10-Q 1 0001.txt HOBILITY HOMES' FORM 10-Q F/Q/E FEBRUARY 3, 2001 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the quarterly period ended February 3, 2001 Commission File number 0-6506 NOBILITY HOMES, INC. (Exact name of registrant as specified in its charter) Florida 59-1166102 (State or other jurisdiction (I.R.S. Employer of incorporation or Identification No.) organization) 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) 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 X ; No _____. The number of shares outstanding of each of the issuer's classes of common equity as of March 15, 2001 was 4,231,338. NOBILITY HOMES, INC. INDEX Page Number PART I. Financial Information Item 1. Financial Statements Consolidated Balance Sheets as of February 3, 2001 and November 4, 2000 3 Consolidated Statements of Income for the three months ended February 3, 2001 and February 5, 2000 4 Consolidated Statements of Cash Flows for three months ended February 3, 2001 and February 5, 2000 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Conditions 8 PART II. Other Information and Signatures 10 Item 4. Submission of Matters to a Vote of Security Holders Item 6. Exhibits Page 2 PART I. FINANCIAL INFORMATION NOBILITY HOMES, INC. CONSOLIDATED BALANCE SHEETS
February 3, 2001 November 4, 2000 ------------------ ------------------- ASSETS (Unaudited) ------ Current Assets: Cash and cash equivalents $ 7,860,363 $ 9,828,122 Accounts receivable - trade 942,244 491,285 Inventories 7,216,088 7,037,495 Deferred income taxes 405,800 405,800 Prepaid expenses and other current assets 344,283 167,063 ------------ ------------ Total current assets 16,768,778 17,929,765 Property, plant and equipment, net 2,580,972 2,580,176 Investment in joint venture - Majestic 21 698,722 624,641 Deferred income taxes - noncurrent 452,900 452,900 Other assets 2,280,999 2,256,001 ------------ ------------ Total assets $ 22,782,371 $ 23,843,483 ============ ============ LIABILITIES & STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 762,995 $ 1,025,464 Accrued expenses and other current liabilities 1,059,263 1,241,617 Accrued compensation 454,419 523,881 Income taxes payable 261,547 27,550 ------------ ------------ Total current liabilities 2,538,224 2,818,512 ------------ ------------ Commitments and contingencies liabilities Stockholders' equity: Preferred stock, $.10 par value, 500,000 shares authorized, none issued - - Common stock, $.10 par value, 10,000,000 shares authorized; 5,364,907 shares issued 536,491 536,491 Additional paid in capital 8,629,144 8,629,144 Retained earnings 17,190,443 16,809,068 Less treasury stock at cost, 1,133,569 and 942,969 shares, respectively, in 2001 and 2000 (6,111,931) (4,949,732) ------------ ------------ Total stockholders' equity 20,244,147 21,024,971 ------------ ------------ Total liabilities and stockholders' equity $ 22,782,371 $ 23,843,483 ============ ============
Page 3 NOBILITY HOMES, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended ------------------ February 3, February 5, 2001 2000 -------------------- ------------------- Net sales $ 5,785,562 $ 6,130,268 Net sales - related parties - 25,245 ------------ ------------ Total net sales 5,785,562 6,155,513 Cost of goods sold (4,197,099) (4,671,316) ------------ ------------ Gross profit 1,588,463 1,484,197 Selling, general and administrative expenses (1,291,009) (1,342,125) ------------ ------------ Impairment adjustment of goodwill - (18,000) Operating income 297,454 124,072 ------------ ------------ Other income: Interest income 131,534 81,398 Undistributed earnings in joint venture - Majestic 21 74,081 127,031 Gain on recovery of TLT, Inc. note receivable 100,000 306,830 Miscellaneous income 12,306 7,578 ------------ ------------ 317,921 522,837 ------------ ------------ Income before provision for income taxes 615,375 646,909 Provision for income taxes (234,000) (248,000) ------------ ------------ Net income $ 381,375 $ 398,909 ============ ============ Average shares outstanding Basic 4,232,358 4,695,685 Diluted 4,232,358 4,695,685 Earnings per share Basic $ .09 $ .08 Diluted $ .09 $ .08
