NOBILITY HOMES INC - Quarter Report: 2021 July (Form 10-Q)

Large accelerated filer

Accelerated filer

Non-accelerated
filer

Smaller reporting company

Emerging growth company

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-Q

Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

For the quarterly period ended July 31, 2021

Commission File number

000-06506

NOBILITY HOMES, INC.

(Exact name of registrant as specified in its charter)


Florida		59-1166102
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3741 S.W. 7th Street Ocala, Florida		34474
(Address of principal executive offices)		(Zip Code)

(352)

732-5157

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule

12b-2

of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐.

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act). Yes ☐ No ☒.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.


		Shares Outstanding on
Title of Class		September 10, 2021
Common Stock		3,532,100

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NOBILITY HOMES, INC.

INDEX


		Page Number
PART I.	Financial Information

Item 1.	Financial Statements (Unaudited)		3

	Condensed Consolidated Balance Sheets as of July 31, 2021 (Unaudited) and October 31, 2020		3

	Condensed Consolidated Statements of Income for the three and nine months ended July 31, 2021 (Unaudited) and August 1, 2020 (Unaudited)		4

	Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended July 31, 2021 (Unaudited) and August 1, 2020 (Unaudited)		5

	Condensed Consolidated Statements of Cash Flows for the nine months ended July 31, 2021 (Unaudited) and August 1, 2020 (Unaudited)		6

	Notes to Condensed Consolidated Financial Statements (Unaudited)		7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		12

Item 4.	Controls and Procedures		16

PART II.	Other Information

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		17

Item 6.	Exhibits		17

Signatures			18

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NOBILITY HOMES, INC.

Condensed Consolidated Balance Sheets


	July 31, 2021			October 31, 2020
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	33,720,078		$	30,305,902
Certificates of deposit		2,090,910			4,602,307
Short-term investments		562,270			358,960
Accounts receivable—trade		1,134,675			790,046
Note receivable		41,636			35,997
Mortgage notes receivable		22,217			20,162
Income taxes receivable		81,262			105,676
Inventories		9,428,923			9,294,677
Pre-owned homes, net		678,303			441,937
Prepaid expenses and other current assets		1,370,339			1,014,849

Total current assets		49,130,613			46,970,513
Property, plant and equipment, net		6,916,778			5,142,714
Pre-owned homes, net		716,582			1,077,240
Note receivable, less current portion		44,595			6,573
Mortgage notes receivable, less current portion		223,762			227,509
Mobile home park note receivable		72,731			—
Other investments		1,775,323			1,729,364
Deferred income taxes		0			3,598
Operating lease right of use assets		684,142			715,368
Cash surrender value of life insurance		3,929,552			3,795,902
Other assets		156,287			156,287

Total assets	$	63,650,365		$	59,825,068

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	818,230		$	928,095
Accrued compensation		441,760			670,520
Accrued expenses and other current liabilities		1,427,862			1,383,833
Operating lease obligation		33,039			24,192
Customer deposits		12,350,225			5,098,633

Total current liabilities		15,071,116			8,105,273

Deferred income taxes		86,413			—
Operating lease obligation, less current portion		752,300			778,519

Total liabilities		15,909,829			8,883,792

Commitments and contingencies
Stockholders’ equity:
Preferred stock, $.10 par value, 500,000 shares authorized; none issued and outstanding		—			—
Common stock, $.10 par value, 10,000,000 shares authorized; 5,364,907 shares issued; 3,532,100 and 3,631,196 outstanding, respectively		536,491			536,491
Additional paid in capital		10,749,843			10,694,554
Retained earnings		58,185,400			57,976,051
Less treasury stock at cost, 1,832,807 shares in 2021 and 1,733,711 shares in 2020		(21,731,198	)		(18,265,820	)

Total stockholders’ equity		47,740,536			50,941,276

Total liabilities and stockholders’ equity	$	63,650,365		$	59,825,068

The accompanying notes are an integral part of these condensed consolidated financial statements

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NOBILITY HOMES, INC.

