes are delivered by outside trucking companies. Nobility estimates that it can compete effectively within a range of approximately 350 miles from its manufacturing plant in Ocala, Florida. Substantially all of Nobility’s sales are made in Florida.
Retail Sales
Prestige Home Centers, Inc., our wholly-owned subsidiary, operates ten retail sales centers in north and central Florida. Its principal executive offices are located at Nobility’s headquarters in Ocala, Florida. Sales by Prestige accounted for 87% and 79% of Nobility’s sales during fiscal years 2021 and 2020, respectively.
Each of Prestige’s retail sales centers are located within 350 miles of Nobility’s Ocala manufacturing facility. Prestige owns the land at eight of its retail sales centers and leases the remaining two retail sales centers from unaffiliated parties.
The primary customers of Prestige are homebuyers who generally purchase manufactured homes to place on their own home sites. Prestige operates its retail sales centers with a model home concept. Each of the homes displayed at its retail sales centers is furnished and decorated as a model home. Although the model homes may be purchased from Prestige’s model home inventory, generally, customers order homes which are shipped directly from the factory to their home site. Prestige sales generally are to purchasers living within a radius of approximately 100 miles from the selling retail lot. The Company’s internet-based marketing program generates numerous leads which are directed to the Prestige retail sales centers to assist a potential buyer in purchasing a home.
2
The retail sale of manufactured homes is a highly competitive business. Because of the number of retail sales centers located throughout Nobility’s market area, potential customers typically can find several sales centers within a 100 mile radius of their present home. Prestige competes with over 80 other retailers in its primary market area, some of which may have greater financial resources than Prestige. In addition, manufactured homes offered by Prestige compete with site-built housing.
Prestige does not itself finance customers’ new home purchases. Financing for home purchases has historically been available from other independent sources that specialize in manufactured housing lending and banks that finance manufactured home purchases. Prestige and Nobility are not required to sign any recourse agreements with any of these retail financing sources.
Insurance and Financial Services
Mountain Financial, Inc., a wholly-owned subsidiary of Prestige Home Centers, Inc., is an independent insurance agent and licensed mortgage loan originator. Its principal activity is providing retail insurance services, which involves placing various types of insurance, including property and casualty, automobile and extended home warranty coverage, with insurance underwriters on behalf of its Prestige customers in connection with their purchase and financing of manufactured homes. As agent, we solely assist our customers in obtaining various types of insurance and extended warranty coverage with insurance underwriters. As such, we have no agreements with homeowners and/or third party insurance companies other than agency agreements with various insurance carriers. 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 for fiscal years 2021 and 2020.
Wholesale Sales to Manufactured Home Communities
Nobility also sells its homes on a wholesale basis through two full-time salespersons to approximately 36 manufactured home communities and independent dealers. Nobility continues to seek new opportunities in the areas in which it operates, as there is ongoing turnover in the manufactured home communities as they achieve full occupancy levels. As is common in the industry, most of Nobility’s independent dealers sell homes produced by several manufacturers.
Nobility does not generally offer consigned inventory programs or other credit terms to its independent dealers and ordinarily receives payment for its homes within 15 to 30 days of delivery. However, Nobility may offer extended terms to park dealers who do a high volume of business with Nobility. In order to stimulate sales, Nobility sells homes for display to related party manufactured home communities on extended terms and recognizes revenue when the homes are sold to the end users. The high visibility of Nobility’s homes in such communities generates additional sales of its homes through such dealers.
Regulation
The manufacture, distribution and sale of homes are subject to governmental regulation at the federal, state and local levels. The Department of Housing and Urban Development (HUD) has adopted national construction and safety standards that preempt state standards. In addition, HUD regulations require that manufactured homes be constructed to more stringent wind load and thermal standards. Compliance with these standards involves approval by a HUD approved engineering firm of engineering plans and specifications on all models. HUD has also promulgated rules requiring producers of manufactured homes to utilize wood products certified by their suppliers to meet HUD’s established limits on formaldehyde emissions. HUD’s standards also require periodic inspection by state or other third party inspectors of plant facilities and construction procedures, as well as inspection of manufactured home units during construction. In addition, some components of manufactured homes may also be subject to Consumer Product Safety Commission standards and recall requirements. Modular homes manufactured by Nobility are required to comply with the Florida Building Code established by the Florida Department of Business and Professional Regulations.
Nobility estimates that compliance with federal, state and local environmental protection laws will have no material effect upon capital expenditures for plant or equipment modifications or earnings for the next fiscal year.
The transportation of manufactured homes is subject to state regulation. Generally, special permits must be obtained to transport the home over public highways and restrictions are imposed to promote travel safety including restrictions relating to routes, travel periods, speed limits, safety equipment and size.
Nobility’s homes are subject to the requirements of the Magnuson-Moss Warranty Act and Federal Trade Commission rulings which regulate warranties on consumer products. Nobility provides a limited warranty of one year on the structural components of its homes.
3
The coronavirus
(“COVID-19”)
pandemic has resulted in government authorities implementing numerous measures to try to contain the virus. We were labeled an essential business and never closed our manufacturing plant or retail sales centers. The government measures as well as the public reaction to
COVID-19
and the various variants had a negative impact on customer traffic (and corresponding sales) within our centers and the operations of our business partners. While our manufacturing operations have continued, an outbreak in our manufacturing facility would impact our ability to produce new homes. There is considerable uncertainty regarding the impact, and expected duration, of such measures and potential future measures, which could cause disruptions to our business in the future. In addition, whether caused by
COVID-19
or other factors, we have experienced unprecedented inflation and shortages in many material products, and difficulty in hiring additional and retaining production workers, with no immediate relief in sight that have resulted in increases to our material and labor costs. The Company is monitoring these issues and has adjusted our selling prices accordingly to help offset the higher costs.
Competition
The manufactured home industry is highly competitive. The initial investment required for entry into the business of manufacturing homes is not unduly large. State bonding requirements for entry in the business vary from state to state. The bond requirement for Florida is $50,000. Nobility competes directly with other manufacturers, some of whom are both considerably larger and possess greater financial resources than Nobility. Nobility estimates that of the 20 manufacturers selling in the state, approximately 10 manufacture homes of the same type as Nobility and compete in the same market area. Nobility believes that it is generally competitive with most of those manufacturers in terms of price, service, warranties and product performance.
Employees
As of January 7, 2022, the Company had 131 full-time employees, including 33 employed by Prestige. Approximately 74 employees are factory personnel compared to approximately 78 in such positions a year ago and 57 are in management, administrative, supervisory, sales and clerical positions compared to approximately 69 a year ago. In addition, Nobility employs part-time employees when necessary.
The Company has managerial, administrative, supervisory, sales and manufacturing employees. We have a focus on safety and being drug free in our manufacturing operations.
Historically, we have had low turnover rates with our employees, other than with respect to our manufacturing employees. It is currently difficult for us to attract long-term quality employees for our manufacturing operations. We have experienced disruption in production as a result of our inability to find labor. We are working on developing programs designed to cause less turnover, although have not been successful to date.
