SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Under Section 13 or 15(d) of
the Securities and Exchange Act of 1934
For the fiscal year ended October 31, 1998
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)
Indicate by check mark 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 .
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not 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-K or any
amendment to this Form 10-K. __
State the aggregate market value of the voting stock held by
non-affiliates of the registrant on January 22, 1999, computed by reference to
the average high and low prices on that date: $27,732,000
(APPLICABLE ONLY TO CORPORATE ISSUERS)
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of January 22, 1999: 4,420,251 shares of common
stock
DOCUMENTS INCORPORATED BY REFERENCE Incorporated at
Nobility Homes, Inc. Proxy Statement for the 1999 Part III, Items 10,
Annual Meeting of Shareholders 11, 12 and 13
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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 through a network of retail sales centers
throughout north and central Florida. The Registrant also sells its manufactured
homes on a wholesale basis to manufactured home dealers and manufactured home
parks.
Manufactured Homes
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 Registrant's manufactured homes ("homes") are
available in single-wide widths of 14 and 16 feet ranging from 48 to 72 feet in
length, double-wide widths of 24, 26, 28 and 32 feet ranging from 36 to 76 feet
in length and triple-wide widths of 36, 38 and 42 feet ranging from 44 to 68
feet in length. Four new "Special Edition" homes were introduced in fiscal 1998
as a result of the success of the Company's 30th anniversary model sold in
fiscal 1997. In addition, during 1997 the Registrant introduced a four section
model referred to as a quad. Quads are T-shaped and have a total of 2,128 square
feet. The Registrant's homes are sold under the trade names "Kingswood,"
"Richwood," "Springwood," "Tropic Isle," "Regency Manor," "Regency Manor
Special," and "Tropic Manor."
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 continued to operate at an
average of approximately 55% of their single shift capacity in fiscal 1998,
representing no change from fiscal 1997.
The Registrant generally does not manufacture its homes to be held by
it as inventory (except for model home inventory of its retail network
subsidiary, Prestige Home Centers,
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Inc.), 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. The homes produced by the
Registrant are delivered by outside trucking companies. The Registrant estimates
that it can compete effectively within a range of approximately 350 miles from
its manufacturing plants. During the last two fiscal years, substantially all of
the Registrant's sales were made in Florida.
Retail Sales
Prestige Home Centers, Inc. ("Prestige") operates 22 retail lots in
north and central Florida. Its principal executive offices are located at the
Registrant's headquarters in Ocala, Florida.
Each of Prestige's retail lots is located within 350 miles of one of
the Registrant's two manufacturing facilities. Prestige leases all but one of
its retail lots from unaffiliated parties under leases with terms of between one
and three years with renewal options.
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.
The Registrant entered into a joint venture agreement in fiscal 1997
with 21st Century Mortgage Corporation to provide financing to retail customers
purchasing the Registrant's manufactured homes from Prestige. Additionally,
financing for home purchases is provided by nine other independent sources that
specialize in manufactured housing lending and numerous banks which 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 100
other retailers in its primary market area, some of which may have greater
financial resources than Prestige. In addition, manufactured homes offered by
Prestige compete with conventional site-built housing.
Prestige also provides, through its wholly-owned subsidiary, Prestige
Insurance Services, Inc., an independent insurance agent, credit life and
property and casualty insurance
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to Prestige customers in connection with their purchase and financing of
manufactured homes. Prestige Insurance Services, Inc. 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
approximately $241,000, $34,000 and $16,000 in fiscal 1998, 1997 and 1996,
respectively.
Sales to Independent Dealers and Manufactured Home Communities
The Registrant currently sells its homes on a wholesale basis
exclusively through 3 full-time salespersons to approximately 35 independent
dealers. 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 communities 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. No one dealer
accounted for more than 10.0% of the Registrant's total sales in fiscal 1998.
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 1998, 1997 or 1996. For additional information, see Note 13 of "Notes to
Consolidated Financial Statements." The Registrant does not finance retail sales
of new homes for customers of its independent dealers.
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 unrelated park dealers who do a high volume of business with the Registrant.
From time to time, the Registrant has offered extended terms to TLT, Inc.
("TLT"), an affiliate of the Registrant's President, which operates three
manufactured home communities targeted at the retiree market, in return for
which TLT has granted the Registrant exclusive sales rights for the manufactured
homes sold by the communities operated by it. See Note 3 of "Notes to
Consolidated Financial Statements" for additional information concerning the
terms of sales to TLT. In order to stimulate sales, the Registrant sells homes
to selected manufactured home communities for display on special
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terms. The high visibility of the Registrant's homes in such communities
generates additional sales of the Registrant's homes through such dealers.
The Registrant offers a quarterly or 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 may assume 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 1998, 1997 and 1996, the Registrant reimbursed dealers
other than TLT $276,000, $152,000 and $112,000, 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 $1,900 in fiscal 1998, $8,000 in fiscal 1997 and $28,000 in fiscal
1996.
Regulation
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. In 1994, HUD
regulations took effect which require that manufactured homes 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 also issued thermal standards for manufacturing housing in 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.
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
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warranties on consumer products. The Registrant provides a limited warranty of
one year on the structural components of the homes it manufactures.
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. The bond requirement for Florida is $50,000. 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.
According to statistics compiled by Statistical Surveys, Inc. from
records on file with the State of Florida, Prestige has been the largest retail
dealer of multi-section manufactured homes in Florida since 1994, based on
number of home sales.
Employees
As of January 2, 1999, the Registrant had 258 full-time employees,
including 93 employed by Prestige. Approximately 140 employees are factory
personnel compared to approximately 116 in such positions a year ago, and 101
are in management, administrative, supervisory, sales and clerical positions
(including 76 management and sales personnel employed by Prestige) compared to
approximately 88 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
and considers its relationship with employees to be generally satisfactory.
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Item 2. Properties
As of October 31, 1998, two manufacturing plants were owned and
operated by the Registrant as follows:
Depreciated Cost of
Approximate Plant and Property
Location Size at October 31, 1998
Belleview, Florida 33,500 sq. ft. $117,000
Ocala, Florida(1) 72,000 sq. ft. 551,000
- -------------------------
(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 of metal and concrete construction and
the Ocala plant is of metal construction. Both properties are in good condition
and require little maintenance.
The Company acquired the land for its Yulee, Florida sales center in
the fourth quarter of fiscal 1998 at a total cost of approximately $450,000,
including improvements.
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
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PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters
The Registrant's Common Stock is 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 1998 and 1997.
Fiscal Year End (1)
-------------------------------------------------------------
Fiscal October 31, 1998 November 1, 1997
Quarter High Low High Low
1st $12.12 $ 7.57 $10.16 $7.33
2nd 15.45 11.06 9.83 7.50
3rd 22.27 14.54 9.16 7.00
4th 18.18 10.68 9.08 7.66
- ---------------
(1) On February 20, 1998, January 31, 1996 and August 16, 1996,
three-for-two stock splits in the form of 50% stock dividends were
paid. Amounts in the table have been restated to give effect to these
stock dividends.
At January 15, 1999, the approximate number of record holders of Common
Stock was 270 (not including individual participants in security position
listings).
The payment of cash dividends is 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 1998, 1997 and 1996, no cash dividends were paid.
On December 16, 1998, the Company declared a 10% stock dividend on its
outstanding common stock payable on February 19, 1999 to shareholders of record
as of January 15, 1999. The per share information presented in this report has
not been restated to give effect to this dividend.
