Quarterly Report (10-q)

Table of Contents

 

 

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

 

 

 

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Table of Contents

NOBILITY HOMES, INC.

INDEX

 

				Page Number
PART I.		Financial Information
Item 1.		Financial Statements (Unaudited)
		Condensed Consolidated Balance Sheets as of May 7, 2022 (Unaudited) and November 6, 2021		3
		Condensed Consolidated Statements of Income for the three and six months ended May 7, 2022 (Unaudited) and May 1, 2021 (Unaudited)		4
		Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended May 7, 2022 (Unaudited) and May 1, 2021 (Unaudited)		5
		Condensed Consolidated Statements of Cash Flows for the six months ended May 7, 2022 (Unaudited) and May 1, 2021 (Unaudited)		6
		Notes to Condensed Consolidated Financial Statements (Unaudited)		7
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations		10
Item 4.		Controls and Procedures		14
PART II.		Other Information
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds		15
Item 6.		Exhibits		15
Signatures				16

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Table of Contents

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

 

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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

 

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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

 

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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

 

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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 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.

 

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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.

 

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•

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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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 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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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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