Nobility makes contributions toward employees’ group health and life insurance. Nobility, which is not subject to any collective bargaining agreements, has not experienced any work stoppage or labor disputes and considers its relationship with employees to be generally satisfactory.
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Item 1A.
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Risk Factors
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As a smaller reporting company, we are not required to provide the information required by this item.
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Item 1B.
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Unresolved Staff Comments
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None.
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Item 2.
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Properties
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As of February 4, 2022, Nobility owned one manufacturing plant as follows:
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Location
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Approximate Size | |
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3741 SW 7th Street
Ocala, Florida
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72,000 sq. ft. |
Nobility’s Ocala facility is located on approximately 35.5 acres of land on which an additional
two-story
structure adjoining the plant serves as Nobility’s corporate offices. The plant, which is of metal construction, is in good condition and requires little maintenance.
4
Prestige owns the properties on which it’s Ocala South, Ocala North, Auburndale, Inverness, Tavares, Panama City, Yulee and Punta Gorda, Florida retail sales centers are located. Prestige leases the property for its other two retail sales centers. The Company purchased the land for the Tavares retail sales center in January 2021 for $245,000, land in Ocala for a future retail sales center in February 2021 for $1,040,000 and the land for the Ocala South retail sales center in March 2021 for $500,000. In December 2017 Prestige executed a lease to open an eleventh retail sales center in north Florida and did not open the retail sales center due to the difficulty in obtaining homes from the manufacturing facility and the hiring of a sales staff. This lease expired in December 2021.
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Item 3.
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Legal Proceedings
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We are a party to various legal proceedings that arise in the ordinary course of our business. We are not currently involved in any litigation nor to our knowledge, is any litigation threatened against us, the outcome of which would, in our judgment based on information currently available to us, have a material adverse effect on our financial position or results of operations.
The Company does not maintain casualty insurance on some of its property, including the inventory at its retail centers, its plant machinery and plant equipment and is at risk for those types of losses.
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Item 4.
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Mine Safety Disclosures
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None.
5
PART II
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Item 5.
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Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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Market Information
The Company’s common stock currently trades under the symbol NOBH on the OTCQX market. Any
market quotations reflect inter-dealer prices, without retail
over-the-counter
mark-up,
mark-down or commission and may not necessarily represent actual transactions.
Holders
At January 31, 2022 the approximate number of holders on record of common stock was 89 (not including individual participants in security position listings).
Dividends
The Board of Directors declared a
one-time
cash dividend of $1.00 per common share for fiscal year 2020 paid to stockholders of record as of March 12, 2021. Any future determination to pay dividends will be at the discretion of our Board of Directors.
Securities Authorized for Issuance under Equity Compensation Plans
The following table displays equity compensation plan information as of the end of the fiscal year ended November 6. 2021 (see Note 13 to the Company’s financial statement included herein).
| Equity Compensation Plan Information | ||||||||||||
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Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
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Weighted-average
exercise price of
outstanding options,
warrants and rights
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Number of securities remaining
available for issuance under equity
compensation plans (excluding
securities reflected in column (a))
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| (a) | (b) | (c) | ||||||||||
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Equity compensation plans approved by security holders
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47,300 | $ | 24.41 | N/A | * | |||||||
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Equity compensation plans not approved by security holders
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N/A | N/A | 252,700 | * | ||||||||
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Total
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47,300 | $ | 24.41 | 252,700 | ||||||||
| * |
The Nobility Homes, Inc. 2011 Stock Incentive Plan was amended by the Board of Directors to extend the termination date from June 2021 until June 1, 2026.
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Recent Sales of Unregistered Securities
None.
Issuer Repurchases of Equity Securities
The Company did not repurchase any shares of its common stock during the fourth quarter ended November 6. 2021.
In September 2021, the Company’s Board of Directors authorized management to repurchase up to 200,000 shares of the Company’s common stock for fiscal year 2022 in the open market.
In September 2020 the Company’s Board of Directors authorized 200,000 share to be repurchased during fiscal year 2021 in the open market. During the twelve months ended November 6, 2021 management repurchased an aggregate of 100,346 share of common stock.
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Item 6.
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Reserved
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6
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Item 7.
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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General
Nobility focuses on home buyers who generally purchase their manufactured homes from retail sales centers to locate on property they own. Nobility has aggressively pursued this market through its Prestige retail sales centers. While Nobility actively seeks to make wholesale sales to independent retail dealers, its presence as a competitor limits potential sales to dealers located in the same geographic areas serviced by its Prestige retail sales centers.
Nobility has aggressively targeted the retirement community market, which is made up of retirees moving to Florida and typically purchasing or renting homes to be located on sites leased from park communities offering a variety of amenities. Sales are not limited by the presence of the Company’s Prestige retail sales centers in this type of arrangement, as the retirement community sells homes only within their community.
Nobility has a product line of approximately 100 active models. Although market demand can fluctuate on a fairly short-term basis, the manufacturing process is such that Nobility can alter its product mix relatively quickly in response to changes in the market. During fiscal years 2021 and 2020, Nobility continued to experience consumer demand for affordable manufactured homes in Florida. Our three, four and five bedroom manufactured homes are favored by families, compared with the one, two and three-bedroom homes that typically appeal to the retirement buyers who reside in the manufactured housing communities.
In an effort to make manufactured homes more competitive with site-built housing, financing packages are available through third-party lenders to provide
(1) 30-year
financing, (2) an interest rate reduction program
(buy-down),
(3) combination land/manufactured home loans, and (4) a 5% down payment program for qualified buyers.
Prestige maintains several outside financing sources that provide financing to retail homebuyers for its manufactured homes. The Company continually tries to develop relationships with new lenders, since established lenders will occasionally leave manufactured home lending. The lack of lenders in our industry, partly as a result of an increase in government regulations, still affects our results by limiting many affordable manufactured housing buyers from purchasing homes.
Prestige’s wholly-owned subsidiary, Mountain Financial, Inc., is an independent insurance agent and licensed loan originator. Mountain Financial provides automobile insurance, extended warranty coverage and property and casualty insurance to Prestige customers in connection with their purchase and financing of manufactured homes.
The
COVID-19
pandemic’s future impact on the housing market, production work force, supply of certain building products and the operations of the Company is difficult to forecast. We were deemed an essential business and never closed our manufacturing plant or retail sales centers. We implemented the recommended protocols to limit the exposure and transmission of
COVID-19,
but it has had a negative impact on customer traffic (and corresponding sales) within our sales centers, operations of the manufacturing facility and our business partners during the third and fourth quarters of fiscal 2021. We expect
COVID-19
to continue to negatively impact the Company and its retail customers during fiscal 2022.
The Company’s fiscal year ends on the first Saturday on or after October 31. The year ended November 6, 2021 (fiscal year 2021) consisted of a fifty-three week period and the year ended October 31, 2020 (fiscal year 2020) consisted of a
fifty-two
week period.