Item 6. Selected Financial Data
The following table sets forth Selected Financial Data for each of the
Registrant's last five fiscal years. This information should be read in
conjunction with the financial statements of the Company (including the related
notes thereto) and Management's Discussion and Analysis of the Financial
Condition and Results of Operations, each included elsewhere in this Form 10-K.
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<TABLE>
<CAPTION>
Years Ended(1)
- --------------------- ------------ ------------------ ------------- ------------- ----------------
October 31, November 1, November 2, November 4, October 29,
1998 1997 1996 1995 1994
(In thousands except per share data)
<S> <C> <C> <C> <C> <C>
Total net sales $44,830 $41,696 $36,455 $30,806 $23,082
Income from
Operations 5,844 4,759 3,839 2,710 1,585
Other income 538 206 47 1,340 374
Net income 3,941 3,038 2,395 2,957 1,769
Net income per
share(2) .87 .68 .54 .68 .41
Total assets 22,803 18,941 14,871 12,896 11,355
Long term
Obligations -0- -0- -0- 659 764
Stockholders
Equity 18,674 15,294 12,256 9,479 6,481
- -----------------------------
(1) The Company's fiscal year ends on the first Saturday on or after
October 31. Prior to 1995, the Company's fiscal year ended on the
Saturday closest to October 31. The years ended November 2, 1996 and
November 4, 1995 consisted of a fifty-three week period and the years
ended October 31, 1998, November 1, 1997, October 29, 1994 and October
30, 1993 consisted of a fifty-two week period.
(2) On February 20, 1998, January 31, 1996 and August 16, 1996,
three-for-two stock splits in the form of 50% stock dividends were paid
to shareholders. Amounts in the table have been restated to give effect
to these stock dividends.
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
The Company's primary focus is young, first time homebuyers who
generally purchase their manufactured homes from retail sales centers to locate
on property they own. The Company has aggressively pursued this market through
its Prestige retail sales centers, which have become the principal focus of its
business strategy. While the Company actively seeks to make wholesale sales to
independent retail dealers, the Company's presence as a competitor limits
potential sales to dealers located in the same geographic areas serviced by its
Prestige sales centers.
The Company 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 portion of the
Company's sales in this market are made to communities owned by the Company's
affiliate, TLT, the importance to the Company of the
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retirement market continues to diminish, both as a focus of its efforts and in
dollars and as a percentage of total sales.
The Company sold 1,262 homes in fiscal 1998, of which 334 homes were
sold to independent dealers, representing sales of $7,260,000, and 8 homes were
sold to TLT communities, representing sales of $197,000. In fiscal 1997, the
Company sold 1,190 homes, of which 361 homes were sold to independent dealers,
representing sales of $7,466,000, and 17 homes were sold to TLT communities,
representing sales of $400,000. In fiscal 1996, the Company sold 1,087 homes, of
which 237 homes were sold to independent dealers, representing sales of
$5,204,000, and 28 homes were sold to TLT communities, representing sales of
$717,000. The balance of the Company's sales in fiscal 1998, 1997 and 1996,
representing 82.0%, 81.1% and 83.8% of net sales, respectively, were made on a
retail basis through Prestige's retail centers.
The Company 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 Company can alter its product mix
relatively quickly in response to changes in the market. During fiscal 1998, the
Company`s product mix was positively affected by the "Special Edition" homes
marketed by Prestige and by larger, more expensive multi-wide homes resulting
from greater consumer confidence and the availability of varied types of
financing at competitive rates. Many family buyers today purchase three-, four-
or five-bedroom manufactured homes, compared with the two-bedroom home that
typically appeals to the retirement community market.
During fiscal 1997, the Company entered into a joint venture agreement
with 21st Century Mortgage Corporation to provide mortgage financing to retail
customers who purchase the Company's manufactured homes at Prestige retail sales
centers. This joint venture, which originates and services loans, has given the
Company more control over the financing aspect of the retail home sales process
and allowed the Company to offer better service to its retail customers.
Management believes that the joint venture gives the Company an additional
potential for profit by providing finance products to retail customers. In
addition, management believes that the Company, has more input in the design of
unique finance programs for prospective homebuyers, and has resulted in more
profitable sales at its Prestige retail sales centers. In an effort to make
manufactured homes more competitive with site-built housing, financing packages
are available to provide 30-year financing, an interest rate reduction program,
combination land/manufactured home loans, and a 5% down payment program for
qualified buyers. The Company also maintains outside financing sources that
provide financing for the Company's manufactured homes for retail homebuyers.
The Company through its wholly-owned subsidiary, Prestige Insurance
Services, Inc., an independent insurance agency, offers credit life, homeowners
and service warranty products to the retail customers.
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Results of Operations
The Company continued to increase revenues during the fiscal year ended
October 31, 1998. Total net sales in 1998 were $44,830,000 compared to
$41,696,000 in 1997 and $36,455,000 in fiscal 1996. Net sales increased 7.5% in
fiscal 1998 and 14.4% in 1997 and 18.3% in 1996. The increased sales revenue in
fiscal 1998 was primarily due to the 6.8% increase in same store sales revenues
at Prestige. The increase in sales in fiscal 1997 over fiscal 1996 was primarily
due to the increased popularity of higher priced homes and increased sales to
outside dealers. The year ended October 31, 1998 and November 1, 1997 consisted
of a fifty-two (52) week period while the year ended November 2, 1996 consisted
of a fifty-three (53) week period.
Industry-wide shipments of multi-section manufactured homes measured in
number of units continued to improve for the first ten months of 1998, up 10.7%
over 1997, while shipments of single section homes declined approximately 4.0%
for 1998. Combined industry shipments of multi-section and single section homes
increased 7.0% in 1997 and 9.1% in 1996. In fiscal 1998, approximately 94% of
the Company's home sales were multi-section homes. Florida combined industry
shipments of multi-section home and single-section homes, in the first ten
months of 1998 increased 7% compared to a 9% increase in combined shipments of
multi-section and single section homes in both 1997 and 1996.
Gross profit as a percentage of net sales was 27.0% in fiscal 1998
compared to 25.8% in 1997 and 25.5% in fiscal 1996. The increase in gross profit
in fiscal 1998 was due to increased gross margins at the retail sales centers,
primarily from the mix of products sold and cost controls. The increase in gross
profit in fiscal 1997 was primarily a result of improvements in the gross
margins at both the manufacturing plants and retail sales centers. The increase
in gross profit in fiscal 1996 was primarily due to increasing home prices to
offset lumber price increases and continuing improvements in operating
efficiency at the Company's manufacturing plants.
Selling, general and administrative expenses as a percent of net sales
was 13.9% in fiscal 1998 as compared to 14.4% in 1997 and 15.0% in fiscal 1996.
The decline in fiscal 1998 selling, general and administrative expenses as a
percent of net sales, although approximately a $200,000 increase in dollars, was
primarily due to reduced general and administrative costs at the manufacturing
plants, partially offset by increased overhead and start-up costs from the seven
new retail sites added during the fourth quarter of fiscal 1998. The decline in
fiscal 1997 selling, general and administrative expenses as a percent of net
sales was primarily due to better operating efficiencies at the retail sales
centers. The increase in selling, general and administrative expenses in fiscal
1996 was primarily due to start-up expenses associated with the addition of the
three retail sales centers in November 1995, coupled with increased newspaper,
radio and television advertising expense.
