FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the Quarterly period ended August 1, 1998
Commission File number 0-6506
NOBILITY HOMES, INC.
(Exact name of registrant as specified in its charter)
Florida 59-1166102
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
3741 S.W. 7th Street
Ocala, Florida 34474
(Address of principal executive offices) (Zip Code)
(352) 732-5157
(Issuer's telephone number, including area code)
Securities registered pursuant to 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)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes X;
No _____.
(APPLICABLE ONLY TO CORPORATE ISSUERS)
State the number of shares outstanding of each of the issuer's
classes of common equity, as of September 14, 1998. 4,456,251
<PAGE>
NOBILITY HOMES, INC.
INDEX
Page
Number
PART I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of
August 1, 1998 and November 1, 1997 3
Consolidated Statements of Income for
the three and nine months ended August 4
1, 1998 and August 2, 1997
Consolidated Statements of Cash Flows
for the nine months ended August 1, 5
1998 and August 2, 1997
Notes to Consolidated Financial 6
Statements
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial 7
Conditions
PART II. Other Information and Signatures
Item 5. Other Information 7
Item 6. Exhibits and Reports of Form 8-K 8
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
NOBILITY HOMES, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
August 1, 1998 November 1, 1997
-------------- ----------------
ASSETS (Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 7,597,575 $ 6,293,924
Accounts receivable - trade 1,396,880 386,019
Inventories 8,031,811 8,041,471
Deferred income taxes 150,100 150,100
Prepaid expenses and other current assets 186,702 113,857
--------------- ------------
Total current assets 17,363,068 14,985,371
Property, plant and equipment, net 1,769,869 1,285,112
Investment in joint venture 343,082 263,024
Deferred income taxes - noncurrent 697,100 697,100
Other assets 1,675,246 1,710,023
--------------- ------------
Total assets $ 21,848,365 $ 18,940,630
=============== ============
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,106,655 $ 1,592,980
Accrued compensation 552,630 606,651
Accrued expenses and other current liabilities 1,752,737 1,044,186
Income taxes payable 301,050 402,979
--------------- ------------
Total current liabilities 3,713,072 3,646,796
--------------- ------------
Stockholders' equity:
Preferred stock, $.10 par value, 500,000
shares authorized, none issued - -
Common stock, $.10 par value, 10,000,000
shares authorized, 4,922,087 shares
issued in 1998 and 1997 492,209 492,209
Additional paid in capital 2,197,185 2,197,185
Retained earnings 17,125,966 14,284,507
Less treasury stock at cost, 465,836 shares (1,680,067) (1,680,067)
--------------- ------------
Total stockholders' equity 18,135,293 15,293,834
--------------- ------------
Commitments and contingencies - -
--------------- ------------
Total liabilities and stockholders' equity $ 21,848,365 $ 18,940,630
=============== ============
</TABLE>
<PAGE>
<TABLE>
NOBILITY HOMES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
August 1, August 2, August 1, August 2,
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 11,403,117 $ 10,367,297 $ 33,269,675 $ 28,867,127
Net sales - related parties 94,005 248,990 157,915 399,853
----------- ----------- ----------- -----------
Total net sales 11,497,122 10,616,287 33,427,590 29,266,980
Less cost of goods sold (8,276,954) (7,779,104) (24,457,559) (21,714,518)
----------- ----------- ----------- -----------
Gross profit 3,220,168 2,837,183 8,970,031 7,552,462
Selling, general and
administrative expense (1,687,594) (1,666,105) (4,694,036) (4,452,000)
----------- ----------- ----------- -----------
Operating income 1,532,574 1,171,078 4,275,995 3,100,462
Other income:
Interest income 77,337 35,272 213,982 73,093
Undistributed earnings in
joint venture 32,236 3,376 80,058 3,376
Miscellaneous income 34,655 56,875 42,424 112,866
----------- ----------- ----------- -----------
144,228 95,523 336,464 189,335
----------- ----------- ----------- -----------
Income before provision
for income taxes 1,676,802 1,266,601 4,612,459 3,289,797
Less provision
for income taxes (644,000) (486,000) (1,771,000) (1,263,000)
----------- ----------- ----------- -----------
Net income $ 1,032,802 $ 780,601 $ 2,841,459 $ 2,026,797
=========== =========== =========== ===========
Weighted average shares
outstanding(1)
Basic 4,456,251 4,456,251 4,456,251 4,456,251
Diluted 4,536,320 4,456,251 4,536,320 4,456,251
Earnings per share(1)
Basic $ 0.23 $ 0.18 $ 0.64 $ 0.46
Diluted $ 0.23 $ 0.18 $ 0.63 $ 0.46
</TABLE>
(1) Restated to reflect three-for-two-stock split in the form of a stock