Condensed Consolidated Statements of Income

(Unaudited)


	Three Months Ended						Nine Months Ended
	July 31,			August 1,			July 31,			August 1,
	2021			2020			2021			2020
Net sales	$	11,778,120		$	8,800,410		$	35,592,531		$	28,446,764
Cost of sales		(9,265,376	)		(6,361,500	)		(26,969,655	)		(19,980,510	)

Gross profit		2,512,744			2,438,910			8,622,876			8,466,254
Selling, general and administrative expenses		(1,320,456	)		(1,107,850	)		(4,144,350	)		(3,586,622	)

Operating income		1,192,288			1,331,060			4,478,526			4,879,632

Other income (loss):
Interest income		62,491			53,209			145,621			239,365
Undistributed earnings in joint venture - Majestic 21		20,202			20,855			45,959			61,125
Proceeds received under escrow arrangement		75,156			64,053			121,024			336,447
(Decrease) increase market value of equity investment		(449	)		21,475			203,310			(159,051	)
Gain on sale of assets		—			32,041			—			32,041
Miscellaneous		48,169			12,910			73,434			32,504

Total other income		205,569			204,543			589,348			542,431

Income before provision for income taxes		1,397,857			1,535,603			5,067,874			5,422,063
Income tax expense		(347,111	)		(375,465	)		(1,226,425	)		(1,311,780	)

Net income	$	1,050,746		$	1,160,138		$	3,841,449		$	4,110,283

Weighted average number of shares outstanding:
Basic		3,599,133			3,631,089			3,621,084			3,641,048
Diluted		3,613,187			3,632,420			3,630,216			3,642,397
Net income per share:
Basic	$	0.29		$	0.32		$	1.06		$	1.13
Diluted	$	0.29		$	0.32		$	1.06		$	1.13

The accompanying notes are an integral part of these condensed consolidated financial statements

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NOBILITY HOMES, INC.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the nine months ended July 31, 2021 and August 1, 2020

(Unaudited)


											Accumulated
											Other
	Common			Common		Additional		Retained			Comprehensive			Treasury
	Stock Shares			Stock		Paid-in-Capital		Earnings			Income			Stock			Total
Balance at October 31, 2020		3,631,196		$	536,491	$	10,694,554	$	57,976,051		$	—		$	(18,265,820	)	$	50,941,276
Stock-based compensation		—			—		20,521		—			—			—			20,521
Exercise of employee stock
options		1,250			—		1,950		—			—			13,175			15,125
Net income		—			—		—		1,065,765			—			—			1,065,765

Balance at January 30, 2021		3,632,446			536,491		10,717,025		59,041,816			—			(18,252,645	)		52,042,687
Cash dividend		—			—		—		(3,632,100	)		—			—			(3,632,100	)
Purchase of treasury stock		(346	)		—		—		—			—			(10,553	)		(10,553	)
Stock-based compensation		—			—		16,409		—			—			—			16,409
Net income		—			—		—		1,724,938			—			—			1,724,938

Balance at May 1, 2021		3,632,100			536,491		10,733,434		57,134,654			—			(18,263,198	)		50,141,381
Purchase of treasury stock		(100,000	)		—		—		—			—			(3,468,000	)		(3,468,000	)
Stock-based compensation		—			—		16,409		—			—			—			16,409
Net income		—			—		—		1,050,746			—			—			1,050,746

Balance at July 31, 2021		3,532,100		$	536,491	$	10,749,843	$	58,185,400		$	—		$	(21,731,198	)	$	47,740,536

Balance at November 2, 2019		3,664,070		$	536,491	$	10,687,662	$	55,298,750		$	389,164		$	(17,445,752	)	$	49,466,315
Adoption of ASU 2016-01		—			—		—		389,164			(389,164	)		—			—
Adoption of ASU 2016-02		—			—		—		(64,591	)		—			—			(64,591	)
Balance at November 2, 2019		—			—		—		—			—			—			—

as adjusted		3,664,070			536,491		10,687,662		55,623,323			—			(17,445,752	)		49,401,724
Purchase of treasury stock		(14,400	)		—		—		—			—			(345,600	)		(345,600	)
Stock-based compensation		—			—		906		—			—			—			906
Net income		—			—		—		1,400,141			—			—			1,400,141

