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 January 30, 1999
Commission File number 0-6506
NOBILITY HOMES, INC.
(Exact name of registrant as specified in its charter)
Florida 59-1166102
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
3741 S.W. 7th Street
Ocala, Florida 34474
(Address of principal executive offices) (Zip Code)
(352) 732-5157
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X ; No _____.
The number of shares outstanding of each of the issuer's classes of common
equity as of March 16, 1999 was 4,861,491.
<PAGE> Page 2
NOBILITY HOMES, INC.
INDEX
Page
Number
PART I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets as of January 30, 1999
and October 31, 1998 3
Consolidated Statements of Income for the three months
ended January 30, 1999 and January 31, 1998 4
Consolidated Statements of Cash Flows for three months
ended January 30, 1999 and January 31, 1998 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Conditions 8
PART II. Other Information and Signatures 11
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports of Form 8-K
<PAGE> Page 3
<TABLE>
PART I. FINANCIAL INFORMATION
NOBILITY HOMES, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
January 30, 1999 October 31, 1998
---------------- ----------------
<S> <C> <C>
ASSETS (Unaudited)
Current Assets:
Cash and cash equivalents $ 4,599,720 $ 5,891,994
Accounts receivable - trade 643,937 535,615
Inventories 11,273,806 10,391,340
Deferred income taxes 127,000 127,000
Prepaid expenses and other current assets 355,266 324,928
---------- ----------
Total current assets 16,999,729 17,270,877
Property, plant and equipment, net 2,060,664 2,037,140
Investment in joint venture - Nobility 21 450,530 428,938
Deferred income taxes - noncurrent 720,200 720,200
Other assets 2,336,934 2,346,051
---------- ----------
Total assets $ 22,568,057 $ 22,803,206
========== ==========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,270,788 $ 1,836,608
Accrued expenses and other current liabilities 807,628 1,367,916
Accrued compensation 343,407 583,889
Income taxes payable 779,050 341,050
---------- ----------
Total current liabilities 3,200,873 4,129,463
---------- ----------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.10 par value, 500,000
shares authorized, none issued - -
Common stock, $.10 par value, 10,000,000
shares authorized in 1999 and 1998; 5,364,907 and
4,922,087 shares issued, respectively, in 1999 and 1998 536,491 492,209
Additional paid in capital 8,629,146 2,197,185
Retained earnings 12,467,668 18,225,666
Less treasury stock at cost, 503,416 and
465,836 shares, respectively, in 1999 and 1998 (2,266,121) (2,241,317)
---------- ----------
Total stockholders' equity 19,367,184 18,673,743
----------- ----------
Total liabilities and stockholders' equity $ 22,568,057 $ 22,803,206
=========== ==========
</TABLE>
<PAGE> Page 4
<TABLE>
NOBILITY HOMES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Months Ended
January 30, January 31,
1999 1998
----------- -----------
<S> <C> <C>
Net sales $ 10,080,257 $ 10,589,052
Net sales - related parties 26,645 16,913
---------- ----------
Total net sales 10,106,902 10,605,965
Cost of goods sold (7,312,538) (7,895,612)
---------- ----------
Gross profit 2,794,364 2,710,353
Selling, general and administrative expenses (1,706,493) (1,503,891)
---------- ----------
Operating income 1,087,871 1,206,462
---------- ----------
Other income:
Interest income 52,298 63,819
Undistributed earnings in joint venture - Nobility 21 21,592 25,852
Miscellaneous income 3,484 3,182
---------- ----------
77,374 92,853
---------- ----------
Income before provision for income taxes 1,165,245 1,299,315
Provision for income taxes (447,000) (499,000)
---------- ---------
Net income $ 718,245 $ 800,315
========== ==========
Weighted average shares outstanding (1)
Basic 4,863,039 4,899,051
Diluted 4,941,227 4,941,886
Earnings per share (1)
Basic $ .15 $ .16
Diluted $ .15 $ .16
(1) Restated to reflect 10% stock dividend paid on February 19, 1999
</TABLE>
<TABLE>
NOBILITY HOMES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Three Months Ended
January 30, January 31,
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 718,245 $ 800,315
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization 59,091 63,649
Undistributed earnings in joint venture - Nobility 21 (21,592) (25,853)
