SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Under Section 13 or 15(d) of
the Securities and Exchange Act of 1934
For the fiscal year ended November 4, 1995
Commission file number 0-6506
NOBILITY HOMES, INC.
(Name of small business issuer 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
(Issuer's telephone number, including area code)
Securities registered under Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $.10 par value
(Title of Class)
Check whether the issuer (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the past 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 .
Check if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB.
State revenues for issuer's most recent fiscal year: $30,805,835
State the aggregate market value of the voting stock held by non-
affiliates of the registrant on January 16, 1996, computed by reference to
the price at which the stock was sold on that date: $9,970,739
(APPLICABLE ONLY TO CORPORATE ISSUERS)
State the number of shares outstanding of each of the issuer's
classes of common stock, as of January 16, 1996: 1,320,431 shares of
common stock
DOCUMENTS INCORPORATED BY REFERENCE Incorporated at
Nobility Homes, Inc. Proxy Statement for the 1996 Part III, Items 9,
Annual Meeting of Shareholders 10, 11 and 12
<PAGE>
PART I
Item 1. Description of Business
Nobility Homes, Inc. (the "Registrant or the "Company"), a
corporation organized under the laws of Florida in 1967, designs,
manufactures and sells a broad line of manufactured homes on a wholesale
basis to manufactured home dealers and manufactured home parks. Trade
names used for its manufactured homes (hereinafter "homes") include
"Kingswood," "Richwood," "Springwood," "Tropic Isle," "Regency Manor,"
"Regency Manor Special," and "Tropic Manor." Through its wholly-owned
subsidiary, Prestige Home Centers, Inc. ("Prestige"), which was acquired
during the fourth quarter of fiscal 1994, the Registrant operates 15
retail sales centers in north and central Florida that sell the
Registrant's homes primarily to the family market.
The Registrant's homes are available in single-wide widths of 12, 14
and 16 feet ranging from 48 to 72 feet in length, double-wide widths of 24
feet, 26 feet and 28 feet ranging from 28 feet to 76 feet in length and
triple-wide widths of 36, 38 and 42 feet wide ranging from 46 feet to 68
feet in length. Homes manufactured by the Registrant are available in
approximately 100 active models, ranging in size from 636 to 2,153 square
feet and contain from one to five bedrooms.
The homes are sold primarily as unfurnished dwellings ready for
permanent occupancy. Interiors are designed and color coordinated in a
range of decors. Depending on the size of the unit and quality of
appliances and other appointments, retail prices for the Registrant's
homes typically range from approximately $14,000 to $60,000. Most of the
prices of the Registrant's homes are considered by it to be within the low
to medium price range of the industry.
Both of the Registrant's manufacturing plants utilize assembly line
techniques in manufactured home production. Both plants manufacture and
assemble the floors, sidewalls, end walls, roofs and interior cabinets for
their homes. The Registrant purchases from outside suppliers various
other components that are built into its homes including the axles,
frames, tires, doors, windows, pre-finished sidings, plywood, ceiling
panels, lumber, rafters, insulation, paneling, appliances, heating units,
lighting and plumbing fixtures, carpeting and drapes. The Registrant is
not dependent upon any one particular supplier for its raw materials or
component parts, nor is it required to carry significant amounts of
inventory to assure itself of a continuous allotment of goods from
suppliers.
The Registrant's two manufacturing plants operated at an average of
approximately 50% of their single shift capacity in fiscal 1995 which
represented a 5% increase from the previous fiscal year.
As of January 20, 1996, the Registrant had 219 full-time employees,
including 67 employed by Prestige. Approximately 117 employees are
factory personnel compared to approximately 104 in such positions a year
ago and 94 are in management, administrative, supervisory, sales and
clerical positions (including 51 management and sales personnel employed
by Prestige) compared to approximately 76 a year ago. In addition, the
Registrant employs part-time employees when necessary.
The Registrant makes a contribution toward employees' group health
and life insurance. The Registrant, which is not subject to any
collective bargaining agreements, has not experienced any work stoppage or
labor disputes during the fiscal year and considers its relationship with
employees to be generally satisfactory.
The Registrant generally does not manufacture its homes to be held by
it as inventory (except for model home inventory of Prestige), but,
rather, manufactures its homes after receipt of dealer orders. Although
the Registrant attempts to maintain a consistent level of production of
homes throughout the fiscal year, seasonal fluctuations do occur, with
sales of homes generally lower during the first quarter due to the holiday
season.
The sales area for a manufactured home manufacturer is limited by
substantial delivery costs of the finished product to the dealer. The
majority of homes produced by the Registrant are delivered by outside
trucking companies. The Registrant estimates that it can compete
effectively within a range of approximately 250 miles from its
manufacturing plants. During the last two fiscal years, all of the
Registrant's sales were made in Florida.
Since 1991, the Registrant's primary market has shifted from retirees
relocating to the Sunbelt to the family market. Primarily through
Prestige, the Registrant's sales to the family market surpassed retirement
park sales for the first time in fiscal 1992 and have continued to
increase as a percent of sales each year since. See "Management's
Discussion and Analysis."
The Registrant sells its homes on a wholesale basis exclusively
through 4 full-time salespersons to approximately 55 active dealers. The
Registrant had a dealer network of 75 dealers at fiscal year-end 1994, but
a number of the dealers did not actively purchase the Registrant's
products and were dropped by the Registrant from its network during fiscal
1995. The Registrant attempts continuously to seek new dealers in the
areas in which it operates as there is ongoing turnover in the dealers
with which it deals at any one time, especially with manufactured home
parks as they achieve full occupancy levels. As is common in the
industry, most of the Registrant's dealers other than its subsidiary,
Prestige, are independent dealers that sell products produced by several
manufacturers. However, the Registrant has exclusive sales arrangements
with TLT, Inc. ("TLT"), an affiliate of the Registrant's President formed
for the purpose of providing a more certain market for the Registrant's
products, which operates three manufactured home communities targeted at
the retiree market. No one dealer accounted for more than 10.0% of the
Registrant's total sales in fiscal 1995. Prior to the Registrant's
acquisition of Prestige effective as of the end of August, 1994, Prestige
accounted for more than half of the Registrant's sales. Sales to Prestige
are booked as an intercompany transaction.
The manufacture, distribution and sale of homes is subject to
governmental regulation at the federal, state and local levels. The
Department of Housing and Urban Development ("HUD") has adopted national
construction and safety standards that have priority over existing state
standards. Compliance with these standards involves submission to and
approval by an engineering firm approved by HUD of engineering plans and
specifications on all models. HUD's standards also require periodic
inspection by state or other third party inspectors of plant facilities
and construction procedures, as well as inspection of manufactured home
units during construction. New federal wind standards for manufactured
homes sold in hurricane prone areas and new energy standards went into
effect in 1994. See "Management's Discussion and Analysis" for
information concerning these standards.
The Registrant estimates that compliance with federal, state and
local environmental protection laws will have no material effect upon
capital expenditures for plant or equipment modifications or earnings for
the next fiscal year.
The transportation of homes manufactured by the Registrant is subject
to state regulation. Generally, special permits must be obtained to
transport the home over public highways, and restrictions are imposed to
promote travel safety including those relating to routes, travel periods,
speed limits, safety equipment and size.
Homes manufactured by the Registrant are subject to the requirements
of the Magnuson-Moss Warranty Act and Federal Trade Commission rulings
which regulate warranties on consumer products. The Registrant provides a
limited warranty of one year on the structural components of the homes it
manufactures.
Dealers generally obtain inventory financing from financial
institutions (usually banks and finance companies) on a "floor plan" basis
whereby the financial institution obtains a security interest in all or
part of the dealer's manufactured home inventory. The Registrant, upon
request of the lending institution, enters into repurchase agreements with
the lending institutions which provide that, in the event of a dealer's
default, the Registrant will, at the lender's request, repurchase the home
provided that the Registrant's liability will not exceed the
manufacturer's invoice price and that the repurchased home is new and
unused. Generally, the repurchase agreement expires within one year after
a home is sold to the dealer, and the repurchase price is limited to
between 70% to 100% of the original invoice price to the dealer, depending
on the length of time that has expired since the original sale.
Generally, repurchase is conditioned upon the dealer's insolvency. Any
losses incurred as a result of such repurchases would be limited to the
difference between the repurchase price and the subsequent resale value of
the home repurchased. The Registrant was not required to repurchase any
homes during fiscal 1995 or 1994. For additional information, see Note 12
of "Notes to Consolidated Financial Statements." The Registrant does not
finance retail sales of new homes for its dealers' customers.
The Registrant does not generally offer consigned inventory programs
or other credit terms to dealers and ordinarily receives payment for its
homes within 15 to 30 days of delivery. However, the Registrant offers
extended terms to park dealers who do a high volume of business with the
Registrant, including TLT as well as unrelated park dealers. In order to
stimulate sales, the Registrant sells homes to selected manufactured home
parks for display on special terms. The high visibility of the
Registrant's homes in such parks generates additional sales of the
Registrant's homes through such dealers. From time to time the Registrant
has extended floor plan and working capital financing to TLT in return for
which the Registrant receives virtually all of the sales rights for the
manufactured homes sold by the parks operated by it. See Note 3 to the
Consolidated Financial Statements for additional information concerning
such financing.