Other income for fiscal 1998 was $538,000 of which $292,000 was from
interest on short term investments and $166,000 was from undistributed earnings
from the Nobility 21
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joint venture. Other income for fiscal 1997 was $206,000 of which $118,000 was
from interest on short term investments. Other income for fiscal 1996 was
$47,000.
As a result of the factors discussed above, earnings for fiscal 1998
were $3,941,000 or $.87 per share compared to $3,038,000 or $.68 per share for
fiscal 1997 and $2,395,000 or $.54 per share for fiscal 1996.
Liquidity and Capital Resources
Cash and cash equivalents were $5,892,000 at October 31, 1998 compared
to $6,294,000 at November 1, 1997. Working capital increased to $13,141,000 in
fiscal 1998 compared to $11,339,000 in fiscal 1997. In fiscal years 1998 and
1997, the Company carried all the inventory for the Prestige retail sales
centers and did not incur third party floor plan financing expenses. Inventories
increased to $10,391,000 in 1998 from $8,041,000 at fiscal year-end 1997. The
increase in inventory was primary due to the $1.6 million dollars of homes
manufactured in the fourth quarter of 1998 for the seven retail sales centers
added in that quarter.
During fiscal 1997 and the first half of fiscal 1998, the Company
maintained a revolving credit agreement with a major bank providing for
borrowings up to $2.5 million. The maximum available amount under the agreement
was increased from $2.5 million to $4.0 million in March 1998. In July 1996, the
Company entered into a second revolving line of credit agreement with a major
bank which provides for borrowings up to $1,500,000. These two agreements
provide the Company with an additional $5.5 million of working capital for use
in connection with its overall operations. At October 31, 1998 and November 1,
1997, there were no amounts outstanding under these agreements.
In July 1997, the Company invested $250,000 in a joint venture with
21st Century Mortgage Corporation to provide additional mortgage financing
services to the Company's retail sales centers. The Company generally does not
have any additional capital contribution obligations with respect to the joint
venture, except to the extent the joint venture may be required to invest in
certain subordinated certificates issued in connection with an asset-backed
security. No such investment is contemplated within the next 12 months.
On August 11, 1998, the Company acquired six manufactured home retail
sales centers located in the panhandle of Florida in an asset acquisition. This
transaction was 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, resulting in approximately $487,000 of
goodwill, which is being amortized on a straight-line basis over 15 years.
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 acquired one additional existing manufactured home retail
sales center in North Central Florida in March 1997 in an asset acquisition.
This transaction was accounted
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for using the purchase method of accounting; accordingly, the purchased assets
have been recorded at their estimated fair value at the date of acquisition,
resulting in approximately $37,000 of goodwill, which is being amortized on a
straight-line basis over 15 years.
In January 1997 Prestige closed its sales center in Perry, Florida.
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 retail sales centers will be
met with internal sources.
Forward Looking Statements
Certain statements in this report are forward-looking statements within
the meaning of the federal securities laws. Although the Company believes that
the expectations reflected in such forward-looking statements are based on
reasonable assumptions, there are risks and uncertainties that may cause actual
results to differ materially from expectations. These risks and uncertainties
include, but are not limited to, competitive pricing pressures at both the
wholesale and retail levels, changes in market demand, adverse weather
conditions that reduce sales at retail centers, the risk of manufacturing plant
shutdowns due to storms or other factors, and the impact of marketing and
cost-management programs.
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 operations. These plans are
expected to be implemented primarily with the use of internal resources. The
Company has assessed (i) the equipment in its manufacturing operations that
contains microprocessors or relies on software, and (ii) the Company's internal
systems. The Company has determined that its manufacturing equipment does not
have a Year 2000 Issue.
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.
13
<PAGE>
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 and that future costs of compliance likewise will not be
material.
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 Issue 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 and operations relied on by such third parties will be
corrected on a timely basis and will not have a material adverse effect on the
Company.
Due to the nature of the Company's manufacturing and retail operations,
including the fact that the materials used by the Company in its manufactured
homes are widely available, the Company does not currently have formal
contingency plans or a timetable for implementing them. The Company's suppliers
typically maintain a one-month supply of materials. 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 manufacturing and
retail operations.
Item 8. Consolidated Financial Statements and Supplementary Data
Financial statements incorporated herein from the Registrant's 1998
Annual Report to Shareholders are attached as Exhibit 13 and are listed at Part
IV, Item 13(a), "Consolidated Financial Statements and Schedules."
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
14
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
Information concerning the directors of the Registrant is incorporated
by reference pursuant to Instruction G of Form 10-K from the Registrant's
definitive proxy statement for the 1999 annual meeting of shareholders to be
filed with the Commission pursuant to Regulation 14A on or before February 28,
1999.
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 (59) Chairman of the Board and President of Registrant;
Mr. Trexler is also President of TLT; from April 1996
to March 1997, Mr. Trexler was a director of Citizens
National Bank and its subsidiary, Citi-Bancshares,
Inc. and was Chairman of the Board of Citizens First
Bancshares, Inc. and its subsidiary, Citizens First
Bank of Ocala prior to its acquisition in April 1996.
Thomas W. Trexler (35) 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.
Edward C. Sims (52) Vice President of Engineering of the Registrant.
Jean Etheredge (53) Secretary of the Registrant.
Lynn J. Cramer, Jr. (53) 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.
15
<PAGE>
Item 11. Executive Compensation
Information concerning executive compensation is incorporated by
reference pursuant to Instruction G of Form 10-K from the Registrant's
definitive proxy statement for the 1999 annual meeting of shareholders to be
filed with the Commission pursuant to Regulation 14A on or before February 28,
1999.
Item 12. 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 G of Form
10-K from the Registrant's definitive proxy statement for the 1999 annual
meeting of shareholders to be filed with the Commission pursuant to Regulation
14A on or before February 28, 1999.
Item 13. Certain Relationships and Related Transactions
Information concerning certain relationships and related transactions
is incorporated by reference pursuant to Instruction G of Form 10-K from the
Registrant's definitive proxy statement for the 1999 annual meeting of
shareholders to be filed with the Commission pursuant to Regulation 14A on or
before February 28, 1999.
16
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Consolidated Financial Statements and Schedules:
Report of PricewaterhouseCoopers LLP
Consolidated Balance Sheets at October 31, 1998 and November 1,
1997
Consolidated Statements of Income for the Years Ended October
31, 1998, November 1, 1997 and November 2, 1996
Consolidated Statements of Changes in Stockholders' Equity for
the Years Ended October 31, 1998, November 1, 1997 and
November 2, 1996
Consolidated Statements of Cash Flows for the Years Ended
October 31, 1998, November 1, 1997 and November 2, 1996
Notes to Consolidated Financial Statements
(b) Reports on Form 8-K:
None
(c) Exhibits:
3. (a) The Registrant's Articles of Incorporation, as
amended (filed as an exhibit to the Registrant's Form
10-K for the fiscal year ended November 1, 1997 and
incorporated herein by reference).
(b) Bylaws, as amended March 28, 1994, (filed as an
exhibit to the Registrant's Form 10-KSB for the
fiscal year ended October 29, 1994 and incorporated
herein by reference.)
10. (a) Joint Venture Agreement with 21st Century Mortgage
Corporation (filed as an exhibit to the Registrant's
Form 10-K for the fiscal year ended November 1, 1997
and incorporated herein by reference).
*(b) Stock Incentive Plan (filed as an exhibit to the
Registrant's registration statement on Form S-8,
registration no. 333-44769, and incorporated herein
by reference).