(Increase) decrease in:
Accounts receivable - trade (108,322) (621,149)
Inventories (882,466) (4,426)
Prepaid expenses and other current assets (30,338) (814)
Increase (decrease) in:
Accounts payable (565,820) (276,130)
Accrued expenses and other current liabilities (560,288) 70,910
Accrued compensation (240,482) (132,865)
Income taxes payable 438,000 242,071
---------- ---------
Net cash provided by (used in) operating activities (1,193,972) 115,708
---------- ---------
Cash flows from investing activities:
Purchase of equipment (73,498) (54,064)
---------- ---------
Net cash used in investing activities (73,498) (54,064)
---------- ---------
Cash flows from financing activities:
Purchase of treasury stock (24,804) -
--------- ---------
Net cash used in financing activities (24,804) -
--------- ---------
(Decrease) Increase in cash and cash equivalents (1,292,274) 61,644
Cash and cash equivalents at beginning of quarter 5,891,994 6,293,924
---------- ---------
Cash and cash equivalents at end of quarter $ 4,599,720 $ 6,355,568
========== =========
Supplemental disclosure of cash flow information
Income taxes paid $ 155,000 $ 275,000
========== =========
</TABLE>
<PAGE> Page 6
NOBILITY HOMES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The unaudited financial information included in this report includes
all adjustments which are, in the opinion of management, necessary to
reflect a fair statement of the results for the interim periods. The
operations for the three months ended January 30, 1999 are not
necessarily indicative of the results of the full fiscal year.
Certain information and footnote disclosure normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the
Securities and Exchange Commission rules and regulations governing Form
10-Q. The condensed financial statements included in this report should
be read in conjunction with the financial statements and notes thereto
included in the Registrant's October 31, 1998 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 January 30, 1999 and October 31, 1998 are
summarized as follows:
<TABLE>
<CAPTION>
January 30, October 31,
1999 1998
----------- -----------
<S> <C> <C>
Raw Materials $ 629,738 $ 587,057
Work-in-process 88,280 101,268
Finished homes 9,337,244 8,525,402
Pre-owned manufactured homes 598,555 621,017
Model home furniture and other 619,989 556,596
---------- ----------
$ 11,273,806 $ 10,391,340
========== ==========
</TABLE>
3. Earnings Per Share
Effective for the quarter ended January 31, 1998, the Company adopted
Statement on Financial Accounting Standards No. 128, Earnings Per Share
(SFAS 128). SFAS 128 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. 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
following reconciliation details the numerators and denominators used
to calculate basic and diluted earnings per share for the respective
periods:
<PAGE> Page 7
NOBILITY HOMES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(UNAUDITED)
Three Months Ended
January 30, January 31,
1999 1998
---------- -----------
Net Income $ 718,245 $ 800,315
========= =========
Weighted average shares outstanding:
Basic 4,863,039 4,899,051
Add: common stock equivalents 78,188 42,835
--------- ---------
Diluted 4,941,227 4,941,886
========== =========
Earnings per share:
Basic and Diluted $ 0.15 $ 0.16
========= =========
4. Stock Split
On January 6, 1998, the Company's Board of Directors authorized a
three-for-two stock split in the form of a 50% stock dividend payable
February 20, 1998 to stockholders of record on January 30, 1998. This
resulted in the issuance of 1,485,297 additional shares of common
stock. Share and per share data for all periods presented herein have
been adjusted to give effect to the 50% stock split.
5. Stock Dividend
On December 15, 1998, the Company's Board of Directors declared a 10%
stock dividend which was paid on February 19, 1999 to stockholders of
record on January 15, 1999. This resulted in the issuance of 442,820
additional shares of common stock. The dividend was charged to retained
earnings in the amount of approximately $6.5 million, which was based
upon the fair value of the Company's common stock. All references to
weighted-average shares outstanding and per share amounts included
herein reflect the 10% stock dividend and its retroactive effect.