7
Results of Operations
Total net sales in fiscal year 2021 increased 8% to $45,062,558 compared to $41,612,307 in fiscal year 2020. The Company reported net income of $5,398,808 in fiscal year 2021, compared to a net income of $5,983,698 during fiscal year 2020. According to the Florida Manufactured Housing Association, shipments for the industry in Florida for the period from November 2020 through October 2021 were up approximately 11% from the same period last year. During third and fourth quarters of 2021 our production of homes was impacted due to the challenges in hiring additional and retaining production workers and the unpredictable absenteeism of the
COVID-19
quarantine. Production has incurred shortages in many building products which has limited production and delayed the completion of the homes both at the manufacturing plant and the set up process in the field. The Company has continued to experience inflation in most building products resulting in increases to our material and labor costs and a corresponding decrease in gross profits.
The following table summarizes certain key sales statistics and percent of gross profit as of and for fiscal years ended November 6, 2021 and October 31, 2020.
| 2021 | 2020 | |||||||
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New homes sold through Company owned sales centers
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394 | 343 | ||||||
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Pre-owned
homes sold through Company owned sales centers
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15 | 12 | ||||||
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Homes sold to independent dealers
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139 | 225 | ||||||
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Total new factory built homes produced
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557 | 547 | ||||||
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Average new manufactured home price - retail
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$ | 93,824 | $ | 91,161 | ||||
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Average new manufactured home price - wholesale
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$ | 50,183 | $ | 43,758 | ||||
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As a percent of net sales:
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Gross profit from the Company owned retail sales centers
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17 | % | 19 | % | ||||
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Gross profit from the manufacturing facilities - including intercompany sales
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15 | % | 22 | % | ||||
Maintaining our strong financial position is vital for future growth and success. Our many years of experience in the Florida market, combined with home buyers’ increased need for more affordable housing, should serve the Company well in the coming years. Management remains convinced that our specific geographic market is one of the best long-term growth areas in the country.
On June 5, 2021 we celebrated our 54
th
anniversary in business specializing in the design and production of quality, affordable manufactured and modular homes. With multiple retail sales centers in Florida for over 31 years and an insurance agency subsidiary, we are the only vertically integrated manufactured home company headquartered in Florida.
Insurance agent commissions in fiscal year 2021 were $283,154 compared to $283,999 in fiscal year 2020. We have established 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 November 6, 2021 and October 31, 2020.
Cost of goods sold at our manufacturing facilities include: materials, direct and indirect labor and manufacturing expenses (which consists of factory occupancy, salary and salary related, delivery costs, manufactured home service costs and other manufacturing expenses). Cost of goods sold at our retail sales centers include: appliances, air conditioners, electrical and plumbing
hook-ups,
furniture, insurance, impact and permit fees, land and home fees, manufactured home, service warranty, setup contractor, interior drywall finish, setup display, skirting, steps, well, septic tank and other expenses.
Gross profit as a percentage of net sales was 25% in fiscal year 2021 compared to 29% in fiscal year 2020. Our gross profit was $11,432,196 for fiscal year 2021 compared to $12,130,487 for fiscal year 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 continued inflation, shortages in certain building products and factory workers to work on the production line to build homes.
Selling, general and administrative expenses at our manufacturing facility include salaries, professional services, advertising and promotions, corporate expense, employee benefits, office equipment and supplies and utilities. Selling, general and administrative expenses at our retail sales center include: advertising, retail sales centers expenses, salary and salary related, professional fees, corporate expense, employee benefit, office equipment and supplies, utilities and travel. Selling, general and administrative expenses at the insurance company include: advertising, professional fees and office supplies.
Selling, general and administrative expenses as a percent of net sales was 12% in fiscal year 2021 and in fiscal year 2020. Selling, general and administrative expenses were $5,286,172 for fiscal year 2021 compared to $4,984,318 for fiscal year 2020. The dollar 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.
8
The Company earned interest in the amount of $180,635 in fiscal year 2021 compared to $286,897 in fiscal year 2020. Interest income is dependent on our cash balance and available rates of return. The decrease during 2021 is primarily due to the decline in the investment rates and the decrease in the monies invested.
The Company earned $59,072 from its joint venture, Majestic 21, in fiscal year 2021 compared to $80,091 in fiscal year 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 $246,216 in fiscal year 2021 and $421,099 in fiscal year 2020 under an escrow arrangement related to a Finance Revenue Sharing Agreement (FRSA) 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 as received, which has been the Company’s past practice. 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 of $7,118,733 in fiscal year 2021 compared to a
pre-tax
income of $7,869,085 in fiscal year 2020.
The Company recorded an income tax expense of $1,719,925 in fiscal year 2021 compared to $1,885,387 in fiscal year 2020.
Net income in fiscal year 2021 was $5,398,808 or $1.50 per basic and diluted share and net income in fiscal year 2020 was $5,983,698 or $1.64 per basic and diluted share.
Liquidity and Capital Resources
Cash and cash equivalents were $36,126,059 at November 6, 2021 compared to $30,305,902 at October 31, 2020. Certificates of deposit were $2,093,015 at November 6, 2021 compared to $4,602,307 at October 31, 2020. Short-term investments were $621,928 at November 6, 2021 compared to $358,960 at October 31, 2020. Working capital was $35,563,355 at November 6, 2021 compared to $38,865,240 at October 31, 2020. A cash dividend was paid from our cash reserves in March 2021 in the amount of $1.00 per share ($3,632,100). During fiscal 2021, the Company repurchased an aggregate of 100,346 shares of its common stock for an aggregate of $3,478,553. The Company purchased the land for the Tavares retail sales center in January 2021 for $245,000, land in Ocala for a future retail sales center in February 2021 for $1,040,000 and land for the Ocala South retail sales center in March 2021 for $500,000. During fiscal 2020, the Company repurchased an aggregate of 33,100 shares of its common stock for an aggregate of $822,450. A cash dividend was paid from the Company’s cash reserves in March 2020 in the amount of $1.00 per share ($3,630,970)
We own the entire inventory for our Prestige retail sales centers which includes new,
.
pre-owned
and repossessed or foreclosed homes and do not incur any third party floor plan financing expenses. In December 2021, the Company broke ground to build an 11,900 square foot frame shop at a cost of approximately $1.1 million to manufacture the steel frames for our homes, on our current manufacturing plant 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 $3.9 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 November 6, 2021, the Company continued to report a strong balance sheet which included total assets of approximately $66 million which was funded primarily by stockholders’ equity of approximately $49 million.
Looking ahead, the Company’s strong balance sheet and significant cash reserves accumulated in profitable years has allowed the Company to remain sufficiently liquid to allow the continuation of operations and should enable the Company to take advantage of any market opportunities. Management believes it has sufficient levels of liquidity as of the date of the filing of this Form
10-K
to allow the Company to operate into the foreseeable future.