The Registrant offers a quarterly and yearly volume bonus award to
those dealers who purchase homes from the Registrant in excess of certain
specified dollar amounts during a specified period. As an additional
dealer incentive, the Registrant assumes certain floor plan financing
costs for a specified number of days for dealers who carry in excess of a
specified level of the Registrant's inventory. During fiscal 1995 and
1994 the Registrant reimbursed dealers other than TLT $35,644 and $20,955,
respectively, as volume bonus awards and for floor plan financing charges
under the programs described above. Volume bonus awards to TLT, which are
granted on the same basis as to other dealers, were $91,000 in fiscal 1995
and $97,000 in fiscal 1994.
Prestige Home Centers, Inc.
Effective August 31, 1994, the Registrant acquired all the
outstanding stock of Prestige from its then shareholders, in exchange for
150,000 shares of the Registrant's Common Stock. Prior to becoming a
wholly-owned subsidiary of the Registrant, Prestige was owned 45% by the
Registrant's President, 45% by his son (a director of the Registrant and,
since December 1994, its Executive Vice President and Chief Financial
Officer), and 10% by the President of Prestige. The acquisition
eliminated the conflicts of interest inherent in the Registrant doing
business with an entity controlled by executive officers and directors of
the Registrant, while at the same time allowing the Registrant to benefit
from the growing market for its homes through the acquisition or
development by Prestige of additional retail lots within the Registrant's
geographic market area.
Prestige, which was formed as a Florida corporation in July 1990,
operates 15 retail lots in north and central Florida. Its principal
executive offices are located at the Registrant's headquarters in Ocala,
Florida. According to statistics compiled by Statistical Surveys, Inc.
from records on file with the State of Florida, Prestige was the largest
retail dealer of multi-section manufactured homes in Florida in 1994 and
1995 based on number of home sales.
Each of Prestige's retail lots is located within 250 miles of one of
the Registrant's two manufacturing facilities. Prestige leases its retail
lots from unaffiliated parties under leases with terms of between one and
three years with renewal options. The following table sets forth the
location of each of Prestige's retail outlets, and the date on which each
was opened or acquired:
Location Date Opened
Ocala South July 1990
Ocala North July 1990
St. Augustine July 1990
Chiefland July 1990
Tallahassee February 1993
Tampa February 1993
Ocala West March 1993
Lake City June 1993
Auburndale August 1994
Jacksonville September 1994
Inverness May 1995
Brooksville May 1995
Tavares November 1995
North
Chiefland November 1995
Perry November 1995
The Inverness and Brooksville sales centers were acquired in May 1995
in exchange for Common Stock with a fair market value of $200,000 and the
assumption of floor plan liabilities of approximately $900,000. The
Tavares, North Chiefland and Perry sales centers were acquired in November
1995 in exchange for Common Stock with a fair market value of $252,000.
The primary customers of Prestige are young, first-time home buyers
who generally purchase manufactured homes to place on their own homesites.
Prestige operates its retail sales centers with a model home concept.
Each of the homes displayed at its retail sales centers is furnished and
decorated as a model home. Although the model homes may be purchased from
Prestige's model home inventory, generally, customers order homes which
are shipped directly from the factory to their homesite. Prestige sales
generally are to purchasers living within a radius of approximately 100
miles from the selling retail lot.
Financing for home purchases is provided by one of several
independent sources that specialize in manufactured housing lending.
Additionally, numerous local banks finance manufactured home purchases.
Prestige is not required to sign any recourse agreements with any of these
retail financing sources, nor does Prestige itself finance customers' new
home purchases.
The retail sale of manufactured homes is a highly competitive
business. Because of the large number of retail sales centers located
throughout the Registrant's market area, potential customers typically can
find a sales center within a 100 mile radius of their present home.
Prestige competes with over 50 other retailers in its primary market area,
some of which may have greater financial resources than Prestige. In
addition, the larger, more expensive manufactured homes offered by
Prestige compete with conventional site-built housing.
Prestige's wholly-owned subsidiary, Prestige Insurance Services,
Inc., operates as an independent insurance agent offering credit life and
property and casualty insurance to Prestige customers in connection with
their purchase and financing of manufactured homes. It receives a
commission on the insurance premium collected at the time an insurance
policy is written and in future years if the homeowner renews the policy.
Its revenues were less than $24,000 and $40,000 in fiscal 1995 and 1994,
respectively.
Competition
The manufactured home industry is highly competitive. The initial
investment required for entry into the business of manufacturing homes is
not unduly large. State bonding requirements for entry in the business
vary from state to state and range from zero to $100,000 per state. The
bond requirement for Florida is $50,000 per plant. The Registrant
competes directly with other manufacturers, some of which are considerably
larger than it and possess greater financial resources. Based on number
of units sold, the Registrant ranks 6th in the state of Florida out of the
top 45 manufacturers selling manufactured homes in the state; however, the
Registrant estimates that of those 45 manufacturers approximately 15
manufacture homes of the same type as the Registrant and compete in the
same market area. The Registrant believes that it is generally competitive
with most of those manufacturers in terms of price, service, warranty and
product performance.
Item 2. Properties
As of November 4, 1995, two manufacturing plants were owned and
operated by the Registrant as follows:
Depreciated Cost of
Approximate Plant and Property
Location Size at November 4, 1995
Belleview, Florida 33,500 sq. ft. $ 72,048
Ocala, Florida(1) 72,000 sq. ft. 516,413
_________________________
(1) This 72,000 square foot plant is located on approximately 35.5 acres
of land on which an additional two-story structure adjoining the
plant serves as the Registrant's corporate offices.
The Company's Belleview plant is metal and concrete construction and
the Ocala plant is of metal construction. Both properties are in good
condition and require little maintenance.
Item 3. Pending Legal Proceedings
Certain claims and suits arising in the ordinary course of business
have been filed or are pending against the Company. In the opinion of
management, any related liabilities that might arise would be covered
under terms of the Company's liability insurance policies or would not be
material to the financial statements taken as a whole.
Item 4. Submission of Matters to a Vote of Security Holders
None
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters
On January 10, 1994, the Registrant's Common Stock was listed on the
Nasdaq National Market under the symbol NOBH. The following table shows
the range of high and low sales prices for the Common Stock for each
fiscal quarter of 1995 and 1994.
Fiscal Year End (1)
November 4, 1995 October 30, 1994
Quarter High Low High Low
1st $10 $8-1/2 $13 $11-3/8
2nd 8-1/4 7-1/4 12-1/8 9-1/4
3rd 11-3/4 10-1/4 9-7/8 8-1/2
4th 16-1/2 13-1/2 8-3/4 7-1/2
_______________________________
(1) On January 19, 1996 a three-for-two stock split in the form of a stock
dividend was paid to shareholders of record on December 22, 1995 and on
January 31, 1994 a 10% stock dividend was paid to shareholders of record
on January 7, 1994. Amounts in the table have not been restated to give
effect to the 1996 stock split.
At January 16, 1996, the approximate number of record holders of
Common Stock was 259 (not including individual participants in security
position listings).
The payment of cash dividends will be within the discretion of the
Registrant's Board of Directors and will depend, among other factors, on
earnings, capital requirements and the operating and financial condition
of the Registrant. During fiscal 1995 and 1994 no cash dividends were
paid.
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
During fiscal 1995, the Company achieved growth in both revenues and
earnings. Total net sales increased 33.4% to $30,805,835 from $23,082,391
in fiscal 1994. The increase in fiscal 1995 sales was primarily due to
the Company having ten retail sales centers in full operation throughout
fiscal 1995 and the acquisition of two existing retail sales centers in
May 1995. In fiscal 1994, the Company had eight retail sales centers in
full operation. Two additional retail sales centers were opened in August
and September 1994, respectively, but did not produce any sales until the
first quarter of fiscal 1995. In addition, the year ended November 4,
1995 consisted of a fifty-three (53) week period and the year ended
October 29, 1994 consisted of a fifty-two (52) week period. A portion of
the fiscal 1995 increase in sales also was due to higher costs passed on
to customers resulting from the new HUD regulations described below.
The Registrant's primary focus is young, first time home buyers who
already live and work in the area. These buyers generally purchase their
manufactured homes from retail sales centers to locate on property they
own. The Registrant has aggressively pursued this market through its
Prestige retail sales centers, which have become the principal focus of
its business strategy. While the Registrant actively seeks to make
wholesale sales to independent retail dealers, the Registrant's presence
as a competitor limits potential sales in the same geographic areas
serviced by its Prestige sales centers.
The Registrant continues to make sales to the retirement community
market, which is made up of retirees from the north who move to Florida to
enjoy its milder winters and who typically purchase homes to be located on
sites leased from park communities that offer a variety of amenities.
While a significant portion of the Registrant's sales in this market are
made to communities owned and/or operated by the Registrant's affiliate,
TLT, the importance to the Registrant of the retirement market continues
to diminish, both as a focus of its efforts and in dollars and as
percentage of total sales.
Industry-wide production of manufactured homes continued to improve
in 1995, up 11.4% over 1994, extending the trend begun in 1992. According
to industry sources, however, production of manufactured houses in Florida
decreased approximately 8.6% for the first eleven months of calendar 1995
following increases of 4.2% in 1994 and 6.9% in 1993 as compared to the
prior year. The statewide increase in production of homes in 1994 and
1993 was primarily due to the increased demand for homes in South Florida
during the rebuilding following Hurricane Andrew. Nobility's growth was
more impressive, as new retail home sales increased by 36.1% in fiscal
1995 and 31.3% in fiscal 1994.