Balance at February 1, 2020		3,649,670			536,491		10,688,568		57,023,464			—			(17,791,352	)		50,457,171
Cash dividend		—			—		—		(3,630,970	)		—			—			(3,630,970	)
Purchase of treasury stock		(18,700	)		—		—		—			—			(476,850	)		(476,850	)
Stock-based compensation		—			—		906		—			—			—			906
Net income		—			—		—		1,550,004			—			—			1,550,004

Balance at May 4, 2020		3,630,970			536,491		10,689,474		54,942,498			—			(18,268,202	)		47,900,261
Stock-based compensation		226			—		4,174		—			—			2,382			6,556
Net income		—			—		—		1,160,138			—			—			1,160,138

Balance at August 1, 2020		3,631,196		$	536,491	$	10,693,648	$	56,102,636		$	—		$	(18,265,820	)	$	49,066,955

The accompanying notes are an integral part of these condensed consolidated financial statements

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NOBILITY HOMES, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Nine Months Ended
	July 31, 2021			August 1, 2020
Cash flows from operating activities:
Net income	$	3,841,449		$	4,110,283
Adjustments to reconcile net income to net cash provide by operating activities:
Depreciation		142,224			118,179
Deferred income taxes		90,011			60,055
Undistributed earnings in joint venture - Majestic 21		(45,959	)		(61,125	)
Gain on disposal of property, plant and equipment		—			(32,041	)
(Increase) decrease in fair market value of equity investments		(203,310	)		159,051
Stock-based compensation		53,340			8,368
Amortization of operating lease right of use assets		31,226			26,862
Decrease (increase) in:
Accounts receivable - trade		(344,629	)		638,480
Inventories		(134,246	)		(20,842	)
Pre-owned homes		124,292			(385,597	)
Prepaid expenses and other current assets		(355,490	)		155,518
Interest receivable		(16,223	)		(130,097	)
Income tax receivables		24,414			—
(Decrease) increase in:
Accounts payable		(109,865	)		(457,884	)
Accrued compensation		(228,760	)		(296,735	)
Accrued expenses and other current liabilities		44,028			(883,146	)
Income taxes payable		—			(2,016,132	)
Customer deposits		7,251,592			69,067

Net cash provided by operating activities		10,164,094			1,062,264

Cash flows from investing activities:
Purchase of property, plant and equipment		(1,916,288	)		(270,365	)
Purchase of certificates of deposit		—			(20,000	)
Proceeds from certificates of deposit		2,496,000			2,024,000
Proceeds from disposal of property, plant and equipment		—			33,139
Collections on interest receivable		31,620			87,358
Collections on mortgage notes receivable		1,692			1,596
(Issuance of) collections o n equipment note receivable		(43,661	)		66,218
Issuance of mobile home park note receivable		(72,731	)		—
Increase in cash surrender value of life insurance		(133,650	)		(144,000	)

Net cash provided by investing activities		362,982			1,777,946

Cash flows from financing activities:
Payment of cash dividend		(3,632,100	)		(3,630,970	)
Proceeds from exercise of employee stock option		15,125			—
Purchase of treasury stock		(3,478,553	)		(822,450	)
Reduction of operating lease obligation		(17,372	)		(9,507	)

Net cash used in financing activities		(7,112,900	)		(4,462,927	)

Increase (decrease) in cash and cash equivalents		3,414,176			(1,622,717	)
Cash and cash equivalents at beginning of year		30,305,902			22,533,965

Cash and cash equivalents at end of period	$	33,720,078		$	20,911,248

Supplemental disclosure of cash flows information:
Income taxes paid	$	1,112,000		$	3,368,000

The accompanying notes are an integral part of these condensed consolidated financial statements

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Nobility Homes, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1

Basis of Presentation and Accounting Policies

The accompanying unaudited condensed consolidated financial statements for the three and nine months ended July 31, 2021 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission for Form

10-Q.

Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.

The unaudited financial information included in this report includes all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary to reflect a fair statement of the results for the interim periods. The results of operations for the three and nine months ended July 31, 2021 are not necessarily indicative of the results of the full fiscal year.