<PAGE> Page 8
NOBILITY HOMES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Results of Operations
Net sales in the first quarter of 1999 were $10,107,000 as compared to
$10,606,000 for the first quarter of 1998. The decrease in sales for the first
three months of 1999 was primarily due to the additional stocking of $1.2
million of new inventory homes for the Company's seven new retail sales centers
that were added in the fourth quarter of 1998.
Gross profit in the first quarter of 1999 as a percentage of net sales
was 27.6 percent compared to 25.5 percent for the same period last year. The
increase in gross profit in the first quarter of 1999 was primarily a result of
improvements in the gross margins at the retails sales centers, caused by
selling a mix of higher priced homes.
Selling, general and administrative expenses, as a percentage of net
sales, was 16.9 percent in the first quarter of 1999 compared to 14.2 percent
for the same period last year. The increase in first quarter of 1999 selling,
general and administrative expenses as a percent of net sales was due to
increased overhead from the seven new retail sales centers added during the
fourth quarter of 1998.
Other income for first quarter 1999 was $77,000 of which $52,000 was
from interest on short term investments and $22,000 was undistributed earnings
from the Company's financing joint venture, Nobility 21. This compares to
$93,000 in the first quarter of fiscal year 1998, of which $64,000 was from
short term interest and $26,000 was undistributed earnings from Nobility 21.
As a result of the factors discussed above, net income for the first
quarter of 1999 was $718,000 or $.15 per share, compared to $800,000 or $.16 per
share in the first quarter of 1998. Earnings per share for the first quarter of
1998 has been restated to reflect a 10% stock dividend paid on February 19,
1999.
Liquidity and Capital Resources
Cash and cash equivalents were $4,600,000 at January 31, 1999 compared to
$5,892,000 as of October 31, 1998. Working capital increased to $13,799,000 at
January 31, 1999 from $13,141,000 at October 31, 1998. Inventories increased to
$11,274,000 in the first quarter of 1999 from $10,391,000 at the fourth quarter
of 1998. The increase in inventory was due to the additional $1.2 million of
homes manufactured in the first quarter of 1999 which were used to stock the
new retail sales centers added in the fourth quarter of 1998.
The Company maintains a revolving credit agreement with a major bank
providing for borrowings up to $4.0 million. A second revolving line of credit
agreement with another bank provides for borrowings up to $1.5 million. These
two agreements provide the Company with an additional $5.5 million of working
capital for use in connection with its overall operations. At January 30, 1999
and October 31, 1998, there were no amounts outstanding under either of these
agreements.
Consistent with normal practice, the Company's operations are not expected
to require significant capital expenditures during fiscal year 1999. Working
capital requirements for the home inventory for new and existing sales centers
will be met with internal sources.
<PAGE> Page 9
NOBILITY HOMES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION (Continued)
Forward Looking Statements
Certain statements in this report are forward-looking statements within
the meaning of the federal securities laws. Although the Company believes that
the expectations reflected in such forward-looking statements are based on
reasonable assumptions, there are risks and uncertainties that may cause actual
results to differ materially from expectations. These risks and uncertainties
include, but are not limited to, competitive pricing pressures at both the
wholesale and retail levels, changes in market demand, 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 were
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 handles 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 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.
<PAGE> Page 10
NOBILITY HOMES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION (Continued)
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.