The Company sold 1,030 homes in fiscal 1995, of which 181 homes were
sold to independent dealers, representing sales of $3,874,817, and 55
homes were sold to TLT communities, representing sales of $1,295,209. In
fiscal 1994, the Company sold 838 homes, of which 230 homes were sold to
independent dealers, representing sales of $4,257,766; and 65 homes were
sold to TLT communities, representing sales of $1,395,207. The balance of
the Registrant's sales in fiscal 1995 and 1994 were made on a retail basis
through Prestige's retail centers. The decline in sales to independent
dealers is a result of the Registrant's presence through its Prestige
retail lots as a competitor in the same geographic markets.
The Registrant has a product line of approximately 100 active models.
Market demand can fluctuate on a fairly short-term basis; however, the
manufacturing process is such that the Registrant can alter its product
mix relatively quickly in response to changes in the market. During
fiscal 1995, the Registrant's product mix was positively affected by
larger, more expensive double-wide and triple-wide homes and better
acceptance of the Registrant's single-wide homes both resulting from
greater consumer confidence and the availability of varied types of
financing at competitive rates. Many family buyers today purchase three-
or four-bedroom manufactured homes, compared with the two-bedroom home
that typically appeals to the retirement community market.
In an effort to make manufactured homes more competitive with
conventional housing, the outside financing sources that finance home
purchases by Prestige's customers continue to develop creative and
attractive financing packages including 30-year mortgages, an interest
rate reduction program, combination land/manufactured home loans, and a 5%
down payment program for qualified buyers.
Gross profit in fiscal 1995 as a percent of net sales was 23.4%
compared to 22.0% in fiscal 1994. The increase in gross profit in fiscal
1995 was primarily due to an 8.4% increase in the average new home sales
prices and better operating efficiencies at both the Prestige retail
centers and at the Registrant's manufacturing plants.
Selling, general and administrative expenses as a percent of net
sales was 14.1% as compared to 14.3% in fiscal 1994.
Other income of $1,339,743 for the 1995 fiscal year consisted of:
(1) $1,000,000 in non-recurring income from the key-man insurance carried
on the former president of Prestige Homes, Bertus C. Parker, who died May
31, 1995 after a lengthy illness; and (2) $348,884 gain from the sale of
the Company's limited partnership interest in Saddle Oak Club. During
fiscal 1994, the Company recognized a $231,327 gain from the sale of its
idle North Carolina manufacturing plant and a $162,530 gain from the sale
of its limited partnership interest in Saddle Oak Club and interest of
approximately $34,192 on the installment sale.
Effective October 31, 1993 the Company adopted Statement of Financial
Accounting Standards No. 109 Accounting for Income Taxes ("FAS 109"). The
adoption of FAS 109 changed the Company's method of accounting for income
taxes from a deferred method to an asset and liability approach. During
the first quarter of fiscal 1994, FAS 109 had the effect of increasing net
income by $664,000. As a result of accounting for the Company's
acquisition of Prestige effective as of August 31, 1994 in a manner
similar to the pooling-of-interests method, the tax benefit and related
cumulative effect adjustments initially recorded in first quarter 1994
were reduced to $580,000 to reflect the calculation under the combined
operations.
As a result of the factors discussed above, earnings for fiscal year
1995 were $2,957,438 or $2.31 per share compared to $1,769,176 or $1.37
per share for fiscal year 1994.
In 1994 new HUD regulations took effect which require that
manufactured homes built after July 13, 1994 be constructed to more
stringent standards. Florida is split between two wind zones. Homes sold
in Zone II, which includes most of north and central Florida, must be able
to withstand winds of up to 100 miles per hour, while homes sold in Zone
III, which covers primarily the coastal areas of south Florida, must be
able to withstand winds up to 110 miles per hour. Homes built to these
standards are significantly stronger than homes built prior to the
effective date. Home set-up was also affected with much stronger tie down
anchoring requirements. Most of the Registrant's homes are sold in Zone
II.
HUD has also issued new thermal standards for manufacturing housing
which were effective for homes manufactured beginning October 25, 1994.
These regulations mandate a much higher insulation throughout the home
including the floor, walls and roof and an improved ventilation system for
the whole house, including kitchen and baths.
Liquidity and Capital Resources
Cash and cash equivalents were $932,432 at November 4, 1995 compared
to $1,743,102 at October 29, 1994. The decrease is primarily due to
management's decision to reduce third party floor plan financing expenses
for its Prestige sales centers, with the Company carrying the inventory to
reduce floor plan interest costs. The Company has approximately $6
million of floor plan financing availability with third party financial
institutions to be utilized to floor plan inventory for the retail sales
centers. During fiscal 1995, the Company maintained an average of $1.5
million on third party floor plans, which was paid off during the fourth
quarter of 1995, compared with an average of $2.0 million in fiscal 1994.
During fiscal 1995, the Company increased its Revolving Credit
Agreement from $1.5 million to $2.5 million of working capital for use in
connection with its overall operations. At November 4, 1995, borrowings
under the Agreement totaled $919,000. This amount has been netted against
cash and cash equivalents in the consolidated balance sheet due to the
legal right of offset established by a Cash Management Agreement with the
bank. The outstanding advance was repaid on the first business day of
fiscal year 1996.
Working capital increased to $6,803,729 on November 4, 1995 from
$5,086,158 on October 29, 1994. Inventories increased to $6,786,159 at
fiscal year end 1995 from $4,604,299 at fiscal year end 1994. The
increase in inventories is primarily due to (1) acquisition of the two
retail sales centers in 1995; and (2) an increase in the average inventory
per retail sales center.
On November 22, 1995, the Company acquired three retail sales centers
in Florida in an asset acquisition by issuing 18,000 shares of common
stock with a fair market value of $252,000.
Consistent with normal practice, the Company's operations are not
expected to require significant capital expenditures during fiscal 1996.
Working capital requirements for inventory for new retail sales centers
are met through a combination of internal sources and the floor plan lines
discussed above.
Item 7. Consolidated Financial Statements and Supplementary Data
Financial statements incorporated herein from the Registrant's Annual
Report to Shareholders are attached as Exhibit 13 and are listed at Part IV,
Item 13(a), "Consolidated Financial Statements and Schedules."
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
Item 9. Directors and Executive Officers of the Registrant
Information concerning the directors of the Registrant is
incorporated by reference pursuant to Instruction E of Form 10-KSB from
the Registrant's definitive proxy statement for the 1996 annual meeting of
shareholders to be filed with the Commission pursuant to Regulation 14A on
or before March 3, 1996.
The following table provides the names, ages and business experience
for the past five years for each of the Executive Officers of the
Registrant. Executive officers are each elected for one year terms.
Executive Officers
Terry E. Trexler (56) Chairman of the Board and President of
Registrant; Mr. Trexler is also President of TLT,
and Chairman of the Board of Citizens First
Bancshares, Inc. and its subsidiary, Citizens
First Bank of Ocala.
Thomas W. Trexler (32) Executive Vice President and Chief Financial
Officer of the Registrant since December 1994 and
a director of the Registrant since February 1993;
President of Prestige Insurance Services, Inc.
since August 1992; President of Prestige since
June 1995 and Vice President from 1991 to June
1995; director of Prestige and Vice President and
director of TLT since September 1991; prior to
September 1991, Mr. Trexler was Vice President of
NationsBank (formerly NCNB National Bank) in
Naples, Florida; Mr. Trexler also is a director
of Citizens First Bancshares, Inc. and its
subsidiary, Citizens First Bank of Ocala.
Edward C. Sims (49) Vice President of Engineering of the Registrant.
Jean Etheredge (50) Secretary of the Registrant.
Lynn J. Cramer, Jr. (50) Treasurer of the Registrant.
Thomas W. Trexler, Executive Vice President, Chief Financial Officer
and a director of the Registrant, is the son of Terry E. Trexler, the
Registrant's President and Chairman of the Board. There are no other
family relationships between any directors or executive officers of the
Registrant.
Item 10. Executive Compensation
Information concerning executive compensation is incorporated by
reference pursuant to Instruction E of Form 10-KSB from the Registrant's
definitive proxy statement for the 1996 annual meeting of shareholders to
be filed with the Commission pursuant to Regulation 14A on or before
March 3, 1996.
Item 11. Security Ownership of Certain Beneficial Owners and Management
Information concerning security ownership of certain beneficial
owners and management is incorporated by reference pursuant to Instruction
E of Form 10-KSB from the Registrant's definitive proxy statement for the
1996 annual meeting of shareholders to be filed with the Commission
pursuant to Regulation 14A on or before March 3, 1996.
Item 12. Certain Relationships and Related Transactions
Information concerning certain relationships and related transactions
is incorporated by reference pursuant to Instruction E of Form 10-KSB from
the Registrant's definitive proxy statement for the 1996 annual meeting of
shareholders to be filed with the Commission pursuant to Regulation 14A on
or before March 3, 1996.
PART IV
Item 13. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Consolidated Financial Statements and Schedules:
Report of Price Waterhouse LLP
Consolidated Balance Sheets at November 4, 1995 and October 29,
1994
Consolidated Statements of Income for the Years Ended November
4, 1995 and October 29, 1994
Consolidated Statements of Changes in Stockholders' Equity for
the Years Ended November 4, 1995 and October 29, 1994
Consolidated Statements of Cash Flows for the Years Ended
November 4, 1995 and October 29, 1994
Notes to Consolidated Financial Statements
(b) Reports on Form 8-K:
None
(c) Exhibits:
3. (a) The Registrant's Articles of Incorporation, as
amended, were attached as an Exhibit to the
Registrant's Annual Report on Form 10-K for the fiscal
year ended November 1, 1981, and are incorporated
herein by reference.
