Nobility Homes Inc 10-K for FY2023
Nobility Homes Inc (NOBH)
About this 10-K
Nobility Homes Inc filed this 10-K on May 20, 2024, covering the fiscal year ended November 4, 2023 (FY2023).
Headline figures
Fiscal year ended November 4, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $63.32M
- up 22.9% from $51.52M a year earlier
- Net income
- $10.9M
- up 50.7% from net income of $7.23M a year earlier
- Diluted EPS
- $3.27
- up 55.7% from $2.10 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
For the fiscal year ended
For the transition period from to .
Commission file number
(Exact name of registrant as specified in its charter)
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(I.R.S. Employer Identification No.) |
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(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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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
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 ☐
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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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.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
The aggregate market value of the common stock held by non-affiliates of the registrant (650,300) shares), based on the closing price of $26.25 on the over-the-counter market on May 5, 2023 (the last business day of the second quarter of fiscal 2023), was approximately $
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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Shares Outstanding on January 31, 2024 |
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DOCUMENTS INCORPORATED BY REFERENCE |
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Title |
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Form 10-K |
Definitive proxy statement for Annual Meeting of Shareholders to be held March 1, 2024
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Part III, Items 10-14 |
TABLE OF CONTENTS
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Form |
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PART I |
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Item 1. |
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Item 1A. |
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Item 1B. |
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Item 1C. |
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Item 2. |
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Item 3. |
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Item 4. |
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PART II |
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Item 5. |
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Item 6. |
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Item 7. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 7A. |
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Item 8. |
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Index to Consolidated Financial Statements Report of Independent Registered Public Accounting Firm-Hancock Askew & Co., LLP |
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Report of Independent Registered Public Accounting Firm-Daszkal Bolton LLP |
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Item 9. |
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
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Item 9A. |
Controls and Procedures |
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Item 9B. |
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Item 9C. |
Disclosure Regarding Foreign Jurisdictions that prevent Inspections |
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PART III |
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Item 10. |
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Item 11. |
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Item 12. |
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
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Item 13. |
Certain Relationships and Related Transactions, and Director Independence |
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Item 14. |
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PART IV |
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Item 15. |
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(b) Exhibits |
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Item 16. |
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1
PART I
Item 1. Business
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:
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 $70,000 to $220,000. 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 continues 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 that began during the COVID-19 pandemic.
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.,("Prestige")), 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 our wholly owned subsidiary, operates ten retail sales centers in north and central Florida. Sales by Prestige accounted for 88% and 95% of Nobility’s sales during fiscal years 2023 and 2022, 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.
2
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.
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, 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 2023 and 2022.
Wholesale Sales to Manufactured Home Communities
Nobility also sells its homes on a wholesale basis through two full-time salespersons to approximately 28 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. 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.
3
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 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.
The government measures as well as the public reaction to COVID variants, previously had an impact on customer traffic (and corresponding sales) within our sales centers and the operations of our business partners, which has since subsided. However, whether caused by COVID variants 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 corresponding 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 into 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 5, 2024, the Company had 142 full-time employees, including 36 employed by Prestige. 85 employees are factory personnel compared to 89 in such positions a year ago and 57 are in management, administrative, supervisory, sales and clerical positions compared to 56 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 non-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 and retain manufacturing labor. We are using different hiring practices such as work release programs and employment services to reduce the turnover. However, we are still experiencing a shortage of new qualified factory production employees and continue to incur turnover of existing employees.
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.
Item 1A. Risk Factors
As a smaller reporting company, we are not required to provide the information required by this item.
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
Not applicable
4
Item 2. Properties
As of January 31, 2024, Nobility owned one manufacturing plant as follows:
Location |
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Approximate Size |
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. The Company has added an 11,900 square foot frame shop constructed of concrete block and metal to manufacture steel frames for our homes, on our current manufacturing plant property in Ocala, Florida.
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 located in Chiefland and Hudson Florida. The Company in April 2022 sold .1066 acres of land frontage at the Inverness location for $96,970 to the Florida Department of Transportation for SR 41 road widening project.
Item 3. Legal Proceedings
Certain claims and suits arising in the ordinary course of business have been filed or are pending against the Company. In the opinion of management, the ultimate outcome of these matters will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.
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.
Item 4. Mine Safety Disclosures
None.
5
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
The Company’s common stock currently trades under the symbol NOBH on the OTCQX market. Any over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
Holders
At January 31, 2024 the approximate number of holders on record of common stock was 85 (not including individual participants in security position listings).
Dividends
The Board of Directors declared an one-time cash dividend of $1.50 per common share for fiscal year 2023 paid to stockholders of record as of March 25, 2024, a one-time cash dividend of $1.00 per common share for fiscal year 2022 paid to stockholders of record as of March 20, 2023. Any future determination to pay dividends will be at the discretion of our Board of Directors.
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 4. 2023.
In December 2023, 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 2024 on the open market.
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. During the twelve months ended November 4, 2023, the Company repurchased an aggregate of 102,083 shares of common stock.
In June 2023, the Company repurchased 100,000 shares of common stock from its President (see note 4) to the Company’s financial statements included herein.
Item 6. Reserved
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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 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 2023 and 2022, 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. In addition, rising interest rates have slowed the demand for retail homebuyers.
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 interest rate environment’s future impact on the overall housing market and other, factors impacting the Company, such as production work force, supply of certain building products, and lingering impact from COVID, are difficult to forecast for fiscal year 2024. These factors have had a negative impact on customer traffic (and corresponding sales) within our sales centers, operations of the manufacturing facility and our business partners throughout fiscal years 2023 and 2022.
