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

 
 
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 May 7, 2022
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.
 
Large accelerated filer      Accelerated filer  
       
Non-accelerated filer
     Smaller reporting company  
       
         Emerging growth company  
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.
 
Title of Class
 
Shares Outstanding on June 
21
, 2022
Common Stock
 
3,370,912
 
 
 

NOBILITY HOMES, INC.
INDEX
 
 
 
 
  
Page
Number
PART I.
 
Financial Information
  
Item 1.
 
Financial Statements (Unaudited)
  
 
  
3
 
  
4
 
  
5
 
  
6
 
  
7
Item 2.
 
  
10
Item 4.
 
  
14
PART II.
 
  
Item 2.
 
  
15
Item 6.
 
  
15
  
16

NOBILITY HOMES, INC.
Condensed Consolidated Balance Sheets
 
 
 
 
 
 
 
 
 
 
     May 7,
2022
    November 6,
2021
 
     (Unaudited)        
Assets
                
Current assets:
                
Cash and cash equivalents
   $  26,530,111     $  36,126,059  
Certificates of deposit
     —         2,093,015  
Short-term investments
     598,154       621,928  
Accounts receivable—trade
     807,197       680,228  
Note receivable
     23,905       32,825  
Mortgage notes receivable
     24,291       22,589  
Income tax receivable
     42,792       —    
Inventories
     15,999,026       10,394,288  
Pre-owned
homes, net
     802,149         542,081  
Prepaid expenses and other current assets
     2,283,654       1,821,267  
    
 
 
   
 
 
 
Total current assets
     47,111,279       52,334,280  
Property, plant and equipment, net
     7,305,133       6,847,780  
Pre-owned
homes, net
     —         755,394  
Note receivable, less current portion
     27,849       38,895  
Mortgage notes receivable, less current portion
     219,772       222,459  
Mobile home park note receivable
     136,509       72,731  
Other investments
     1,813,658       1,788,436  
Operating lease right of use assets
     —         1,597  
Cash surrender value of life insurance
     4,052,457       3,966,939  
Other assets
     156,287       156,287  
    
 
 
   
 
 
 
Total assets
   $ 60,822,944     $ 66,184,798  
    
 
 
   
 
 
 
Liabilities and Stockholders’ Equity
                
Current liabilities:
                
Accounts payable
   $ 1,819,257     $ 939,964  
Accrued compensation
     777,649       555,222  
Accrued expenses and other current liabilities
     1,627,284       1,513,967  
Income taxes payable
     —         89,083  
Operating lease obligation
     —         1,597  
Customer deposits
     13,285,127       13,671,092  
    
 
 
   
 
 
 
Total current liabilities
     17,509,317       16,770,925  
Deferred income taxes
     51,027       99,568  
    
 
 
   
 
 
 
Total liabilities
     17,560,344       16,870,493  
    
 
 
   
 
 
 
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; 3,370,912 and 3,532,100
shares outstanding, respectively
     536,491       536,491  
Additional paid in capital
     10,806,923       10,766,253  
Retained earnings
     58,823,643       59,742,759  
Less treasury stock at cost, 1,993,995 and 1,832,807 share
s
, respectively
     (26,904,457     (21,731,198
    
 
 
   
 
 
 
Total stockholders’ equity
     43,262,600       49,314,305  
    
 
 
   
 
 
 
Total liabilities and stockholders’ equity
   $ 60,822,944     $ 66,184,798  
    
 
 
   
 
 
 
The accompanying notes are an integral part of these condensed consolidated financial statements
 
3

NOBILITY HOMES, INC.
Condensed Consolidated Statements of Income
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     Three Months Ended     Six Months Ended  
     May 7,
2022
    May 1,
2021
    May 7,
2022
    May 1,
2021
 
Net sales
   $  10,645,046     $ 14,742,900     $ 21,453,316     $ 23,814,411  
Cost of sales
     (7,623,128     (11,130,215     (15,703,170     (17,704,279
    
 
 
   
 
 
   
 
 
   
 