dividend paid on February 20, 1998
<PAGE>
<TABLE>
NOBILITY HOMES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months Ended
August 1, August 2,
1998 1997
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,841,459 $ 2,026,797
Adjustments to reconcile net income to net cash flows
provided by operating activities:
Depreciation and amortization 153,743 110,178
Undistributed earnings in joint venture (80,058) (3,376)
(Increase) decrease in:
Accounts receivable - trade (1,010,861) (620,073)
Inventories 9,660 (949,718)
Prepaid expenses and other current assets (72,845) 149,676
Increase (decrease) in:
Accounts payable (486,325) (303,391)
Accrued compensation (54,021) 226,373
Accrued expenses and other current liabilities 708,551 259,190
Income taxes payable (101,929) 289,005
----------- -----------
Net cash flows provided by operating activities 1,907,374 1,184,661
----------- -----------
Cash flows from investing activities:
Investment in joint venture - Nobility 21 - (250,000)
Purchase of property, plant and equipment (603,723) (299,438)
----------- -----------
Net cash flows (used in) investing activities (603,723) (549,438)
----------- -----------
Increase in cash and cash equivalents 1,303,651 635,223
Cash and cash equivalents at beginning of year 6,293,924 2,049,184
----------- -----------
Cash and cash equivalents at end of quarter $ 7,597,575 $ 2,684,407
=========== ===========
Supplemental disclosure of cash flow information
Income taxes paid $ 1,891,000 $ 1,142,500
=========== ===========
</TABLE>
<PAGE>
NOBILITY HOMES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The unaudited financial information included in this report
includes all adjustments which are, in the opinion of
management, necessary to reflect a fair statement of the results
for the interim periods. The operations for the nine months
ended August 1, 1998 are not necessarily indicative of the
results of the full fiscal year.
Certain information and footnote disclosure normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted pursuant to the Securities Exchange Commission rules and
regulations governing form 10-Q. The condensed financial
statements included in this report should be read in conjunction
with the financial statements and notes thereto included in the
Registrant's November 1, 1997 form 10-K annual report.
2. Inventories
Inventories are carried at the lower of cost or market. Cost of
finished home inventories is determined on the specific identification
method. Other inventory costs are determined on a first-in, first-out
basis. Inventories at August 1, 1998 and November 1, 1997 are summarized
as follows:
August 1, November 1,
1998 1997
--------- -----------
Raw Materials $ 572,760 $ 540,279
Work-in-process 87,043 75,022
Finished homes 6,383,297 6,501,759
Pre-owned manufactured homes 454,317 340,751
Model home furniture and other 534,394 583,660
----------- -----------
$ 8,031,811 $ 8,041,471
=========== ===========
3. Earnings Per Share
Effective for the quarter ended January 31, 1998, the Company adopted
FASB Statement on Accounting Standards No. 128, Earnings Per Share. The
Statement simplifies the standards for computing earnings per share by
replacing the presentation of primary earnings per share with a
presentation of basic earnings per share. Prior years have been restated
to reflect this change. The following reconciliation details the
numerators and denominators used to calculate basic and diluted earnings
per share for the respective periods.
Three Months Ended Nine Months Ended
August 1, August 2, August 1, August 2,
1998 1997 1998 1997
--------- --------- --------- ---------
Net Income $ 1,032,802 $ 780,601 $ 2,841,459 $ 2,026,797
========== ========== ========== ==========
Weighted average
shares outstanding
Basic
4,456,251 4,456,251 4,456,251 4,456,251
Add: common
stock equivalents 80,069 -- 80,069 --
---------- ---------- ---------- ----------
Diluted 4,536,320 4,456,251 4,536,320 4,456,251
========== ========== ========== ==========
Earning per share:
Basic $ 0.23 $ 0.18 $ 0.64 $ 0.46
========== ========== ========== ==========
Diluted $ 0.23 $ 0.18 $ 0.63 $ 0.46
========== ========== ========== ==========
4. Three-for-two Stock Split
On January 6, 1998, the Company declared a three-for-two stock split
in the form of a stock dividend, payable on February 20, 1998 to
shareholders of record as of January 30, 1998. Fiscal 1997 stockholders'
equity has been restated to give retroactive recognition to the stock
split in the prior period by reclassifying from additional paid-in-capital
to common stock the par value of the 1,485,297 shares arising from the
split. In addition, all references to per share amounts of the Company's
common stock have been restated.