In fiscal year 2023, Prestige purchased from other manufacturers 44 new homes for an aggregate of ($4,432,483) and in fiscal year 2022 purchased 153 new homes from other manufacturers for an aggregate of ($12,595,593) to help eliminate the backlog from Nobility. Prestige has 76 new homes purchase for an aggregate of ($4,979,162) from Nobility and outside manufacturers, that are included in inventory and are in the field, waiting to be completed and closed as of the year end 2023.
Nobility believes that being located in Florida offers a number of advantages such as an increasing population, a low-tax and business friendly state government. However, Nobility is also aware of climate-related risks such as hurricanes, tornados, sea-level rise, flooding and wildfires which are prone to occur in Florida. To date, management does not believe these climate-related risks have adversely impacted the Company. However, management believes if such climate-related events impacted the Company’s manufacturing or sales facilities, then the Company would be adversely impacted. If such climate-related events should deter future population growth in Florida, then the Company would be adversely impacted. If climate-related disclosures are required in the future by the Securities and Exchange Commission or if customary business practices should change to require greater climate-risk mitigation, then the Company would face increased compliance costs and costs of doing business. Such costs are not currently quantifiable.
The Company’s fiscal year ends on the first Saturday on or after October 31. The year ended November 4, 2023 (fiscal year 2023) consisted of a fifty-two-week period and the year ended November 5, 2022 (fiscal year 2022) consisted of a fifty-two-week period.
7
Results of Operations
Total net sales in fiscal year 2023 increased 23% to $63,318,392 compared to $51,522,054 in fiscal year 2022. The Company reported a 51% increase in net income to $10,898,864 in fiscal year 2023, compared to a net income of $7,232,029 in fiscal year 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 negatively impacted our ability to complete and deliver homes to customers. During fiscal year 2023, the supply chain challenges eased compared to the prior year and we were able to complete and deliver more retail customers homes, which included us selling sixty four new homes during fiscal year 2023 purchased for $10,871,250 from other manufacturers, to help reduce our backlog. 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 Company’s manufacturing facility and the set-up process of retail homes in the field, resulting in decreased net sales due to our inability to timely deliver and set up homes to customers. We expect that these challenges will continue throughout fiscal 2024 and potentially beyond. The Company also 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.
The current demand for affordable manufactured housing in Florida and the U.S. is slowing, which we believe is because of the increased interest rate environment. According to the Florida Manufactured Housing Association, shipments for the industry in Florida for the period from November 2022 through October 2023 declined by approximately 16% from the same period last year.
The following table summarizes certain key sales statistics and percent of gross profit as of and for fiscal years 2023 and 2022.
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2023 |
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2022 |
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New homes sold through Company owned sales centers |
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367 |
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371 |
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Pre-owned homes sold through Company owned sales centers |
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6 |
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13 |
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Homes sold to independent dealers |
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169 |
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43 |
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Total new factory built homes produced |
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470 |
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423 |
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Average new manufactured home price - retail |
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$ |
147,583 |
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$ |
126,438 |
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Average new manufactured home price - wholesale |
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$ |
72,612 |
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$ |
72,983 |
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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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23 |
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20 |
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Gross profit from the manufacturing facilities - including intercompany sales |
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24 |
% |
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16 |
% |
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, we celebrated our 56th 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 33 years and an insurance agency subsidiary, we are the only vertically integrated manufactured home company headquartered in Florida.
Insurance agent commissions in fiscal year 2023 were $340,565 compared to $299,672 in fiscal year 2022. Revenues are generated by new and renewal policies being written which affects agent commission earned. 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 4, 2023 and November 5, 2022.
Cost of goods sold includes manufacturing costs such as: (1) materials, material variance and discounts, freight-in (2) direct and indirect labor-factory production (3) manufacturing expenses: (a) factory occupancy; depreciation of building and equipment, equipment rental, factory supplies and tools, repair/maintenance of building and equipment, rubbish disposal and utilities (b) salary and salary related; supervision, maintenance, purchasing, payroll taxes, group insurance and workmen’s compensation (c) delivery costs (d) home service costs; salaries servicemen and office personnel, home repair contractors and materials, service vans expense for gas/maintenance and servicemen travel expenses (e) other manufacturing expenses; employee benefits, factory gas, oil, insurance, licenses and taxes and professional services. Post manufacturing cost of goods sold at our retail model centers may 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.
8
Gross profit as a percentage of net sales was 34% in fiscal year 2023 compared to 29% in fiscal year 2022. Our gross profit was $21,487,885 for fiscal year 2023 compared to $14,903,438 for fiscal year 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 at our manufacturing facility include salaries, professional services, advertising and promotions, corporate expenses, 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 percentage of net sales was 13% in fiscal year 2023 and in fiscal year 2022. Selling, general and administrative expenses were $8,087,534 for fiscal year 2023 compared to $6,477,988 for fiscal year 2022. The dollar increases in expenses in 2023 were due to the increase in variable expenses which were a direct result of employee benefits compensation due to the increase in sales.
The Company earned interest in the amount of $803,622 in fiscal year 2023 compared to $234,804 in fiscal year 2022. Interest income is dependent on our cash balance and available rates of return. The increase during 2023 is primarily due to the increase in the interest rates and an increase in the monies invested.
The Company earned $104,306 from its joint venture, Majestic 21, in fiscal year 2023 compared to $60,457 in fiscal year 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 could vary year to year, but overall, the earnings will continue to decrease due to the amortization, maturity and payoff of the loans.
We received $239,736 in fiscal year 2023 and $364,520 in fiscal year 2022 under an escrow arrangement related to a Finance Revenue Sharing Agreement (FRSA) between 21st Mortgage Corporation and the Company. The distributions from the escrow account, related to certain loans financed by 21st Mortgage Corporation, are recorded in income by the Company as received, which has been the Company’s past practice due to the uncertainty of the receipts. The earnings overall 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 $14,579,429 in fiscal year 2023 compared to a pre-tax income of $9,436,534 in fiscal year 2022.