<PAGE> Page 11
Part II. OTHER INFORMATION AND SIGNATURES
There were no reportable events for Item 1 through Item 3 and Item 5
Item 4. Submission of Matters to a Vote of Security Holders.
a) The Annual Meeting of the Shareholders was held on February 26,
1999
b) The vote to elect a board of five directors was as follows:
<TABLE>
<CAPTION>
For Against Abstain Not Voted
--- ------- ------- ---------
<S> <C> <C> <C> <C>
Terry E. Trexler 2,809,012 0 0 1,620,239
Richard C. Barberie 2,808,762 250 0 1,620,239
Robert P. Holliday 2,808,762 250 0 1,620,239
Robert P. Saltsman 2,808,392 620 0 1,620,239
Thomas W. Trexler 2,809,012 0 0 1,620,239
</TABLE>
Item 6. Exhibits
Exhibit 10 Revolving Credit Agreement dated March 4, 1998 with
Suntrust Bank
Exhibit 27 Financial Data Schedule
<PAGE> Page 12
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NOBILITY HOMES, INC.
DATE: March 16, 1999 By: /s/ Terry E. Trexler
----------------------------------
Terry E. Trexler, Chairman,
President and Chief
Executive Officer
DATE: March 16, 1999 By: /s/ Thomas W. Trexler
----------------------------------
Thomas W. Trexler, Executive
Vice President, Chief Financial
Officer
DATE: March 16, 1999 By: /s/ Lynn J. Cramer, Jr.
----------------------------------
Lynn J. Cramer, Jr., Treasurer
and Principal Accounting Officer
REVOLVING CREDIT AGREEMENT
March 4, 1998
Mr. Terry E. Trexler, President
Nobility Homes, Inc.
3741 S. W. 7th ST
Ocala, FL 34478
Dear Mr. Trexler:
The following agreement is provided in an effort to clarify the terms,
conditions and covenants relative to the $2,500,000 Line of Credit ("Line"),
which was provided your organization by SunTrust Bank, North Central Florida. If
requested by Nobility Homes, Inc., SunTrust Bank will increase the line to
$4,000,000.00, provided however, that Nobility Homes, Inc. is not in default of
any loan covenants. Nobility Homes, Inc. agrees to execute all necessary
documents relative to increasing the line of credit. This agreement shall
supersede the previous agreement dated March 27, 1997. The Line is offered
subject to the following terms, conditions and covenants.
A. TERMS OF LINE
1. Borrower: Advances under the line shall be made to Nobility Homes, Inc.
("Borrower"), which shall be responsible for the repayment of the
advances.
2. Amount of Line: The maximum amount of the Line shall be Two Million, Five
Hundred Thousand and No/100 Dollars ($2,500,000.00).
3. Purpose: Advances under the Line are to be used for general short-term
working capital requirements which occur in the normal course of
Borrower's business.
4. Term of Line: The Line shall be represented and evidenced by a promissory
note or notes, payable on demand of the Bank. The Bank's obligation to
advance under this Line of Credit Commitment shall expire on demand and
shall be subject to the Borrower's continued banking relationship with the
Bank, as well as the continued satisfactory financial condition of the
Borrower, in the opinion of the Bank.
5. Interest Rate: Advances under the Line shall bear and accrue interest at a
rate per annum which is defined as SunTrust Banks', Inc. Prime Rate minus
1/2% (loan rate today would be 8.00%). Interest shall be due and payable
monthly. Rate basis is floating, with adjustments made the day of change.
5.1 Calculation of Interest: All interest under the Note or hereunder shall be
calculated on the basis of a 360-day year for the actual number of days
elapsed in an interest period (actual/360 method), unless the Bank shall
otherwise elect.
6. Advances: The sums contemplated to be advanced may be repaid and re-
advanced pursuant to the terms hereof, so long as this agreement remains
in effect. The advances may be repaid in whole or in part at any time
without prepayment, premium, penalty, or fee whatsoever.
7. Line of Credit Paydown: During the term of this commitment, the outstand-
ings under the Line shall be paid down to a balance not to exceed One and
No/100 Dollars ($1.00) for thirty (30) consecutive days.
8. Loan Security: The advances shall be extended on an unsecured basis; how-
ever, the Borrower shall not, without the prior written consent of the
Bank, permit or suffer to exist any lien, charge, encumbrance, or security
interest in or upon the Borrower's business assets, with the exception of
floor plan lines of credit occurring in the normal course of business, in
as much as they do not adversely impact the financial covenants detailed
in this agreement.