- -------------
* Management Remuneration Plan.
17
<PAGE>
(c) Revolving Credit Agreement dated July 17, 1996 with
AmSouth Bank of Florida (filed as an exhibit to the
Registrant's Form 10-K for the fiscal year ended
November 2, 1996 and incorporated by reference
herein).
(d) Revolving Credit Agreement dated June 7, 1996 with
SunTrust Bank, North Central Florida (filed as an
exhibit to the Registrant's Form 10-K for the fiscal
year ended November 2, 1996 and incorporated by
reference herein).
13. Consolidated Financial Statements from 1998 Annual Report
to Shareholders.
21. Subsidiaries of Registrant.
23. Consent of PricewaterhouseCoopers LLP.
27. Financial Data Schedule.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NOBILITY HOMES, INC.
DATE: January 29, 1999 By:/s/ Terry E. Trexler
--------------------------------------
Terry E. Trexler, Chairman, President
and Chief Executive Officer
DATE: January 29, 1999 By:/s/ Thomas W. Trexler
--------------------------------------
Thomas W. Trexler, Executive
Vice President and
Chief Financial Officer
DATE: January 29, 1999 By:/s/ Lynn J. Cramer, Jr.
--------------------------------------
Lynn J. Cramer, Jr., Treasurer and
Principal Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
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 29, 1999 /s/ Terry E. Trexler
-----------------------------------------
Terry E. Trexler, Director
DATE: January 29, 1999 /s/ Richard C. Barberie
-----------------------------------------
Richard C. Barberie, Director
DATE: January 29, 1999 /s/ Robert Holliday
-----------------------------------------
Robert Holliday, Director
DATE: January 27, 1999 /s/ Robert P. Saltsman
-----------------------------------------
Robert P. Saltsman, Director
DATE: January 29, 1999 /s/ Thomas W. Trexler
-----------------------------------------
Thomas W. Trexler, Director
19
<PAGE>
EXHIBIT INDEX
3. (a) The Registrant's Articles of Incorporation, as amended (filed as
an exhibit to the Registrant's Form 10-K for the fiscal year ended
November 1, 1997 and incorporated herein by reference).
(b) Bylaws, as amended March 28, 1994, (filed as an exhibit to the
Registrant's Form 10-KSB for the fiscal year ended October 29,
1994 and incorporated herein by reference.)
10. (a) Joint Venture Agreement with 21st Century Mortgage Corporation
(filed as an exhibit to the Registrant's Form 10-K for the fiscal
year ended November 1, 1997 and incorporated herein by reference).
*(b) Stock Incentive Plan (filed as an exhibit to the Registrant's
registration statement on Form S-8, registration no. 333-44769,
and incorporated herein by reference).
(c) Revolving Credit Agreement dated July 17, 1996 with AmSouth Bank
of Florida (filed as an exhibit to the Registrant's Form 10-K for
the fiscal year ended November 2, 1996 and incorporated by
reference herein).
(d) Revolving Credit Agreement dated June 7, 1996 with SunTrust Bank,
North Central Florida (filed as an exhibit to the Registrant's
Form 10-K for the fiscal year ended November 2, 1996 and
incorporated by reference herein).
13. Consolidated Financial Statements from 1998 Annual Report to
Shareholders.
21. Subsidiaries of Registrant.
23. Consent of PricewaterhouseCoopers LLP.
27. Financial Data Schedule.
- -----------
* Management Remuneration Plan.
20
Nobility Homes, Inc.
Consolidated Financial Statements
October 31, 1998 and
November 1, 1997
<PAGE>
Report of Independent Certified Public Accountants
To the Board of Directors and
Stockholders 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. and its subsidiaries (the "Company") at October 31, 1998
and November 1, 1997, and the results of their operations and their cash flows
for each of the three years in the period ended October 31, 1998, 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.
PricewaterhouseCoopers LLP
Orlando, Florida
December 14, 1998
<PAGE>
Nobility Homes, Inc.
Consolidated Balance Sheets
October 31, 1998 and November 1, 1997
- ------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
Assets
Current assets:
<S> <C> <C>
Cash and cash equivalents $5,891,994 $6,293,924
Accounts receivable 535,615 386,019
Inventories 10,391,340 8,041,471
Deferred income taxes - current 127,000 150,100
Prepaid expenses and other current assets 324,928 113,857
------------ -------------
Total current assets 17,270,877 14,985,371
Property, plant and equipment, net 2,037,140 1,285,112
Investment in joint venture - Nobility 21 428,938 263,024
Deferred income taxes - noncurrent 720,200 697,100
Other assets 2,346,051 1,710,023
------------- -------------
Total assets $22,803,206 $18,940,630
============= =============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $1,836,608 $1,592,980
Accrued expenses and other current liabilities 1,367,916 1,044,186
Accrued compensation 583,889 606,651
Income taxes payable 341,050 402,979
--------------- ------------------
Total current liabilities 4,129,463 3,646,796
--------------- ------------------
Commitments and contingent liabilities (Note 13)
Stockholders' equity:
Preferred stock, $.10 par value, 500,000
shares authorized, none issued - -
Common stock, $.10 par value, 10,000,000
and 4,000,000 shares authorized, respectively,
and 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 18,225,666 14,284,507
Less treasury stock at cost, 501,836 and 465,836
shares, respectively, in 1998 and 1997 (2,241,317) (1,680,067)
--------------- ------------------
Total stockholders' equity 18,673,743 15,293,834
--------------- ------------------
Total liabilities and stockholders' equity $22,803,206 $18,940,630
=============== ==================
</TABLE>
The accompanying notes are an integral part of these financial statements.
-2-
<PAGE>
Nobility Homes, Inc.
Consolidated Statements of Income
For the Years Ended October 31, 1998, November 1, 1997
and November 2, 1996
- ------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Net sales $ 44,633,842 $ 41,296,594 $35,738,608
Net sales - related parties 196,533 399,853 716,587
------------- --------------- -------------
Total net sales 44,830,375 41,696,447 36,455,195
Cost of goods sold (32,747,216) (30,926,601) (27,159,157)
------------- --------------- -------------
Gross profit 12,083,159 10,769,846 9,296,038
Selling, general and administrative expenses (6,238,730) (6,010,933) (5,456,774)
------------- --------------- -------------
Operating income 5,844,429 4,758,913 3,839,264
------------- --------------- -------------
Other income (expense):
Interest income 291,593 118,336 19,544
Interest expense - - (62,849)
Undistributed earnings in joint
venture - Nobility 21 165,914 13,024 -
Miscellaneous income 80,223 74,305 90,171
------------- --------------- -------------
537,730 205,665 46,866
------------- --------------- -------------
Income before provision for income taxes 6,382,159 4,964,578 3,886,130
Provision for income taxes (2,441,000) (1,927,000) (1,491,000)
------------- --------------- -------------
Net income $ 3,941,159 $ 3,037,578 $2,395,130
============= =============== =============
Average shares outstanding
Basic 4,451,742 4,456,251 4,451,102
Diluted 4,533,298 4,467,357 4,451,102
Earnings per share
Basic $ .89 $ .69 $ .54
Diluted $ .87 $ .68 $ .54
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
Nobility Homes, Inc.