 
 
Gross profit
     3,021,918       3,612,685       5,750,146       6,110,132  
Selling, general and administrative expenses
     (1,378,606     (1,550,513     (2,795,149     (2,823,894
    
 
 
   
 
 
   
 
 
   
 
 
 
Operating income
     1,643,312       2,062,172       2,954,997       3,286,238  
    
 
 
   
 
 
   
 
 
   
 
 
 
Other income (loss):
                                
Interest income
     39,577       52,474       114,257       83,130  
Undistributed earnings in joint venture—Majestic 21
     12,665       12,049       25,222       25,757  
Proceeds received under escrow arrangement
     115,454       —         233,499       45,868  
(Decrease) increase in fair value of equity investment
     (19,681     123,803       (23,774     203,759  
Gain on disposal of property, plant and equipment
     88,936       —         88,936       —    
Miscellaneous
     12,352       17,945       25,908       25,265  
    
 
 
   
 
 
   
 
 
   
 
 
 
Total other income
     249,303       206,271       464,048       383,779  
    
 
 
   
 
 
   
 
 
   
 
 
 
Income before provision for income taxes
     1,892,615       2,268,443       3,419,045       3,670,017  
Income tax expense
     (435,789     (543,505     (805,185     (879,314
    
 
 
   
 
 
   
 
 
   
 
 
 
Net income
     1,456,826       1,724,938       2,613,860       2,790,703  
    
 
 
   
 
 
   
 
 
   
 
 
 
Weighted average number of shares outstanding:
                                
Basic
     3,476,508       3,632,195       3,504,655       3,632,060  
Diluted
     3,487,516       3,642,501       3,515,994       3,638,140  
Net income per share:
                                
Basic
   $ 0.42     $ 0.47     $ 0.75     $ 0.77  
Diluted
   $ 0.42     $ 0.47     $ 0.74     $ 0.77  
The accompanying notes are an integral part of these condensed consolidated financial statements
 
4

NOBILITY HOMES, INC.
Condensed Consolidated Statements of Changes in Stockholders’
Equity
For the three and six months ended May 7, 2022 and May 1, 202
1
(Unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     Common
Stock Shares
    Common
Stock
     Additional
Paid-in-Capital
    Retained
Earnings
    Treasury
Stock
    Total  
Balance at November 6, 2021
     3,532,100     $ 536,491      $ 10,766,253     $ 59,742,759     $ (21,731,198   $ 49,314,305  
Stock-based compensation
     180       —          33,218       —         2,135       35,353  
Exercise of employee stock options
     966       —          (17,452     —         17,452        
Treasury stock purchase
     (270     —          —         —         (9,197     (9,197
Net income
     —         —          —         1,157,034       —         1,157,034  
    
 
 
   
 
 
    
 
 
   
 
 
   
 
 
   
 
 
 
Balance at February 5, 2022
     3,532,976    
$
536,491     
$
10,782,019    
$
60,899,793    
$
(21,720,808  
$
50,497,495  
 
  
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash dividend
     —         —          —         (3,532,976     —         (3,532,976
Purchase of treasury stock
     (162,300     —          —         —         (5,186,070     (5,186,070
Stock-based compensation
     236       —          24,904       —         2,421       27,325  
Net income
     —         —          —         1,456,826       —         1,456,826  
    
 
 
   
 
 
    
 
 
   
 
 
   
 
 
   
 
 
 
Balance at May 7, 2022
     3,370,912     $ 536,491      $ 10,806,923     $ 58,823,643     $ (26,904,457   $ 43,262,600  
    
 
 
   
 
 
    
 
 
   
 
 
   
 
 
   
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     Common
Stock Shares
    Common
Stock
     Additional
Paid-in-Capital
     Retained
Earnings
    Treasury
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  
    
 
 
   
 
 
    
 
 
    
 
 
   
 
 
   
 
 
 
The accompanying notes are an integral part of these condensed consolidated financial statements
 
5

NOBILITY HOMES, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
 
 
 
 
 
 
 