(b) Bylaws, as amended March 28, 1994, were attached as an
Exhibit to the Registrant's Annual Report on Form
10-KSB for the fiscal year ended October 29, 1994 and
are incorporated herein by reference.
10. (a) The following documents relating to floor plan
financing for Prestige Home Centers, Inc.:
(2) Inventory Financing Agreement between Prestige
Home Centers, Inc. and Ford Motor Credit Company
was attached as an Exhibit to the Registrant's
Annual Report on Form 10-KSB for the fiscal year
ended October 29, 1994 and is incorporated herein
by reference.
(3) Inventory Security Agreement between Prestige
Home Centers, Inc. and John Deere Credit, Inc.
was attached as an Exhibit to the Registrant's
Annual Report on Form 10-KSB for the fiscal year
ended October 29, 1994 and is incorporated herein
by reference.
(b) Revolving Credit Agreement dated November 28, 1995.
13. Consolidated Financial Statements and Schedules from the
1995 Annual Report to Shareholders.
21. Subsidiaries of Registrant.
27. Financial Data Schedule.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NOBILITY HOMES, INC.
DATE: January 19, 1996 By:/s/ Terry E. Trexler
Terry E. Trexler, Chairman,
President and Chief Executive
Officer
DATE: January 19, 1996 By:/s/ Thomas W. Trexler
Thomas W. Trexler, Executive Vice
President and Chief Financial
Officer
DATE: January 19, 1996 By:/s/ Lynn J. Cramer, Jr.
Lynn J. Cramer, Jr., Treasurer and
Principal Accounting Officer
In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated:
DATE: January 19, 1996 /s/ Terry E. Trexler
Terry E. Trexler, Director
DATE: January 19, 1996 /s/ Richard C. Barberie
Richard C. Barberie, Director
DATE: January 22, 1996 /s/ Robert P. Saltsman
Robert P. Saltsman, Director
DATE: January 19, 1996 /s/ Thomas W. Trexler
Thomas W. Trexler, Director
<PAGE>
EXHIBIT INDEX
3. (a) The Registrant's Articles of Incorporation, as amended,
were attached as an Exhibit to the Registrant's Annual
Report on Form 10-K for the fiscal year ended November 1,
1981, and are incorporated herein by reference.
(b) Bylaws, as amended March 28, 1994, were attached as an
Exhibit to the Registrant's Annual Report on Form 10-KSB
for the fiscal year ended October 29, 1994 and are
incorporated herein by reference.
10. (a) The following documents relating to floor plan financing
for Prestige Home Centers, Inc.:
(2) Inventory Financing Agreement between Prestige
Home Centers, Inc. and Ford Motor Credit Company
was attached as an Exhibit to the Registrant's
Annual Report on Form 10-KSB for the fiscal year
ended October 29, 1994 and is incorporated herein
by reference.
(3) Inventory Security Agreement between Prestige
Home Centers, Inc. and John Deere Credit, Inc.
was attached as an Exhibit to the Registrant's
Annual Report on Form 10-KSB for the fiscal year
ended October 29, 1994 and is incorporated herein
by reference.
(b) Revolving Credit Agreement dated November 28, 1995.
13. Consolidated Financial Statements and Schedules from the
1995 Annual Report to Shareholders.
21. Subsidiaries of Registrant.
27. Financial Data Schedule.
REVOLVING CREDIT AGREEMENT
November 28, 1995
Mr. Terry E. Trexler, President
Nobility Homes, Inc.
3741 S. W. 7th ST
Ocala, FL 34478
Dear Mr. Trexler:
The following agreement is provided in an effort to clarify the terms,
conditions and covenants relative to the $2,500,000 Line of Credit
("Line"), which was provided your organization by SunTrust Bank, North
Central Florida (F/K/A SunBank/ North Central Florida). This agreement
shall supersede the previous agreement dated January 6, 1994 and the
modification of such on June 22, 1995. The Line is offered subject to
the following terms, conditions and covenants.
A. TERMS OF LINE
1. Borrower: Advances under the line shall be made to Nobility Homes,
Inc. ("Borrower"), which shall be responsible for the repayment of
the advances.
2. Amount of Line: The maximum amount of the Line shall be Two Million,
Five Hundred Thousand and No/100 Dollars ($2,500,000.00).
3. Purpose: Advances under the Line are to be used for general short-
term working capital requirements which occur in the normal course of
Borrower's business.
4. Term of Line: The Line shall be represented and evidenced by a
promissory note or notes, payable on demand of the Bank. The Bank's
obligation to advance under this Line of Credit Commitment shall
expire on April 1, 1996 and shall be subject to the Borrower's
continued banking relationship with the Bank, as well as the
continued satisfactory financial condition of the Borrower, in the
opinion of the Bank.
5. Interest Rate: Advances under the Line shall bear and accrue
interest at a rate per annum which shall be the Borrower's choice of
(a) the Bank's Prime Rate, which is defined as that rate of interest
announced from time to time by the Bank as its Prime Rate or (b) the
London interbank offering rate (LIBOR) as calculated on a daily rate
basis plus 250 basis points. In either event, interest shall be due
and payable monthly. Both rate basis are floating, with adjustments
made the day of change.
5.1 Calculation of Interest: All interest under the Note or hereunder
shall be calculated on the basis of a 360-day year for the actual
number of days elapsed in an interest period (actual/360 method),
unless the Bank shall otherwise elect.
6. Advances: The sums contemplated to be advanced may be repaid and
re-advanced pursuant to the terms hereof, so long as this agreement
remains in effect. The advances may be repaid in whole or in part at
any time without prepayment premium, penalty, or fee whatsoever.
7. Line of Credit Paydown: During the term of this commitment, the
outstandings under the Line shall be paid down to a balance not to
exceed One and No/100 Dollars ($1.00) for thirty (30) consecutive
days.
8. Loan Security: The advances shall be extended on an unsecured
basis; however, the Borrower shall not, without the prior written
consent of the Bank, permit or suffer to exist any lien, charge,
encumbrance, or security interest in or upon the Borrower's business
assets, with the exception of floor plan lines of credit occurring in
the normal course of business, in as much as they do not adversely
impact the financial covenants detailed in this agreement.
B. REQUIREMENTS AND CONDITIONS OF LINE
1. Financial Information: Borrower shall maintain books and records in
accordance with generally accepted accounting principles and shall
furnish to the Bank the following periodic financial information:
(a) Quarterly Reports. Within 45 days after the end of each
calendar quarter, an income statement and a balance sheet prepared in
accordance with generally accepted accounting principles, certified
by the chief financial officer or president of Borrower as being true
and accurate;
(b) Annual Reports. Within 90 days after the end of each fiscal
year, an income statement and a reconciliation of surplus statement
of the Borrower for such year, and a balance sheet as of the end of
such year, prepared in accordance with generally accepted auditing
standards certified by independent certified public accountants of
recognized standing selected by the Borrower and satisfactory to the
Bank; and
(c) No Default Certificates. Together with each report required by
Subsection (a) and (b), shall submit a certificate of its president
or chief financial officer that no Default or Event of Default then
exists or if a Default or Event of Default exists, the nature and
duration thereof and the Borrower's intention with respect thereto.
In addition, in the event of a default, the Borrower's independent
auditors (if applicable) shall include, within its audit report, a
statement that, in the course of such audit, it discovered any
circumstances which it believes constitutes a Default or Event of
Default and if it discovered any such circumstances, the nature and
duration thereof.
If the Borrower has Subsidiaries, the financial statements required
above shall be consolidated and, if required by the Bank,
consolidating form for the Borrower and all Subsidiaries required by
generally accepted accounting principles to be consolidated for
financial reporting purposes, and/or,
(d) Other Information. In addition to the financial statements
required herein,the bank reserves the right to require other or
additional financial or other information concerning the Borrower
and/or its Subsidiaries.
2. Conditions Precedent to Borrowing. Prior to any Advance of the
proceeds of any Loan, the following conditions shall have been
satisfied, in the sole opinion of the Bank and its counsel:
2.1 Conditions Precedent to Each Advance. The following conditions
shall have been satisfied prior to any advance, in the sole opinion
of the Bank and its counsel:
(a) Advance Request. Automatic advances under the line of credit
to cover cash shortfalls in the Borrower's depository accounts
with Bank as provided under the automatic sweep service
currently in place with Bank are permitted. In the event of the
need for a manual advance under the line, the Borrower shall
deliver to the Bank a written request for Advance signed by an
authorized officer of the firm as stated in the corporate
resolutions.
(b) No Default. No default shall have occurred and be continuing or
will occur upon the making of the Advance in question.
(c) No Adverse Change. There shall have been no material adverse
change in the condition, financial or otherwise, of the Borrower
or any Subsidiary from such condition as it existed on the date
of the most recent financial statements of Borrower delivered
prior to date hereof.
C. COVENANTS OF THE BORROWER
The Borrower covenants and agrees that from the date hereof and until
payment in full of the Indebtedness and the formal termination of this
Agreement, unless the Bank shall otherwise consent in writing, the
Borrower and each Subsidiary:
1. Use of Loan Proceeds. Shall use the proceeds of the Loan only for
the commercial purposes permitted herein or otherwise permitted by
the Bank and furnish the bank all evidence that it may reasonably
require with respect to such use.
2. Insurance. Shall maintain such liability insurance, workers'
compensation insurance, and casualty insurance as may be required by
law, customary and usual for prudent businesses in its industry or as
may be reasonably required by the Bank.
3. Payment of Taxes, Etc. Shall pay before delinquent all of its debts
and taxes except that the Bank shall not unreasonably withhold its
consent to nonpayment of taxes being actively contested in accordance
with law (provided that the Bank may require bonding or other
assurances).
