NOBILITY HOMES INC - Quarter Report: 2022 August (Form 10-Q)

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Total net sales in third quarter of 2022 were up 18% to $13,846,698 compared to $11,778,120 in third quarter of 2021. Total net sales for the first nine months of 2022 was $35,300,014 compared to $35,592,531 for the first nine months of 2021. The Company reported net income of $1,884,759 in third quarter of 2022, compared to a net income of $1,050,746 in third quarter 2021. Net income for the first nine months of 2022 was $4,498,619 compared to $3,841,449 for the first nine months of 2021. According to the Florida Manufactured Housing Association, shipments for the industry in Florida for the period from November 2021 through July 2022 were up approximately 22% from the same period last year. Although net sales increased during the three months ended August 6, 2022 as compared to the same period last year, we continued to experience the negative impact of limitations being placed on certain key production materials from suppliers, the delay or lack of key components from vendors as well as back orders, delayed shipments, price increases and labor shortages. These supply chain issues have caused delays in completion of the homes at the manufacturing facility and the set up process of retail homes in the field, resulting in decreased net sales due to our inability to timely deliver and setup homes to customers. We expect that these challenges will continue for the remainder of fiscal year 2022 and potentially beyond until the industry supply chain normalizes.

Gross profit as a percentage of net sales was 28% in the third quarter of 2022 compared to 21% for the third quarter of 2021 and was 27% for the first nine months of 2022 compared to 24% for the first nine months of 2021. The gross profit in the third quarter of 2022 was $3,898,060 compared to $2,512,744 in the third quarter of 2021 and was $9,648,206 for the first nine months of 2022 compared to $8,622,876 for the first nine months of 2021. The gross profit is dependent on the sales mix of wholesale and retail homes and number of 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 on each home and increase in the average gross profit at our retail sales centers.

We earned interest income of $62,449 for the third quarter of 2022 compared to $62,491 for the third quarter of 2021. For the first nine months of 2022, interest income was $176,706 compared to $145,621 in the first nine months of 2021. The increase in interest income for the first nine months of 2022 is primarily due to the interest earned from the sale of (repossessed) inventory acquired from the Company’s joint venture partner, 21st Mortgage Corporation in the first quarter of 2022.

The Company realized income in the third quarter of 2022 of $2,479,072 as compared to $1,397,857 in the third quarter of 2021. The income for the first nine months of 2022 was $5,898,117 as compared to $5,067,874 in first nine months of 2021.

Cash and cash equivalents were $20,437,309 at August 6, 2022 compared to $36,126,059 at November 6, 2021, with the reduction primarily due to increases in inventory. Certificates of deposit were $1,946,429 at August 6, 2022 compared to $2,093,015 at November 6, 2021. Short-term investments were $541,132 at August 6, 2022 compared to $621,928 at November 6, 2021. Working capital was $31,228,311 at August 6, 2022 as compared to $35,563,355 at November 6, 2021. During the first nine months of 2022, the Company repurchased an aggregate of 162,300 shares of its common stock for an aggregate of $5,186,070. A cash dividend was paid from our cash reserves in April 2022 in the amount of $1.00 per share ($3,532,976). The Company purchased $4.6 million of new homes from two independent home manufactures for the Prestige retail sales centers during third quarter of 2022. We own the entire inventory for our Prestige retail sales centers, which includes new and homes, and do not incur any third party floor plan financing expenses. As of August 6, 2022 the Company has incurred approximately $834,269 of the estimated construction cost of the approximately $1.1 allocated to build an 11,900 square foot frame shop on the Company’s property in Ocala, Florida.

In Item 7 of our Form 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.

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 pandemic or other health pandemics, competitive pricing pressures at both the wholesale and retail levels, inflation, increasing material costs (including forest based products) or availability of materials due to 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

. The Company’s Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer) have evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a–15(e) and 15d–15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report (the “Evaluation Date”). Based on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of August 6, 2022.

There were no changes in our internal controls over financial reporting that occurred during the third quarter of fiscal 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.