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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the quarterly period ended
Commission File number
(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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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
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.
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Large accelerated filer |
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☐ |
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Accelerated filer |
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☐ |
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☒ |
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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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐; No
Indicate the number of shares outstanding of each of the 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 September 19, 2023 |
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Table of Contents
NOBILITY HOMES, INC.
IND EX
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Page
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PART I. |
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Financial Information |
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Item 1. |
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Financial Statements (Unaudited) |
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Condensed Consolidated Balance Sheets as of August 5, 2023 (Unaudited) and November 5, 2022 |
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4 |
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5 |
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6 |
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Notes to Condensed Consolidated Financial Statements (Unaudited) |
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7 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 4. |
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12 |
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PART II. |
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13 |
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Item 2. |
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13 |
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Item 5. |
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13 |
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Item 6. |
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14 |
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2
Table of Contents
NOBILITY HOMES, INC.
Condensed Consolid ated Balance Sheets
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August 5,
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November 5,
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(Unaudited) |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Certificates of deposit |
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Short-term investments |
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Accounts receivable - trade |
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Note receivable |
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Mortgage notes receivable |
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Income taxes receivable |
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Inventories |
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Prepaid expenses and other current assets |
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Total current assets |
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Property, plant and equipment, net |
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Note receivable, less current portion |
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Mortgage notes receivable, less current portion |
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Other investments |
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Property held for resale |
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Deferred income taxes |
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Cash surrender value of life insurance |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and Stockholders’ Equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued compensation |
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Accrued expenses and other current liabilities |
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Income taxes payable |
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Customer deposits |
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Total current liabilities |
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Stockholders’ equity: |
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Preferred stock, $.
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Common stock, $.
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Additional paid in capital |
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Retained earnings |
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Less treasury stock at cost,
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(
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(
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
Table of Contents
NOBILITY HOMES, INC.
Condensed Con solidated Statements of Income
(Unaudited)
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Three Months Ended |
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Nine Months Ended |
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August 5,
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August 6,
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August 5,
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August 6,
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Net sales |
$ |
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$ |
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$ |
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$ |
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Cost of sales |
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(
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(
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(
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(
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Gross profit |
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Selling, general and administrative expenses |
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(
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(
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(
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(
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Operating income |
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Other income (loss): |
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Interest income |
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Undistributed earnings in joint venture - Majestic 21 |
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Proceeds received under escrow arrangement |
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Increase (decrease) in fair value of equity investment |
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(
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(
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(
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Gain on disposal of property, plant and equipment |
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Miscellaneous |
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Total other income |
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Income before provision for income taxes |
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Income tax expense |
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(
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(
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(
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(
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Net income |
$ |
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$ |
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$ |
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$ |
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Weighted average number of shares outstanding: |
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Basic |
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Diluted |
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Net income per share: |
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Basic |
$ |
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$ |
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$ |
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$ |
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Diluted |
$ |
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$ |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Table of Contents
NOBILITY HOMES, INC.