Critical Accounting Policies and Estimates
The Company applies judgment and estimates, which may have a material effect in the eventual outcome of assets, liabilities, revenues and expenses, accounts receivable, inventory and goodwill. The following explains the basis and the procedure where judgment and estimates are applied.
9
Revenue Recognition
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 buyer’s 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 revenue 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.
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” to the Company’s financial statement included herein
The Company recognizes revenue 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 Company’s 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 Company’s 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 November 6, 2021 or October 31, 2020.
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.
Rebate Program
The Company has a rebate program for some dealers, based upon the number and type of homes 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.
Off-Balance
Sheet Arrangements
As part of our ongoing business, we generally do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or variable interest entities (“VIE’s”), which would have been established for the purpose of facilitating
off-balance
sheet arrangements or other contractually narrow or limited purposes.
10
As of November 6, 2021, we are not involved in any material unconsolidated entities (other than the Company’s investments in Majestic 21).
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 pandemics, competitive pricing pressures at both the wholesale and retail levels, inflation, 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, management’s 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.
|
Item 7A.
|
Quantitative and Qualitative Disclosures about Market Risk
|
As a smaller reporting company, we are not required to provide the information required by this item.
11
|
Item 8.
|
Financial Statements and Supplementary Data
|
Index to Consolidated Financial Statements
| 13 | ||||
| 14 | ||||
| 15 | ||||
| 16 | ||||
| 17 | ||||
| 18 |
12
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 November 6, 2021 and October 31, 2020, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for each of the years in the
two-year
period ended November 6, 2021, 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 Company’s management. Our responsibility is to express an opinion on the Company’s 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 Company’s 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.
Critical Audit Matters
Critical audit matters are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ Daszkal Bolton LLP
We have served as the Company’s auditor since 2018.
Jupiter, Florida
February 4, 2022
13
Nobility Homes, Inc.
November 6, 2021 and October 31, 2020
| November 6, 2021 | October 31,2020 | |||||||
|
Assets
|
||||||||
|
Current assets:
|
||||||||
|
Cash and cash equivalents
|
$ |
|
$ |
|
||||
|
Certificates of deposit
|
|
|
||||||
|
Short-term investments
|
|
|
||||||
|
Accounts receivable—trade
|
|
|
||||||
|
Note receivable
|
|
|
||||||
|
Mortgage notes receivable
|
|
|
||||||
|
Income taxes receivable
|
— |
|
||||||
|
Inventories
|
|
|
||||||
|
Pre-owned
homes, net
|
|
|
||||||
|
Prepaid expenses and other current assets
|
|
|
||||||
|
|
|
|
|
|||||
|
Total current assets
|
|
|
||||||
|
Property, plant and equipment, net
|
|
|
||||||
|
Pre-owned
homes, net
|
|
|
||||||
|
Note receivable, less current portion
|
|
|
||||||
|
Mortgage notes receivable, less current portion
|
|
|
||||||
|
Mobile home park note receivable
|
|
— | ||||||
|
Other investments
|
|
|
||||||
|
Deferred income taxes
|
— |
|
||||||
|
Operating lease right of use asset
|
|
|
||||||
|
Cash surrender value of life insurance
|
|
|
||||||
|
Other assets
|
|
|
||||||
|
|
|
|
|
|||||
|
Total assets
|
$ |
|
$ |
|
||||
|
|
|
|
|
|||||
|
Liabilities and Stockholders’ Equity
|
||||||||
|
Current liabilities:
|
||||||||
|
Accounts payable
|
$ |
|
$ |
|
||||
|
Accrued compensation
|
|
|
||||||
|
Accrued expenses and other current liabilities
|
|
|
||||||
|
Income taxes payable
|
|
— | ||||||
|
Operating lease obligation
|
|
|
||||||
|
Customer deposits
|
|
|
||||||
|
|
|
|
|
|||||
|
Total current liabilities
|
|
|
||||||
|
|
|
|
|
|||||
|
Deferred income taxes
|
|
— | ||||||
|
Operating lease obligation, less current portion
|
— |
|
||||||
|
Total liabilities
|
|
|
||||||
|
|
|
|
|
|||||
|
Commitments and contingent liabilities
|
|
|
||||||
|
Stockholders’ equity:
|
||||||||
|
Preferred stock, $
|
|
|
||||||
|
Common stock, $
|
|
|
||||||
|
Additional paid in capital
|
|
|
||||||
|
Retained earnings
|
|
|
||||||
|
Less treasury stock at cost,
|
(
|
) |
(
|
) | ||||
|
|
|
|
|
|||||
|
Total stockholders’ equity
|
|
|
||||||
|
|
|
|
|
|||||
|
Total liabilities and stockholders’ equity
|
$ |
|
$ |
|
||||
|
|
|
|
|
|||||
The accompanying notes are an integral part of these financial statements.
14
Nobility Homes, Inc.
For the years ended November 6, 2021 and October 31, 2020
|
|
|
Year Ended
|
|
|||||
|
|
|
November 6,
2021 |
|
|
October 31,
2020 |
|
||
|
Net sales
|
$ |
|
$ |
|
||||
|
Cost of sales
|
(
|
) |
(
|
) | ||||
|
|
|
|
|
|||||
|
Gross profit
|
|
|
||||||
|
Selling, general and administrative expenses
|
(
|
) |
(
|
) | ||||
|
|
|
|
|
|||||
|
Operating income
|
|
|
||||||
|
|
|
|
|
|||||
|
Other income (loss):
|
||||||||
|
Interest income
|
|
|
||||||
|
Undistributed earnings in joint venture—Majestic 21
|
|
|
||||||
|
Proceeds received under escrow arrangement
|
|
|
||||||
|
Increase (decrease) in fair value of equity investment
|
|
(
|
) | |||||
|
Gain on sale of assets
|
— |
|
||||||
|
Miscellaneous
|
|
|
||||||
|
|
|
|
|
|||||
|
Total other income
|
|
|
||||||
|
|
|
|
|
|||||
|
Income before provision for income taxes
|
|
|
||||||
|
Income tax expense
|
(
|
) |
(
|
) | ||||
|
|
|
|
|
|||||
|
Net income
|
|
|
||||||
|
|
|
|
|
|||||
|
Weighted average number of shares outstanding:
|
||||||||
|
Basic
|
|
|
||||||
|
Diluted
|
|
|
||||||
|
Net income per share:
|
||||||||
|
Basic
|
$ |
|
$ |
|
||||
|
Diluted
|
$ |
|
$ |
|
||||
The accompanying notes are an integral part of these financial statements.
15
Nobility Homes, Inc.