4. Compliance; Hazardous Materials. Shall strictly comply with all
laws, regulations, ordinances and other legal requirements,
specifically including, without limitation, ERISA, all securities
laws and all laws relating to hazardous materials and the
environment. Unless approved in writing by the Bank, neither the
Borrower nor any Subsidiary shall engage in the storage, manufacture,
disposition, processing, handling, use or transportation of any
hazardous or toxic materials, whether or not in compliance with
applicable laws and regulations.
5. Change in Business. Shall not enter into any business which is
substantially different from the business or businesses in which it
is presently engaged.
6. Sale of Business. Shall maintain its corporate existence, good
standing and necessary qualifications to do business and shall not
sell, lease, assign or otherwise dispose of any substantial portion
of its assets (other than sales of obsolete or worn-out equipment and
sales of Inventory in the ordinary course of business). Change in
the principal ownership of the Firm will cause the Line to become
immediately due and payable.
7. Financial Covenants. At all times, the Borrower shall be in
compliance with the following financial covenants on a consolidated
basis:
(a) The tangible net worth of the Borrower shall not be less than
$5,500,000. at the end of any fiscal quarter;
For purposes of this Agreement, the term "tangible net worth" shall
be the networth of an Entity according to generally accepted
accounting principles less any write-up of assets subsequent to
October 31, 1993; deferred assets other than prepaid insurance and
prepaid taxes; patents, copyrights, trademarks, trade names, non-
compete agreements, franchises and other intangibles; goodwill or
other amounts representing the excess of the purchase price of assets
or stock over the value assigned thereto on the books of such Entity;
unamortized debt discount and expense; and any other amounts
categorized as intangibles under generally accepted accounting
principles.
(b) The ratio of current assets of the Borrower to current
liabilities shall not be less than 1.5:1 as at the end of the fiscal
quarter;
(c) The current assets of the Borrower shall exceed its current
liabilities by at least $2,500,000 as at the end of each fiscal
quarter;
(d) All financial terms used herein shall have the meanings assigned
to them under generally accepted accounting principles unless another
meaning shall be specified.
8. Events of Default. Each of the following shall constitute an Event
of Default:
(a) Any representation or warranty made by the Borrower or any
other party to any Loan Document (other than the Bank) herein or
therein or in any certificate or report furnished in connection
herewith or therewith shall prove to have been untrue or incorrect in
any material respect when made; or
(b) There shall occur any default by the Borrower in the payment,
when due, of any principal of or interest on the Note, any amounts
due hereunder or any other Loan Document or any other Indebtedness
(not cured within the grace period provided in such Note or in the
document or instrument evidencing such Indebtedness);
(c) Any other obligation now or hereafter owed by the Borrower or
any Subsidiary to the Bank shall be in default and not cured within
any period of grace provided therein or any such Entity shall be in
default under any obligation in excess of $75,000. owed to any other
obligee, which default entitles the obligee to accelerate any such
obligations or exercise other remedies with respect thereto;
(d) There shall occur any default by the Borrower or any other
party to any Loan Document (other than the Bank) in the performance
of any agreement, covenant or obligation contained in this Agreement
or such Loan Document not provided for elsewhere in this Section 12
and such default is not cured within any grace period provided in
this Agreement or such other loan Document; or
(e) The Borrower or any Subsidiary shall (i) voluntarily liquidate
or terminate operations or apply for or consent to the appointment
of, or the taking of possession by, a receiver, custodian, trustee or
liquidator or such Person or of all or of a substantial part of its
assets, (ii) admit in writing its inability, or be generally unable,
to pay its debts as the debts become due, (iii) make a general
assignment for the benefit of its creditors, (iv) commence a
voluntary case under the federal Bankruptcy Code ( as now or
hereafter in effect), (v) file a petition seeking to take advantage
of any other law relating to bankruptcy, insolvency,
(f) Without its application, approval or consent, a proceeding shall
be commenced, in any court of competent jurisdiction, seeking in
respect of such Person any remedy under the federal Bankruptcy Code,
the liquidation, reorganization, dissolution, winding-up, or
composition or readjustment of debt, the appointment of a trustee,
receiver, liquidator or the like of such Person, or of all or any
substantial part of the assets of such Person, or other like relief
under any law relating to bankruptcy, insolvency, reorganization,
winding-up, or composition or adjustment of debts.
9. Remedies. If any Default shall occur, the Bank may, without notice
to the Borrower, at its option, withhold further Advances to the
Borrower of proceeds of the Loans. Should any Event of Default occur
and not be cured within thirty (30) days following delivery of
written notice complete upon hand or overnight delivery or upon
facsimile delivery or mailing by certified mail, return receipt
requested, the Bank may declare any or all Indebtedness to be
immediately due and payable (if not earlier demanded), bring suit
against the Borrower to collect the Indebtedness, exercise any remedy
available to the Bank hereunder and take any action or exercise any
remedy provided herein or in any other Loan Document or under
applicable law. No remedy shall be exclusive of other remedies or
impair the right of the Bank to exercise any other remedies.
10. Severability No failure on the part of the Bank to exercise, and
no delay in exercising, any right hereunder or under any other Loan
Document shall operate as a waiver thereof, nor shall any single or
partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The remedies
herein provided are cumulative and are in addition to any other
remedies provided by law, any Loan Document or otherwise.
11 Survival of Representations. All representations and warranties
made herein shall survive the making of the loans hereunder and the
delivery of the Notes, and shall continue in full force and effect
so long as any Indebtedness is outstanding, there exists any
commitment by the Bank to the Borrower, and until this Agreement is
formally terminated in writing.
10.3 Notices. Any notice or other communication hereunder to any party
hereto shall be by hand delivery, overnight delivery, facsimile,
telegram, telex or registered certified mail and unless otherwise
provided herein shall be deemed to have been given or made when
delivered, telegraphed, telexed, faxed or deposited in the mails,
postage prepaid, addressed to the party at its address specified
below (or at any other address that the party may hereafter specify
to the other parties in writing):
The Bank: SunTrust Bank, North Central Florida
Corporate Lending Division
203 E. Silver Springs Blvd.
Ocala, FL 34470
The Borrower: Nobility Homes, Inc.
3741 S. W. 7th Street
Ocala, FL 34474
10.4 Valid Existence and Power. The Borrower and each subsidiary is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Florida and is duly qualified or
licensed to transact business in all places where the failure to be
so qualified would have a material adverse effect on it. The
Borrower and each other Entity which is a party to any Loan Document
(other than the Bank) has the power to make and perform the Loan
Documents executed by it and all such instruments will constitute the
legal, valid and binding obligations of such Entity, enforceable in
accordance with their respective terms, subject only to bankruptcy
and similar laws affecting creditors' rights generally.
11. Commitment Expiration: This commitment shall expire unless it has
been accepted in writing and the acceptance received by the
undersigned on or before December 15, 1995.
Please indicate your acceptance of this commitment and the terms and
conditions contained herein by executing your acceptance immediately below
and returning one executed copy of the Commitment Letter and Agreement to
the Bank.
We would like to express our appreciation for the opportunity you have
given us to be of service, and look forward to an ongoing mutually
satisfactory relationship.
Sincerely,
SunTrust Bank, North Central Florida
Roy Hilgenfeldt
Vice President
Page 8 of 8
Nobility Homes, Inc.
November 28, 1995
BORROWER'S ACCEPTANCE OF COMMITMENT AND AGREEMENT
The above Revolving Credit Agreement is hereby accepted on the terms and
conditions outlined therein.
Nobility Homes, Inc.
By: _________________________________
Terry E. Trexler, President
Date:
Exhibit 13
Report of Independent Certified Public Accountants
To the Board of Directors and
Shareholders of Nobility Homes, Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income, of changes in stockholders'
equity and of cash flows present fairly, in all material respects, the
financial position of Nobility Homes, Inc. at November 4, 1995 and October
29, 1994, and the results of their operations and their cash flows for the
years then ended in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion
expressed above.
As discussed in Note 1 to the financial statements, the Company adopted
Statement of Financial Accounting Standards No. 109 in 1994.
Price Waterhouse LLP
Orlando, Florida
December 8, 1995
<PAGE>
Nobility Homes, Inc.
Consolidated Balance Sheets
November 4, 1995 and October 29, 1994
1995 1994
Assets
Current assets:
Cash and cash equivalents $932,432 $1,743,102
Accounts receivable - trade, net of
allowance for doubtful accounts
of $48,000 in 1994 544,620 378,883
Accounts receivable - trade, from
related parties 956,037 792,011
Inventories 6,786,159 4,604,299
Note receivable from related party
installment sale -- 297,584
Income taxes receivable 109,082 225,269
Deferred income taxes -- 945,730
Other current assets 233,620 209,631
--------- ---------
Total current assets 9,561,950 9,196,509
Property, plant and equipment, net 994,376 929,773
Receivable from President for life
insurance premiums 478,585 458,610
Cash surrender value of life insurance 867,143 770,081
Deferred income taxes - noncurrent 847,005 --
Goodwill 147,356 --
---------- ----------
Total assets $12,896,415 $11,354,973
========== ==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
Nobility Homes, Inc.