Condensed Consolidated Statements of Changes in Stockhol ders’ Equity
For the three and nine months ended August 5, 2023 and August 6, 2022
(Unaudited)
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Common
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Common
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Additional
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Retained
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Treasury
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Total |
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||||||
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Balance at November 5, 2022 |
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$ |
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$ |
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$ |
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$ |
(
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$ |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Net income |
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— |
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— |
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— |
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— |
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Balance at February 4, 2023 |
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(
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) |
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Cash dividend |
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— |
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— |
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— |
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(
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) |
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— |
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(
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) |
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Purchase of treasury stock |
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(
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) |
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— |
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— |
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— |
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(
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) |
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(
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) |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Net income |
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— |
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— |
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— |
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— |
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Balance at May 6, 2023 |
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$ |
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$ |
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$ |
|
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$ |
(
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) |
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$ |
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Purchase of treasury stock |
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(
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) |
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— |
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— |
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— |
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(
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) |
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(
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) |
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Stock-based compensation |
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— |
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— |
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Net income |
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— |
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— |
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— |
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— |
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|
Balance at August 5, 2023 |
|
|
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$ |
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$ |
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$ |
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$ |
(
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) |
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$ |
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Common
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Common
|
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Additional
|
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Retained
|
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Treasury
|
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Total |
|
||||||
|
Balance at November 6, 2021 |
|
|
|
|
|
$ |
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$ |
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$ |
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$ |
(
|
) |
|
$ |
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Stock-based compensation |
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— |
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— |
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Exercise of employee stock
|
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— |
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(
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) |
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— |
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— |
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Treasury stock purchase |
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(
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) |
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— |
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— |
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— |
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(
|
) |
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|
(
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) |
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Net income |
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— |
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— |
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— |
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— |
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Balance at February 5, 2022 |
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(
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) |
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Cash dividend |
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— |
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— |
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|
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— |
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(
|
) |
|
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— |
|
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(
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) |
|
Purchase of treasury stock |
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|
(
|
) |
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— |
|
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— |
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|
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— |
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(
|
) |
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|
(
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) |
|
Stock-based compensation |
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— |
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— |
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Net income |
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— |
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— |
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— |
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— |
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|
Balance at May 7, 2022 |
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|
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|
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(
|
) |
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|
|
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Stock-based compensation |
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— |
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— |
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— |
|
|
|
— |
|
|
|
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|
Net income |
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|
— |
|
|
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— |
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|
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— |
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|
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|
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— |
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|
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|
Balance at August 6, 2022 |
|
|
|
|
|
$ |
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$ |
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|
|
$ |
|
|
|
$ |
(
|
) |
|
$ |
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
Table of Contents
NOBILITY HOMES, INC.
Condensed Consolidated St atements of Cash Flows
(Unaudited)
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|
Nine Months Ended |
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|||||
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August 5,
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August 6,
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||
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Cash flows from operating activities: |
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Net income |
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$ |
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$ |
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Adjustments to reconcile net income to net cash provided by operating
|
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Depreciation |
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Deferred income taxes |
|
|
|
|
|
|
(
|
) |
|
Undistributed earnings in joint venture - Majestic 21 |
|
|
(
|
) |
|
|
(
|
) |
|
Gain on disposal of property, plant and equipment |
|
|
|
|
|
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(
|
) |
|
Decrease in fair market value of equity investments |
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Stock-based compensation |
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Amortization of operating lease right of use assets |
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Decrease (increase) in: |
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||
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Accounts receivable - trade |
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(
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) |
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(
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) |
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Inventories |
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(
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) |
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Pre-owned homes |
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Prepaid expenses and other current assets |
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(
|
) |
|
Interest receivable |
|
|
(
|
) |
|
|
(
|
) |
|
Income tax receivable |
|
|
(
|
) |
|
|
|
|
|
(Decrease) increase in: |
|
|
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|
|
|
||
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Accounts payable |
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Accrued compensation |
|
|
(
|
) |
|
|
|
|
|
Accrued expenses and other current liabilities |
|
|
(
|
) |
|
|
|
|
|
Income taxes payable |
|
|
(
|
) |
|
|
|
|
|
Customer deposits |
|
|
(
|
) |
|
|
(
|
) |
|
Net cash provided by (used in) operating activities |
|
|
|
|
|
|
(
|
) |
|
Cash flows from investing activities: |
|
|
|
|
|
|
||
|
Purchase of property, plant and equipment |
|
|
(
|
) |
|
|
(
|
) |
|
Purchase of certificates of deposit |
|
|
(
|
) |
|
|
(
|
) |
|
Purchase of property held for resale |
|
|
(
|
) |
|
|
|
|
|
Proceeds from certificates of deposit |
|
|
|
|
|
|
|
|
|
Proceeds disposal of property, plant and equipment |
|
|
|
|
|
|
|
|
|
Collections on interest receivable |
|
|
|
|
|
|
|
|
|
Collections on mortgage notes receivable |
|
|
|
|
|
|
|
|
|
Collections on equipment and other notes receivable |
|
|
|
|
|
|
|
|
|
Issuance of mobile home park note receivable |
|
|
|
|
|
|
(
|
) |
|
Increase in cash surrender value of life insurance |
|
|
(
|
) |
|
|
(
|
) |
|
Net cash used in investing activities |
|
|
(
|
) |
|
|
(
|
) |
|
Cash flows from financing activities: |
|
|
|
|
|
|
||
|
Payment of cash dividend |
|
|
(
|
) |
|
|
(
|
) |
|
Purchase of treasury stock |
|
|
(
|
) |
|
|
(
|
) |
|
Reduction of operating lease obligation |
|
|
|
|
|
|
(
|
) |
|
Net cash (used in) financing activities |
|
|
(
|
) |
|
|
(
|
) |
|
Decrease in cash and cash equivalents |
|
|
(
|
) |
|
|
(
|
) |
|
Cash and cash equivalents at beginning of period |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
|
|
|
$ |
|
|
|
Supplemental financing activity: |
|
|
|
|
|
|
||
|
Income taxes paid |
|
$ |
|
|
|
$ |
|
|
|
Noncash exercise of employee stock options |
|
$ |
|
|
|
$ |
(
|
) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
Table of Contents
Nobility Homes, Inc.