The Company recorded an income tax expense of $3,680,565 in fiscal year 2023 compared to $2,204,505 in fiscal year 2022.
Net income in fiscal year 2023 was $10,898,864 or $3.27 per basic and diluted share and net income in fiscal year 2022 was $7,232,029 or $2.10 per basic and diluted share.
Liquidity and Capital Resources
Cash and cash equivalents were $13,879,358 at November 4, 2023 compared to $16,653,449 at November 5, 2022. Certificates of deposit were $10,204,287 at November 4, 2023 compared to $3,903,888 at November 5, 2022. Short-term investments were $527,899 at November 4, 2023 compared to $589,071 at November 5, 2022. Working capital was $37,871,552 at November 4, 2023 compared to $33,667,732 at November 5, 2022. A cash dividend was paid from our cash reserves in April 2023 in the amount of $1.00 per share ($3,370,912). During fiscal 2023, the Company repurchased an aggregate 102,083 shares of its common stock for an aggregate of $2,853,981 and Prestige purchased from other manufacturers 44 new homes for $4,432,483 to help eliminate the large backlog from Nobility. Prestige new home inventory was $18,968,831 at November 4, 2023 compared to $20,016,093 at November 5, 2022. Prestige has 76 ($4,432,483) new homes from Nobility and other manufacturers 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, pre-owned and repossessed or foreclosed homes and do not incur any third-party floor plan financing expenses. The Company incurred $500,000 in fiscal year 2023 and $1,100,000 in fiscal year 2022 in building an 11,900 square foot frame shop to manufacture steel frames for our homes. In April 2022 Prestige sold .1066 acres of land frontage at the Inverness location for $96,970 to the Florida Department of Transportation for SR 41 road widening project. A cash dividend was paid from our cash reserves in April 2022 in the amount of $1.00 per share ($3,532,976). During fiscal 2022, the Company repurchased an aggregate of 162,570 shares of its common stock for an aggregate of $5,195,267.
9
The Company currently has no line of credit facility and no debt and does not believe that such a facility is currently necessary for its operations. The Company also has approximately $4.3 million of cash surrender value of life insurance which it would be able to access as an additional source of liquidity though the Company has not currently viewed this to be necessary. As of November 4, 2023, the Company continued to report a strong balance sheet which included total assets of approximately $65.7 million which was funded primarily by stockholders’ equity of approximately $52.7 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 pay dividends to shareholders 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.
Revenue Recognition
The Company recognizes revenue from its retail sales of new manufactured homes upon the occurrence of the following:
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 set up 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 on November 4, 2023 or November 5, 2022.
Inventories – New home inventory is carried at a lower of cost or net realizable value. Capitalized manufacturing costs on retail manufactured homes built by the company are valued at manufacturing cost, including materials, labor, and manufacturing overhead,
10
or net purchase price if acquired from unaffiliated third parties. 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. 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 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 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 inventory.
Inventory held at consignment locations by affiliated entities is included in the Company’s inventory on the Company’s consolidated balance sheets.
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.
See Note 6 "Inventories" to the Company’s financial statement included herein.
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. As of November 4, 2023, 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 competitive pricing pressures at both the wholesale and retail levels, inflation, increasing material costs (including forest based products) or availability of materials
11
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 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.
12
Item 8. Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
13
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
Nobility Homes, Inc.
Ocala, Florida
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of Nobility Homes, Inc. (the Company) as of November 04, 2023, and the related consolidated statements of income, changes in stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of November 04, 2023, and the results of its operations and its cash flows for the year 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 audit. 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 audit 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 audit, 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 audit 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 audit 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 audit provides a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.
Capitalized manufacturing costs in new home inventory
Description of the Matter
As described in Note 1 to the consolidated financial statements, the Company accounts for new home inventory at the lower of cost or net realizable value. Capitalized manufacturing costs on retail manufactured homes built by the Company are valued at manufacturing cost, including materials, labor, and manufacturing overhead, or net purchase price if acquired from unaffiliated third parties. 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.
We identified the estimation of manufacturing cost on retail manufactured homes built by the company that remain in inventory as a critical audit matter. The company estimates manufacturing costs based on an original bill of materials which may or may not have been recently updated. For those bills of materials that have not been recently updated, the company estimates the cost based on inflation estimates of current material prices and labor and overhead rates since the last update of the standard cost. The estimates in calculating
14
costs lead to a high level of estimation uncertainty related to inventory cost estimates, the inherent subjectivity in management’s judgment in estimating the total costs, and high degree of auditor judgment and an increased extent of effort to test the Company’s cost capitalization.
How we Addressed the Matter in our Audit
/s/
May 20, 2024
PCAOBID #
We have served as the Company’s auditor since 2024
15
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of
Nobility Homes, Inc.
Ocala, Florida
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Nobility Homes, Inc. (the “Company”) at November 5, 2022, and the related consolidated statements of comprehensive income, changes in stockholders’ equity, and cash flows for the year ended November 5, 2022, 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 at November 5, 2022, and the results of its operations and its cash flows for the year ended November 5, 2022, 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 audit. 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 audit 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 audit 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 audit 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 audit provides a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the audit of the November 5, 2022, 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
Jupiter, Florida
February 1, 2023
PCAOB ID # 229
We have served as the Company’s auditor from 2018 through March 2023.
16
Nobility Homes, Inc.
Consolidated Balance Sheets
November 4, 2023 and November 5, 2022
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November 4, |
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November 5, |
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2023 |
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2022 |
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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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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 financial statements.
