NOTE 5 Other Investments

Investment in Joint Venture – Majestic 21 – During fiscal 1997, the Company contributed $250,000 for a 50% interest in a joint venture engaged in providing mortgage financing on manufactured homes. This investment is accounted for under the equity method of accounting.

While Majestic 21 has been deemed to be a variable interest entity, the Company only holds a 50% interest in this entity and all allocations of profit and loss are on a 50/50 basis. Since all allocations are to be made on a 50/50 basis and the Company’s maximum exposure is limited to its investment in Majestic 21, management has concluded that the Company would not absorb a majority of Majestic 21’s expected losses nor receive a majority of Majestic 21’s expected residual returns; therefore, the Company is not required to consolidate Majestic 21 with the accounts of Nobility Homes in accordance with ASC 810.

See Note 13 for discussion of the Company’s guarantee of a $5 million note payable of Majestic 21.

The following is summarized financial information of the Company’s joint venture:


	October 31, 2015		November 1, 2014
Total Assets	$	14,499,423	$	16,457,594
Total Liabilities	$	10,511,965	$	11,747,081
Total Equity	$	3,987,458	$	4,710,513
Net Income	$	276,945	$	269,840

Distributions received from the joint venture amounted to $500,000 in fiscal year 2015. There were no distributions received from the joint venture in fiscal year 2014.

With regard to our investment in Majestic 21, there are no differences between our investment balance and the amount of underlying equity in net assets owned by Majestic 21.

Investment in Retirement Community Limited Partnerships –The Company has a 31.3% investment interest in Walden Woods South LLC (“Walden Woods”), which owns and operates a retirement manufactured home community named Walden Woods located in Homosassa, Florida. The Company’s investment in Walden Woods is fully impaired. The majority owner of Walden Woods is the Company’s principal shareholder. The Company’s principal shareholder guaranteed the financing used to purchase Walden Woods Park, which created an implicit guarantee from the Company. The implicit guarantee caused Walden Woods Park to be a variable interest entity as defined in Accounting Standard Codification (ASC) 810. The Company is considered to currently have an implicit guarantee with Walden Woods because it is a related party to the primary guarantor. In determining the primary beneficiary of the variable interest entity, the Company has determined the principal shareholder has the power to direct the activities that most significantly impact the economic performance of Walden Woods. As a result, in accordance with ASC 810, Walden Woods has not been consolidated in the financial statements of the Company.

The Company has a 48.5% investment interest in a retirement manufactured home community, CRF III, Ltd. (Cypress Creek) located in Winter Haven, Florida. The Company has the right to assign some of its ownership to partners other than Nobility Homes. During 2015, the Company’s investment in Cypress Creek was reduced to zero from recurring operating losses.

These investments in Walden Woods and Cypress Creek are accounted for under the equity method of accounting and all allocations of profit and loss are on a pro-rata basis. Since the Company’s maximum exposure is limited to its investment in Walden Woods and Cypress Creek, management has concluded that the Company would not absorb a majority of Walden Woods’ or Cypress Creek’s expected losses nor receive a majority of Walden Woods’ and Cypress Creek’s expected residual returns; therefore, the Company is not required to consolidate Walden Woods and Cypress Creek with the accounts of Nobility Homes in accordance with FASB ASC No. 810-10.

The following is summarized financial information of Walden Woods and Cypress Creek as of September 30, 2015 and September 30, 2014*:


	September 30, 2015			September 30, 2014
Total Assets	$	13,273,488		$	13,477,599
Total Liabilities	$	17,101,517		$	16,271,729
Total Deficit	$	(3,828,029	)	$	(2,794,130	)

*	Due to Walden Woods, and Cypress Creek having a calendar year-end, the summarized financial information provided is from their most recent quarter.

The following table summarizes the change in the investments for fiscal year 2015 and 2014:


	Walden Woods		Cypress Creek
Investment at November 2, 2013	$	—	$	467,934
Losses on investment		—		(321,531	)

Investment at November 1, 2014		—		146,403
Losses on investment		—		(146,403	)

Investment at October 31, 2015	$	—	$	—

The Company has no obligation to fund future operating losses of Walden Woods or Cypress Creek and accordingly, has not reduced the investment carrying value to less than zero.