B. REQUIREMENTS AND CONDITIONS OF LINE
1. Financial Information: Borrower shall maintain books and records in
accordance with generally accepted accounting principles and shall furnish
to the Bank the following periodic financial information:
(a) Quarterly Reports. Within 45 days after the end of each calendar
quarter, an income statement and a balance sheet prepared in
accordance with generally accepted accounting principles, certified
by the chief financial officer or president of Borrower as being true
and accurate;
(b) Annual Reports. Within 90 days after the end of each fiscal year, an
income statement and a reconciliation of surplus statement of the
Borrower for such year, and a balance sheet as of the end of such
year, prepared in accordance with generally accepted auditing
standards certified by independent certified public accountants of
recognized standing selected by the Borrower and satisfactory to the
Bank; and
(c) No Default Certificates. Together with each report required by Sub-
section (a) and (c), shall submit a certificate of its president or
chief financial officer that no Default or Event of Default then
exists or if a Default or Event of Default exists, the nature and
duration thereof and the Borrower's intention with respect thereto.
In addition, in the event of a default, the Borrower's independent
auditors (if applicable) shall include, within its audit report, a
statement that, in the course of such audit, it discovered any
circumstances which it believes constitutes a Default or Event of
Default and if it discovered any such circumstances, the nature and
duration thereof.
If the Borrower has Subsidiaries, the financial statements required
above shall be consolidated and, if required by the Bank, consolidating
form for the Borrower and all Subsidiaries required by generally
accepted accounting principles to be consolidated for financial
reporting purposes, and/or,
(d) Other Information. In addition to the financial statements required
herein, the bank reserves the right to require other or additional
financial or other information concerning the Borrower and/or its
Subsidiaries.
2. Conditions Precedent to Borrowing. Prior to any Advance of the proceeds of
any Loan, the following conditions shall have been satisfied, in the sole
opinion of the Bank and its counsel:
2.1 Conditions Precedent to Each Advance. The following conditions shall have
been satisfied prior to any advance, in the sole opinion of the Bank and
its counsel:
(a) Advance Request. Automatic advances under the line of credit to cover
cash shortfalls in the Borrower's depository accounts with Bank as
provided under the automatic sweep service currently in place with
Bank are permitted. In the event of the need for a manual advance
under the line, the Borrower shall deliver to the Bank a written
request for Advance signed by an authorized officer of the firm as
stated in the corporate resolutions.
(b) No Default. No default shall have occurred and be continuing or will
occur upon the making of the Advance in question.
(c) No Adverse Change. There shall have been no material adverse change
in the condition, financial or otherwise, of the Borrower or any
Subsidiary from such condition as it existed on the date of the most
recent financial statements of Borrower delivered prior to date
hereof.
C. COVENANTS OF THE BORROWER
The Borrower covenants and agrees that from the date hereof and until payment in
full of the Indebtedness and the formal termination of this Agreement, unless
the Bank shall otherwise consent in writing, the Borrower and each Subsidiary:
1. Use of Loan Proceeds. Shall use the proceeds of the Loan only for the
commercial purposes permitted herein or otherwise permitted by the Bank
and furnish the bank all evidence that it may reasonably require with
respect to such use.
2. Insurance. Shall maintain such liability insurance, workers' compensation
insurance, and casualty insurance as may be required by law, customary and
usual for prudent businesses in its industry or as may be reasonably
required by the Bank.
3. Payment of Taxes, Etc. Shall pay before delinquent all of its debts and
taxes except that the Bank shall not unreasonably withhold its consent to
nonpayment of taxes being actively contested in accordance with law
(provided that the Bank may require bonding or other assurances).
4. Compliance; Hazardous Materials. Shall strictly comply with all laws,
regulations, ordinances and other legal requirements, specifically includ-
ing, without limitation, ERISA, all securities laws and all laws relating
to hazardous materials and the environment. Unless approved in writing by
the Bank, neither the Borrower nor any Subsidiary shall engage in the
storage, manufacture, disposition, processing, handling, use or trans-
portation of any hazardous or toxic materials, whether or not in
compliance with applicable laws and regulations.
