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 November 6, 1999
Commission file number 0-6506
NOBILITY HOMES, INC.
(Name of 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 24, 2000, computed by reference to the average high
and low prices on that date: $11,710,130
(APPLICABLE ONLY TO CORPORATE ISSUERS)
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of January 24, 2000: 4,731,838 shares of common stock
DOCUMENTS INCORPORATED BY REFERENCE Incorporated at
----------------------------------- ---------------
Nobility Homes, Inc. Proxy Statement for the 2000 Part III, Items 10,
Annual Meeting of Shareholders 11, 12 and 13
<PAGE>
PART I
Item 1. Description of Business
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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
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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 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 1999
as a result of the success of the Company's 30th anniversary model sold in
fiscal 1997. 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 appoint-
ments, retail prices for the Registrant's homes typically range from approxi-
mately $14,000 to $60,000. Most of the prices of the Registrant's homes are
considered by it to be within the low to medium price range of the industry.
Both of the Registrant's manufacturing plants utilize assembly line
techniques in manufactured home production. Both plants manufacture and
assemble the floors, sidewalls, end walls, roofs and interior cabinets for their
homes. The Registrant purchases from outside suppliers various other components
that are built into its homes including the axles, frames, tires, doors,
windows, pre-finished sidings, plywood, ceiling panels, lumber, rafters,
insulation, paneling, appliances, heating units, lighting and plumbing fixtures,
carpeting and drapes. The Registrant is not dependent upon any one particular
supplier for its raw materials or component parts, nor is it required to carry
significant amounts of inventory to assure itself of a continuous allotment of
goods from suppliers.
The Registrant's two manufacturing plants operated at an average of
approximately 35% of their single shift capacity in fiscal 1999, representing a
reduction of approximately 20% from fiscal 1998.
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, Inc.), but, rather, manufactures its homes after receipt
of orders. Although the Registrant attempts to maintain a consistent level of
production of homes throughout the fiscal year,
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seasonal fluctuations do occur, with sales of homes generally lower during the
first fiscal 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 three fiscal years, substantially all
of the Registrant's sales were made in Florida.
Retail Sales
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Prestige Home Centers, Inc. ("Prestige") operates 19 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.
In fiscal 1997, the Registrant entered into a joint venture agreement 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,
extended warranty coverage and property and casualty insurance to Prestige
customers in connection with their purchase and financing of manufactured homes.
Prestige Insurance Services, Inc. receives a commission on
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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 approxi-
mately $356,000, $241,000 and $34,000 in fiscal 1999, 1998 and 1997,
respectively.
Sales to Independent Dealers and Manufactured Home Communities
- --------------------------------------------------------------
The Registrant currently sells its homes on a wholesale basis exclusively
through 4 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% of
the Registrant's total sales in fiscal 1999.
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 1999, 1998 or 1997. For additional information, see Note 14 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 terms. The high
visibility of the Registrant's homes in such communities generates additional
sales of the Registrant's homes through such dealers.
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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 1999, 1998 and 1997, the Registrant reimbursed dealers
other than TLT $114,000, $276,000 and $152,000, respectively, as volume bonus
awards and for floor plan financing charges under the programs described above.
Regulation
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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 approval by a HUD approved engineering firm 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 wind load and thermal
standards.
The Registrant estimates that compliance with federal, state and local
environmental protection laws will have no material effect upon capital
expenditures for plant or equipment modifications or earnings for the next
fiscal year.
The transportation of homes manufactured by the Registrant is subject to
state regulation. Generally, special permits must be obtained to transport the
home over public highways, and restrictions are imposed to promote travel safety
including those relating to routes, travel periods, speed limits, safety
equipment and size.
Homes manufactured by the Registrant are subject to the requirements of the
Magnuson-Moss Warranty Act and Federal Trade Commission rulings which regulate
warranties on consumer products. The Registrant provides a limited warranty of
one year on the structural components of the homes it manufactures.
Competition
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The manufactured home industry is highly competitive. The initial invest-
ment 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
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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
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As of January 2, 2000, the Registrant had 177 full-time employees,
including 71 employed by Prestige. Approximately 84 employees are factory
personnel compared to approximately 140 in such positions a year ago, and 93
are in management, administrative, supervisory, sales and clerical positions
(including 64 management and sales personnel employed by Prestige) compared to
approximately 101 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
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As of November 6, 1999, two manufacturing plants were owned and operated by
the Registrant as follows:
Depreciated Cost of
Approximate Plant and Property
Location Size at November 6, 1999
-------- ----------- -------------------
Belleview, Florida 33,500 sq. ft. $150,211
Ocala, Florida(1) 72,000 sq. ft. 542,409
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(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
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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 have a material adverse
impact on the Company's results of operations or cash flows.