Notes to Condensed Co nsolidated Financial Statements
(Unaudited)
Note 1 Basis of Presentation and Accounting Policies
The accompanying unaudited condensed financial statements for the three and nine months ended August 5, 2023 and August 6, 2022 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission for Form 10-Q.
Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.
The unaudited financial information included in this report includes all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary to reflect a fair statement of the results for the interim periods. The results of operations for the three and nine months ended August 5, 2023, are not necessarily indicative of the results of the full fiscal year.
The condensed consolidated financial statements included in this report should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended November 5, 2022.
Note 2 Inventories
New home inventory is carried at a lower of cost or net realizable value. The cost of finished home inventories determined on the specific identification method is removed from inventories and recorded as a component of cost of sales at the time revenue is recognized. In addition, an allocation of depreciation and amortization is included in the cost of goods sold. Under the specific identification method, if finished home inventory can be sold for a profit there is no basis to write down the inventory below the lower of cost or net realizable value.
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 21st Mortgage Corporation. The Company acquired this inventory at the amount of the uncollected balance of the financing at the time of the repossessions by 21st Mortgage Corporation. The Company records this inventory at a cost determined by the specific identification method. All of the refurbishment costs are paid by 21st Mortgage Corporation. This arrangement assists 21st 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 21st 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 21st Mortgage. Any shortfall from the proceeds to cover these amounts is paid by 21st Mortgage to the Company. As the Company has no risk of loss on the sale, there is no valuation allowance necessary for repossessions of inventory.
Inventory held at consignment locations by affiliated entities is included in the Company’s inventory on the Company’s condensed consolidated balance sheets. Consigned inventory was $
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 net realizable value.
Other inventory costs are determined on a first-in, first-out basis.
7
Table of Contents
A breakdown of the elements of inventory at August 5, 2023 and November 5, 2022 is as follows:
|
|
|
August 5, |
|
|
November 5, |
|
||
|
|
|
2023 |
|
|
2022 |
|
||
|
|
|
(unaudited) |
|
|
|
|
||
|
Raw materials |
|
$ |
|
|
|
$ |
|
|
|
Work-in-process |
|
|
|
|
|
|
|
|
|
Inventory consigned to affiliated entities |
|
|
|
|
|
|
|
|
|
Finished homes - Nobility |
|
|
|
|
|
|
|
|
|
Finished homes - Other |
|
|
|
|
|
|
|
|
|
Pre-owned homes |
|
|
|
|
|
|
|
|
|
Model home furniture |
|
|
|
|
|
|
|
|
|
Inventories |
|
$ |
|
|
|
$ |
|
|
Note 3 Short-term Investments
The following is a summary of short-term investments (available for sale):
|
|
|
August 5, 2023 |
|
|||||||||||||
|
|
|
(unaudited) |
|
|||||||||||||
|
|
|
Cost |
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
||||
|
Equity securities in a public company |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
November 5, 2022 |
|
|||||||||||||
|
|
|
Cost |
|
|
Gross
|
|
|
Gross
|
|
|
Estimated
|
|
||||
|
Equity securities in a public company |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The fair values were estimated based on quoted market prices in active markets at each respective period end.