The condensed consolidated financial statements included in this report should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on

Form 10-K

for the fiscal year ended October 31, 2020.

Note 2

Inventories

New home inventory is carried at the lower of cost or net realizable value. The cost of finished home inventories determined on the specific identification method is removed from inventories and recorded as a component of cost of sales at the time revenue is recognized. In addition, an allocation of depreciation and amortization is included in cost of goods sold. Under the specific identification method, if finished home inventory can be sold for a profit there is no basis to write down the inventory below the lower of cost or net realizable value.

The Company acquired certain repossessed

pre-owned

inventory (Buy Back Inventory) in 2011 as part of an Amendment of the Finance Revenue Sharing Agreement with 21

Mortgage Corporation. This inventory is valued at the Company’s cost to acquire determined on the specific identification method, plus refurbishment costs (any item on the home that needs to be repaired or replaced) incurred to date to bring the inventory to a more saleable state. The Buy Back Inventory amount is reduced where necessary on a unit specific basis by a valuation reserve which management believes results in inventory being valued at market.

Other

pre-owned

homes are acquired (Repossessions Inventory) as a convenience to the Company’s joint venture partner, 21st Mortgage Corporation. This inventory has been repossessed by 21

Mortgage Corporation or through mortgage foreclosure. The Company acquired this inventory at the amount of the uncollected balance of the financing at the time of the foreclosure/repossessions by 21st Mortgage Corporation. The Company records this inventory at cost determined on the specific identification method. All of the refurbishment costs are paid by 21

Mortgage Corporation. This arrangement assists 21

Mortgage Corporation with liquidation of their repossessed inventory. The timing of these repurchases by the Company is unpredictable as it is based on the repossessions 21

Mortgage Corporation incurs in the portfolio. When the home is sold, the Company retains the cost of the home, an interest factor on the cost of the home and a sales commission, from the sales proceeds. Any additional proceeds are paid to 21

Mortgage. Any shortfall from the proceeds to cover these amounts is paid by 21

Mortgage to the Company. As the Company has no risk of loss on the sale, there is no valuation allowance necessary for this inventory.

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Inventory held at consignment locations by affiliated entities is included in the Company’s inventory on the Company’s condensed consolidated balance sheets. Consigned inventory was $382,279 and $1,277,681 as of July 31, 2021 and October 31, 2020, respectively.

Pre-owned

homes are also taken as

trade-ins

on new home sales

(Trade-in

Inventory). This inventory is recorded at estimated actual wholesale value, which is generally lower than market value, determined on the specific identification method, plus refurbishment costs incurred to date to bring the inventory to a more saleable state. The

Trade-in

Inventory amount is reduced where necessary on a unit specific basis by a valuation reserve, which management believes results in inventory being valued at market.

Other inventory costs are determined on a

first-in,

first-out

basis. A breakdown of the elements of inventory is as follows:


	July 31, 2021			October 31, 2020
Raw materials	$	1,854,317		$	1,203,282
Work-in-process		136,723			107,651
Inventory consigned to affiliated entities		382,279			1,277,681
Finished homes		6,910,596			6,543,861
Model home furniture		145,008			162,202

Inventories	$	9,428,923		$	9,294,677

Pre-owned homes	$	1,510,484		$	1,686,373
Inventory impairment reserve		(115,599	)		(167,196	)

		1,394,885			1,519,177
Less homes expected to sell in 12 months		(678,303	)		(441,937	)

Pre-owned homes, long-term	$	716,582		$	1,077,240

Note 3

Short-term Investments

The following is a summary of short-term investments (available for sale):


	July 31, 2021
	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Equity securities in a public company	$	167,930	$	394,340	$	—	$	562,270


	October 31, 2020
	Cost		Gross Unrealized Gains		Gross Unrealized Losses		Estimated Fair Value
Equity securities in a public company	$	167,930	$	191,030	$	—	$	358,960

The fair values were estimated based on quoted market prices in active markets at each respective period end.

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Note 4

Fair Value of Financial Instruments

The carrying amount of cash and cash equivalents, accounts and notes receivable, accounts payable and accrued expenses approximates fair value because of the short maturity of those instruments.