5. Change in Business. Shall not enter into any business which is sub-
stantially different from the business or businesses in which it is
presently engaged.
6. Sale of Business. Shall maintain its corporate existence, good standing
and necessary qualifications to do business and shall not sell, lease,
assign or otherwise dispose of any substantial portion of its assets
(other than sales of obsolete or worn-out equipment and sales of Inventory
in the ordinary course of business). Change in the principal ownership of
the Firm will cause the Line to become immediately due and payable.
7. Financial Covenants. At all times, the Borrower shall be in compliance
with the following financial covenants on a consolidated basis:
(a) The tangible net worth of the Borrower shall not be less than
$5,500,000 at the end of any fiscal quarter;
For purposes of this Agreement, the term "tangible net worth" shall be
the net worth of an Entity according to generally accepted accounting
principles less any write-up of assets subsequent to October 31, 1993;
deferred assets other than prepaid insurance and prepaid taxes;
patents, copyrights, trademarks, trade names, non-compete agreements,
franchises and other intangibles; goodwill or other amounts
representing the excess of the purchase price of assets or stock over
the value assigned thereto on the books of such Entity; unamortized
debt discount and expense; and any other amounts categorized as
intangibles under generally accepted accounting principles.
(b) The ratio of current assets of the Borrower to current liabilities
shall not be less than 2.0:1 as at the end of the fiscal quarter;
(c) All financial terms used herein shall have the meanings assigned to
them under generally accepted accounting principles unless another
meaning shall be specified.
8. Events of Default. Each of the following shall constitute an Event of
Default along with any events of default as contained with the promissory
note:
(a) Any representation or warranty made by the Borrower or any other
party to any Loan Document (other than the Bank) herein or therein or
in any certificate or report furnished in connection herewith or
therewith shall prove to have been untrue or incorrect in any
material respect when made; or
(b) There shall occur any default by the Borrower in the payment, when
due, of any principal of or interest on the Note, any amounts due
hereunder or any other Loan Document or any other Indebtedness (not
cured within the grace period provided in such Note or in the
document or instrument evidencing such Indebtedness);
(c) There shall occur any default by the Borrower or any other party to
any Loan Document (other than the Bank) in the performance of any
agreement, covenant or obligation contained in this Agreement or such
Loan Document not provided for elsewhere and such default is not
cured within any grace period provided in this Agreement or such
other loan Document;
(d) The Borrower or any Subsidiary shall (i) voluntarily liquidate or
terminate operations or apply for or consent to the appointment of,
or the taking of possession by, a receiver, custodian, trustee or
liquidator or such Person or of all or of a substantial part of its
assets, (ii) admit in writing its inability, or be generally unable,
to pay its debts as the debts become due, (iii) make a general
assignment for the benefit of its creditors, (iv) commence a
voluntary case under the federal Bankruptcy Code (as now or hereafter
in effect), (v) file a petition seeking to take advantage of any
other law relating to bankruptcy, insolvency; or
(e) Without its application, approval or consent, a proceeding shall be
commenced, in any court of competent jurisdiction, seeking in respect
of such Person any remedy under the federal Bankruptcy Code, the
liquidation, reorganization, dissolution, winding-up, or composition
or readjustment of debt, the appointment of a trustee, receiver,
liquidator or the like of such Person, or of all or any substantial
part of the assets of such Person, or other like relief under any law
relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts.
9. Remedies. If any Default shall occur, the Bank may, without notice to the
Borrower, at its option, withhold further Advances to the Borrower of
proceeds of the Loans. Should any Event of Default occur and not be cured
upon demand following delivery of written notice from the bank to the
Borrower complete upon hand or overnight delivery or upon facsimile
delivery or mailing by certified mail, return receipt requested, the Bank
may declare any or all Indebtedness to be immediately due and payable,
bring suit against the Borrower to collect the Indebtedness, exercise any
remedy available to the Bank hereunder and take any action or exercise any
remedy provided herein or in any other Loan Document or under applicable
law. No remedy shall be exclusive of other remedies or impair the right of
the Bank to exercise any other remedies.