Consolidated Balance Sheets
November 4, 1995 and October 29, 1994
1995 1994
Liabilities & Stockholders' Equity
Current liabilities:
Accounts payable $1,453,823 $1,093,174
Accrued expenses 866,499 638,665
Floor plan financing -- 1,553,602
Note payable to stockholders -- 133,333
Customer deposits 213,220 217,375
Deferred gain on related party
installment sale -- 348,884
Deferred gross profit on related
party sales 124,695 84,633
Other current liabilities 99,984 40,685
--------- ---------
Total current liabilities 2,758,221 4,110,351
Notes payable - cash surrender value
of life insurance 652,424 620,965
Note payable after one year 6,644 9,449
Note payable to stockholders after
one year -- 133,333
--------- ---------
Total liabilities 3,417,289 4,874,098
--------- ---------
Stockholders' equity:
Preferred stock, $.10 par value,
500,000 shares authorized, none issued -- --
Common stock, $.10 par value, 4,000,000
shares authorized, 1,748,267 and
1,724,738 shares issued in 1995 and
1994, respectively 174,826 172,473
Additional paid-in capital 2,132,568 1,934,921
Retained earnings 8,851,799 5,894,361
Less treasury stock at cost, 465,836
and 446,236 shares in 1995 and 1994,
respectively (1,680,067) (1,520,880)
---------- ----------
Total stockholders' equity 9,479,126 6,480,875
---------- ----------
Commitments and contingent liabilities
(Note 12) -- --
---------- ----------
Total liabilities and
stockholders' equity $12,896,415 $11,354,973
========== ==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
Nobility Homes, Inc.
Consolidated Statements of Income
For the years ended November 4, 1995 and October 29, 1994
1995 1994
Net sales $29,119,703 $21,209,805
Net sales - related parties 1,686,132 1,872,586
---------- ----------
Total net sales 30,805,835 23,082,391
Less cost of goods sold (23,584,591) (17,997,513)
---------- ----------
Gross profit 7,221,244 5,084,878
Selling, general and administrative
expenses (4,348,797) (3,295,053)
Interest expense on floor plan
financing (162,752) (204,697)
---------- ----------
Operating income 2,709,695 1,585,128
---------- ----------
Other income (expense):
Life insurance proceeds 1,000,000 --
Gain on sale of idle facility -- 231,327
Gain on related party installment sale 348,884 162,530
Interest income 33,842 81,308
Interest expense (72,172) (53,567)
Miscellaneous income (expense) 29,189 (47,550)
---------- ---------
1,339,743 374,048
---------- ---------
Income before provision for income taxes
and cumulative effect 4,049,438 1,959,176
Less provision for income taxes (1,092,000) (770,000)
---------- ---------
Income before cumulative effect 2,957,438 1,189,176
Cumulative effect of change to FAS 109 -- 580,000
---------- ---------
Net income $2,957,438 $1,769,176
========== =========
Weighted average shares outstanding 1,279,950 1,287,502
========== =========
Earnings per share
Income before cumulative effect $2.31 $.92
Cumulative effect - .45
---- ----
Net income $2.31 $1.37
==== ====
Pro-forma earnings per share to reflect
three-for-two stock split (unaudited)
(see Note 13)
Income before cumulative effect $1.54 $.62
Cumulative effect - 30
---- ----
Net income $1.54 $.92
==== ====
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
Nobility Homes, Inc.
Consolidated Statements of Changes in Stockholders' Equity
For the years ended November 4, 1995 and October 29, 1994
<CAPTION>
Additional
Common Paid-in Retained Treasury
Stock Capital Earnings Stock Total
<S> <C> <C> <C> <C> <C>
Balance at October 30, 1993 $172,473 $1,934,921 $4,125,185 $(1,412,880) $4,819,699
Treasury stock purchased
(12,000 shares) (108,000) (108,000)
Net income 1,769,176 1,769,176
-------- ---------- --------- ---------- ---------
Balance at October 29, 1994 172,473 1,934,921 5,894,361 (1,520,880) 6,480,875
Common stock issued for
acquisition of retail
centers (23,529 shares) 2,353 197,647 200,000
Treasury stock purchased
(19,600 shares) (159,187) (159,187)
Net income 2,957,438 2,957,438
------- --------- ---------- ---------- ---------
Balance at November 4, 1995 $174,826 $2,132,568 $8,851,799 $(1,680,067) $9,479,126
======= ========= ========== ========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Nobility Homes, Inc.
Consolidated Statements of Cash Flows
For the years ended November 4, 1995 and October 29, 1994
1995 1994
Cash flows from operating activities:
Net income $2,957,438 $1,769,176
Adjustments to reconcile net income
to net cash flows provided by (used
in) operating activities:
Depreciation 114,861 104,569
Gain on sale of idle facility -- (231,327)
Gain on related party installment sale (348,884) (162,530)
Deferred income taxes 945,730 (945,730)
Deferred income taxes - noncurrent (847,005) 445,730
(Increase) decrease in:
Accounts receivable - trade (165,737) (115,282)
Accounts receivable - trade, from
related parties (164,026) 136,453
Inventories (2,145,476) (565,142)
Income taxes receivable 116,187 (225,269)
Other current assets (41,594) (46,539)
Increase (decrease) in:
Accounts payable 360,649 214,364
Accrued expenses 227,834 28,150
Customer deposits (4,155) 64,012
Income taxes payable -- (602,730)
Deferred gross profit on related
party sales 40,062 (71,297)
Other current liabilities 72,413 (9,370)
--------- ----------
Net cash flows provided by (used
in) operating activities 1,118,297 (212,762)
--------- ----------
Cash flows from investing activities:
Purchase of investments -- (3,000,000)
Maturity of investments -- 3,040,000
Purchase of plant and equipment (163,204) (96,446)
Proceeds from sale of property and
equipment -- 323,670
Issuance of notes receivable -- (47,500)
Collections of notes receivable 17,605 14,649
Collections of note receivable from
related party installment sale 297,584 120,558
Issuance of note receivable from
related party -- (862,500)
Collections of notes receivables from
related parties -- 965,500
Increase in receivable from President
for life insurance premiums (19,975) (19,975)
Increase in cash surrender value of
life insurance (97,062) (87,447)
--------- --------
Net cash flows provided by
investing activities 34,948 350,509
--------- --------
The accompanying notes are an integral part of these financial statements.
<PAGE>
Nobility Homes, Inc.
Consolidated Statements of Cash Flows
For the years ended November 4, 1995 and October 29, 1994
1995 1994
Cash flows from financing activities:
Decrease in floor plan financing $(1,553,602) $(1,185,847)
Principal payments on note payable
to stockholders (266,666) (43,334)
Additions to notes payable - cash
surrender value of life insurance 31,459 30,917
Principal payments on notes payable (15,919) (14,051)
Additions to notes payable -- 8,000
Purchase of treasury stock (159,187) (108,000)
--------- ----------
Net cash flows used in financing
activities (1,963,915) (1,312,315)
--------- ----------
Decrease in cash and cash equivalents (810,670) (1,174,568)
Cash and cash equivalents at beginning
of year 1,743,102 2,917,670
--------- ----------
Cash and cash equivalents at end of year $932,432 $1,743,102
======== =========
Supplemental disclosure of cash
flow information
Interest paid $183,624 $224,681
Income taxes paid $920,000 $1,426,000
Supplemental Schedule of Noncash Investing and Financing Activities:
Effective August 31, 1994, the Company acquired Prestige Home Centers,
Inc. through the issuance of 150,000 shares of the Company's common stock.
On May 8, 1995, the Company acquired certain assets of two manufactured
home retail sales centers in Florida by issuing 23,529 shares of common
stock valued at $200,000.
The accompanying notes are an integral part of these financial statements.
<PAGE>
Nobility Homes, Inc.
Notes to Consolidated Financial Statements
November 4, 1995 and October 29, 1994
1. Reporting Entity and Significant Accounting Policies
Operations
The consolidated financial statements include the accounts of Nobility
Homes, Inc. ("Nobility"), its wholly-owned subsidiary, Prestige Home
Centers, Inc. ("Prestige") and Prestige's wholly-owned subsidiary,
Prestige Insurance Services, Inc., an independent insurance agency
(collectively, the "Company"). The Company is engaged in the
manufacture and sale of manufactured homes to various dealerships and
manufactured housing communities throughout Florida. The Company has
two manufacturing plants located in and near Ocala, Florida. Prestige
currently operates twelve Florida retail sales centers in Ocala (3),
Tallahassee, St. Augustine, Tampa, Chiefland, Lake City, Auburndale,
Jacksonville, Brooksville and Inverness.
All intercompany accounts and transactions of the Company and its
wholly-owned subsidiary have been eliminated in consolidation.
Fiscal Year
The Company's fiscal year ends on the Saturday on or after October 31.
Prior to 1995, the Company's fiscal year ended on the Saturday closest
to October 31. The year ended November 4, 1995 consisted of a fifty-
three week period and the year ended October 29, 1994 consisted of a
fifty-two week period.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments purchased
with an original maturity of three months or less to be cash
equivalents. Cash and cash equivalents in the accompanying
consolidated financial statements represent bank deposits.
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.
Property, Plant and Equipment
Property, plant and equipment are stated at cost and depreciated over
their estimated useful lives using the straight-line method. Routine
maintenance and repairs are charged to expense when incurred. Major
replacements and improvements are capitalized.
Goodwill
Goodwill represents costs in excess of the fair value of net assets of
businesses acquired and is amortized using the straight-line method
over 15 years. The Company periodically reviews goodwill to assess
recoverability. Impairment would be recognized if a permanent
diminution in value were to occur.
Revenue Recognition
The Company recognizes revenue on the sale of a manufactured home when
title transfers to an unrelated third party.