The Company accounts for the fair value of financial investments in accordance with FASB Accounting Standards Codification (ASC) No. 820 “Fair Value Measurements” (ASC 820).

ASC 820 defines fair value as the price that would be received upon the sale of an asset or paid to transfer a liability (i.e. exit price) in an orderly transaction between market participants at the measurement date. ASC 820 requires disclosures that categorize assets and liabilities measured at fair value into one of three different levels depending on the assumptions (i.e. inputs) used in the valuation. Financial assets and liabilities are classified in their entirety based on the lowest level of input significant to the fair value measurement. The ASC 820 fair value hierarchy is defined as follows:

•

Level 1 - Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities.

•

Level 2 - Valuations are based on quoted prices for similar assets or liabilities in active markets, or quoted prices in markets that are not active for which significant inputs are observable, either directly or indirectly.

•

Level 3 - Valuations are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. Inputs reflect management’s best estimate of what market participants would use in valuing the asset or liability at the measurement date.

The following tables represent the Company’s financial assets and liabilities which are carried at fair value.


	July 31, 2021
	Level 1		Level 2		Level 3
Equity securities in a public company	$	562,270	$	—	$	—


	October 31, 2020
	Level 1		Level 2		Level 3
Equity securities in a public company	$	358,960	$	—	$	—

Note 5

Net Income per Share

These financial statements include “basic” and “diluted” net income per share information for all periods presented. The basic net income per share is calculated by dividing net income by the weighted-average number of shares outstanding. The diluted net income per share is calculated by dividing net income by the weighted-average number of shares outstanding, adjusted for dilutive common shares.

Note 6

Revenues by Products and Service

The Company operates in one business segment, which is manufactured housing and ancillary services. The Company considers there to be revenue concentration risks for distribution of its products where net product revenues exceed 10% of consolidated net product revenues. The concentration of the Company’s distribution net product revenues below may have a material adverse effect on the Company’s revenues and results of operations if sales in the respective distribution channels experience difficulties.

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Revenues by net sales from manufactured housing,

pre-owned

homes and insurance agent commissions are as follows:


	Three Months Ended				Nine Months Ended
	July 31, 2021		August 1, 2020		July 31, 2021		August 1, 2020
Manufactured housing
Homes sold through Company owned sales centers	$	10,128,706	$	6,252,906	$	30,033,265	$	20,874,755
Homes sold to independent dealers		833,904		1,998,720		3,661,753		6,260,268
Homes sold through manufactured home parks		458,955		380,875		1,108,600		845,634

	$ 11,421,565		$ 8,632,501		$ 34,803,618		$ 27,980,657
Pre-owned homes		288,261		95,011		572,005		253,689
Insurance agent commissions		68,294		72,898		216,908		212,418

Total net sales	$	11,778,120	$	8,800,410	$	35,592,531	$	28,446,764

Note 7 Operating Leases

The Company leases the property for several Prestige retail sales centers from various unrelated entities under operating lease agreements expiring through December 2021. The Company also leases certain equipment under unrelated operating leases. These leases have varying renewal options. To offset expiring leases, The Company purchased the land for the Ocala South retail sales center in March 2021 for $500,000 and the Tavares retail sales center in January 2021 for $245,000.

Right of use assets are included as a

non-current

asset in the amount of $684,142,

net of amortization in the condensed consolidated Balance Sheet as of July 31, 2021.

Based on the terms of the lease agreements, all of the Company’s leases are classified as operating leases. The weighted average remaining lease term and weighted average discount rate of the operating leases is 8.40 years and 3.0%, respectively.

Minimum rental payments under operating leases are recognized on a straight-line basis over the term of the lease. Individual components of the total lease cost incurred by the Company in the amount of $136,872 for the nine months ended July 31, 2021.