10. Severability No failure on the part of the Bank to exercise, and no delay
in exercising, any right hereunder or under any other Loan Document shall
operate as a waiver thereof, nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative
and are in addition to any other remedies provided by law, any Loan
Document or otherwise.
10.1. Notices. Any notice or other communication hereunder to any party hereto
shall be by hand delivery, overnight delivery, facsimile, telegram, telex
or registered certified mail and unless otherwise provided herein shall be
deemed to have been given or made when delivered, telegraphed, telexed,
faxed or deposited in the mails, postage prepaid, addressed to the party
at its address specified below (or at any other address that the party may
hereafter specify to the other parties in writing):
The Bank: SunTrust Bank, North Central Florida
Corporate Lending Division
203 E. Silver Springs Blvd.
Ocala, FL 34470
The Borrower: Nobility Homes, Inc.
3741 S. W. 7th Street
Ocala, FL 34474
10.2 Valid Existence and Power. The Borrower and each subsidiary is a corpora-
tion duly organized, validly existing and in good standing under the laws
of the State of Florida and is duly qualified or licensed to transact
business in all places where the failure to be so qualified would have a
material adverse effect on it. The Borrower and each other Entity which is
a party to any Loan Document (other than the Bank) has the power to make
and perform the Loan Documents executed by it and all such instruments
will constitute the legal, valid and binding obligations of such Entity,
enforceable in accordance with their respective terms, subject only to
bankruptcy and similar laws affecting creditors' rights generally.
11. Survival of Representations. All representations and warranties made
herein shall survive the making of the loans hereunder and the delivery of
the Notes, and shall continue in full force and effect so long as any
Indebtedness is outstanding, there exists any commitment by the Bank to
the Borrower, and until this Agreement is formally terminated in writing.
12. Commitment Expiration: This commitment shall expire unless it has been
accepted in writing and the acceptance received by the undersigned on or
before March 16, 1998.
Please indicate your acceptance of this commitment and the terms and conditions
contained herein by executing your acceptance immediately below and returning
one executed copy of the Commitment Letter and Agreement to the Bank.
We would like to express our appreciation for the opportunity you have given us
to meet your financial needs, and look forward to an ongoing mutually
satisfactory relationship.
Sincerely,
Loren M. Thrasher
Vice President
Corporate Lending Division
LMT/lr
<PAGE>
BORROWER'S ACCEPTANCE OF COMMITMENT AND AGREEMENT
The above Revolving Credit Agreement is hereby accepted on the terms and
conditions outlined therein.
Nobility Homes, Inc.
By: __________________________________
Terry E. Trexler, President
Date: _______________________________
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF NOBILITY HOMES, INC. AS OF AND FOR
THE QUARTER ENDED JANUARY 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-06-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> JAN-30-1999
<CASH> 4,599,720
<SECURITIES> 0
<RECEIVABLES> 643,937
<ALLOWANCES> 0
<INVENTORY> 11,273,806
<CURRENT-ASSETS> 16,999,729
<PP&E> 3,649,987
<DEPRECIATION> 1,589,323
<TOTAL-ASSETS> 22,568,057
<CURRENT-LIABILITIES> 3,200,873
<BONDS> 0
0
0
<COMMON> 536,491
<OTHER-SE> 18,830,693
<TOTAL-LIABILITY-AND-EQUITY> 22,568,057
<SALES> 10,106,902
<TOTAL-REVENUES> 10,106,902
<CGS> 7,312,538
<TOTAL-COSTS> 1,706,493
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,165,245
<INCOME-TAX> 447,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 718,245
<EPS-PRIMARY> 0.15
<EPS-DILUTED> 0.15
</TABLE>