 
 
     Six Months Ended  
     May 7,
2022
    May 1,
2021
 
Cash flows from operating activities:
                
Net income
   $ 2,613,860     $ 2,790,703  
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
                
Depreciation
     86,454       94,815  
Deferred income taxes
     (48,541     19,182  
Undistributed earnings in joint venture—Majestic 21
     (25,222     (25,757
Gain on disposal of property, plant and equipment
     (88,936     —    
Decrease (increase) in fair market value of equity investments
     23,774       (203,759
Stock-based compensation
     62,678       36,930  
Amortization of operating lease right of use assets
     1,597       20,739  
Decrease (increase) in:
                
Accounts receivable—trade
     (126,969     (1,027,542
Inventories
     (5,604,739 )     (884,425
Pre-owned
homes
     495,327       (69,794
Prepaid expenses and other current assets
     (462,387     (622,655
Interest receivable
     —         (14,118
Income tax receivables
     (42,792     105,676  
(Decrease) increase in:
                
Accounts payable
     879,293       357,411  
Accrued compensation
     222,427       36,216  
Accrued expenses and other current liabilities
     104,120       100,709  
Income taxes payable
     (89,083     219,456  
Customer deposits
     (385,965     5,047,191  
    
 
 
   
 
 
 
Net cash (used in) provided by operating activities
     (2,375,907     5,980,978  
    
 
 
   
 
 
 
Cash flows from investing activities:
                
Purchase of property, plant and equipment
     (551,841     (1,870,893
Proceeds from certificates of deposit
     2,087,936       2,496,000  
Proceeds from disposal of property, plant and equipment
     96,970       —    
Collections on interest receivable
     5,079       31,620  
Collections on mortgage notes receivable
     985       1,363  
Collections on equipment and other notes receivable
     19,966       13,460  
Issuance of mobile home park note receivable
     (63,778     (2,481
Increase in cash surrender value of life insurance
     (85,518     (89,100
    
 
 
   
 
 
 
Net cash provided by investing activities
     1,509,799       579,969  
    
 
 
   
 
 
 
Cash flows from financing activities:
                
Payment of cash dividend
     (3,532,976     (3,632,100
Proceeds from exercise of employee stock option
           15,125  
Purchase of treasury stock
     (5,186,070     (10,553
Reduction of operating lease obligation
     (1,597     (11,503
    
 
 
   
 
 
 
Net cash used in financing activities
     (8,729,840     (3,639,031
    
 
 
   
 
 
 
(Decrease) increase in cash and cash equivalents
     (9,595,948     2,921,916  
Cash and cash equivalents at beginning of year
   $ 36,126,059     $ 30,305,902  
    
 
 
   
 
 
 
Cash and cash equivalents at end of quarter
   $ 26,530,111     $ 33,227,818  
    
 
 
   
 
 
 
Supplemental disclosure of cash flows information:
                
Income taxes paid
   $ 1,060,735     $ 535,000  
    
 
 
   
 
 
 
Noncash exercise of employee stock options
  
$
(9,197
 
$
—  
 
  
 
 
 
 
 
 
 
The accompanying notes are an integral part of these condensed consolidated financial statements
 