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The amount of future minimum lease payments under operating leases are as follows:


	Operating Lease
Undiscounted future minimum lease payments:
2021 (3 months remaining)	$	16,106
2022		68,401
2023		74,322
2024		80,955
2025		88,388
Thereafter		458,175

Total		786,347
Amount representing imputed interest		(1,008	)

Total operating lease liability		785,339
Current portion of operating lease liability		(33,039	)

Operating lease liability, non-current	$	752,300

Note 8 Stockholders’ Equity and Related Party Transaction

During the nine months ended July 31, 2021, the Company repurchased 100,346 shares of its common stock for per share prices ranging from $30.50—$34.68 for an aggregate total of $3,478,553. Of these repurchased shares, 100,000 were from a related party for which the Company paid $34.68 per share.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

Total revenues in the third quarter of 2021 increased 34% to $11,778,120 compared to $8,800,410 in the third quarter of 2020. Total net sales for the first nine months of 2021 increased 25% to $35,592,531 compared to $28,446,764 for the first nine months of 2020. The Company reported net income of $1,050,746 in the third quarter of 2021, compared to a net income of $1,160,138 during the third quarter of 2020. Net income for the first nine months of 2021 was $3,841,449 compared to a net income of $4,110,283 for the first nine months of 2020. According to the Florida Manufactured Housing Association, shipments for the industry in Florida for the period from November 2020 through July 2021 were up approximately 11% from the same period last year. The lack of lenders in our industry, still adversely affects our results by limiting many affordable manufactured housing buyers from purchasing homes. During third quarter of 2021, our production of homes was impacted due to the challenges in hiring additional factory workers and the unpredictable absenteeism of the

COVID-19

quarantine. These factors have continued in the fourth quarter of 2021. Also, production has incurred shortages in certain building products delaying the completion of the homes and has continued to experience inflation in most building products resulting in significant increases to our material costs and a corresponding decrease in gross profits. We have continued to focus on increasing production of homes due to the above challenges.

The following table summarizes certain key sales statistics and percent of gross profit.


	Three Months Ended						Nine Months Ended
	July 31, 2021			August 1, 2020			July 31, 2021			August 1, 2020
New homes sold through Company owned sales centers		104			70			318			232
Pre-owned homes sold through Company owned sales centers		6			3			12			7
Homes sold to independent dealers		26			51			115			159
Total new factory built homes produced		120			127			448			393
Average new manufactured home price—retail	$	94,385		$	91,017		$	91,488		$	91,644
Average new manufactured home price—wholesale	$	51,919		$	44,308		$	48,720		$	43,913
As a percent of net sales:
Gross profit from the Company owned retail
sales centers		17	%		19	%		17	%		19	%
Gross profit from the manufacturing facilities -
including intercompany sales		11	%		20	%		14	%		22	%

Maintaining our strong financial position is vital for future growth and success. Because of very challenging business conditions during economic recessions in our market area, management will continue to evaluate all expenses and react in a manner consistent with maintaining our strong financial position, while exploring opportunities to expand our distribution and manufacturing operations.

Our many years of experience in the Florida market, combined with home buyers’ increased need for more affordable housing, should serve the Company well in the coming years. Management remains convinced that our specific geographic market is one of the best long-term growth areas in the country.

On June 5, 2021 the Company celebrated its 54th anniversary in business specializing in the design and production of quality, affordable manufactured homes. With multiple retail sales centers in Florida for over 30 years and an insurance agency subsidiary, we are the only vertically integrated manufactured home company headquartered in Florida.

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Insurance agent commission revenues in the third quarter of 2021 were $68,294 compared to $72,898 in the third quarter of 2020. Total insurance agent commission revenues for the first nine months of 2021 were $216,908 compared to $212,418 for the first nine months of 2020. The increase in insurance agent commissions in the first nine months of 2021 were due to more new policies and renewals generated which affects agent commission earned. The Company establishes appropriate reserves for policy cancellations based on numerous factors, including past transaction history with customers, historical experience and other information, which is periodically evaluated and adjusted as deemed necessary. In the opinion of management, no reserve was deemed necessary for policy cancellations at July 31, 2021 and October 31, 2020.