Page 4 NOBILITY HOMES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended ------------------ February 3, February 5, 2001 2000 ----------------- ----------------- Cash flows from operating activities: Net income $ 381,375 $ 398,909 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 47,261 64,692 Impairment adjustment of goodwill - 18,134 Gain on recovery of TLT, Inc. note receivable (100,000) (306,830) Undistributed earnings in joint venture - Majestic 21 (74,081) (127,031) Increase in cash surrender value of life insurance (25,000) (25,000) (Increase) decrease in: Accounts receivable - trade (450,959) (325,464) Inventories (178,593) 756,870 Prepaid expenses and other current assets (177,220) (68,129) Increase (decrease) in: Accounts payable (262,469) (448,278) Accrued expenses and other current liabilities (182,354) (443,727) Accrued compensation (69,462) (195,651) Income taxes payable 233,997 248,000 ---------- ---------- Net cash used in operating activities (857,505) (453,505) ---------- ---------- Cash flows from investing activities: Purchase of property, plant and equipment (48,055) (29,046) Collection of TLT,Inc. note receivable 100,000 306,830 ---------- ---------- Net cash used in investing activities 51,945 277,784 ---------- ---------- Cash flows from financing activities: Purchase of treasury stock (1,162,199) (325,572) Other - 39,530 ---------- ---------- Net cash (used in) provided by financing activities (1,162,199) (286,042) ---------- ---------- Decrease in cash and cash equivalents (1,967,759) (461,763) Cash and cash equivalents at beginning of quarter 9,828,122 7,973,241 ---------- ---------- Cash and cash equivalents at end of quarter $ 7,860,363 $ 7,511,478 ========== ========== Supplemental disclosure of cash flow information Interest Paid $ - $ - ========== ========== Income taxes paid $ - $ - ========== ==========
Page 5 NOBILITY HOMES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. The unaudited financial information included in this report includes all adjustments which are, in the opinion of management, necessary to reflect a fair statement of the results for the interim periods. The operations for the three months ended February 3, 2001 are not necessarily indicative of the results of the full fiscal year. Certain information and footnote disclosure normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the Securities and Exchange Commission rules and regulations governing Form 10-Q. The condensed financial statements included in this report should be read in conjunction with the financial statements and notes thereto included in the Registrant's November 4, 2000 Form 10-K Annual Report. 2. Inventories Inventories are carried at the lower of cost or market. Cost of finished home inventories is determined on the specific identification method. Other inventory costs are determined on a first-in, first-out basis. Inventories at February 3, 2001 and November 4, 2000 are summarized as follows: February 3, November 4, 2001 2000 --------------- -------------- Raw materials $ 472,354 $ 478,039 Work-in-process 107,494 122,377 Finished homes 6,017,729 5,734,138 Pre-owned manufactured homes 283,226 320,895 Model home furniture and other 335,285 382,046 --------------- -------------- $ 7,216,088 $ 7,037,495 ================ ============== Page 6 NOBILITY HOMES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) (UNAUDITED)
Three Months Ended February 3, February 5, 2001 2000 ----------------- ----------------- Net income $ 381,375 $ 398,909 ================= ================= Weighted average shares outstanding: Basic 4,232,358 4,695,685 Add: common stock equivalents - - ----------------- ----------------- Diluted 4,232,358 4,695,685 ================= ================= Earnings per share: Basic and Diluted $ 0.09 $ 0.08 ================= =================
3. Affiliated Entities In the first three months of 2001, TLT, Inc. paid $100,000 to the Company for advances that are non-interest bearing and have been fully reserved since 1991. The amount collected has been recorded as gain on recovery of the TLT, Inc. note receivable in the accompanying consolidated financial statements. The balance of the unpaid advances at February 3, 2001, which are fully reserved total $652,654. While some collections have been made against the previously reserved receivable, management believes a full reserve against the remaining unpaid amounts is warranted because the receivable is uncollateralized. Page 7 NOBILITY HOMES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Results of Operations --------------------- Net sales for the three months ended February 3, 2001 decreased to $5,785,562 from $6,155,513 for the same period last year. The decrease in sales for the first three months of 2001 was primarily due to a very competitive market caused by the industry's excess retail inventory. This excess inventory has developed from industry growth of new retail locations that has outpaced consumer demand. Tighter credit standards, increasing mortgage interest rates and management's decision not to discount homes just to maintain sales volume also adversely impacted sales. In the near term, we