Note 4 Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, accounts and notes receivable, accounts payable, customer deposits and accrued expenses approximate fair value because of the short maturity of those instruments.
The Company accounts for the fair value of financial investments in accordance with FASB Accounting Standards Codification (ASC) No. 820 “Fair Value Measurements” (ASC 820).
ASC 820 defines fair value as the price that would be received upon the sale of an asset or paid to transfer a liability (i.e. exit price) in an orderly transaction between market participants at the measurement date. ASC 820 requires disclosures that categorize assets and liabilities measured at fair value into one of three different levels depending on the assumptions (i.e. inputs) used in the valuation. Financial assets and liabilities are classified in their entirety based on the lowest level of input significant to the fair value measurement. The ASC 820 fair value hierarchy is defined as follows:
8
Table of Contents
The following tables represent the Company’s financial assets and liabilities which are carried at fair value.
|
|
|
August 5, 2023 |
|
|||||||||
|
|
|
(unaudited) |
|
|||||||||
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|||
|
Equity securities in a public company |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
November 5, 2022 |
|
|||||||||
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|||
|
Equity securities in a public company |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Note 5 Net Income per Share
These condensed consolidated financial statements include “basic” and “diluted” net income per share information for all periods presented. The basic net income per share is calculated by dividing net income by the weighted-average number of shares outstanding. The diluted net income per share is calculated by dividing net income by the weighted-average number of shares outstanding, adjusted for dilutive common shares.
Note 6 Revenues by Products and Service
The Company operates in one business segment, which is manufactured housing and ancillary services.
Revenues by net sales from manufactured housing homes and insurance agent commissions are as follows:
|
|
|
(unaudited) |
|
|
(unaudited) |
|
||||||||||
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
|
August 5, |
|
|
August 6 |
|
|
August 5, |
|
|
August 6 |
|
||||
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
Manufactured housing |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Homes sold through Company owned sales
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
Homes sold to independent dealers and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance agent commissions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
9
Table of Contents
Item 2. Management’s Discussion and Analysis of Fin ancial Condition and Results of Operations
Results of Operations
Total net sales in the third quarter of 2023 were up 6% to $14,654,789 compared to $13,846,698 in the third quarter of 2022. Total net sales for the first nine months of 2023 were up 38% to $48,599,139 compared to $35,300,014 for the first nine months of 2022. The Company reported a 41% increase in net income to $2,666,328 in the third quarter of 2023, compared to a net income of $1,884,759 in the third quarter 2022. Net income for the first nine months of 2023 was up 91% to $8,582,144 compared to $4,498,619 for the first nine months of 2022. The primary reason that sales and net income increased in fiscal 2023 over fiscal 2022 was due to the severe supply chain challenges experienced during the first nine months of fiscal 2022 that impacted our ability to complete and deliver homes to customers. During the first nine months of fiscal 2023, the supply chain challenges eased compared to the prior period and we were able to complete and deliver more retail customers homes, which included us selling forty-eight ($8,216,827) new homes during the first nine months of 2023 from other manufacturers, to help reduce our backlog. Although net sales increased during fiscal 2003 as compared to last year, we continue to experience limitations being placed on certain key production materials from suppliers, the delay or lack of key components from vendors as well as back orders, delayed shipments, price increases and labor shortages. These issues continue to cause delays in the completion of the homes at the manufacturing Company's facility and the set-up process of retail homes in the field, resulting in decreased net sales due to our inability to timely deliver and set up homes to customers. We expect that these challenges will continue throughout 2023 and potentially beyond. The Company continues to experience inflation in some building products resulting in increases to our material and labor costs which may increase the wholesale and retail selling prices of our homes. Additionally, potential customers may delay or defer purchasing decisions when considering the rising interest rate environment.