For the years ended November 6, 2021 and October 31, 2020
|
Common
Stock Shares |
Common
Stock |
Additional
Paid-in
Capital |
Retained
Earnings |
Accumulated
Other Comprehensive Income |
Treasury
Stock |
Total | ||||||||||||||||||||||
|
Balance at October 31, 2020
|
|
$ |
|
$ |
|
$ |
|
$ | — | $ |
(
|
) | $ |
|
||||||||||||||
|
Cash dividend
|
— | — | — |
(
|
) | — | — |
(
|
) | |||||||||||||||||||
|
Purchase of treasury stock
|
(
|
) | — | — | — | — |
(
|
) |
(
|
) | ||||||||||||||||||
|
Stock-based compensation
|
— | — |
|
— | — | — |
|
|||||||||||||||||||||
|
Exercise of employee stock options
|
|
— |
|
— | — |
|
|
|||||||||||||||||||||
|
Net income
|
— | — | — |
|
— | — |
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Balance at November 6, 2021
|
|
$ |
|
$ |
|
$ |
|
$ | — | $ |
(
|
) | $ |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Balance at November 2, 2019
|
|
$ |
|
$ |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
|
||||||||||||||
|
Adoption of ASU
2016-01
|
— | — | — |
|
(
|
) | — | — | ||||||||||||||||||||
|
Adoption of ASU
2016-02
|
— | — | — |
(
|
) | — | — |
(
|
) | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Balance at November 2, 2019 as adjusted
|
|
|
|
|
— |
(
|
) |
|
||||||||||||||||||||
|
Cash dividend
|
— | — | — |
(
|
) | — | — |
(
|
) | |||||||||||||||||||
|
Purchase of treasury stock
|
(
|
) | — | — | — | — |
(
|
) |
(
|
) | ||||||||||||||||||
|
Stock-based compensation
|
|
— |
|
— | — |
|
|
|||||||||||||||||||||
|
Net income
|
— | — | — |
|
— | — |
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
Balance at October 31, 202
0
|
|
$ |
|
$ |
|
$ |
|
$ | — | $ |
(
|
) | $ |
|
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
The accompanying notes are an integral part of these financial statements.
16
Nobility Homes, Inc.
For the years ended November 6, 2021 and October 31, 2020
| Year Ended | ||||||||
|
November 6,
2021 |
October 31,
2020 |
|||||||
|
Cash flows from operating activities:
|
||||||||
|
Net income
|
$ |
|
$ |
|
||||
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
|
Depreciation
|
|
|
||||||
|
Deferred income taxes
|
|
|
||||||
|
Undistributed earnings in joint venture—Majestic 21
|
(
|
) |
(
|
) | ||||
|
Gain on disposal of property, plant and equipment
|
— |
(
|
) | |||||
|
(Increase) decrease in fair value of equity investments
|
(
|
) |
|
|||||
|
Stock-based compensation
|
|
|
||||||
|
Amortization of operating lease right of use assets
|
|
|
||||||
|
Decrease (increase) in:
|
||||||||
|
Accounts receivable—trade
|
|
|
||||||
|
Inventories
|
(
|
) |
|
|||||
|
Pre-owned
homes
|
|
(
|
) | |||||
|
Prepaid expenses and other current assets
|
(
|
) |
|
|||||
|
Interest receivable
|
(
|
) |
(
|
) | ||||
|
Income taxes receivable
|
— |
(
|
) | |||||
|
(Decrease) increase in:
|
||||||||
|
Accounts payable
|
|
(
|
) | |||||
|
Accrued compensation
|
(
|
) |
(
|
) | ||||
|
Accrued expenses and other current liabilities
|
|
(
|
) | |||||
|
Income taxes payable
|
|
(
|
) | |||||
|
Customer deposits
|
|
|
||||||
|
|
|
|
|
|||||
|
Net cash provided by operating activities
|
|
|
||||||
|
|
|
|
|
|||||
|
Cash flows from investing activities:
|
||||||||
|
Purchase of property, plant and equipment
|
(
|
) |
(
|
) | ||||
|
Purchase of certificates of deposit
|
— |
(
|
) | |||||
|
Proceeds from certificates of deposit
|
|
|
||||||
|
Proceeds from disposal of property, plant and equipment
|
— |
|
||||||
|
Collections on interest receivable
|
|
|
||||||
|
Collections on mortgage notes receivable
|
|
|
||||||
|
Collections on equipment and other notes receivable
|
|
|
||||||
|
Issuance of equipment note receivable
|
(
|
) | ||||||
|
Issuance of mobile home park not receivable
|
(
|
) | — | |||||
|
Increase in cash surrender value of life insurance
|
(
|
) |
(
|
) | ||||
|
|
|
|
|
|||||
|
Net cash provided by investing activities
|
|
|
||||||
|
|
|
|
|
|||||
|
Cash flows from financing activities:
|
||||||||
|
Payment of cash dividend
|
(
|
) |
(
|
) | ||||
|
Proceeds from exercise of employee stock options
|
|
— | ||||||
|
Proceeds from paycheck protection program
|
|
|
—
|
|
|
|
|
|
|
Return of proceeds from paycheck protection program
|
|
|
—
|
|
|
|
(
|
)
|
|
Purchase of treasury stock
|
(
|
) |
(
|
) | ||||
|
Reduction of operating lease obligation
|
(
|
) |
(
|
) | ||||
|
|
|
|
|
|||||
|
Net cash used in financing activities
|
(
|
) |
(
|
) | ||||
|
|
|
|
|
|||||
|
Increase cash and cash equivalents
|
|
|
||||||
|
Cash and cash equivalents at beginning of year
|
|
|
||||||
|
|
|
|
|
|||||
|
Cash and cash equivalents at end of year
|
$ |
|
$ |
|
||||
|
|
|
|
|
|||||
|
Supplemental disclosure of cash flow information:
|
||||||||
|
Income taxes paid
|
$ |
|
$ |
|
||||
|
|
|
|
|
|||||
The accompanying notes are an integral part of these financial statements.
17
Description of Business and Principles of Consolidation –
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
–
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
–
fifty-two
week period.
Revenue Recognition
–
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 buyer’s 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 accompanying notes are an integral part of these financial statements.
18
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.
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 Company’s 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 Company’s 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 November 6, 2021 and October 31, 2020.
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
pre-owned
homes, and insurance agent commissions for the years ended November 6, 2021 and October 31, 2020 are as follows:
| 2021 | 2020 | |||||||
|
Manufactured housing
|
$ |
|
$ |
|
||||
|
Pre-owned
homes
|
|
|
||||||
|
Insurance agent commissions
|
|
|
||||||
|
|
|
|
|
|||||
|
Total net sales
|
$ |
|
$ |
|
||||
|
|
|
|
|
|||||
Cash and Cash Equivalents
–
Certificates of Deposit
Accounts Receivable –
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
–
“available-for-sale”
available-for-sale
2016-01,
unrealized gains and losses on these
available-for-sale
Inventories –
The accompanying notes are an integral part of these financial statements.