6

Nobility Homes, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 Basis of Presentation and Accounting Policies
The accompanying unaudited condensed financial statements for the three and six months ended May 7, 2022 have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission for Form
10-Q.
Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.
The unaudited financial information included in this report includes all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary to reflect a fair statement of the results for the interim periods. The results of operations for the three and six months ended May 7, 2022 are not necessarily indicative of the results of the full fiscal year.
The condensed consolidated financial statements included in this report should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on
Form 10-K
for the fiscal year ended November 6, 2021.
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.
Other
pre-owned
homes are acquired (Repossessions Inventory) as a convenience to the Company’s joint venture partner, 21st Mortgage Corporation. This inventory has been repossessed by 21
st
Mortgage Corporation or through mortgage foreclosure. The Company acquired this inventory at the amount of the uncollected balance of the financing at the time of the foreclosure/repossessions by 21st Mortgage Corporation. The Company records this inventory at cost determined on the specific identification method. All of the refurbishment costs are paid by 21
st
Mortgage Corporation. This arrangement assists 21
st
Mortgage Corporation with liquidation of their repossessed inventory. The timing of these repurchases by the Company is unpredictable as it is based on the repossessions 21
st
Mortgage Corporation incurs in the portfolio. When the home is sold, the Company retains the cost of the home, an interest factor on the cost of the home and a sales commission, from the sales proceeds. Any additional proceeds are paid to 21
st
Mortgage. Any shortfall from the proceeds to cover these amounts is paid by 21
st
Mortgage to the Company. As the Company has no risk of loss on the sale, there is no valuation allowance necessary for this inventory.
New 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 $642,019 and $794,766 as of May 7, 2022 and November 6, 2021, 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.
 
7

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:
 
 
  
May 7,
2022
 
  
November 6,
2021
 
Raw materials
   $ 2,331,385      $ 2,225,532  
Work-in-process
     115,134        97,021  
Inventory consigned to affiliated entities
     642,019        794,766  
Finished homes
     12,792,772        7,140,880  
Model home furniture
     117,716        136,089  
    
 
 
    
 
 
 
Inventories
   $  15,999,026      $  10,394,288  
    
 
 
    
 
 
 
     
Pre-owned homes
  
$
802,149
 
  
$
1,297,475
 
Less homes expected to sell in 12 months
  
 
(802,149 )
  
 
(542,081
 
  
 
 
 
  
 
 
 
Pre-owned homes, long term
  
$
—  
 
  
$
755,394
 
 
  
 
 
 
  
 
 
 
Note 3 Short-term Investments
The following is a summary of short-term investments (
available
for sale):
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     May 7, 2022  
     Cost      Gross
Unrealized
Gains
     Gross
Unrealized
Losses
     Estimated
Fair Value
 
Equity securities in a public company
   $  167,930      $  430,224      $  —        $  598,154  
    
 
 
    
 
 
    
 
 
    
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     November 6, 2021  
     Cost      Gross
Unrealized
Gains
     Gross
Unrealized
Losses
     Estimated
Fair Value
 
Equity securities in a public company
   $  167,930      $  453,998      $  —        $  621,928  
    
 
 
    
 
 
    
 
 
    
 
 
 
The fair values were estimated based on quoted market prices in active markets at each respective period end.
Note 4 Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, accounts and notes receivable, accounts payable 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.
 
8

   
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.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     May 7, 2022  
     Level 1      Level 2      Level 3  
Equity securities in a public company
   $ 598,154      $ —        $ —    
    
 
 
    
 
 
    
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     November 6, 2021  
     Level 1      Level 2      Level 3  
Equity securities in a public company
   $ 621,928      $ —        $ —    
    
 
 
    
 
 
    
 
 
 
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.
Revenues by net sales from manufactured housing,
pre-owned
homes and insurance agent commissions are as follows:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     Three Months Ended      Six Months Ended  
     May 7,
2022
     May 1,
2021
     May 7,
2022
     May 1,
2021
 
Manufactured housing
                                   
Homes sold through Company owned sales centers
   $ 9,492,596      $ 12,361,377      $ 18,682,934      $ 19,904,559  
Homes sold to independent dealers
     351,999        1,624,113        932,711        2,827,849  
Homes sold through manufactured home parks
     515,390        431,210        990,350        649,645  
    
 
 
    
 
 
    
 
 
    
 
 
 
     $ 10,359,985      $ 14,416,700      $ 20,605,995      $ 23,382,053  
Pre-owned
homes
     207,561        243,557        702,834        283,744  
Insurance agent commissions
     77,500        82,643        144,487        148,614  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total net sales
   $ 10,645,046      $ 14,742,900      $ 21,453,316      $ 23,814,411  
    
 
 
    
 
 
    
 
 
    
 
 
 