The current demand for affordable manufactured housing in Florida and the U.S. is slowing because of the increased interest rate environment driven by the Federal Reserve. According to the Florida Manufactured Housing Association, shipments for the industry in Florida for the period from November 2022 through July 2023 declined by approximately 15% from the same period last year.
The following table summarizes certain key sales statistics and percentage of gross profit.
|
|
|
(unaudited) |
|
|
(unaudited) |
|
||||||||||
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
|
August 5, |
|
|
August 6, |
|
|
August 5, |
|
|
August 6, |
|
||||
|
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
|
New homes sold through Company owned sales centers |
|
|
84 |
|
|
|
101 |
|
|
|
292 |
|
|
|
265 |
|
|
Pre-owned homes sold through Company owned sales
|
|
|
1 |
|
|
|
4 |
|
|
|
5 |
|
|
|
13 |
|
|
Homes sold to independent dealers |
|
|
46 |
|
|
|
9 |
|
|
|
109 |
|
|
|
24 |
|
|
Total new factory built homes produced |
|
|
108 |
|
|
|
101 |
|
|
|
361 |
|
|
|
306 |
|
|
Average new manufactured home price - retail |
|
$ |
147,426 |
|
|
$ |
129,343 |
|
|
$ |
147,094 |
|
|
$ |
120,796 |
|
|
Average new manufactured home price - wholesale |
|
$ |
71,514 |
|
|
$ |
74,747 |
|
|
$ |
74,325 |
|
|
$ |
71,012 |
|
|
As a percent of net sales: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Gross profit from the Company owned retail sales centers |
|
|
24 |
% |
|
|
20 |
% |
|
|
23 |
% |
|
|
19 |
% |
|
Gross profit from the manufacturing facilities -including
|
|
|
26 |
% |
|
|
15 |
% |
|
|
24 |
% |
|
|
14 |
% |
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, 2023, the Company celebrated its 56th anniversary in business specializing in the design and production of quality, affordable manufactured homes. With multiple retail sales centers in Florida for over 33 years and an insurance agency subsidiary, we are the only vertically integrated manufactured home company headquartered in Florida.
Insurance agent commission revenues in the third quarter of 2023 were $86,255 compared to $77,911 in the third quarter of 2022. Total insurance agent commission revenues for the first nine months of 2023 were $255,052 compared to $222,398 for the first nine months of 2022. Revenues are generated by new and renewal policies being written which affects agent commission earned. The Company establishes appropriate reserves for policy cancellations based on numerous factors, including past transaction history with customers, historical experience and other information, which is periodically evaluated and adjusted as deemed necessary. In the opinion of management, no reserve was deemed necessary for policy cancellations at August 5, 2023, and November 5, 2022.
10
Table of Contents
Gross profit as a percentage of net sales was 35% in the third quarter of 2023 compared to 28% for the third quarter of 2022 and was 35% for the first nine months of 2023 compared to 27% for the first six months of 2022. The gross profit in the third quarter of 2023 was $5,114,390 compared to $3,898,060 in the third quarter of 2022 and was $16,939,297 for the first nine months of 2023 compared to $9,648,206 for the first nine months of 2022. The gross profit is dependent on the sales mix of wholesale and retail homes and number of pre-owned homes sold. The increase in gross profit as a percentage of net sales is primarily due to increases in our selling prices to offset the higher inflation costs of building products and labor cost on each home and the increase in the average gross profit at our retail sales centers.
Selling, general and administrative expenses as a percent of net sales was 14% in the third quarter of 2023 compared to 12% for the third quarter 2022 and for the first nine months of 2023 and 2022 was 13% . Selling, general and administrative expenses in the third quarter of 2023 was $1,987,782 compared to $1,653,200 in the third quarter of 2022 and was $6,238,457 for the first nine months of 2023 compared to $4,448,349 for the first nine months of 2022. The dollar increases in expenses for the three and nine months of 2023 were due to the increase in employee sales compensation as a result of increased sales.
We earned interest income of $203,972 for the third quarter of 2023 compared to $62,449 for the third quarter of 2022. For the first nine months of 2023, interest income was $513,987 compared to $176,706 in the first nine months of 2022. The increase in interest income for the three and nine months of 2023 is primarily due to the higher interest rates and an increase in the monies invested.