19
Other
pre-owned
homes are acquired (Repossessions Inventory) as a convenience to the Company’s joint venture partner, 21st Mortgage Corporation. This inventory has been repossessed by 21
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 Company’s inventory on the Company’s consolidated balance sheets. Consigned inventory was $
794,766
and $
1,277,681
as of November 6, 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.
See Note 6 “Inventories”.
Property, Plant and Equipment –
Investment in Majestic 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 21’s formation. While Majestic 21 has been deemed to be a variable interest entity, the Company only holds a
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 Company’s network of retail centers which management believes benefits the historical loss experience of the joint venture. The only impact on the Company’s operations from this arrangement are commissions earned on the resale of these units and interest earned for the Company’s carrying costs of the units while in inventory.
See Note 14 “Commitments and Contingent Liabilities”.
Impairment of Long-Lived Assets –
The accompanying notes are an integral part of these financial statements.
20
Customer Deposits –
Company Owned Life Insurance
Warranty Costs –
| 2021 | 2020 | |||||||
|
Beginning accrued warranty expense
|
$ |
|
$ |
|
||||
|
Less: reduction for payments
|
(
|
) |
(
|
) | ||||
|
Plus: additions to accrual
|
|
|
||||||
|
|
|
|
|
|||||
|
Ending accrued warranty expense
|
$ |
|
$ |
|
||||
|
|
|
|
|
|||||
The Company’s 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
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 –
Rebate Program –
Advertising –
Income Taxes –
The accompanying notes are an integral part of these financial statements.
21
Net Income per Share –
Shipping and Handling Costs
–
Comprehensive Income –
available-for-sale
Segments –
Major Customers
–
customers
that accounted for more than
Concentration of Credit Risk –
Concentration of Retail Financing Sources
–
Recently Issued or Adopted Accounting Pronouncements –
No. 2016-01,
“Financial Instruments–Overall: 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 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):
| November 6, 2021 | ||||||||||||||||
| Amortized Cost |
Gross
Unrealized Gains |
Gross
Unrealized Losses |
Estimated Fair
Value |
|||||||||||||
|
Equity securities in a public company
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
|
|
|
|
|
|
|
|
|||||||||
The accompanying notes are an integral part of these financial statements.
22
| October 31, 2020 | ||||||||||||||||
| Amortized Cost |
Gross
Unrealized Gains |
Gross
Unrealized Losses |
Estimated Fair
Value |
|||||||||||||
|
Equity securities in a public company
|
$ |
|
$ |
|
$ |
|
$ |
|
||||||||
|
|
|
|
|
|
|
|
|
|||||||||
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 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 management’s best estimate of what market participants would use in valuing the asset or liability at the measurement date.
|
| November 6, 2021 | ||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||
|
Equity securities in a public company
|
$ |
|
$ |
|
$ |
|
||||||
|
|
|
|
|
|
|
|||||||
| October 31, 2020 | ||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||
|
Equity securities in a public company
|
$ |
|
$ |
|
$ |
|
||||||
|
|
|
|
|
|
|
|||||||
NOTE 4 Related Party Transactions
Affiliated Entities
TLT, Inc. –
Repurchase of Common Stock
The accompanying notes are an integral part of these financial statements.
23
NOTE 5 Other Investments
Investment in Joint Venture – Majestic 21
–
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 Company’s maximum exposure is limited to its investment in Majestic 21, management has concluded that the Company would not absorb a majority of Majestic 21’s expected losses nor receive a majority of Majestic 21’s 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 14 “Commitments and Contingent Liabilities”.
We received
no
distributions from the joint venture in fiscal year 2021 or 2020.
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.
NOTE 6 Inventories
A breakdown of the elements of inventory at November 6, 2021 and October 31, 2020 is as follows:
|
November 6,
2021 |
October 31,
2020 |
|||||||
|
Raw materials
|
$ |
|
$ |
|
||||
|
Work-in-process
|
|
|
||||||
|
Inventory consigned to affiliated entities
|
|
|
||||||
|
Finished homes
|
|
|
||||||
|
Model home furniture
|
|
|
||||||
|
|
|
|
|
|||||
|
Inventories
|
$ |
|
$ |
|
||||
|
|
|
|
|
|||||
|
Pre-owned
homes
|
$ |
|
$ |
|
||||
|
Less homes expected to sell in 12 months
|
(
|
) |
(
|
) | ||||
|
|
|
|
|
|||||
|
Pre-owned
homes, long-term
|
$ |
|
$ |
|
||||
|
|
|
|
|
|||||
The accompanying notes are an integral part of these financial statements.
24
NOTE 7 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 | November 6, 2021 | October 31, 2020 | ||||||||
|
Land
|
|
$ |
|
$ |
|
|||||
|
Land improvements
|
|
|
|
|||||||
|
Buildings and improvements
|
|
|
|
|||||||
|
Machinery and equipment
|
|
|
|
|||||||
|
Furniture and fixtures
|
|
|
|
|||||||
|
Construction in progress
|
|
|
|
|||||||
|
|
|
|
|
|||||||
|
|
|
|||||||||
|
Less accumulated depreciation
|
(
|
) |
(
|
) | ||||||
|
|
|
|
|
|||||||
| $ |
|
$ |
|
|||||||
|
|
|
|
|
|||||||
Depreciation expense during the years ended November 6, 2021 and October 31, 2020 totaled $
186,320
and $
180,047
, respectively.
NOTE 8 Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities are comprised of the following:
| November 6, 2021 | October 31, 2020 | |||||||
|
Accrued warranty expense
|
$ |
|
$ |
|
||||
|
Accrued property and sales taxes
|
|
|
||||||
|
Other accrued expenses
|
|
|
||||||
|
|
|
|
|
|||||
|
Total accrued expenses and other current liabilities
|
$ |
|
$ |
|
||||
|
|
|
|
|
|||||
NOTE 9 Proceeds Received Under Escrow Arrangement
The Company received $
246,216
in fiscal year 2021 and $
421,099
in fiscal year 2020 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 Company’s past practice.
NOTE 10 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
50
% likely of being realized on examination. For tax positions not meeting the
no
tax benefit is recorded.
“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
“more-likely-than-not”
test,
The Company and its subsidiaries are subject to U.S. federal income tax, as well as income tax of the state of Florida. The Company’s 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 2021 or 2020 statements of operations, nor are any amounts accrued for interest and penalties at November 6, 2021 and October 31, 2020.
The accompanying notes are an integral part of these financial statements.