Item 4. Submission of Matters to a Vote of Security Holders
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None
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PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters
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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 1999 and 1998.
Fiscal Year End (1)
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Fiscal November 6, 1999 October 31, 1998
Quarter High Low High Low
1st $12.63 $ 12.25 $11.67 $11.37
2nd 9.00 8.50 15.11 14.55
3rd 8.44 8.00 19.09 17.73
4th 5.63 5.50 13.86 13.18
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(1) On February 19, 1999 a 10% stock dividend was paid and in February 20,
1998, a three-for-two stock split in the form of a 50% stock dividend
was paid. Amounts in the table have been restated to give effect to
these stock dividends.
At January 15, 2000, the approximate number of record holders of Common
Stock was 259 (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 1999, 1998 and 1997, no cash dividends were paid.
Item 6. Selected Financial Data
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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)
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November 6, October 31, November 1, November 2, November 4,
1999 1998 1997 1996 1995
(In thousands except per share data)
<S> <C> <C> <C> <C> <C>
Total net sales $40,353 $44,830 $41,696 $36,455 $30,806
Income from
operations 3,386 5,844 4,759 3,839 2,710
Other income 1,080 538 206 47 1,340
Net income 2,792 3,941 3,038 2,395 2,957
Earnings per
share(2)
Basic .58 .81 .62 .49 .62
Diluted .58 .79 .62 .49 .62
Total assets 17,781 22,803 18,941 14,871 12,896
Long term
obligations -0- -0- -0- -0- 659
Stockholders'
equity 20,437 18,674 15,294 12,256 9,479
Cash dividends
per common share -0- -0- -0- -0- -0-
</TABLE>
- -----------------------------
(1) The Company's fiscal year ends on the first Saturday on or after
October 31. The years ended November 6, 1999, November 2, 1996 and
November 4, 1995 consisted of a fifty-three week period and the years
ended October 31, 1998 and November 1, 1997 consisted of a fifty-two
week period.
(2) On February 19, 1999 a 10% stock dividend was paid and 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. Per share
amounts in the table have been restated to give effect to these stock
dividends.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
- ------ of Operations
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General
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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.
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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 retirement market continues
to diminish, as a focus of its efforts and in dollars and as a percentage of
total sales.
The Company sold 884 homes in fiscal 1999, of which 109 homes were sold to
independent dealers, representing sales of $2,357,721, and 3 homes were sold to
TLT communities, representing sales of $85,575. In fiscal 1998, the Company sold
1,262 homes, of which 334 homes were sold to independent dealers, representing
sales of $7,259,901, and 8 homes were sold to TLT communities, representing
sales of $195,622. In fiscal 1997, the Company sold 1,190 homes, of which 361
homes were sold to independent dealers, representing sales of $7,466,046, and 17
homes were sold to TLT communities, representing sales of $399,853. The balance
of the Company's sales in fiscal 1999, 1998 and 1997, representing 95.1%, 82.0%
and 81.1% 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 1999 and 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.
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The Company through its wholly-owned subsidiary, Prestige Insurance
Services, Inc., an independent insurance agency, offers credit life, homeowners
and service warranty products to Prestige's retail customers.
The year ended November 6, 1999 consisted of a fifty-three (53) week period
while the years ended October 31, 1998 and November 1, 1997 consisted of a
fifty-two (52) week period.
Results of Operations
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Total net sales in fiscal year 1999 were $40,353,254 compared to
$44,830,375 in 1998 and $41,696,447 in fiscal 1997. Net sales declined 9.9%
in fiscal 1999 as compared to increases of 7.5% in 1998 and 14.4% in 1997. The
decline in sales revenue in 1999 was primarily due to approximately $5.0 million
less sales to outside dealers, resulting in large part from increased
competition. The increased sales revenue in fiscal 1998 was primarily due to the
6.8% increase in same store sales revenues at Prestige.
Industry-wide shipments of multi-section manufactured homes measured in
number of units improved slightly by 1.21% for the first ten months of 1999,
verses an increase of 10.7% in 1998 and an increase of 7% in 1997. Shipments of
single section homes declined approximately 13.9% in the first ten months of
1999 compared to a decrease of 4.0% for 1998 and a decrease of 18% in 1997.