 
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Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Results of Operations
Total net sales in second quarter of 2022 was $10,645,046 compared to $14,742,900 in second quarter of 2021. Total net sales for the first six months of 2022 was $21,453,316 compared to $23,814,411 for the first six months of 2021. The Company reported net income of $1,456,826 in second quarter of 2022, compared to a net income of $1,724,938 in second quarter 2021. Net income for the first six months of 2022 was $2,613,860 compared to $2,790,703 for the first six months of 2021. According to the Florida Manufactured Housing Association, shipments for the industry in Florida for the period from November 2021 through April 2022 were up approximately 23% from the same period last year. Net sales decreased during the three and six months ended May 7, 2022 as compared to the same period last year. We continue 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 has 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 complete and deliver 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.
The following table summarizes certain key sales statistics and percent of gross profit.
 
     Three Months Ended     Six Months Ended  
     May 7,
2022
    May 1,
2021
    May 7,
2022
    May 1,
2021
 
New homes sold through Company owned sales centers
     77       132       164       214  
Pre-owned
homes sold through Company owned sales centers
     3       5       9       6  
Homes sold to independent dealers
     5       49       15       89  
Total new factory built homes produced
     113       178       205       328  
Average new manufactured home price—retail
   $  124,855     $  91,217     $  115,533     $  90,080  
Average new manufactured home price—wholesale
   $ 73,561     $ 47,578     $ 69,172     $ 47,549  
As a percent of net sales:
        
Gross profit from the Company owned retail sales centers
     19     18     19     18
Gross profit from the manufacturing facilities - including intercompany sales
     13     15     13     15
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, 2022 the Company celebrated its 55th anniversary in business specializing in the design and production of quality, affordable manufactured homes. With multiple retail sales centers in Florida for over 31 years and an insurance agency subsidiary, we are the only vertically integrated manufactured home company headquartered in Florida.
 
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Insurance agent commission revenues in the second quarter of 2022 were $77,500 compared to $82,643 in the second quarter of 2021. Total insurance agent commission revenues for the first six months of 2022 were $144,487 compared to $148,614 for the first six months of 2021. 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 May 7, 2022 and November 6, 2021.
Gross profit as a percentage of net sales was 28% in the second quarter of 2022 compared to 25% for the second quarter of 2021 and was 27% for the first six months of 2022 compared to 26% for the first six months of 2021. The gross profit in the second quarter of 2022 was $3,021,918 compared to $3,612,685 in the second quarter of 2021 and was $5,750,146 for the first six months of 2022 compared to $6,110,132 for the first six months of 2021. 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 on each home. The decrease in gross profit dollar amount is primarily due to the decrease in sales due to shortages in many building products, which has limited production and delayed the completion of the homes both at the manufacturing plant and the set up process in the field, resulting in decreased net sale due to our inability to timely complete and deliver homes to customers.
Selling, general and administrative expenses as a percent of net sales was 13% in second quarter of 2022 compared to 11% in the second quarter of 2021 and was 13% for the first six months of 2022 compared to 12% for the first six months of 2021. Selling, general and administrative expenses in second quarter of 2022 was $1,378,606 compared to $1,550,513 in the second quarter of 2021 and was $2,795,149 for the first six months of 2022 compared to $2,823,894 for the first six months of 2021. The dollar decrease in expenses in the three and six months of 2022 compared to the same period last year were due to reduction of the variable expenses related to the decreased sales.
We earned interest income of $39,577 for the second quarter of 2022 compared to $52,474 for the second quarter of 2021. For the first six months of 2022, interest income was $114,257 compared to $83,130 in the first six months of 2021. The increase in interest income for the first six months of 2022 is primarily due to the interest earned from the sale of
pre-owned
(repossessed) inventory acquired from the Company’s joint venture partner, 21st Mortgage Corporation in the first quarter of 2022.
Our earnings from Majestic 21 in the second quarter of 2022 were $12,665 compared to $12,049, for the second quarter of 2021. Earnings from Majestic 21 for the first six months of 2022 were $25,222 compared to $25,757 for the first six months of 2021. 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 second quarter of 2022 of $115,454 compared to no distributions in the second quarter of 2021 and $233,499 for the first six months of 2022 compared to $45,868 for the first six months of 2021. The increase in distributions in the first six months of 2022 is due to the timing of the reserve balances. The distributions are from an escrow arrangement related to a Finance Revenue Sharing Agreement (FRSA) between 21
st
Mortgage Corporation and the Company. The distributions from the escrow arrangement, relates to certain loans financed by 21
st
Mortgage Corporation, are recorded as income by the Company when received. The earnings from the FRSA loan portfolio will continue to decrease due to the amortization and payoff of the loans.
The Company realized
pre-tax
income in the second quarter of 2022 of $1,892,615 as compared to $2,268,443 in the second quarter of 2021. The
pre-tax
income for the first six months of 2022 was $3,419,045 as compared to $3,670,017 in first six months of 2021.
 