Consolidated Statements of Changes in Stockholders' Equity
For the Years Ended October 31, 1998, November 1, 1997
and November 2, 1996
- ------------------------------------------------------------
<TABLE>
<CAPTION>
Additional
Common Paid-in Retained Treasury
Stock Capital Earnings Stock Total
<S> <C> <C> <C> <C> <C>
Balance at November 4, 1995 $ 335,130 $ 1,972,264 $ 8,851,799 $ (1,680,067) $ 9,479,126
Common stock issued for
acquisition of retail
center (18,000 shares) 1,800 250,200 - - 252,000
Stock options exercised
(5,000 shares at $5.00
per share and 15,000
shares at $7.00 per share) 2,000 128,000 - - 130,000
Stock split, three-for-two,
effective December 22, 1995 1,900 (1,900) - - -
Stock split, three-for-two,
effective July 26, 1996 2,849 (2,849) - - -
Stock split, three-for-two,
effective January 6, 1998 148,530 (148,530) - - -
Net income - - 2,395,130 - 2,395,130
------------- -------------- --------------- -------------- ---------------
Balance at November 2, 1996 492,209 2,197,185 11,246,929 (1,680,067) 12,256,256
Net income - - 3,037,578 - 3,037,578
------------- -------------- --------------- -------------- ---------------
Balance at November 1, 1997 492,209 2,197,185 14,284,507 (1,680,067) 15,293,834
Purchase of treasury stock - - - (561,250) (561,250)
Net income - - 3,941,159 - 3,941,159
------------- -------------- --------------- -------------- ---------------
Balance at October 31, 1998 $ 492,209 $ 2,197,185 $ 18,225,666 $ (2,241,317) $ 18,673,743
============= ============= =============== =============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
Nobility Homes, Inc.
Consolidated Statements of Cash Flows
For the Years Ended October 31, 1998, November 1, 1997
and November 2, 1996
- ------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996
Cash flows from operating activities:
<S> <C> <C> <C>
Net income $ 3,941,159 $ 3,037,578 $ 2,395,130
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 216,836 174,375 144,519
Deferred income taxes - 5,400 (5,595)
Undistributed earnings in joint venture
- Nobility 21 (165,914) (13,024) -
(Increase) decrease in:
Accounts receivable - trade (149,596) 256,607 (77,935)
Accounts receivable - related parties - 350,379 605,658
Inventories (2,198,238) (213,671) (939,776)
Prepaid expenses and other current assets (183,521) 260,859 (25,654)
Increase (decrease) in:
Accounts payable 243,628 224,812 (85,655)
Accrued expenses and other current liabilities 323,730 144,443 71,472
Accrued compensation (22,762) 304,286 (173,762)
Income taxes payable (61,929) 358,873 44,106
------------ ------------- ------------
Net cash provided by operating activities 1,943,393 4,890,917 1,952,508
------------ ------------- ------------
Cash flows from investing activities:
Purchase of property, plant and equipment, net (796,534) (241,758) (239,039)
Acquisition of retail centers (800,000) (85,000) -
Investment in joint venture - Nobility 21 - (250,000) -
Increase in cash surrender value of life insurance (149,000) (49,444) (47,564)
Increase in receivable from officers for life
insurance premiums (38,539) (19,975) (19,975)
Issuance of notes receivable - - (25,778)
Collections of notes receivable - - 25,668
------------ ------------- ------------
Net cash used in investing activities (1,784,073) (646,177) (306,688)
------------ ------------- ------------
Cash flows from financing activities:
Additions to notes payable - cash surrender value
of life insurance - - 24,929
Principal payments on notes payable - - (683,997)
Proceeds from exercise of stock options - - 130,000
Purchase of treasury stock (561,250) - -
------------ ------------- ------------
Net cash used in financing activities (561,250) - (529,068)
------------ ------------- ------------
(Decrease) increase in cash and cash equivalents (401,930) 4,244,740 1,116,752
Cash and cash equivalents at beginning of year 6,293,924 2,049,184 932,432
------------ ------------- ------------
Cash and cash equivalents at end of year $ 5,891,994 $ 6,293,924 $ 2,049,184
------------ ------------- ------------
Supplemental disclosure of cash flow information
Interest paid $ - $ - $ 50,839
------------ ------------- ------------
Income taxes paid $ 2,521,000 $ 1,612,500 $ 1,200,000
------------ ------------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
Nobility Homes, Inc.
Notes to Consolidated Financial Statements
October 31, 1998 and November 1, 1997
- ------------------------------------------------------------
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, including its own retail sales
centers, and manufactured housing communities throughout Florida. The
Company has two manufacturing plants located in and near Ocala, Florida.
Prestige currently operates twenty-two Florida retail sales centers in
Ocala (3), Tallahassee, St. Augustine, Tampa, Chiefland (2), Lake City,
Auburndale, Jacksonville (2), Hudson, Inverness, Chipley, Fort Walton,
Milton, Pace, Tavares, Panama City (2), and Yulee.
All intercompany accounts and transactions of Nobility and its wholly-owned
subsidiary have been eliminated in consolidation.
Fiscal Year
The Company's fiscal year ends on the first Saturday on or after October
31. The years ended October 31, 1998 and November 1, 1997 consisted of a
fifty-two week period and the year ended November 2, 1996 consisted of a
fifty-three week period.
Revenue Recognition
The Company recognizes revenue on the sale of a manufactured home when
title transfers to an unrelated third party. Gross profit on sales of
manufactured homes to certain related parties is deferred until the
manufactured homes are sold to unrelated third parties, at which time the
gross profit is recognized as earnings in the accompanying consolidated
financial statements.
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. As of
October 31, 1998 and November 1, 1997, approximately $2,405,000 and
$144,000, respectively, of the cash and cash equivalents were held in the
form of certificates of deposit and short-term bonds.
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
-6-
<PAGE>
Nobility Homes, Inc.
Notes to Consolidated Financial Statements
October 31, 1998 and November 1, 1997
- ------------------------------------------------------------
when incurred. Major replacements and improvements are capitalized. Gains
or losses are credited or charged to earnings upon disposition.
Investment in Joint Venture - Nobility 21
During fiscal 1997, the Company contributed $250,000 for a 50% interest in
a joint venture engaged in providing mortgage financing on manufactured
homes. This investment is accounted for under the equity method of
accounting.
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.
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 approximately $530,000, $710,000
and $568,000 for fiscal years 1998, 1997 and 1996, respectively.
Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes (SFAS
109), which utilizes an asset and liability approach. SFAS 109 requires the
recognition of deferred taxes for the expected future tax consequences of
temporary differences between the carrying amounts and the tax bases of
assets and liabilities.
Earnings Per Share
The Company adopted Statement of Financial Accounting Standards No. 128,
Earnings per Share (SFAS 128) for fiscal year ended 1998. Accordingly,
these financial statements include the presentation of both basic and
diluted earnings per share. Basic earnings per share is calculated by
dividing net income by the weighted-average number of shares outstanding.
Diluted earnings per share is calculated by dividing net income by the
weighted-average number of shares outstanding, adjusted for dilutive
potential common shares. The weighted-average number of shares used in
calculating basic earnings per share were 4,451,742, 4,456,251, and
4,451,102 for fiscal years 1998, 1997 and 1996, respectively. In
calculating diluted earnings per share, these amounts were adjusted to
include dilutive potential common shares of 81,556, 11,106, and 0 for
fiscal years 1998, 1997, and 1996, respectively. Earnings per share data
for prior periods was restated to give effect to the Company's adoption of
SFAS 128 and the stock splits as discussed in Note 14.
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.
-7-
<PAGE>
Nobility Homes, Inc.