Gross profit as a percentage of net sales was 21% in the third quarter of 2021 compared to 28% for the third quarter of 2020 and was 24% for the first nine months of 2021 compared to 30% for the first nine months of 2020. The gross profit in the third quarter of 2021 was $2,512,744 compared to $2,438,910 in the third quarter of 2020 and was $8,622,876 for the first nine months of 2021 compared to $8,466,254 for the first nine months of 2020. The gross profit is dependent on the sales mix of wholesale and retail homes and number of

pre-owned

homes sold. The decrease in gross profit as a percentage of net sales is primarily due to the continued inflation in most building products which increased the material cost of each home manufactured in all three quarters of 2021. We are continuing to monitoring this situation and will continue to adjust our selling prices to help offset some of the higher costs on each home.

Selling, general and administrative expenses as a percent of net sales was 11% in third quarter of 2021 compared to 13% in the third quarter of 2020 and was 12% for the first nine months of 2021 compared to 13% for the first nine months of 2020. Selling, general and administrative expenses in third quarter of 2021 was $1,320,456 compared to $1,107,850 in the third quarter of 2020 and was $4,144,350 for the first nine months of 2021 compared to $3,586,622 for the first nine months of 2020. The increase in expenses in 2021 were due to the increase in variable expenses which were a direct result of employee benefits compensation due to the increase in sales.

We earned interest income of $62,491 for the third quarter of 2021 compared to $53,209 for the third quarter of 2020. For the first nine months of 2021, interest income was $145,621 compared to $239,365 in the first nine months of 2020. The decrease during 2021 is primarily due to the decline in the investment rates and the decrease in the monies invested.

Our earnings from Majestic 21 in the third quarter of 2021 were $20,202 compared to $20,855, for the third quarter of 2020. Earnings from Majestic 21 for the first nine months of 2021 were $45,959 compared to $61,125 for the first nine months of 2020. The earnings from Majestic 21 represent the allocation of profit and losses which are owned 50% by 21st Mortgage Corporation and 50% by the Company. The earnings from the Majestic 21 loan portfolio will continue to decrease due to the amortization, maturity and payoff of the loans.

We received distributions in the third quarter of 2021 of $75,156 compared to $64,053 in the third quarter of 2020 and $121,024 for the first nine months of 2021 compared to $336,447 for the first nine months of 2020. The distributions are from an escrow arrangement related to a Finance Revenue Sharing Agreement (FRSA) between 21

Mortgage Corporation and the Company. The distributions from the escrow arrangement, which relates to certain loans financed by 21

Mortgage Corporation, are recorded as income by the Company when received. The earnings from the FRSA loan portfolio will continue to decrease due to the amortization and payoff of the loans.

The Company realized

pre-tax

income in the third quarter of 2021 of $1,397,857 as compared to $1,535,603 in the third quarter of 2020. The

pre-tax

income for the first nine months of 2021 was $5,067,874 as compared to $5,422,063 in first nine months of 2020.

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The Company recorded an income tax expense in the amount of $347,111 in the third quarter of 2021 as compared to $375,465 in third quarter 2020. Income tax expense for the nine months of 2021 was $1,226,425 compared to $1,311,780 for the nine months of 2020.

We reported net income of $1,050,746 for the third quarter of 2021 or $0.29 per share, compared to $1,160,138 or $0.32 per share, for the third quarter of 2020. For the first nine months of 2021 net income was $3,841,449 or $1.06 per share, compared to $4,110,283 or $1.13 per share, in the first nine months of 2020.

Liquidity and Capital Resources

Cash and cash equivalents were $33,720,078 at July 31, 2021 compared to $30,305,902 at October 31, 2020. Certificates of deposit were $2,090,910 at July 31, 2021 compared to $4,602,307 at October 31, 2020. Short-term investments were $562,270 at July 31, 2021 compared to $358,960 at October 31, 2020. Working capital was $34,059,497 at July 31, 2021 as compared to $38,865,240 at October 31, 2020. During the first nine months of 2021, the Company repurchased an aggregate of 100,346 shares of its common stock for an aggregate of $3,478,553. The Company purchased the land for the Ocala South retail sales center in March 2021 for $500,000, the Tavares retail sales center in January 2021 for $245,000 and land in Ocala for a future retail sales center in February 2021 for $1,040,000. The Company paid a

one-time

cash dividend of $1.00 per common share in March 2021 for $3,632,100. We own the entire inventory for our Prestige retail sales centers which includes new,

pre-owned,

repossessed or foreclosed homes and do not incur any third party floor plan financing expenses. We have a material commitment for a significant capital expenditure. Depending upon when the Company receives the building permit, we plan to build an 11,900 square foot frame shop to manufacture our frames on our current manufacturing plant property on our Ocala Florida property.