17
Nobility Homes, Inc.
Consolidated Statements of Income
For the years ended November 4, 2023 and November 5, 2022
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Year Ended |
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November 4, |
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November 5, |
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2023 |
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2022 |
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Net sales |
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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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Gross profit |
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Selling, general and administrative expenses |
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( |
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( |
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Operating income |
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Other income: |
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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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Decrease in fair value of equity investment |
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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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Net income |
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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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$ |
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$ |
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Basic |
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$ |
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$ |
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Diluted |
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The accompanying notes are an integral part of these financial statements.
18
Nobility Homes, Inc.
Consolidated Statements of Changes in Stockholders’ Equity
For the years ended November 4, 2023 and November 5, 2022
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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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Stock Shares |
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Stock |
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Paid-in-Capital |
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Earnings |
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Stock |
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Total |
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Balance at November 6, 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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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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( |
) |
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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( |
) |
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 November 4, 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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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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Stock Shares |
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Stock |
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Paid-in-Capital |
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Earnings |
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Stock |
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Total |
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Balance at November 6, 2021 |
|
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$ |
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$ |
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$ |
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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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- |
|
|
$ |
( |
) |
Purchase of treasury stock |
|
|
( |
) |
|
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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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||||
Exercise of employee stock |
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options |
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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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$ |
|
||
Balance at November 5, 2022 |
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|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||||
The accompanying notes are an integral part of these financial statements.
19
Nobility Homes, Inc.
Consolidated Statements of Cash Flows
For the years ended November 4, 2023 and November 5, 2022
|
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Year Ended |
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November 4, |
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November 5, |
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2023 |
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2022 |
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||
Cash flows from operating activities: |
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||
Net income |
|
$ |
|
|
$ |
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||
Adjustments to reconcile net income to net cash (used in) provided by |
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||
Depreciation |
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|
||
Deferred income taxes |
|
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( |
) |
|
|
( |
) |
Undistributed earnings in joint venture - Majestic 21 |
|
|
( |
) |
|
|
( |
) |
Gain on disposal of property, plant and equipment |
|
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|
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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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|
||
Accounts receivable - trade |
|
|
( |
) |
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|
( |
) |
Inventories |
|
|
|
|
|
( |
) |
|
Prepaid expenses and other current assets |
|
|
|
|
|
( |
) |
|
Interest receivable |
|
|
( |
) |
|
|
( |
) |
(Decrease) increase in: |
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|
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|
||
Accounts payable |
|
|
( |
) |
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|
Accrued compensation |
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( |
) |
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|
Accrued expenses and other current liabilities |
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||
Income taxes payable |
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||
Customer deposits |
|
|
( |
) |
|
|
( |
) |
Net cash provided by (used in) operating activities |
|
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( |
) |
|
Cash flows from investing activities: |
|
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|
||
Purchase of property, plant and equipment |
|
|
( |
) |
|
|
( |
) |
Purchase certificates of deposit |
|
|
( |
) |
|
|
( |
) |
Purchase of property held for resale |
|
|
( |
) |
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|
Proceeds from certificates of deposit |
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||
Proceeds from disposal of property, plant and equipment |
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||
Collections on interest receivable |
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Collections on mortgage notes receivable |
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||
Collections on equipment and other notes receivable |
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||
Collections of mobile home park note receivable |
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||
Issuance of mobile home park note receivable |
|
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|
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|
( |
) |
|
Increase in cash surrender value of life insurance |
|
|
( |
) |
|
|
( |
) |
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Cash flows from financing activities: |
|
|
|
|
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|
||
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 year |
|
|
|
|
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|
||
Cash and cash equivalents at end of year |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
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|
||
Supplemental disclosure of cash flows information: |
|
|
|
|
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|
||
Income taxes paid |
|
$ |
|
|
$ |
|
||
Noncash exercise of employee stock options |
|
$ |
|
|
$ |
( |
) |
|
The accompanying notes are an integral part of these financial statements.
20
NOTE 1 Reporting Entity and Significant Accounting Policies
Description of Business and Principles of Consolidation – The consolidated financial statements include the accounts of Nobility Homes, Inc. (“Nobility”), its wholly-owned subsidiaries, Prestige Home Centers, Inc. (“Prestige”), and Prestige’s wholly-owned subsidiaries, Mountain Financial, Inc., an independent insurance agency and licensed mortgage loan originator and Majestic Homes, Inc., (collectively the “Company”). The Company is engaged in the manufacture and sale of manufactured and modular homes to various dealerships, including its own retail sales centers, and manufactured housing communities throughout Florida. The Company has a manufacturing plant in operation that is located in Ocala, Florida. At November 4, 2023, Prestige operated
All intercompany accounts and transactions have been eliminated in consolidation. The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP).
Use of Estimates – The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying disclosures. These estimates and assumptions are based upon management’s best knowledge of current events and actions that the Company may take in the future. The Company is subject to uncertainties such as the impact of future events, economic, environmental and political factors and changes in the Company’s business environment; therefore, actual results could differ from these estimates. Accordingly, the accounting estimates used in the preparation of the Company’s consolidated financial statements will change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes. Changes in estimates are made when circumstances warrant. Such changes in estimates and refinements in estimation methodologies are reflected in the reported financial condition and results of operations; if material, the effects of changes in estimates are disclosed in the notes to the consolidated financial statements. Significant estimates and assumptions by management affect: valuation of inventory homes, the allowance for doubtful accounts, the carrying value of long-lived assets, the provision for income taxes and related deferred tax accounts, certain accrued expenses and contingencies, warranty reserve and stock-based compensation.