5. Subsequent Events
On August 11, 1998, the Company acquired six manufactured home retail
sales centers located in the panhandle of Florida. This transaction will
be accounted for using the purchase method of accounting; accordingly, the
purchased assets have been recorded at their estimated fair market value at
the date of acquisition. The results of operations of the acquired
businesses will be included in the consolidated financial statements from
the date of acquisition.
On August 18, 1998, the Company opened a retail sales center located
in Yulee, Florida. The cost of the land and land improvements was
approximately $450,000.
<PAGE>
Nobility Homes, Inc.
Management's Discussion And Analysis Of Results Of
Operations And Financial Condition
Results of Operations
Net sales for the three months ended August 1, 1998 increased 8
percent to $11,497,122 from $10,616,287 for the same period last year.
Net sales for the nine months increased 14 percent to $33,427,590 from
$29,266,980 a year ago. The increase in sales was primarily due to the
same store sales volume at the Company's Prestige Home Centers increasing
11.6 percent to $9,035,609 for the third quarter of 1998 from $8,098,521
for the same period last year and increasing 13.7 percent to $24,701,913
for the nine months of 1998 from $21,725,048 for the same nine month
period last year.
Gross profit, as a percentage of net sales, increased to 28 percent
in the third quarter of 1998 from 26.7 percent for the same period last
year. For the nine months, gross profit, as a percentage of net sales,
increased to 26.8 percent as of August 1, 1998 from 25.8 percent for the
same nine month period last year. The increase in gross profit was
primarily a result of improvements in the gross margins at both the
manufacturing plants and retails sales centers.
Selling, general and administrative expenses, as a percentage of net
sales, declined to 14.7 percent in the third quarter of 1998 from 15.7
percent for the third quarter last year. For the nine months, selling,
general and administrative expenses, as a percentage of net sales,
declined to 14 percent as of August 1, 1998 from 15.2 percent for the
same nine month period last year. The decline in selling, general and
administrative expenses as a percent of net sales was primarily due to
better operating efficiencies at both the manufacturing plants and retail
sales centers.
Other income for the third quarter of 1998 was $144,228 of which
$77,337 was from interest on short term investments and $32,236
represented undistributed earnings from Nobility 21, a joint venture which
began operations in May 1997 and which provides financing to Prestige's
retail customers. For the third quarter of 1997, other income was
$95,523. For the nine months ended August 1, 1998, other income was
$336,464 of which $213,982 was from interest on short term investments and
$80,058 was undistributed earnings from Nobility 21. For the same nine
month period last year, other income was $189,335.
As a result of the factors discussed above, net income for the third
quarter of 1998 increased 32% to $1,032,802 or $.23 per diluted share,
compared to $780,601 or $.18 per diluted share in 1997. For the nine
months ended August 1, 1998 net income increased 40% to $2,841,459 or $.63
per diluted share, compared to $2,026,797 or $.46 per diluted share as of
August 2, 1997. Earnings per share for 1997 have been restated to reflect
a three-for-two stock split in the form of a 50% stock dividend paid on
February 20, 1998.
Liquidity and Capital Resources
Cash and cash equivalents were $7,597,575 at August 1, 1998 compared
to $6,293,924 as of November 1, 1997. Accounts receivable - trade
increased to $1,396,880 at August 1, 1998 from an abnormally low $386,019
at November 1, 1997, but was down from $1,613,078 at August 2, 1997.
On August 11, 1998 the Company closed on the acquisition of six
retail sales centers located in the panhandle of Florida. On August 18,
1998 the Company opened a retail sales center located in Yulee, Florida.
The cost of the land and land improvements was approximately $450,000.
The Company maintains a revolving credit agreement with a major bank
providing for borrowings up to $2.5 million and a second revolving line of
credit agreement with a major bank which provides for borrowings up to
$1.5 million. These two agreements provide the Company with an additional
$4.0 million of working capital for use in connection with its overall
operations. At August 1, 1998 there were no amounts outstanding under
these agreements.
Consistent with normal practice, the Company's operations are not
expected to require significant capital expenditures during fiscal 1998.
Working capital requirements for the home inventory for new sales centers
will be met with internal sources.