Deferred Gain on Related Party Installment Sale
Deferred gain on related party installment sale represents
unrecognized gain associated with the sale of the Company's limited
partnership interest in a manufactured housing community. Gain is
recognized in the accompanying consolidated financial statements upon
collection of the related note receivable.
Deferred Gross Profit on Related Party Sales
Gross profit on sales of manufactured homes to certain related parties
is deferred until these manufactured homes are sold to unrelated third
parties, at which point the gross profit is recognized as earnings in
the accompanying consolidated financial statements.
Warranty Costs
Estimated costs related to product warranties are accrued as the
manufactured homes are sold and are included in accrued expenses in
the accompanying consolidated financial statements.
Income Taxes
The Company adopted Statement of Financial Accounting Standards No.
109 Accounting for Income Taxes ("FAS 109") during the first quarter
of fiscal 1994. The adoption of FAS 109 changed the Company's method
of accounting for income taxes from the deferred method to an asset
and liability approach. The asset and liability approach requires the
recognition of deferred tax assets and liabilities for the expected
future tax consequences of temporary differences between the carrying
amounts and the tax bases of assets and liabilities. Temporary
differences that give rise to the Company's deferred tax assets and
liabilities include allowance for bad debts, the accrual of certain
expenses for financial reporting purposes which are not deductible for
tax purposes, and the deferral of certain revenue for financial
reporting purposes.
Under provisions of FAS 109, the Company elected not to restate prior
years' consolidated financial statements. The $580,000 cumulative
effect of initial adoption on prior years' retained earnings has been
included in the consolidated financial statements as the cumulative
effect of a change in accounting principle.
Treasury Stock
Treasury stock is recorded at its cost to the Company and is presented
as a reduction to stockholders' equity in the accompanying
consolidated financial statements. Issuance of treasury stock is
recorded using the weighted average cost of treasury shares held.
Earnings Per Share
Earnings per share information was retroactively restated to give
effect to shares issued for the acquisition of Prestige. Earnings per
common share are computed by dividing net income by the weighted
average number of common shares outstanding during the period. The
weighted average number of shares outstanding used to present earnings
per share data is as follows:
1994
Weighted average number of shares
outstanding before restatement 1,137,502
Shares issued for acquisition
(see Note 2) 150,000
---------
Weighted average number of
shares outstanding as restated 1,287,502
=========
Dilution that could result from the exercise of certain stock options,
as described in Note 9, would not have a material effect on earnings
per share included in the accompanying consolidated financial
statements.
Concentration of Credit Risk
The Company's customers are concentrated in the state of Florida. No
single customer accounted for over 10% of the Company's sales.
Reclassifications
Certain amounts in the prior year consolidated financial statements
have been reclassified to conform to current year presentation.
2. Acquisitions
On May 8, 1995, the Company acquired two manufactured home retail
sales centers in Florida in an asset acquisition by issuing 23,529
shares of common stock valued at $200,000. This transaction was
accounted for using the purchase method of accounting. Accordingly,
the purchased assets and liabilities have been recorded at their
estimated fair value at the date of acquisition. This treatment
resulted in approximately $147,000 of cost in excess of net assets
acquired, which is being amortized on a straight-line basis over 15
years. The results of operations of the acquired businesses have been
included in the consolidated financial statements since the date of
acquisition.
Effective August 31, 1994, Nobility acquired Prestige Home Centers,
Inc. The acquisition was financed through the issuance of 150,000
shares of Nobility's common stock and was accounted for in a manner
similar to the pooling-of-interests method. Accordingly, all
financial information for prior periods were restated to include the
results of Prestige. The consolidated financial information contains
all material adjustments needed to conform the accounting policies of
Prestige to that of Nobility. All intercompany transactions have been
eliminated.
Separate company operating results for the year ended October 29, 1994
are summarized as follows:
1994
Net sales:
Nobility $17,356,961
Prestige 17,429,718
Intercompany sales (11,704,288)
----------
Consolidated net sales $23,082,391
==========
Net income:
Nobility $1,595,780
Prestige 173,396
---------
Consolidated net income $1,769,176
=========
3. Related Party Transactions
Affiliated Entities
The President, Chairman of the Board of Directors, and 49% stockholder
of the Company (the "President") owns 100% of the stock of TLT, Inc.
TLT, Inc. is the general partner of three limited partnerships which
are developing manufactured housing communities throughout Central and
North Florida (the "TLT Communities"). The President owns between a
23% and a 100% direct and indirect interest in each of these limited
partnerships. The TLT Communities purchased manufactured homes from
the Company during fiscal 1995 and fiscal 1994.
Terms of Sales to Related Parties
The Company sells manufactured homes to unaffiliated customers under
various terms which require payment between 15 and 180 days from the
date of shipment. The Company charges the same sales price to both
unaffiliated customers and related party customers. The Company sells
manufactured homes to the TLT Communities under terms which, in some
cases, do not require payment to the Company until such time as TLT
Communities receives proceeds from the manufactured home, either
through sale to an unrelated third party or floor plan financing. As
discussed in Note 1, the Company defers gross profits on sales to
these related parties until such time as the manufactured homes are
sold to unrelated third parties.
Accounting Services
The Company provides certain accounting services for TLT, Inc. and the
TLT Communities at no charge in return for exclusive sales rights at
these communities.
Banking Relationship
The President of the Company and the President of Prestige are
directors of the bank which served as the Company's depository
institution. At October 29, 1994, the Company had deposits with the
bank totaling approximately $1,893,000. There were no investments
with this institution during 1994.
The Company changed its primary depository relationship to an
unrelated bank during 1995.
Volume Rebate Program
The Company has a volume rebate program which pays rebates based upon
sales volume. Volume rebates are used to reduce sales in the
accompanying financial statements. Volume rebates for the TLT
Communities amounted to $91,000 in 1995 and $97,000 in 1994.
Sales to Other Affiliated Companies
The Company sells manufactured homes to customers that are controlled
by an outside director of the Company. These sales are classified as
related party transactions in the accompanying financial statements.
The director resigned during fiscal year 1995.
Sales and Deferred Gross Profit/Gain from Related Parties
The following summarizes the portion of the Company's net sales and
deferred gross profit/gain for the years ended November 4, 1995 and
October 29, 1994 resulting from related party transactions:
1995 1994
Net Deferred Net Deferred
Sales Profit/Gain Sales Profit/Gain
TLT, Inc. and
TLT Communities $1,280,109 $124,695 $1,395,207 $84,633
Entities controlled
by outside director 406,023 -- 477,379 --
Sale of limited
partnership -- -- -- 348,884
---------- -------- ---------- --------
$1,686,132 $124,695 $1,872,586 $433,517
========== ======== ========== ========
Note Receivable from Related Party Installment Sale
In 1990, the Company accepted a note receivable for an installment
sale of its interest in a limited partnership to Marathon II, a
limited partnership owned 100% by the President. The note which is
collateralized by the limited partnership interest sold by the
Company, bears interest at 10% and is payable annually. The note was
due in October 1995. The outstanding balance at October 29, 1994
totaled $297,584 and was paid in full during fiscal year 1995.
Notes Receivable from Related Parties
Beginning in 1990, the Company made advances to TLT, Inc. to fund
working capital needs of the TLT Communities in return for exclusive
sales rights at these communities. As of November 4, 1995 and
October 29, 1994, advances amounted to $1,919,000. These advances are
non-interest bearing and have been fully reserved for since 1991. No
additional amounts have been advanced for working capital needs since
1993.
During 1994, the Company loaned TLT, Inc. $862,500 at a 10% interest
rate, secured by assignment of a note and mortgage. TLT, Inc. repaid
this entire amount during 1994 after it was outstanding for
approximately 5 weeks.
Receivable from President for Life Insurance Premiums
The Company funds premiums for the President on two split-dollar life
insurance policies with a face value of $1,000,000 at November 4,
1995. These policies insure the President and name a trust
established for the President's family as beneficiary. The cumulative
premiums advanced under this arrangement amounted to $478,600 at
November 4, 1995 and $458,600 at October 29, 1994. The advances are
non-interest bearing. Net cash surrender value at November 4, 1995 of
approximately $563,000 was pledged to the Company as security for
advances under this arrangement.
Note Payable to Stockholders
In September 1993 prior to the Prestige merger with the Company,
Prestige borrowed $300,000 under a promissory note from the two
primary shareholders of the Company. Proceeds of this borrowing were
used to provide working capital. The promissory note was renewed in
June 1994, and the payment terms were extended to September 1996. The
note had an annual interest rate of 8%, with interest and principal
payable quarterly. The note was paid in full during fiscal year 1995.
4. Inventories
Inventories at November 4, 1995 and October 29, 1994 are summarized as
follows:
1995 1994
Raw materials $530,061 $534,292
Work-in-process 73,068 58,842
Finished homes 5,366,658 3,416,878
Pre-owned manufactured homes 292,374 279,627
Model home furniture 523,998 314,660
--------- ----------
$6,786,159 $4,604,299
========== =========
5. Property, Plant and Equipment
Property, plant and equipment along with their estimated useful lives
and related accumulated depreciation as of November 4, 1995 and
October 29, 1994 is summarized as follows:
Range
of Lives
in Years 1995 1994
Land -- $286,639 $286,639
Land and leasehold
improvements 10-20 186,751 182,437
Buildings and improvements 15-40 1,054,374 1,022,454
Machinery and equipment 3-10 533,997 402,837
Furniture and fixtures 3-10 201,637 189,567
--------- ----------
2,263,398 2,083,934
Less accumulated depreciation (1,269,022) (1,154,161)
---------- ----------
$994,376 $929,773
======== =======
Depreciation expense totaled $114,900 and $104,600 for fiscal years
1995 and 1994, respectively.