25
The provision for income taxes for the years ended consists of the following:
| November 6, 2021 | October 31, 2020 | |||||||
|
Current tax expense:
|
||||||||
|
Federal
|
$ |
|
$ |
|
||||
|
State
|
|
|
||||||
|
Deferred tax (benefit)
|
|
|
||||||
|
|
|
|
|
|||||
|
Provision for income taxes
|
$ |
|
$ |
|
||||
|
|
|
|
|
|||||
The following table shows the reconciliation between the statutory federal income tax rate and the actual provision for income taxes for the years ended:
| November 6, 2021 | October 31, 2020 | |||||||
|
Provision—federal statutory tax rate
|
$ |
|
$ |
|
||||
|
Increase (decrease) resulting from:
|
||||||||
|
State taxes, net of federal tax benefit
|
|
|
||||||
|
Permanent differences:
|
||||||||
|
Stock option expirations
|
|
|
||||||
|
Decrease in FL corporate tax rate
|
(
|
) |
(
|
) | ||||
|
Other comprehensive income
|
|
|
||||||
|
Other
|
(
|
) |
(
|
) | ||||
|
|
|
|
|
|||||
|
Provision for income taxes
|
$ |
|
$ |
|
||||
|
|
|
|
|
|||||
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:
| November 6, 2021 | October 31, 2020 | |||||||
|
Deferred tax assets:
|
||||||||
|
Allowance for doubtful accounts
|
$ |
|
$ |
|
||||
|
Inventories
|
|
|
||||||
|
Prepaid Expenses
|
|
|
||||||
|
Accrued expenses
|
|
|
||||||
|
Other assets
|
|
|
||||||
|
Lease right of use liability
|
|
|
||||||
|
Stock-based compensation
|
|
|
||||||
|
|
|
|
|
|||||
|
Total deferred tax assets
|
|
|
||||||
|
Deferred tax liabilities:
|
||||||||
|
Depreciation
|
(
|
) |
(
|
) | ||||
|
Carrying value of investments
|
(
|
) |
(
|
) | ||||
|
Amortization
|
(
|
) |
(
|
) | ||||
|
Prepaid expenses
|
(
|
) |
(
|
) | ||||
|
Lease right of use asset
|
(
|
) |
(
|
) | ||||
|
|
|
|
|
|||||
|
Net deferred tax assets (liabilities)
|
$ |
(
|
) | $ |
|
|||
|
|
|
|
|
|||||
The accompanying notes are an integral part of these financial statements.
26
These amounts are included in the accompanying consolidated balance sheets under the following captions:
| November 6, 2021 | October 31, 2020 | |||||||
|
Current assets (liabilities):
|
||||||||
|
Deferred tax assets
|
$ |
|
$ |
|
||||
|
Deferred tax liabilities
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
Net current deferred tax assets
|
|
|
||||||
|
|
|
|
|
|
|
|
|
|
|
Non-current
assets (liabilities):
|
||||||||
|
Deferred tax assets
|
|
|
||||||
|
Deferred tax liabilities
|
(
|
) |
(
|
) | ||||
|
|
|
|
|
|
|
|
|
|
|
Net
non-current
deferred tax
assets
(liabilities)
|
(
|
) |
|
|||||
|
|
|
|
|
|||||
|
Net deferred tax assets (liabilities)
|
$ |
(
|
) | $ |
|
|||
|
|
|
|
|
|||||
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 2021 and 2020, the Company determined that a valuation reserve for the Company’s deferred tax assets was not considered necessary as the deferred tax assets were fully realizable.
NOTE 11 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
100,346
and
33,100
shares of its common stock during fiscal years 2021 and 2020, respectively.
NOTE 12 Stock Option Plan
In June 2011, the Company’s Board of Directors adopted and the Company’s 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
of
non-employee
directors. A total
2026
. At November 6, 2021,
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 2021 and 2020, the Company recognized compensation cost related to the vesting of stock options of approximately $
69,750
and $
3,624
respectively.
The accompanying notes are an integral part of these financial statements.
27
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 2, 2019
|
|
$ |
|
$ |
|
|||||||||||
|
|
|
|
|
|
|
|||||||||||
|
Granted
|
|
|
|
|||||||||||||
|
Exercised
|
|
|
|
|||||||||||||
|
Canceled
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|||||||||||
|
Outstanding at October
3
1, 2020
|
|
$ |
|
|
||||||||||||
|
|
|
|
|
|
|
|||||||||||
|
Granted
|
|
|
|
|||||||||||||
|
Exercised
|
|
|
|
|||||||||||||
|
Canceled
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
|
Outstanding at November 6, 2021
|
|
$ |
|
$ |
|
$ |
|
|||||||||
|
|
|
|
|
|
|
|
|
|||||||||
The aggregate intrinsic value in the table above represents total intrinsic value (of options in the money), which is the difference between the Company’s closing stock price on the last trading day of fiscal year 2021 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 November 6, 2021.
The following table summarizes information about the outstanding stock options at November 6, 2021:
| Options Outstanding | Options Exercisable | |||||||||||||||||||||
|
Exercise Price
|
Shares
Outstanding |
Weighted
Average Remaining Contractual Life (years) |
Weighted
Average Exercise Price |
Number
Exercisable |
Weighted
Average Exercise Price |
|||||||||||||||||
| $ |
|
|
|
$ |
|
|
$ |
|
||||||||||||||
| $ |
|
|
|
|
|
|
||||||||||||||||
| $ |
|
|
|
|
|
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
$ |
|
|
$ |
|
||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
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 Company’s 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 13 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 employee’s compensation. The contribution expense charged to operations amounted to approximately $
219,900
and $
175,000
in fiscal years 2021 and 2020, respectively.
NOTE 14 Commitments and Contingent Liabilities
Operating Leases –
The accompanying notes are an integral part of these financial statements.
28
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 Company’s assessments on whether a contract is or contains a lease, and the Company’s 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
1,597
, net of amortization in the consolidated Balance Sheet as of November 6, 2021.
non-current
asset in the amount of $
Based on the terms of the lease agreements, all of the Company’s leases are classified as operating leases. The weighted average remaining lease term and weighted average discount rate of the operating leases is .
08
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 $
179,802
for the twelve months ended November 6, 2021.
Other Contingent Liabilities –
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.
The accompanying notes are an integral part of these financial statements.
29
|
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.
|
Item 9A.
|
Controls and Procedures
|
Evaluation of Disclosure Controls and Procedures
Management’s Annual Report on Internal Control over Financial Reporting.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
The Company’s management assessed the effectiveness of its internal control over financial reporting as of November 6, 2021 based on criteria established in Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and determined that its internal controls were effective.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.
Changes in internal control over financial reporting.
|
Item 9B.
|
Other Information
|
None.
|
Item 9C.
|
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
|
Not applicable.
The accompanying notes are an integral part of these financial statements.
30
PART III
|
Item 10.
|
Directors, Executive Officers and Corporate Governance
|
Information is incorporated by reference pursuant to Instruction G of Form
10-K
from its definitive proxy statement for the 2022 annual meeting of shareholders.
The following table provides the names, ages and business experience for the past five years for each of Nobility’s executive officers. Executive officers are each elected for one year terms.