Fiscal Year – The Company’s fiscal year ends on the first Saturday on or after October 31. The year ended November 4, 2023 (fiscal year 2023) consisted of a fifty-two-week period and the year ended November 5, 2022 (fiscal year 2022) consisted of a fifty-two-week period.
Revenue Recognition – The Company’s revenue comes substantially from the sale of manufactured housing, modular housing and park models, along with freight billed to customers, parts sold and aftermarket services.
The Company recognizes revenue following the comprehensive framework of Financial Accounting Standards Board ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (ASU 2014-09), which established a methodology for determining how much revenue to recognize and when it should be recognized through application of the following five-step approach:
The Company recognizes revenue from its retail sales of new manufactured homes upon the occurrence of the following:
21
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 set up 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 4, 2023 and November 5, 2022.
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.
Revenues by Products and Services – Revenues by net sales from manufactured housing, pre-owned homes, and insurance agent commissions for the years ended November 4, 2023 and November 5, 2022 are as follows:
|
|
2023 |
|
|
2022 |
|
||
Manufactured housing |
|
$ |
|
|
$ |
|
||
Pre-owned homes |
|
|
|
|
|
|
||
Insurance agent commissions |
|
|
|
|
|
|
||
Total net sales |
|
$ |
|
|
$ |
|
||
Cash and Cash Equivalents – The Company considers all money market accounts and highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.
Certificates of Deposit – Certificates of deposits are recorded at cost plus accrued interest.
Accounts Receivable – Accounts receivable are stated at net realizable value. An allowance for doubtful accounts is provided based on prior collection experiences and management’s analysis of specific accounts. At November 4, 2023 or November 5, 2022, in the opinion of management, no material accounts were considered uncollectible and, accordingly, no allowance was deemed necessary.
Accounts receivable fluctuate due to the number of homes sold to independent dealers. The Company recognizes revenues from its independent dealers upon receiving wholesale floor plan financing or establishing retail credit approval for terms, shipping of the home, and transferring title and risk of loss to the independent dealer.
Investments – The Company’s investments consist of equity securities of a public company. Investments with maturities of less than one year are classified as short-term investments. The Company’s equity investment in a public company is classified as “available-for-sale” and carried at fair value. Upon the Company’s adoption of ASU 2016-01, unrealized gains and losses on these available-for-sale securities are reflected in the statement of income and comprehensive income.
Inventories – New home inventory is carried at a lower of cost or net realizable value. Capitalized manufacturing costs on retail manufactured homes built by the company are valued at manufacturing cost, including materials, labor, and manufacturing overhead, or net purchase price if acquired from unaffiliated third parties. 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. 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.
22
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 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 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 inventory.
Inventory held at consignment locations by affiliated entities is included in the Company’s inventory on the Company’s consolidated balance sheets. The Company had
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.
See Note 6 “Inventories” to the Company’s financial statement included herein.
Property, Plant and Equipment – Property, plant and equipment are stated at cost and depreciated over their estimated useful lives using the straight-line method. Routine maintenance and repairs are charged to expense when incurred. Major replacements and improvements are capitalized. Gains or losses are credited or charged to earnings upon disposition.
Investment in Majestic 21 – Majestic 21 was formed in 1997 as a joint venture with our joint venture partner, an unrelated entity, 21st Mortgage Corporation (“21st 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 21st 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 21st 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” to the Company’s financial statement included herein.
Impairment of Long-Lived Assets – In the event that facts and circumstances indicate that the carrying value of a long-lived asset may be impaired, an evaluation of recoverability is performed by comparing the estimated future undiscounted cash flows associated with the asset to the asset’s carrying amount to determine if a write-down is required. If such evaluations indicate that the future undiscounted cash flows of certain long-lived assets are not sufficient to recover the carrying value of such assets, the assets are adjusted to their fair values.
Customer Deposits – A retail customer is required to make a down payment ranging from $
23
Company Owned Life Insurance – The Company has purchased life insurance policies for a key executive. Company owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.
Warranty Costs – The Company provides a warranty as the manufactured homes are sold.
|
|
2023 |
|
|
2022 |
|
||
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 (
The Company tracks the warranty claims per home. Based on the history of the warranty claims, the Company has determined that a majority of warranty claims usually occur within the first three months after the home is sold. The Company determines its warranty accrual using the last three months of home sales. Accrued warranty costs are included in accrued expenses in the accompanying consolidated balance sheets.
Accrued Home Setup Costs – Accrued home setup costs represent amounts due to vendors and/or independent contractors for various items related to the actual setup of the home on the retail home buyers’ site. These costs include appliances, air conditioners, electrical/plumbing hook-ups, furniture, insurance, impact/permit fees, land/home fees, extended service plan, freight, skirting, steps, well, septic tanks and other setup costs and are included in accrued expenses in the accompanying consolidated balance sheets.
Stock-Based Compensation – The Company has a stock incentive plan (the “Plan”) which authorizes the issuance of options to purchase common stock. Stock-based compensation is measured at the grant date based on the fair value of the award and is recognized as an expense over the period during which an employee is required to provide service in exchange for the award (usually the vesting period).
Rebate Program – The Company has a rebate program for some dealers based upon the number and type of home purchased, which pays rebates based upon sales volume to the dealers. Volume rebates are recorded as a reduction of sales in the accompanying consolidated financial statements. The rebate liability is calculated and recognized as eligible homes are sold based upon factors surrounding the activity and prior experience of specific dealers and is included in accrued expenses in the accompanying consolidated balance sheets. There were
Advertising – Advertising for Prestige retail sales centers consists primarily of internet, newspaper, radio and television advertising. All costs are expensed as incurred. Advertising expenses amounted to approximately $
Income Taxes – The Company accounts for income taxes utilizing the asset and liability method. This approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Net Income per Share – These financial statements include “basic” and “diluted” net income per share information for all periods presented. The basic net income per share is calculated by dividing net income by the weighted-average number of shares outstanding. The diluted net income per share is calculated by dividing net income by the weighted-average number of shares outstanding, adjusted for dilutive common shares.