6. Income Taxes
The provision for income taxes for the years ended November 4, 1995
and October 29, 1994 consists of the following:
1995 1994
Current tax expense:
Federal $843,000 $592,000
State 150,000 98,000
------- -------
993,000 690,000
Deferred tax expense:
Federal 99,000 80,000
--------- -------
Provision for income taxes $1,092,000 $770,000
========= =======
The following table shows the reconciliation between the statutory
federal income tax rate and the actual provision for income taxes for
the years ended November 4, 1995 and October 29, 1994.
1995 1994
Provision - federal statutory
tax rate $1,328,000 $666,000
Increase (decrease) resulting from:
State taxes, net of federal
tax benefit 99,000 71,000
Permanent differences:
Proceeds from officers life
insurance (340,000)
Other 5,000 33,000
--------- -------
Provision for income taxes $1,092,000 $770,000
========= =======
The types of temporary differences between the tax bases of assets and
liabilities and their financial reporting amounts that give rise to
deferred tax assets and deferred tax liabilities are as follows (these
numbers are shown net of tax):
1995 1994
Gross deferred tax assets:
Allowance for doubtful accounts $740,000 $740,000
Deferred gain on related party
installment sale -- 19,300
Deferred gross profit on related
party sales 47,000 98,000
Accrued expenses 66,200 87,500
Reserve for warranty expense 39,500 39,500
------- -------
$892,700 $984,300
======= =======
Gross deferred tax liabilities:
Depreciation $(44,000) $(33,000)
Accrued expenses (1,695) (5,570)
------- -------
$(45,695) $(38,570)
No provision for a valuation reserve was provided for the deferred tax
assets because the Company believes there is sufficient income in
carryback years to absorb the deferred asset. Due to a change in
estimate regarding the allowance for doubtful accounts, the deferred
tax asset was classified noncurrent as of November 4, 1995 because
most of the temporary differences creating this asset will not reverse
within the subsequent year.
7. Life Insurance Policies
The Company owns certain life insurance policies with a face value of
approximately $960,000 at November 4, 1995. These policies insure the
President of the Company and name the Company as beneficiary. The
accompanying consolidated financial statements include the cash
surrender value of these policies as a noncurrent asset in the amount
of $867,000 and $770,000 as of November 4, 1995 and October 29, 1994,
respectively.
The Company has loans outstanding against the cash surrender value of
these policies totaling $652,000 and $621,000 as of November 4, 1995
and October 29, 1994, respectively. The loans bear interest at an
annual rate between 5% and 6%. Under terms of the loans, unpaid
interest is added to the note balance. There are no specific terms of
repayment on these notes, and the borrowings are not to exceed a
certain dollar limit as established in the related policies.
The Company received $1,000,000 from the proceeds of a life insurance
policy on the former President of Prestige who died during fiscal
1995. This amount has been included as a component of other income in
the accompanying consolidated statement of income.
8. Financing Agreements
Revolving Credit Facility
The Company maintains a Revolving Credit Agreement (the "Agreement")
with a bank which provides for borrowings up to $2,500,000. The
Agreement is effective through April 1996 and provides for interest at
LIBOR plus 2.5% (7.6875% at November 4, 1995) on the outstanding
balance. There are no commitment fees or compensating balance
arrangements associated with the Agreement.
At November 4, 1995, borrowings outstanding under the Agreement
totaled $919,000. This amount has been netted against cash and cash
equivalents in the consolidated balance sheet due to the legal right
of offset established by a Cash Management Agreement with the bank.
The outstanding advance was repaid on the first business day of fiscal
year 1996. Interest expense under the line of credit was
approximately $19,800 for 1995.
Floor Plan Financing
The Company has floor plan arrangements with certain finance companies
to finance a portion of its inventory. Amounts are borrowed on
individual manufactured homes up to the invoice price. These loans
bear interest at annual rates up to 1.50% above the prime interest
rate, with interest payable monthly, and are secured by the related
manufactured home. These loans are due at the earlier of the sale of
the manufactured home to retail customers or various terms which range
from 360 days to 540 days.
Amounts outstanding under these arrangements totaled $1,553,600 at
October 29, 1994. There were no amounts outstanding at November 4,
1995. The Company incurred interest expense under these arrangements
of approximately $163,000 and $205,000 in 1995 and 1994, respectively.
9. Stockholders' Equity
The authorized preferred stock of the Company may be issued in series
with rights and preferences designated by the Board of Directors at
the time it authorizes the issuance of such stock.
During 1993, the Company issued certain stock options to an investor
relations consultant. The options are to purchase 20,000 common
shares at an exercise price of $5.00 for 5,000 shares and $7.00 for
the remaining 15,000 shares. As of November 4, 1995, these options
are exercisable and remain outstanding. The accompanying consolidated
financial statements include no corresponding charge for the issuance
of these options as the exercise price of these options exceeded the
market value of the stock at the time of issuance.
During 1995 and 1994, the Company purchased 19,600 and 12,000 shares
of its common stock at an average cost of $8.12 and $9.00,
respectively. These purchases are included in treasury stock in the
accompanying consolidated financial statements.
10. Advertising
Advertising for Prestige retail sales centers consists primarily of
newspaper, radio and television advertising. All costs are expensed
as incurred. Advertising expense amounted to $422,400 and $340,800
for 1995 and 1994, respectively.
11. Significant Fourth Quarter Adjustment
The Company recorded an adjustment in the fourth quarter of 1995 to
defer gross profit on certain intercompany and related party sales,
primarily due to additional inventory at new retail sales centers.
The adjustment amounted to approximately $322,000 and represented a
charge to the earnings of the Company. This adjustment impacts all
quarters previously presented by the Company for fiscal year 1995.
12. Commitments and Contingent Liabilities
Leases - Operating
The Company leases the property for the Prestige retail sales centers
under various operating lease agreements expiring through September
1999. The Company also leases certain equipment under operating
leases. Total lease expense amounted to approximately $360,000 and
$241,000 in 1995 and 1994, respectively.
Future minimum lease payments under operating leases with initial or
remaining noncancelable lease terms in excess of one year at November
4, 1995 are as follows:
Year
1996 $175,000
1997 106,000
1998 91,000
1999 51,000
--------
Total $423,000
========
Repurchase Agreements
The Company is contingently liable under terms of repurchase
agreements covering dealer floor plan financing arrangements. These
arrangements, which are customary in the industry, provide for the
repurchase of homes sold to dealers in the event of default on
payments by the dealer to the dealer's financing source. The
contingent liability under these agreements amounted to approximately
$781,000 and $273,000 at November 4, 1995 and October 29, 1994,
respectively. The risk of loss is spread over numerous dealers and
financing institutions and is further reduced by the resale value of
any homes which may be repurchased. There were no homes repurchased
in 1995 or 1994.
Other Contingent Liabilities
Certain claims and suits arising in the ordinary course of business
have been filed or are pending against the Company. In the opinion of
management, any related liabilities that might arise would not have a
material adverse effect on the Company's consolidated financial
statements.
13. Subsequent Events
Three-for-Two Stock Split (Unaudited)
On November 7, 1995, the Company declared a three-for-two stock split
in the form of a stock dividend, payable on January 31, 1996 to
shareholders of record as of December 22, 1995. The information is
labeled unaudited because this transaction has not been consummated,
and the number of shares which will be issued cannot be verified.
Accordingly, no adjustments have been made to the consolidated
financial statements. The pro forma effect on weighted average shares
outstanding and the consolidated balance sheets is as follows:
Unaudited
1995 1994
Weighted average shares
outstanding 1,279,950 1,287,502
Shares issued for stock split 641,215 641,215
--------- ---------
Weighted average shares
outstanding, as restated 1,921,165 1,928,717
========= =========
Pro forma stockholders' equity
Common stock $238,948 $236,595
Additional paid-in-capital 2,068,446 1,870,799
Retained earnings 8,851,799 5,894,361
Treasury stock (1,680,067) (1,520,880)
---------- ----------
Total stockholders' equity $9,479,126 $6,480,875
========= =========
Acquisition
On November 22, 1995, the Company acquired three manufactured home
retail sales centers in Florida in an asset acquisition by issuing
18,000 shares of common stock valued at $252,000. This transaction
will be accounted for using the purchase method of accounting.
Exhibit 21
SUBSIDIARIES OF REGISTRANT
Prestige Home Centers, Inc.
Prestige Insurance Services, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-04-1995
<PERIOD-START> OCT-30-1994
<PERIOD-END> NOV-04-1995
<CASH> 932,432
<SECURITIES> 0
<RECEIVABLES> 1,500,657
<ALLOWANCES> 0
<INVENTORY> 6,786,159
<CURRENT-ASSETS> 9,561,950
<PP&E> 2,263,398
<DEPRECIATION> 994,376
<TOTAL-ASSETS> 12,896,415
<CURRENT-LIABILITIES> 2,758,221
<BONDS> 0
0
0
<COMMON> 174,826
<OTHER-SE> 9,304,300
<TOTAL-LIABILITY-AND-EQUITY> 12,896,415
<SALES> 30,805,835
<TOTAL-REVENUES> 30,805,835
<CGS> 23,584,591
<TOTAL-COSTS> 4,348,797
<OTHER-EXPENSES> 162,752
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,049,438
<INCOME-TAX> 1,092,000
<INCOME-CONTINUING> 2,957,438
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,957,438
<EPS-PRIMARY> 2.31
<EPS-DILUTED> 0
</TABLE>