Our earnings from Majestic 21 in the third quarter of 2023 were $27,828 compared to $15,488, for the third quarter of 2022. The earnings for the first nine months of 2023 were $76,276 compared to $40,710 for the first nine months of 2022. 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 vary quarter to quarter, but overall, the earnings will decrease due to the amortization, maturity and payoff of the loans.
We received distributions from 21 st Mortgage Corporation in the third quarter of 2023 of $115,641 compared to $52,140 in the third quarter of 2022 and $209,806 for the first nine months of 2023 compared to $285,639 for the first nine months of 2022. We received no distributions in the first quarter of 2023. The distributions are from an escrow arrangement related to a Finance Revenue Sharing Agreement (FRSA) between 21 st Mortgage Corporation and the Company. The distributions from the escrow arrangement, relating to certain loans financed by 21 st Mortgage Corporation, are recorded as income by the Company when received. The earnings from the FRSA loan portfolio will vary quarter to quarter, but will continue to decrease due to the amortization and payoff of the loans.
The Company realized pre-tax income in the third quarter of 2023 of $3,571,531 as compared to $2,479,072 in the third quarter of 2022. The pre-tax income for the first nine months of 2023 was $11,495,736 as compared to $5,898,117 in the first nine months of 2022.
The Company recorded an income tax expense in the amount of $905,203 in the third quarter of 2023 as compared to $594,313 in third quarter 2022. Income tax expense for the nine months of 2023 was $2,913,592 compared to $1,399,498 for the nine months of 2022.
We reported net income of $2,666,328 for the third quarter of 2023 or $0.80 per share, compared to $1,884,759 or $0.56 per share, for the third quarter of 2022. For the first nine months of 2023 net income was $8,582,144 or $2.56 per share compared to $4,498,619 or $1.30 per share in the first nine months of 2022.
Liquidity and Capital Resources
Cash and cash equivalents were $12,973,685 at August 5, 2023 compared to $16,653,449 at November 5, 2022. Certificates of deposit were $7,347,913 at August 5, 2023 compared to $3,903,888 at November 5, 2022. Short-term investments were $541,132 at August 5, 2023 compared to $589,071 at November 5, 2022. Working capital was $35,501,408 at August 5, 2023 as compared to $33,667,732 at November 5, 2022. During the first nine months of 2023, the Company repurchased an aggregate of 102,083 shares if its common stock for an aggregate of $2,853,981. A cash dividend was paid from our cash reserves in April 2023 in the amount of $1.00 per share ($3,370,912). Prestige purchased thirty-seven (37) ($3,618,890) new homes during the first nine months of 2023 from other manufacturers to help eliminate the backlog from Nobility. Prestige new home inventory was $20,066,150 at August 5, 2023 compared to $20,016,093 at November 5, 2022. Prestige has ninety two (92) ($6,061,996) new homes that are included in inventory and are in the field waiting to be completed and closed. We own the entire inventory for our Prestige retail sales centers, which includes new and pre-owned homes, and do not incur any third-party floor plan financing expenses.
The Company currently has no line of credit facility and no debt and does not believe that such a facility is currently necessary to its operations. The Company also has approximately $4.3 million of cash surrender value of life insurance which can be accessed as an additional source of liquidity though the Company has not currently viewed this to be necessary. As of August 5, 2023, the Company
11
Table of Contents
continued to report a strong balance sheet which included total assets of approximately $63 million which was funded primarily by stockholders’ equity of approximately $50 million.
Critical Accounting Policies and Estimates
In Item 7 of our Form 10-K, under the heading “Critical Accounting Policies and Estimates,” we have provided a discussion of the critical accounting policies and estimates that management believes affect its more significant judgments and estimates used in the preparation of our Consolidated Financial Statements. No significant changes have occurred since that time.