Notes to Consolidated Financial Statements
October 31, 1998 and November 1, 1997
- ------------------------------------------------------------
Fair Value of Financial Instruments
The carrying amount of accounts receivable and accounts payable
approximates fair value because of the short maturity of those instruments.
The fair value of the revolving line of credit and revolving credit
agreement is assumed to approximate the recorded value because there have
not been any significant changes in market conditions or specific
circumstances since the instruments were originally recorded.
Impairment of Long-Lived Assets
Under the provisions of Statement of Financial Accounting Standards No. 121
Accounting for the Impairment of Long-lived Assets and for Long-lived
Assets to be Disposed Of, the Company evaluates its long-lived assets for
financial impairment as events or changes in circumstances indicate that
the carrying amount of such assets may not be fully recoverable. The
Company evaluates the recoverability of long-lived assets by measuring the
carrying amounts of the assets against their estimated undiscounted future
cash flows. If such evaluations indicate that the future undiscounted cash
flows of certain long-lived assets are not sufficient to recover the
carrying value of such assets, the assets are adjusted to their fair
values.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
New Accounting Standards
Comprehensive Income
The Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income
(SFAS 130) in June 1997. SFAS 130, which is effective for the Company
beginning in fiscal year 1999, established standards for reporting and
display of comprehensive income and its components in the financial
statements. The adoption of SFAS 130 will not have a significant impact on
the Company's financial reporting.
Segment Reporting
In June 1997, the FASB adopted Statement of Financial Accounting Standards
No. 131, Disclosures About Segments of an Enterprise and Related
Information (SFAS 131). SFAS 131, which is effective in fiscal year 1999,
mandates the management approach to identifying business segments. Under
the management approach, segments are defined as the organizational units
that have been established for internal performance evaluation purposes.
The Company is in the process of determining its preferred format. The
adoption of SFAS 131 will not have a significant impact on the Company's
financial reporting.
-8-
<PAGE>
Nobility Homes, Inc.
Notes to Consolidated Financial Statements
October 31, 1998 and November 1, 1997
- ------------------------------------------------------------
2. Acquisitions
On August 11, 1998, the Company acquired six manufactured home retail sales
centers located in the panhandle of Florida in an asset acquisition. This
transaction was 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 which resulted in
approximately $487,000 of goodwill, which is being amortized on a
straight-line basis over 15 years.
On March 28, 1997, the Company acquired a manufactured home retail sales
center in Florida in an asset acquisition. This transaction was accounted
for using the purchase method of accounting. The purchased assets were
recorded at the estimated fair value at the date of acquisition.
Approximately $37,000 of goodwill was recorded for the acquisition, 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 from the date of acquisition.
3. Related Party Transactions
Receivable from Officers 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 and pays premiums for
the Executive Vice President on a split-dollar life insurance policy with a
face value of $1,200,000. These policies insure the President and the
Executive Vice President and name their respective families as beneficiary.
The cumulative premiums advanced under these arrangements amounted to
approximately $557,000 and $519,000 at October 31, 1998 and November 1,
1997, respectively. The advances are non-interest bearing. Net cash
surrender value of approximately $773,000 and $669,000 at October 31, 1998
and November 1, 1997, respectively, was pledged to the Company as security
for advances under this arrangement.
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 in 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 exclusively from the Company
during fiscal years 1998, 1997 and 1996.
-9-
<PAGE>
Nobility Homes, Inc.
Notes to Consolidated Financial Statements
October 31, 1998 and November 1, 1997
- ------------------------------------------------------------
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 defers the gross profit
on sales to TLT Communities, a related party, until such time as the
manufactured homes are sold to an unrelated retail buyer.
The following summarizes the portion of the Company's net sales and
deferred gross profit for the years ended October 31, 1998, November 1,
1997 and November 2, 1996 resulting from related party transactions:
<TABLE>
<CAPTION>
1998 1997 1996
Net Deferred Net Deferred Net Deferred
Sales Profit Sales Profit Sales Profit
<S> <C> <C> <C> <C> <C> <C>
TLT, Inc. and TLT
Communities $196,533 $ - $399,853 $ 19,279 $716,587 $ 58,000
------------- ------------- ------------ ------------ ------------ -------------
</TABLE>
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. At October 31, 1998 the advances totaled
approximately $1,919,000. These advances are non-interest bearing and have
been fully reserved since 1991. No additional amounts have been advanced
for working capital needs since 1993.
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.
The Company has a volume rebate program for all dealers which pays rebates
based upon sales volume. Volume rebates are recorded as a reduction of
sales in the accompanying financial statements. Volume rebates for the TLT
Communities amounted to approximately $2,000, $8,000 and $28,000 in fiscal
years 1998, 1997 and 1996, respectively.
4. Inventories
Inventories at October 31, 1998 and November 1, 1997 are summarized as
follows:
1998 1997
Raw materials $ 587,057 $ 540,279
Work-in-process 101,268 75,022
Finished homes 8,525,402 6,501,759
Pre-owned manufactured homes 621,017 340,751
Model home furniture 556,596 583,660
---------------- ----------------
$10,391,340 $8,041,471
---------------- ----------------
-10-
<PAGE>
Nobility Homes, Inc.
Notes to Consolidated Financial Statements
October 31, 1998 and November 1, 1997
- -----------------------------------------------------------------
The finished homes, pre-owned manufactured homes and model home furniture
are maintained at the Prestige retail sales centers.
5. Property, Plant and Equipment
Property, plant and equipment along with their estimated useful lives and
related accumulated depreciation as of October 31, 1998 and November 1,
1997 are summarized as follows:
Range
of Lives
in Years 1998 1997
Land - $ 579,994 $ 286,639
Land and leasehold improvements 10-20 410,798 269,291
Buildings and improvements 15-40 1,518,168 1,331,988
Machinery and equipment 3-10 678,277 492,331
Furniture and fixtures 3-10 389,285 267,564
------------ --------------
3,576,522 2,647,813
Less accumulated depreciation (1,539,382) (1,362,701)
------------ --------------
$2,037,140 $1,285,112
------------ --------------
Depreciation expense totaled approximately $177,000, $158,000 and $130,000
for fiscal years 1998, 1997 and 1996, respectively.
6. Other Assets
Other assets at October 31, 1998 and November 1, 1997 are comprised of the
following:
1998 1997
Cash surrender value of life insurance $1,113,151 $ 964,151
Receivable from officers for life
insurance premiums 557,074 518,535
Goodwill 675,826 227,337
----------- ---------------
$2,346,051 $1,710,023
----------- ---------------
The Company owns certain life insurance policies with a total face value of
approximately $1,000,000. These policies insure the President of the
Company and name the Company as beneficiary. The cash surrender value of
the life insurance policies totaled approximately $1,113,000 at October 31,
1998.
-11-
<PAGE>
Nobility Homes, Inc.
Notes to Consolidated Financial Statements
October 31, 1998 and November 1, 1997
- ----------------------------------------------------
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. Amortization of goodwill totaled approximately $40,000, $16,000 and
$15,000 for fiscal years 1998, 1997 and 1996, respectively. The Company
periodically reviews goodwill to assess recoverability. An impairment would
be recognized if a permanent decline in value were to occur.
7. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities at October 31, 1998 and
November 1, 1997 are comprised of the following:
1998 1997
Customer deposits $ 585,105 $ 509,988
Accrued sales taxes 263,178 186,940
Other accrued expenses 519,633 347,258
------------- ------------
$1,367,916 $1,044,186
------------- ------------
8. Income Taxes
The provision for income taxes for the years ended October 31, 1998,
November 1, 1997 and November 2, 1996 consists of the following:
1998 1997 1996
Current tax expense:
Federal $2,094,000 $1,669,600 $1,282,000
State 347,000 252,000 215,000
------------ ------------ ------------
2,441,000 1,921,600 1,497,000
Deferred tax expense (benefit) - 5,400 (6,000)
------------ ------------ ------------
Provision for income taxes $2,441,000 $1,927,000 $1,491,000
------------ ------------ ------------
-12-
<PAGE>
Nobility Homes, Inc.
Notes to Consolidated Financial Statements
October 31, 1998 and November 1, 1997
- ----------------------------------------------------
The following table shows the reconciliation between the statutory federal
income tax rate and the actual provision for income taxes for the years
ended October 31, 1998, November 1, 1997 and November 2, 1996.
1998 1997 1996
Provision - federal statutory tax rate $2,234,000 $1,688,000 $1,331,000
Increase (decrease) resulting from:
State taxes, net of federal tax benefit 220,000 167,000 131,000
Permanent differences:
Other (13,000) 72,000 29,000
---------- --------- -----------
Provision for income taxes $2,441,000 $1,927,000 $1,491,000
---------- --------- -----------
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 (the
amounts are shown net of tax):
1998 1997
Gross deferred tax assets:
Allowance for doubtful accounts $ 722,000 $ 722,000
Deferred gross profit on related party sales - 7,400
Accrued expenses 80,200 80,200
Reserve for warranty expense 46,800 62,500
----------- ----------
Total deferred tax assets 849,000 872,100
----------- ----------
Gross deferred tax liabilities:
Depreciation (1,800) (24,900)
----------- ----------
Net deferred tax asset $ 847,200 $ 847,200
----------- ----------
The Company believes that, based upon the lengthy and consistent history of
profitable operations, it is probable that the net deferred tax assets of
$847,200 at October 31, 1998 will be realized on future tax returns,
primarily from the generation of future taxable income.
9. Financing Agreements
Revolving Line of Credit
On July 17, 1996, the Company entered into a revolving line of credit
agreement ("line of credit") with a bank which provides for borrowings up
to $1,500,000. The line of credit is payable on demand and provides for
monthly interest on the outstanding balance at the 30-day LIBOR rate plus
2.25% (7.489% at October 31, 1998). The line of credit is due on demand and
includes certain restrictive covenants relating to tangible net worth,
minimum
-13-
<PAGE>
Nobility Homes, Inc.
Notes to Consolidated Financial Statements
October 31, 1998 and November 1, 1997
- ------------------------------------------------------
levels of working capital and acquiring new debt.
Revolving Credit Agreement
The Company also maintains a revolving credit agreement (the "Agreement")
with a bank which provides for borrowings up to $4,000,000. The Agreement
expires on demand and provides for interest at the bank prime rate less
0.5% (7.25% at October 31, 1998) on the outstanding balance.
The outstanding balance, if any, 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.
There are no commitment fees or compensating balance arrangements
associated with the line of credit or the Agreement. At October 31, 1998
and November 1, 1997, there were no borrowings outstanding under either
credit facility.
10. Stockholders' Equity
Authorized preferred stock 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. The Company has never issued any preferred
stock.
Treasury stock is recorded at cost and is presented as a reduction of
stockholders' equity in the accompanying consolidated financial statements.
The Company repurchased 36,000 shares of its common stock during fiscal
year 1998. These shares were acquired for general corporate needs.
On December 18, 1995, an investor relations consultant exercised certain
stock options granted in February 1993 to purchase 20,000 shares of common
stock. The shares were purchased at an exercise price of $5.00 per share
for 5,000 shares and $7.00 per share for the remaining 15,000 shares.
11. Stock Option Plan
In September 1996, the Company's Board of Directors adopted a stock
incentive plan (the "Plan"), approved by the Shareholders on February 28,
1997, which authorizes the issuance of options to purchase common stock.
The Plan provides for the granting of options for the purchase of up to
450,000 shares of common stock to key employees and non-employee directors
at a price not less than 100% of the fair market value of the underlying
shares at the date of grant. The options granted in fiscal year 1996 are
exercisable after one or more years and expire no later than ten years from
the date of grant or upon termination of employment, retirement or death.
The options granted in fiscal year 1997 are exercisable after one or more
-14-
<PAGE>
Nobility Homes, Inc.
Notes to Consolidated Financial Statements
October 31, 1998 and November 1, 1997
- ------------------------------------------------------
years and expire no later than six years from the date of grant or upon
termination of employment, retirement or death. Options available for future
grant were 262,500 at October 31, 1998 and November 1, 1997 and 300,000 at
November 2, 1996. Options were held by 31 persons at October 31, 1998.
In August 1998, the Company granted 40,000 options to an employee. These options
are exercisable in July 2000 and expire in September 2000.
Information with respect to options granted at October 31, 1998 is as follows:
<TABLE>
<CAPTION>
Stock Weighted Weighted
Option Average Stock Average
Number of Price Exercise Options Exercise
Shares Range Price Exercisable Price
------------ -------------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Shares under option:
Outstanding at November 4, 1995 - $ - $ - - $ -
Granted 150,000 8.83 8.83 - -
Exercised - - - - -
Canceled - - - - -
------------ -------------- ---------- ---------- -----------
Outstanding at November 2, 1996 150,000 $ 8.83 $ 8.83 - $ -
------------ -------------- ---------- ---------- -----------
Granted 37,500 8.50 8.50 - -
Exercised - - - - -
Canceled - - - - -
------------ -------------- ---------- ---------- -----------
Outstanding at November 1, 1997 187,500 $ 8.50 - 8.83 $ 8.77 30,000 $ 8.83
------------ -------------- ---------- ---------- -----------
Granted 40,000 21.13 21.13 - -
Exercised - - - - -
Canceled - - - - -
------------ -------------- ---------- ---------- -----------
Outstanding at October 31, 1998 227,500 $ 8.50 - 21.13 $ 10.94 63,750 $ 8.81
------------ -------------- ---------- ---------- -----------
</TABLE>
The following table summarizes information about the Plan's stock options
at October 31, 1998:
-15-
<PAGE>
Nobility Homes, Inc.
Notes to consolidated Financial Statements
October 31, 1998 and November 1, 1997
- --------------------------------------------------------
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------------- -----------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Shares Contractual Exercise Shares Exercise
Range of exercise prices Outstanding Life (years) Price Outstanding Price
- ------------------------ -------------- -------------- ------------ --------------- ------------
<S> <C> <C> <C> <C> <C>
$8.50 37,500 4.8 $ 8.50 3,750 $ 8.50
$8.83 150,000 7.8 $ 8.83 60,000 $ 8.83
$21.13 40,000 1.8 $ 21.13 - $ -
--------------
227,500
--------------
</TABLE>
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation (SFAS 123). Accordingly, no compensation cost has been
recognized for the stock option plans. Had compensation cost for the
Company's option plans been determined based on the fair value at the grant
dates, as prescribed by SFAS 123, the Company's net income and earnings per
share would have been as follows:
1998 1997 1996
Net income:
As reported $3,941,159 $3,037,578 $2,395,130
Pro forma $3,853,660 $2,937,508 $2,395,130
Earnings per share:
As reported $ .89 $ .69 $ .54
Pro forma $ .85 $ .66 $ .54
The fair value of each option is estimated on the date of grant using the
minimum value method with the following assumptions used for grants during
the applicable period: dividend yield of 0% for all periods; risk-free
interest rates of 4.68% - 4.74%, 6.41% -6.60% and 6.13% - 6.25% for fiscal
years 1998, 1997 and 1996 respectively; a weighted average expected option
term of 2-4 years for all periods; and a volatility factor of 45% for
fiscal year 1998 and 46% for fiscal years 1997 and 1996.