The Company currently has no line of credit facility and no debt and does not believe that such a facility is currently necessary to its operations. The Company also has approximately $3.9 million of cash surrender value of life insurance which it may be able to access as an additional source of liquidity though the Company has not currently viewed this to be necessary. As of July 31, 2021, the Company continued to report a strong balance sheet which included total assets of approximately $64 million which was funded primarily by stockholders’ equity of approximately $48 million.

Critical Accounting Policies and Estimates

In Item 7 of our Form

10-K,

under the heading “Critical Accounting Policies and Estimates,” we have provided a discussion of the critical accounting policies and estimates that management believes affect its more significant judgments and estimates used in the preparation of our Consolidated Financial Statements. No significant changes have occurred since that time.

Forward-Looking Statements

Certain statements in this report are unaudited or forward-looking statements within the meaning of the federal securities laws. Although Nobility believes that the amounts and expectations reflected in such forward-looking statements are based on reasonable assumptions, there are risks and uncertainties that may cause actual results to differ materially from expectations. These risks and uncertainties include, but are not limited to, the potential adverse impact on our business caused by the

COVID-19

pandemic or other health pandemic, competitive pricing pressures at both the wholesale and retail levels, inflation, increasing material costs (including forest based products) or availability of materials due to potential supply chain interruptions (such as current inflation with forest products and supply issues with vinyl siding and PVC piping), changes in market demand, changes in interest rates, availability of financing for retail and wholesale purchasers, consumer confidence, adverse

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weather conditions that reduce sales at retail centers, the risk of manufacturing plant shutdowns due to storms or other factors, the impact of marketing and cost-management programs, reliance on the Florida economy, impact of labor shortage, impact of materials shortage, increasing labor cost, cyclical nature of the manufactured housing industry, impact of rising fuel costs, catastrophic events impacting insurance costs, availability of insurance coverage for various risks to Nobility, market demographics, management’s ability to attract and retain executive officers and key personnel, increased global tensions, market disruptions resulting from terrorist or other attack, any armed conflict involving the United States and the impact of inflation.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

. The Company’s Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer) have evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a–15(e) and 15d–15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report (the “Evaluation Date”). Based on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of July 31, 2021.

Changes in Internal Control over Financial Reporting.

There were no changes in our internal controls over financial reporting that occurred during the third quarter of fiscal 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

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Part II. OTHER INFORMATION AND SIGNATURES

There were no reportable events for Item 1 and Items 3 through 5.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The following table represents information with respect to purchases by the Company of its common stock during the three months ended July 31, 2021.


Period	Total number of shares purchased	Average price paid per share	Total number of shares purchased as part of publicly announced plans or programs*	Maximum number of shares that may yet be purchased under the plans or programs*
May 2 – May 29, 2021	0	0	0		199,654
May 30 – Jun 26, 2021	0	0	0		199,654
Jun 27 – Jul 31, 2021	100,000	$34.68	100,000		99,654

In September 2020 the Company’s Board of Directors authorized 200,000 shares to be repurchased during fiscal year 2021 in the open market. During the first nine months ended July 31, 2021 management has repurchased an aggregate of 100,346 shares of common stock and is authorized to purchase up to an additional 99,654 shares.

Item 6. Exhibits

31.

(a) Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934

(b) Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act and Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934

32.

(a) Written Statement of Chief Executive Officer Pursuant to 18 U.S.C. §1350

(b) Written Statement of Chief Financial Officer Pursuant to 18 U.S.C. §1350

101.

Interactive data filing formatted in IXBRL

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


DATE: September 10, 2021				By: /s/ Thomas W. Trexler
				Thomas W. Trexler, Executive Vice President, and Chief Financial Officer


DATE: September 10, 2021				By: /s/ Lynn J. Cramer, Jr.
				Lynn J. Cramer, Jr., Treasurer and Principal Accounting Officer