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The Company recorded an income tax expense in the amount of $435,789 in the second quarter of 2022 as compared to $543,505 in second quarter 2021. Income tax expense for the six months of 2022 was $805,185 compared to $879,314 for the six months of 2021.
We reported net income of $1,456,826 for the second quarter of 2022 or $0.42 per share, compared to $1,724,938 or $0.47 per share, for the second quarter of 2021. For the first six months of 2022 net income was $2,613,860 or $0.75 per share ($0.74 diluted), compared to $2,790,703 or $0.77 per share, in the first six months of 2021.
Liquidity and Capital Resources
Cash and cash equivalents were $26,530,111 at May 7, 2022 compared to $36,126,059 at November 6, 2021. Certificates of deposit were $0 at May 7, 2022 compared to $2,093,015 at November 6, 2021. Short-term investments were $598,154 at May 7, 2022 compared to $621,928 at November 6, 2021. Working capital was $29,601,962 at May 7, 2022 as compared to $35,563,355 at November 6, 2021. During the first six 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). We own the entire inventory for our Prestige retail sales centers, which includes new and
pre-owned
homes, and do not incur any third party floor plan financing expenses. As of May 7, 2022 the Company has incurred approximately $531,906 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.
The Company currently has no line of credit facility and no debt and does not believe that such a facility is currently necessary to its operations. The Company also has approximately 4.1 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 May 7, 2022, the Company continued to report a strong balance sheet which included total assets of approximately $60.8 million which was funded primarily by stockholders’ equity of approximately 43.3 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 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
 
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Table of Contents
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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Table of Contents
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 May 7, 2022.
Changes in Internal Control over Financial Reporting.
There were no changes in our internal controls over financial reporting that occurred during the second quarter of fiscal 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.
 
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Table of Contents
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 May 7, 2022.
 
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*
 
Feb 6 – Mar 5, 2022
     0        0        0        200,000  
Mar 6 – Apr 2, 2022
     62,300      $ 30.90        62,300        137,700  
Apr 3 – May 7, 2022
     100,000      $ 32.61        100,000        100,000  
 
*
The Company’s Board of Directors authorized 200,000 shares in September 2021 and in June 2022 authorized an additional 62,300 shares to be repurchased during fiscal year 2022, in the open market. During the first six months ended May 7, 2022 management has repurchased an aggregate of 162,300 shares of common stock and is authorized to purchase up to an additional 100,000 shares in fiscal year 2022.
 
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 XBRL
104.   Cover Page Interactive Date File (formatted as inline XBRL and contained in Exhibit 101.
 
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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.
 
    NOBILITY HOMES, INC.  
DATE: June 21, 2022     By: /s/ Terry E. Trexler  
    Terry E. Trexler, Chairman,  
    President and Chief Executive Officer  
DATE: June 21, 2022     By: /s/ Thomas W. Trexler  
    Thomas W. Trexler, Executive Vice President,  
    and Chief Financial Officer  
DATE: June 21, 2022     By: /s/ Lynn J. Cramer, Jr.  
    Lynn J. Cramer, Jr., Treasurer  
    and Principal Accounting Officer  
 
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