24
Shipping and Handling Costs – Net sales include the revenue related to shipping and handling charges billed to customers. The related costs associated with shipping and handling is included as a component of cost of goods sold.
Segments – The Company’s chief operating decision maker is its Chief Executive Officer, who reviews financial information on a company-wide or consolidated basis. Accordingly, the Company accounts for its operations in accordance with FASB ASC No. 280, “Segment Reporting.” No segment disclosures have been made as the Company considers its business activities as a single segment.
Major Customers –There were no customers that accounted for more than
Concentration of Credit Risk – The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, short-term and long-term investments and accounts receivable. At times, the Company’s deposits may exceed federally insured limits. However, the Company has not experienced any losses in such accounts and management believes the Company is not exposed to any significant credit risk in these accounts. The majority of the Company’s sales are credit sales which are made primarily to customers whose ability to pay is dependent upon the industry economics prevailing in the areas where they operate; however, concentrations of credit risk with respect to accounts receivables is limited due to generally short payment terms. The Company also performs ongoing credit evaluations of its customers to help further reduce credit risk. The Company maintains reserves for potential credit losses when deemed necessary and such losses have historically been within management’s expectations.
Concentration of Retail Financing Sources –There are two national lenders that service the manufactured housing industry with several others who specialize in government insured loans (Fannie, Freddie, FHA, VA, etc.). With only a few lenders dedicated to our industry, the loss of any of them could adversely affect our retail sales.
Recently Issued Accounting Standards – In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016 - 13, "Financial Instruments - Credit Losses," which introduced new guidance for an approach based on expected losses to estimate credit losses on certain types of financial instruments. This standard will be effective for the Company beginning November 5, 2023. The Company has evaluated this guidance and does not expect a material impact on our financial statements at adoption.
NOTE 2 Investments
The following is a summary of short-term investments (available for sale):
|
|
November 4, 2023 |
|
|||||||||||||
|
|
Amortized Cost |
|
|
Gross |
|
|
Gross |
|
|
Estimated Fair |
|
||||
Equity securities in a public company |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
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|
||||
|
|
November 5, 2022 |
|
|||||||||||||
|
|
Amortized Cost |
|
|
Gross |
|
|
Gross |
|
|
Estimated Fair |
|
||||
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 Instruments
The carrying amount of cash and cash equivalents, accounts and notes receivable, accounts payable and accrued expenses approximate fair value because of the short maturity of those instruments.
The Company accounts for the fair value of financial instruments in accordance with FASB ASC No. 820, “Fair Value Measurements” (ASC 820).
25
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:
|
|
November 4, 2023 |
|
|||||||||
|
|
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 4 Related Party Transactions
Affiliated Entities
TLT, Inc. – Our President and Chairman of the Board of Directors (“President”) and the Executive Vice President each own
Repurchase of Common Stock – In June 2023, the Company repurchased
NOTE 5 Other Investments
Investment in Joint Venture – Majestic 21 – During fiscal 1997, the Company contributed $
While Majestic 21 has been deemed to be a variable interest entity, the Company only holds a
See Note 14 “Commitments and Contingent Liabilities” to the Company’s financial statement included herein.
We received
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.
26
NOTE 6 Inventories
A breakdown of the elements of inventory at November 4, 2023 and November 5, 2022 is as follows:
|
|
November 4, 2023 |
|
|
November 5, 2022 |
|
||
Raw materials |
|
$ |
|
|
$ |
|
||
Work-in-process |
|
|
|
|
|
|
||
Inventory consigned to affiliated entities |
|
|
|
|
|
|
||
Finished homes - Nobility manufactured |
|
|
|
|
|
|
||
Finished homes - Other manufactures |
|
|
|
|
|
|
||
Pre-owned homes |
|
|
|
|
|
|
||
Model home furniture |
|
|
|
|
|
|
||
Inventories |
|
$ |
|
|
$ |
|
||
27
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 4, 2023 |
|
|
November 5, 2022 |
|
||
Land |
|
- |
|
$ |
|
|
$ |
|
||
Land improvements |
|
|
|
|
|
|
|
|||
Buildings and improvements |
|
|
|
|
|
|
|
|||
Machinery and equipment |
|
|
|
|
|
|
|
|||
Furniture and fixtures |
|
|
|
|
|
|
|
|||
Construction in progress |
|
- |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
||
Less accumulated depreciation |
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
$ |
|
|
$ |
|
||
Depreciation expenses during the years ended November 4, 2023 and November 5, 2022 totaled $
NOTE 8 Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities are comprised of the following:
|
|
November 4, 2023 |
|
|
November 5, 2022 |
|
||
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 $
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 “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
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 the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities. The estimate of the Company’s tax liabilities relating to uncertain tax positions requires management to assess uncertainties and to make judgments about the application of complex tax laws and regulations. We recognize interest and penalties relating to income taxes as components of income tax expense. At November 4, 2023 and November
28
5, 2022, management has determined there are no material uncertain tax positions, and does not anticipate any significant change within twelve months of this reporting date.