Forward-Looking Statements
Certain statements in this report are unaudited or forward-looking statements within the meaning of the federal securities laws. Although Nobility believes that the amounts and expectations reflected in such forward-looking statements are based on reasonable assumptions, there are risks and uncertainties that may cause actual results to differ materially from expectations. These risks and uncertainties include, but are not limited to, the potential adverse impact on our business caused competitive pricing pressures at both the wholesale and retail levels, inflation, increasing material costs (including forest based products) or availability of materials due to supply chain interruptions (such as current inflation with forest products and supply issues with vinyl siding and PVC piping), changes in market demand, increase in interest rates, availability of financing for retail and wholesale purchasers, consumer confidence, adverse weather conditions that reduce sales at retail centers, the risk of manufacturing plant shutdowns due to storms or other factors, the impact of marketing and cost-management programs, reliance on the Florida economy, impact of labor shortage, impact of materials shortage, increasing labor cost, cyclical nature of the manufactured housing industry, impact of rising fuel costs, catastrophic events impacting insurance costs, availability of insurance coverage for various risks to Nobility, market demographics, management’s ability to attract and retain executive officers and key personnel, increased global tensions, market disruptions resulting from terrorist attacks, or other events such as a pandemic, any armed conflict involving the United States and the impact of inflation.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company’s Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer) have evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report (the “Evaluation Date”). Based on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of August 5, 2023.
Changes in Internal Control over Financial Reporting.
There were no changes in our internal controls over financial reporting that occurred during the third quarter of fiscal 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.
12
Table of Contents
Part II. OTHER INFORMATI ON AND SIGNATURES
There were no reportable events for Item 1, 3 and 4.
Item 2. Unregistered Sales of Equity Sec urities and Use of Proceeds.
The following table represents information with respect to purchases by the Company of its common stock during the three months ended August 5, 2023.
|
|
Total |
|
Average |
|
Total number of shares |
|
Maximum number of |
|
||||
|
|
number of |
|
price |
|
purchased as part of |
|
shares that may yet be |
|
||||
|
|
shares |
|
paid |
|
publicly announced plans |
|
purchased under the plans |
|
||||
|
Period |
purchased |
|
per share |
|
or program* |
|
or programs* |
|
||||
|
May 7 - Jun 3, 2023 |
|
- |
|
|
- |
|
|
- |
|
|
197,971 |
|
|
Jun 4 - Jul 1, 2023 |
|
100,000 |
|
$ |
27.97 |
|
|
100,000 |
|
|
97,971 |
|
|
Jun 4 - Aug 5, 2023 |
|
- |
|
|
- |
|
|
- |
|
|
97,971 |
|
*In September 2022, the Company’s Board of Directors authorized the Company to repurchase up to 200,000 shares of the Company’s common stock during fiscal year 2023 on the open market.
Item 5. Other Information
During the three months ended August 5, 2023, no director or Section 16 officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in item 408(a) of Regulation S-K.
Item 6. Exhib its
|
|
|
|
|
|
|
|
31. |
(a) |
|
|
|
|
|
|||
|
|
|
(b) |
|
|
|
|
|
|||
|
|
32. |
(a) |
|
Written Statement of Chief Executive Officer Pursuant to 18 U.S.C. §1350 |
|
|
|
|||
|
|
|
(b) |
|
Written Statement of Chief Financial Officer Pursuant to 18 U.S.C. §1350 |
|
|
|
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101. |
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Interactive data filing formatted in XBRL |
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104. |
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Cover Page Interactive Date File (formatted as inline XBRL and contained in Exhibit 101. |
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Table of Contents
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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NOBILITY HOMES, INC. |
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DATE: September 19, 2023 |
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By: |
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/s/ Terry E. Trexler |
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Terry E. Trexler, Chairman, |
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President and Chief Executive Officer |
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DATE: September 19, 2023 |
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By: |
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/s/ Thomas W. Trexler |
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Thomas W. Trexler, Executive Vice President, |
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and Chief Financial Officer |
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DATE: September 19, 2023 |
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By: |
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/s/ Lynn J. Cramer, Jr. |
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Lynn J. Cramer, Jr., Treasurer |
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and Principal Accounting Officer |
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