-16-
<PAGE>
Nobility Homes, Inc.
Notes to Consolidated Financial Statements
October 31, 1998 and November 1, 1997
- -------------------------------------------------------
12. Employee Benefit Plan
The Company has a defined contribution retirement plan (the "Plan")
qualifying under Section 401(k) of the Internal Revenue Code. The Plan
covers employees who have met certain service requirements. The Company
makes a matching contribution of 10% of an employee's contribution up to a
maximum of .6% of an employee's compensation. The Company's contribution
charged to operations was approximately $28,000, $18,000 and $0 in fiscal
years 1998, 1997 and 1996, respectively.
13. Commitments and Contingent Liabilities
Leases - Operating
The Company leases the property for the Prestige retail sales centers from
various unrelated entities under operating lease agreements expiring
through November 2002. The Company also leases certain equipment under
operating leases. Total lease expense amounted to approximately $493,000,
$414,000 and $413,000 in fiscal years 1998, 1997 and 1996, respectively.
Future minimum payments by year and in the aggregate, under the
aforementioned leases and other noncancelable operating leases with initial
or remaining terms in excess of one year, as of October 31, 1998 are as
follows:
Fiscal Year Ending
1999 $ 138,000
2000 99,000
2001 48,000
2002 48,000
2003 2,000
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 $575,000, $2,097,000 and $1,270,000 at October 31, 1998, November
1, 1997 and November 2, 1996, 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
fiscal years 1998, 1997 or 1996.
-17-
<PAGE>
Nobility Homes, Inc.
Notes to Consolidated Financial Statements
October 31, 1998 and November 1, 1997
- -------------------------------------------------------
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, the ultimate outcome of these matters will not have a material
adverse effect on the Company's financial position or results of
operations.
14. Stock Splits
On January 6, 1998, July 9, 1996 and November 7, 1995, the Company declared
a three-for-two stock split in the form of a stock dividend, payable on
February 20, 1998, August 16, 1996 and January 31, 1996 to stockholders of
record as of January 30, 1998, July 26, 1996 and December 22, 1995,
respectively. Fiscal year 1996 stockholders' equity has been restated to
give retroactive recognition to the stock splits in prior periods by
reclassifying from additional paid-in-capital to common stock the par value
of the 1,799,060 shares arising from the splits. In addition, all
references in the financial statements to per share amounts of the
Company's common stock have been restated.
-18-
<PAGE>
Nobility Homes, Inc.
Notes to Consolidated Financial Statements
October 31, 1998 and November 1, 1997
- ------------------------------------------------------------
15. Quarterly Financial Summary (Unaudited)
Following is a summary of the unaudited interim results of operations for
each quarter in the years ended October 31, 1998 and November 1, 1997.
<TABLE>
<CAPTION>
First Second Third Fourth
Year ended October 31, 1998
<S> <C> <C> <C> <C>
Net sales .................. $ 10,606,965 $ 11,324,503 $ 11,497,122 $ 11,401,785
Cost of goods sold ......... 7,895,612 8,284,991 8,276,954 8,289,659
Net income ................. 800,315 1,008,345 1,032,802 1,099,697
Earnings per share
Basic .................... .18 .23 .23 .25
Diluted .................. .18 .22 .23 .24
Composite stock price range:
High ..................... $ 19.25 $ 16.63 $ 21.00 $ 15.25
Low ...................... $ 18.63 $ 16.00 $ 19.50 $ 14.50
Close .................... $ 18.75 $ 16.38 $ 19.50 $ 15.00
Year ended November 1, 1997
Net sales .................. $ 9,045,992 $ 9,604,700 $ 10,616,287 $ 12,429,468
Cost of goods sold ......... 6,826,587 7,108,823 7,779,104 9,212,087
Net income ................. 541,214 704,985 780,601 1,010,778
Earnings per share
Basic .................... .12 .16 .18 .23
Diluted .................. .12 .16 .18 .23
Composite stock price range:
High ..................... $ 14.50 $ 11.25 $ 12.88 $ 12.38
Low ...................... $ 14.00 $ 10.50 $ 12.25 $ 12.25
Close .................... $ 14.00 $ 11.25 $ 12.88 $ 12.38
</TABLE>
The Company historically records the increase in cash surrender value
related to its life insurance policies on the Company's president during
the fourth quarter. Accordingly, the Company recorded credits of $149,000,
$49,000 and $48,000 in fiscal years 1998, 1997 and 1996, respectively, to
insurance expense in the fourth quarter of the respective years.
16. Subsequent Event (Unaudited)
On December 16, 1998, the Company declared a 10% stock dividend on its
outstanding common stock, payable on February 19, 1999 to shareholders of
record as of January 15, 1999. The information is labeled unaudited because
this transaction has not been consummated, and the number of shares which
will be issued cannot be verified.
-19-
<PAGE>
Notes to Consolidated Financial Statements
October 31, 1998 and november 1, 1997
Accordingly, no adjustments have been made to the consolidated financial
statements. The pro forma effect on weighted average shares outstanding and
earnings per share is as follows:
Unaudited
1998 1997 1996
Weighted average shares outstanding
(diluted) 4,533,298 4,467,357 4,451,102
Shares issued for stock dividend 442,025 442,025 442,025
------- ------- -------
Weighted average shares outstanding,
as restated 4,975,323 4,909,382 4,893,127
--------- --------- ---------
Earnings per share, as restated $ .79 $ .62 $ .49
-------- ------- -------
-20-
Exhibit 21
Subsidiaries of Registrant
Prestige Home Centers, Inc.
Prestige Insurance Services, Inc.
Exhibit 23
Consent of Independent Certified Public Accountants
We hereby consent to the incorporation by reference in Nobility Homes,
Inc.'s Registration Statement on Form S-8 (SEC File No. 333-44769) of our report
dated December 14, 1998, appearing on page 1 of Exhibit 13 in Nobility Homes,
Inc.'s Annual Report on Form 10-K for the fiscal year ended October 31, 1998.
PricewaterhouseCoopers LLP
Orlando, Florida
January 28, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-02-1998
<PERIOD-END> OCT-31-1998
<CASH> 5,891,994
<SECURITIES> 0
<RECEIVABLES> 535,615
<ALLOWANCES> 0
<INVENTORY> 10,391,340
<CURRENT-ASSETS> 17,270,877
<PP&E> 3,576,522
<DEPRECIATION> 1,539,382
<TOTAL-ASSETS> 22,803,206
<CURRENT-LIABILITIES> 4,129,463
<BONDS> 0
0
0
<COMMON> 492,209
<OTHER-SE> 18,181,534
<TOTAL-LIABILITY-AND-EQUITY> 22,803,206
<SALES> 44,830,375
<TOTAL-REVENUES> 44,830,375
<CGS> 32,747,216
<TOTAL-COSTS> 6,238,730
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 6,382,159
<INCOME-TAX> 2,441,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,941,159
<EPS-PRIMARY> .89
<EPS-DILUTED> .87
</TABLE>