The provision for income taxes for the years ended consists of the following:
|
|
November 4, 2023 |
|
|
November 5, 2022 |
|
||
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 4, 2023 |
|
|
November 5, 2022 |
|
||
Provision—federal statutory tax rate |
|
$ |
|
|
$ |
|
||
Increase (decrease) resulting from: |
|
|
|
|
|
|
||
State taxes, net of federal tax benefit |
|
|
|
|
|
|
||
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 4, 2023 |
|
|
November 5, 2022 |
|
||
Deferred tax assets: |
|
|
|
|
|
|
||
Allowance for doubtful accounts |
|
$ |
|
|
$ |
|
||
Prepaid Expenses . |
|
|
|
|
|
|
||
Accrued expenses |
|
|
|
|
|
|
||
Other assets |
|
|
|
|
|
|
||
Stock-based compensation |
|
|
|
|
|
|
||
Total deferred tax assets |
|
|
|
|
|
|
||
Deferred tax liabilities: |
|
|
|
|
|
|
||
Depreciation |
|
|
( |
) |
|
|
( |
) |
Carrying value of investments |
|
|
( |
) |
|
|
( |
) |
Amortization |
|
|
( |
) |
|
|
( |
) |
Prepaid expenses |
|
|
( |
) |
|
|
( |
) |
Net deferred tax assets (liabilities) |
|
$ |
|
|
$ |
|
||
These amounts are included in the accompanying consolidated balance sheets under the following captions:
|
|
November 4, 2023 |
|
|
November 5, 2022 |
|
||
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) |
|
$ |
|
|
$ |
|
||
29
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 2023 and 2022, 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
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 non-employee directors. A total of
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 a 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 2023 and 2022, the Company recognized compensation costs related to the vesting of stock options of approximately $
A summary of information with respect to options granted is as follows:
|
|
Number of Shares |
|
|
|
Stock Option Price Range |
|
|
Weighted Average Exercise Price |
|
|
Weighted Average Grant Date Fair Value |
|
||||
Outstanding at November 6, 2021 |
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||
Canceled |
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||
Outstanding at November 5, 2022 |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
||||
Exercised |
|
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
Canceled |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Outstanding at November 4, 2023 |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The aggregate intrinsic value of exercisable Company options was $
30
The following table summarizes information about the outstanding stock options at November 4, 2023:
Options Outstanding |
|
|
Options Exercisable |
|
||||||||||||||||||
Exercise Price |
|
|
Shares Outstanding |
|
|
Weighted Average |
|
|
Weighted Average Exercise Price |
|
|
Number Exercisable |
|
|
Weighted |
|
||||||
$ |
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||||
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||
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 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
NOTE 14 Commitments and Contingent Liabilities
Operating Leases – The Company leases the property for several Prestige retail sales centers from various unrelated entities under operating lease agreements expiring through October 2024. The Company also leases certain equipment under unrelated operating leases.
Other Contingent Liabilities – Certain claims and suits arising in the ordinary course of business have been filed or are pending against the Company. In the opinion of management, the ultimate outcome of these matters will not have a material adverse effect on the Company’s financial position, results of operations or cash flows. Accordingly, the Company has an accrual provision of $
NOTE 15 Subsequence Events
The Company received approximately $
31
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 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
32
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 2024 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 and Directors
Terry E. Trexler (84) |
Chairman of the Board and President of Nobility since 1967; Mr. Trexler is also President of TLT, Inc. |
|
|
Thomas W. Trexler (60) |
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.
|
Robert P. Saltsman (71) |
Director since 1988. Mr. Saltsman is an attorney in private practice since 1983. |
Arthur L. Havener, Jr. (57) |
Director since 2019. Mr. Havener is and has been since 2007 principal of Stampede Capital LLC, a real estate advisory and investment firm. |
Jean Etheredge (78) |
Secretary since 1967. |
|
|
Lynn J. Cramer, Jr. (78) |
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 the 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 7th 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 2024 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 2024 annual meeting of shareholders.
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 4, 2023 (see Note 12 to the Company’s financial statement included herein).
33
|
|
Equity Compensation Plan Information |
|
|
|
|
||||||
|
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights |
|
|
Weighted-average exercise price of outstanding options, warrants and rights |
|
|
Number of securities remaining available for issuance under equity compensation plans (excluding securities reflected in column (a)) |
|
|||
|
|
(a) |
|
|
(b) |
|
|
(c) |
|
|||
Equity compensation plans approved by security holders |
|
|
74,258 |
|
|
$ |
26.46 |
|
|
225,742 |
|
|
Equity compensation plans not approved by security holders |
|
N/A |
|
|
N/A |
|
|
N/A |
|
|||
Total |
|
|
74,258 |
|
|
$ |
26.46 |
|
|
|
225,742 |
|
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 2024 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 2024 annual meeting of shareholders.
34
PART IV
Item 15. Exhibits and Financial Statement Schedules
Report of Hancock Askew & Co., LLP
Report of Daszkal Bolton LLP
Consolidated Balance Sheets at November 4, 2023 and November 5, 2022
Consolidated Statements of Income for the Years Ended November 4, 2023 and November 5, 2022
Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended November 4, 2023 and November 5, 2022
Consolidated Statements of Cash Flows for the Years Ended November , 2022 and November 6, 2021
Notes to Consolidated Financial Statements
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:
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.
35
23.1 Consent of Hancock Askew & Co., LLP
23.2 Consent of Daszkal Bolton LLP.
32.(a) Written Statement of Chief Executive Officer pursuant to 18 U.S.C. §1350.
Item 16. Form 10-K Summary
None.