Year 2000 Issue
Many existing computer programs use only two digits to identify a
year in the date field. As the century date change occurs, these programs
may recognize the year 2000 as 1900, or not at all. If not corrected, many
computer systems and applications could fail or create erroneous results
by or at the year 2000 (the "Year 2000 Issue").
The Company has developed plans to address its possible exposures
related to the impact of the Year 2000 Issue on its internal systems.
These plans are expected to be implemented primarily with the use of
internal resources.
The Company's internal systems consist of its central operating and
accounting systems, which handle the majority of its business
transactions. The Company has completed an assessment of its central
operating and accounting systems which resulted in the identification of
certain modifications necessary to bring these systems into year 2000
compliance. These modifications have been made, primarily through the
purchase of updated hardware and updated vendor-supplied software. Based
on the results of initial testing, with respect to these systems, the
Company does not anticipate that the Year 2000 Issue will materially
impact operations or operating results.
Management believes that total pretax costs incurred to date in
connection with the Year 2000 Issue have not materially impacted the
Company's operating results.
The Company believes its planning efforts are adequate to address the
Year 2000 Issue and that its risk factors are primarily those that it
cannot directly control, including the readiness of its major suppliers,
customers and service providers. Failure on the part of these entities to
timely remediate their Year 2000 Issues could result in disruptions in the
Company's supply of materials, disruptions in its customers' ability to
conduct business and interruptions to the Company's daily operations.
Management believes that its exposure to third party risk may be minimized
to some extent because it does not rely significantly on any one supplier
or customer. There can be no guarantee, however, that the systems of other
unrelated entities on which the Company's systems and operations relay
will be corrected on a timely basis and will not have a material adverse
effect on the Company.
The Company does not currently have formal contingency plans or a
timetable for implementing them. contingency plans will be established, if
they are deemed necessary, after the company has adequately assessed the
impact on its operations should third parties fail to properly remediate
their computer systems. Contingency plans would include such items as
identifying alternative suppliers and increasing inventory levels prior to
the year 2000 to ensure availability of supplies for the Company's
customers.
<PAGE>
Part II. Other Information And Signatures
Item 1. There were no reportable events for item 1 through item 4.
Item 5. Other Information.
The deadline for submission of shareholder proposals pursuant to Rule
14a-8 under the Securities Exchange Act of 1934, as amended (""Rule 14a-
8"), for inclusion in the Company's proxy statement for its 1999 Annual
Meeting of Shareholders is October 7, 1998. After December 21, 1999,
notice to the Company of a shareholder proposal submitted otherwise than
pursuant to Rule 14a-8 will considered untimely, and the persons named in
proxies solicited by the Company's Board of Directors for its 1999 Annual
Meeting of Shareholders may exercise discretionary voting power with
respect to any such proposal as to which the Company does not receive
timely notice.
Item 6. Exhibits and Reports on Form 8-K
Exhibit 27 Financial Data Schedule
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, there unto duly authorized.
NOBILITY HOMES, INC.
DATE: September 14, 1998 By: /s/ Terry E. Trexler
Terry E. Trexler, Chairman,
President and Chief
Executive Officer
DATE: September 14, 1998 By: /s/ Thomas W. Trexler
Thomas W. Trexler, Executive
Vice President, Chief
Financial Officer
DATE: September 14, 1998 By: /s/ Lynn J. Cramer, Jr
Lynn J. Cramer, Jr., Treasurer
and Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE CONSOLIDATED
FINANCIAL STATEMENTS OF NOBILITY HOMES, INC. AS OF AND FOR THE QUARTERLY PERIOD
ENDED AUGUST 1, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> MAY-03-1998
<PERIOD-END> AUG-01-1998
<CASH> 7,597,575
<SECURITIES> 0
<RECEIVABLES> 1,396,880
<ALLOWANCES> 0
<INVENTORY> 8,031,811
<CURRENT-ASSETS> 17,363,068
<PP&E> 3,251,036
<DEPRECIATION> 1,481,167
<TOTAL-ASSETS> 21,848,365
<CURRENT-LIABILITIES> 3,713,074
<BONDS> 0
0
0
<COMMON> 492,209
<OTHER-SE> 17,643,082
<TOTAL-LIABILITY-AND-EQUITY> 21,848,365
<SALES> 11,497,122
<TOTAL-REVENUES> 11,497,122
<CGS> 8,276,954
<TOTAL-COSTS> 1,687,594
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,676,802
<INCOME-TAX> 644,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,032,802
<EPS-PRIMARY> .23
<EPS-DILUTED> .23
</TABLE>