Executive Officers
| Terry E. Trexler (82) | Chairman of the Board and President of Nobility since 1967; Mr. Trexler is also President of TLT, Inc. | |
| Thomas W. Trexler (58) | Executive Vice President and Chief Financial Officer of Nobility since December 1994; President of Prestige Home Centers, Inc. since June 1995; Director of Prestige since 1993 and Vice President from 1991 to June 1995; President of Mountain Financial, Inc. since August 1992; Vice President of TLT, Inc. since September 1991. | |
| Jean Etheredge (76) | Secretary since 1967. | |
| Lynn J. Cramer, Jr. (76) | Treasurer since 1980. | |
Thomas W. Trexler, Executive Vice President, Chief Financial Officer and a director, is the son of Terry E. Trexler, Nobility’s President and Chairman of the Board. There are no other family relationships between any directors or executive officers.
Code of Ethics
We have adopted a code of ethics that applies to the principal executive officer, principal financial officer, executive vice presidents and controller. The code has been designed in accordance with provisions of the Sarbanes-Oxley Act of 2002, to promote honest and ethical conduct.
Our code of ethics is available on our website at www.nobilityhomes.com. You may also obtain a copy of the Nobility Homes, Inc. Code of Ethics, at no cost, by forwarding a written request to the Secretary, Nobility Homes, Inc., 3741 SW 7
th
Street, Ocala, Florida 34474.
|
Item 11.
|
Executive Compensation
|
Information concerning executive compensation is incorporated by reference pursuant to Instruction G of Form
10-K
from Nobility’s definitive proxy statement for the 2022 annual meeting of shareholders.
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
Information concerning security ownership of certain beneficial owners and management is incorporated by reference pursuant to Instruction G of Form
10-K
from Nobility’s definitive proxy statement for the 2022 annual meeting of shareholders.
|
Item 13.
|
Certain Relationships and Related Transactions, and Director Independence
|
Information concerning certain relationships and related transactions is incorporated by reference pursuant to Instruction G of Form
10-K
from Nobility’s definitive proxy statement for the 2022 annual meeting of shareholders.
|
Item 14.
|
Principal Accounting Fees and Services
|
Information concerning principal accountant fees and services is incorporated by reference pursuant to Instruction G of Form
10-K
from Nobility’s definitive proxy statement for the 2022 annual meeting of shareholders.
The accompanying notes are an integral part of these financial statements.
31
PART IV
|
Item 15.
|
Exhibits and Financial Statement Schedules
|
| (a) |
Consolidated Financial Statements and Schedules
|
Report of Daszkal Bolton LLP
Consolidated Balance Sheets at November 6, 2021 and October 31, 2020
Consolidated Statements of Comprehensive Income for the Years Ended November 6, 2021 and October 31, 2020
Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended November 6, 2021 and October 31, 2020
Consolidated Statements of Cash Flows for the Years Ended November 6, 2021 and October 31, 2020
Notes to Consolidated Financial Statements
| (b) |
Exhibits:
|
In reviewing the agreements included as exhibits to this report, please remember they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about the Company, its subsidiaries or other parties to the agreements. The agreements contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and:
| • |
should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;
|
| • |
have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;
|
| • |
may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and
|
| • |
were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.
|
Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about the Company may be found elsewhere in this report and the Company’s other public files, which are available without charge through the SEC’s website at http://www.sec.gov.
| 3.(a) |
Nobility’s Articles of Incorporation, as amended (filed as an exhibit to Nobility’s Form
10-K
for the fiscal year ended November 1, 1997 and incorporated herein by reference).(P)
|
| (b) |
Bylaws, as amended March 28, 1994 (filed as an exhibit to Nobility’s Form
10-KSB
for the fiscal year ended October 29, 1994 and incorporated herein by reference.) (P)
|
| 4.1 |
| 10.(a) |
Joint Venture Agreement with 21st Century Mortgage Corporation (filed as an exhibit to Nobility’s For
10-K
for the fiscal year ended November 1, 1997 and incorporated herein by reference).(P)
|
| (b) |
| (c) |
| (d) |
| (e) |
The accompanying notes are an integral part of these financial statements.
32
| (f) |
| 21.1 |
| 23.1 |
| 31.(a) |
| (b) |
| 32.(a) |
| (b) |
| 101. |
Interactive data filing formatted in XBRL.
|
|
Item 16.
|
Form
10-K
Summary
|
None.
The accompanying notes are an integral part of these financial statements.
33
Signatures
Pursuant to the requirements of Section 13 or 15(d) 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: February 4, 2022 |
By: /s/ Terry E. Trexler
|
|||||
| Terry E. Trexler, Chairman, | ||||||
| President and Chief Executive Officer (Principal Executive Officer) | ||||||
| DATE: February 4, 2022 |
By: /s/ Thomas W. Trexler
|
|||||
| Thomas W. Trexler, Executive Vice President | ||||||
| and Chief Financial Officer (Principal Financial Officer) | ||||||
| DATE: February 4, 2022 |
By: /s/ Lynn J. Cramer, Jr.
|
|||||
| Lynn J. Cramer, Jr., Treasurer | ||||||
| and Principal Accounting Officer | ||||||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
| DATE: February 4, 2022 |
By: /s/ Terry E. Trexler
|
|||||
| Terry E. Trexler, Director | ||||||
| DATE: February 4, 2022 |
By: /s/ Thomas W. Trexler
|
|||||
| Thomas W. Trexler, Director | ||||||
| DATE: February 4, 2022 |
By: /s/ Robert P. Saltsman
|
|||||
| Robert P. Saltsman, Director | ||||||
| DATE: February 4, 2022 |
By: /s/ Arthur L. Havener
|
|||||
| Arthur L. Havener, Director | ||||||
The accompanying notes are an integral part of these financial statements.
34
TABLE OF CONTENTS
Part IItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Mine Safety DisclosuresPart IIItem 5. Market For Registrant S Common Equity, Related Stockholder Matters and Issuer Purchases Of Equity SecuritiesItem 6. ReservedItem 7. Management S Discussion and Analysis Of Financial Condition and Results Of OperationsItem 7A. Quantitative and Qualitative Disclosures About Market RiskItem 8. Financial Statements and Supplementary DataNote 1 Reporting Entity and Significant Accounting PoliciesNote 2 InvestmentsNote 3 Fair Values Of Financial InvestmentsNote 4 Related Party TransactionsNote 5 Other InvestmentsNote 6 InventoriesNote 7 Property, Plant and EquipmentNote 8 Accrued Expenses and Other Current LiabilitiesNote 9 Proceeds Received Under Escrow ArrangementNote 10 Income TaxesNote 11 Stockholders EquityNote 12 Stock Option PlanNote 13 Employee Benefit PlanNote 14 Commitments and Contingent LiabilitiesItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9B. Other InformationItem 9C. Disclosure Regarding Foreign Jurisdictions That Prevent InspectionsPart IIIItem 10. Directors, Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership Of Certain Beneficial Owners and Management and Related Stockholder MattersItem 13. Certain Relationships and Related Transactions, and Director IndependenceItem 14. Principal Accounting Fees and ServicesPart IVItem 15. Exhibits and Financial Statement SchedulesItem 16. Form 10-k Summary