36
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: May 20, 2024 |
|
|
By: /s/ Terry E. Trexler |
|
|
|
Terry E. Trexler, Chairman, |
|
|
|
President and Chief Executive Officer (Principal Executive Officer) |
|
|
|
|
DATE: May 20, 2024 |
|
|
By: /s/ Thomas W. Trexler |
|
|
|
Thomas W. Trexler, Executive Vice President |
|
|
|
and Chief Financial Officer (Principal Financial Officer) |
|
|
|
|
DATE: May 20, 2024 |
|
|
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: May 20, 2024 |
|
|
By: /s/ Terry E. Trexler |
|
|
|
Terry E. Trexler, Director |
|
|
|
|
DATE: May 20, 2024 |
|
|
By: /s/ Thomas W. Trexler |
|
|
|
Thomas W. Trexler, Director |
|
|
|
|
DATE: May 20, 2024 |
|
|
By: /s/ Robert P. Saltsman |
|
|
|
Robert P. Saltsman, Director |
|
|
|
|
DATE: May 20, 2024 |
|
|
By: /s/ Arthur L. Havener |
|
|
|
Arthur L. Havener, Director |
37
Exhibit 4.1
DESCRIPTION OF THE REGISTRANT’S SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934
As of November 4, 2023, Nobility Homes, Inc. (“we” or “our”) had one class of securities, common stock, par value $0.10 per share (“Common Stock”), registered under Section 12 of the Securities Exchange Act of 1934, as amended. The following description of our Common Stock is a summary and is subject to, and is qualified in its entirety by reference to, the provisions of our Articles of Incorporation and our Bylaws, copies of which are attached as Exhibits 3. (a) and 3. (b), respectively, to our Annual Report on Form 10-K for the year ended November 4, 2023, of which Exhibit 4.1 is a part.
Our authorized capital stock consists of 10,000,000 shares of Common Stock, $.10 par value per share, and 500,000 shares of preferred stock, $0.10 par value per share. As of November 4, 2023, 3,269,075 shares of Common Stock were issued and outstanding and no shares of preferred stock were issued and outstanding.
Our Common Stock is traded on the OTCQX market under the symbol “NOBH.” Holders of our Common Stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders and do not have cumulative voting rights. Holders of Common Stock are entitled to receive at least such dividends, if any, as may be declared by the board of directors out of funds legally available therefore, subject to a preferential dividend right of outstanding preferred stock. Upon the liquidation, dissolution or our winding up, the holders of Common Stock are entitled to receive ratably our net assets available after the payment of all debts and other liabilities and subject to the prior rights of any outstanding preferred stock. The rights, preferences and privileges of holders of Common Stock are subject to and may be adversely affected by the rights of the holders of any series of preferred stock that we may designate and issue in the future.
Exhibit 21.1
Subsidiaries of Registrant
Prestige Home Centers |
|
Florida |
Mountain Financial, Inc. (a subsidiary of Prestige Home Centers, Inc.) |
|
Florida |
Majestic Homes, Inc. (a subsidiary of Prestige Home Centers, Inc.) |
|
Florida |
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
Nobility Homes, Inc.
Ocala, Florida
We hereby consent to the incorporation by reference in Registration Statements on Form S-8 (No. 333-102919 and No. 333-193608) of Nobility Homes, Inc., of our report dated May 20, 2024, relating to the consolidated financial statements of Nobility Homes, Inc. as of and for the year ended November 04, 2023 which appear in this Form 10-K.
/s/ Hancock Askew & Co., LLP
Jacksonville, Florida
May 20, 2024
Exhibit 23.2
Consent of Independent Registered Public Accounting Firm
Nobility Homes, Inc.
Ocala, Florida
We consent to the incorporation by reference in the following Registration Statements:
(1) Registration Statement (Form S-8 No. 333-193608) pertaining to the 2011 Stock Incentive Plan of Nobility Homes, Inc., and
(2) Registration Statement (Form S-8 No. 333-102919) pertaining to the (401k) Profit Sharing Plan of Nobility Homes, Inc.;
of our report dated February 1, 2023, with respect to the consolidated financial statements of Nobility Homes, Inc. at and for the year ended November 5, 2022, which are included in this Annual Report (Form 10-K) for the year ended November 4, 2023.
/s/ Daszkal Bolton LLP
Jupiter, Florida
May 20, 2024
Exhibit 31(a)
Certifications of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-14(a)
or 15d-14(a) under the Securities Exchange Act of 1934
I, Terry E. Trexler, certify that:
DATE: May 20, 2024 |
|
By: /s/ Terry E. Trexler |
|
|
Terry E. Trexler, Chairman, |
|
|
President and Chief Executive Officer |
|
|
(Principal Executive Officer) |
Exhibit 31(b)
Certifications of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-14(a)
or 15d-14(a) under the Securities Exchange Act of 1934
I, Thomas W. Trexler, certify that:
DATE: May 20, 2024 |
|
By: /s/ Thomas W. Trexler |
|
|
Thomas W. Trexler, Executive Vice President |
|
|
and Chief Financial Officer |
|
|
(Principal Financial Officer) |
Exhibit 32(a)
Written Statement of the Chief Executive Officer
Pursuant to 18 U.S.C. §1350
Solely for the purposes of complying with 18 U.S.C. Section 1350, I, the undersigned Chairman and Chief Executive Officer of Nobility Homes, Inc. (the “Company”), hereby certify that:
DATE: May 20, 2024 |
|
By: /s/ Terry E. Trexler |
|
|
Terry E. Trexler, Chairman, |
|
|
President and Chief Executive Officer |
Exhibit 32(b)
Written Statement of the Chief Financial Officer
Pursuant to 18 U.S.C. §1350
Solely for the purposes of complying with 18 U.S.C. Section 1350, I, the undersigned Executive Vice President and Chief Financial Officer of Nobility Homes, Inc. (the “Company”), hereby certify that:
DATE: May 20, 2024 |
|
By: /s/ Thomas W. Trexler |
|
|
Thomas W. Trexler, Executive Vice President |
|
|
and Chief Financial Officer |