anticipate continued pressure on both sales and earnings resulting from these factors. Gross profit as a percentage of net sales was 27.5% in the first quarter of 2001 compared to 24.1% for the same period last year. The increase in gross profit in the first quarter of 2001 was primarily due to increased gross margins at the retail sales centers, caused by selling a mix of higher priced homes. Selling, general and administrative expenses, as a percentage of net sales, was 22.3% in the first quarter of 2001 compared to 21.8% for the same period last year. The increase in first quarter of 2001 selling, general and administrative expenses as a percent of net sales was due to the fixed overhead cost associated with the lower sales volume. Other income for first quarter 2001 was $317,921 of which $131,534 was from interest on cash equivalents and $74,081 was from equity in earnings from the Company's financing joint venture, Majestic 21. The Company received a $100,000 payment from TLT, Inc. against $752,654 of advances that are non-interest bearing and have been fully reserved since 1991. This compares to other income of $522,837 in the first quarter of fiscal 2000, of which $81,398 was from interest on cash equivalents and $127,031 was from equity in earnings from Majestic 21. Included in the equity in earnings from Majectic 21 in the first quarter 2000 were proceeds from the sale of loans in an asset backed securitization. The Company received a $306,830 payment from TLT, Inc. in first quarter 2000. As a result of the factors discussed above and the share repurchases discussed below, net income for the first quarter of 2001 was $381,375 or $.09 per share, compared to $398,909 or $.08 per share in the first quarter of 2000. Liquidity and Capital Resources ------------------------------- Cash and cash equivalents were $7,860,363 at February 3, 2001 compared to $9,828,122 as of November 4, 2000. The decrease in cash and cash equivalents was primarily due to the repurchase of 190,600 shares of the Company's common stock in the open market during the first quarter of 2001 for $1,162,200, an increase in accounts receivable of $450,959 from increased sales to outside dealers, a $178,600 increase in inventories and a $177,200 increase in prepaid expenses. The Company maintains a revolving credit agreement with a major bank providing for borrowings up to $2,500,000 with an option to increase the line to $4,000,000. At February 3, 2001 and November 4, 2000, there were no amounts outstanding under this agreement. Consistent with normal practice, the Company's operations are not expected to require significant capital expenditures during fiscal year 2001. Working capital requirements for the home inventory for new sales centers will be met with internal sources. Page 8 NOBILITY HOMES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (Continued) Forward Looking Statements -------------------------- Certain statements in this report are forward-looking statements within the meaning of the federal securities laws. Although the Company believes that the 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, competitive pricing pressures at both the wholesale and retail levels, changes in market demand, changes in interest rates, adverse weather conditions that reduce sales at retail centers, the risk of manufacturing plant shutdowns due to storms or other factors, and the impact of marketing and cost-management programs. Page 9 Part II. OTHER INFORMATION AND SIGNATURES There were no reportable events for Item 1 through Item 3 and Item 5 Item 4. Submission of Matters to a Vote of Securtiy Holders. a) The annual Meeting of the Shareholders was held on February 23, 2001. The only matter to come before the meeting was the election of directors. b) The Vote to elect a board of five directors was as follows:
For Against Abstain Not Voted --- ------- ------- --------- Terry E. Trexler 3,301,852 0 330 926,656 Richard C. Barberie 3,301,852 0 330 926,656 Robert P. Holliday 3,301,852 0 330 926,656 Robert P. Saltsman 3,301,852 0 330 926,656 Thomas W. Trexler 3,301,852 0 330 926,656
Item 6. Exhibits Page 10 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: March 15, 2001 By: /s/ Terry E. Trexler -------------------------------------- Terry E. Trexler, Chairman, President and Chief Executive Officer DATE: March 15, 2001 By: /s/ Thomas W. Trexler -------------------------------------- Thomas W. Trexler, Executive Vice President, Chief Financial Officer DATE: March 15, 2001 By: /s/ Lynn J. Cramer, Jr. -------------------------------------- Lynn J. Cramer, Jr., Treasurer and Principal Accounting Officer Page 11