Combined industry shipments of multi-section and single section homes declined
4.72% in the first ten months of 1999 compared to an increase of 4.4% in 1998
and a decrease of 3% in 1997. In fiscal 1999, approximately 92% 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 1999
declined 10.8% compared to increases in 1998 of 7% and 1997 of 9%.
Gross profit as a percentage of net sales was 26.1 % in fiscal 1999
compared to 27.0% in fiscal 1998 and 25.8% in 1997. The decrease in gross profit
in fiscal 1999 was primarily a result of a decline in the Company's sales to
independent dealers. 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 improved cost controls.
Selling, general and administrative expenses as a percent of net sales,
were 17.4% in fiscal 1999 compared to 13.9% in 1998 and 14.4% in 1997. The
increase in fiscal 1999 selling, general and administrative expenses as a
percent of net sales, was primarily due to increased expenses from the
seven new retail sales centers added during the fourth quarter of 1998 and the
expense associated with closing three retail sales centers. The decline in
fiscal 1998 selling, general and administrative expenses as a percent of net
sales, 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.
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During third and fourth quarters of fiscal year 1999 the Company made an
impairment adjustment to goodwill in the amount of $154,000 in connection with
the closing of two recently acquired, under performing retail sales centers.
Other income for fiscal 1999 was $1,080,265 of which $208,834 was from
interest on short term investments and $388,495 was from undistributed earnings
from the Nobility 21 joint venture. In 1999 the Company received $400,000
payment from TLT Communities against $1,918,754 of advances that are non-
interest bearing and have been fully reserved since 1991. Other income for
fiscal 1998 was $537,730 of which $291,593 was from interest on short term
investments and $165,914 was from undistributed earnings from the Nobility 21
joint venture. Other income for fiscal 1997 was $205,665 of which $118,336 was
from interest on short term investments.
As a result of the factors discussed above, earnings for fiscal 1999 were
$2,791,540 or $.58 per share compared to $3,941,159 or $.79 per share for fiscal
1998 and $3,037,578 or $.62 per share for fiscal 1997.
Liquidity and Capital Resources
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Cash and cash equivalents were $7,973,241 at November 6, 1999 compared to
$5,891,994 at October 31, 1998. Working capital increased to $15,095,927 in
fiscal 1999 compared to $13,141,414 in fiscal 1998. In fiscal years 1999 and
1998, the Company carried the entire inventory for the Prestige retail sales
centers and did not incur third party floor plan financing expenses. Inventories
decreased to $9,149,924 at fiscal year-end 1999 from $10,391,340 at fiscal year-
end 1998.
The Company maintains a revolving credit agreement with a major bank
providing for borrowings up to $4.0 million. At November 6, 1999 and October 31,
1998, there were no amounts outstanding under this agreement.
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. The Company received
$386,000 in distributions from the joint venture in fiscal year 1999.
In August 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.
During fiscal year 1999 the Company closed two of the six retail sales centers
for under-performance and made an impairment adjustment to goodwill in the
amount of $154,000.
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Prestige closed one of its sales centers in Jacksonville, Florida in
September 1999. A new retail sales center was opened in Yulee, Florida in
August 1998. 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 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.
Prestige closed one of its sales centers in Perry, Florida in January 1997.
Consistent with normal practice, the Company's operations are not expected
to require significant capital expenditures during fiscal 2000. 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
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Because many existing computer programs use only two digits to identify a
year in the date field, it was anticipated that, as the century date change
occurred, these programs might recognize the year 2000 as 1900, or not at
all, resulting in many computer systems and applications failing or creating
erroneous results.
The Company's internal systems consist of its central operating and
accounting systems, which handle the majority of its business transactions. The
Company 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 were made,
primarily through the purchase of updated hardware and updated vendor-supplied
software. To date the Company has not experienced any problems with its central
operating or accounting systems, and the Company's manufacturing and retail
operations, have not experienced any problems with major suppliers, customers or
service providers. There can be no guarantee, however, that a year 2000 system
failure will not occur in the Company's systems or in the systems of third
parties with whom the Company deals.
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Item 8. Consolidated Financial Statements and Supplementary Data
- ------ --------------------------------------------------------
Financial statements incorporated herein from the Registrant's 1999 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 2000 annual meeting of shareholders to be
filed with the Commission pursuant to Regulation 14A on or before March 5, 2000.
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 (60) 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; Director of Nobility 21,
LLC since July 1997.
Thomas W. Trexler (36) 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; Director of Nobility 21, LLC since
July 1997.
Edward C. Sims (53) Vice President of Engineering of the Registrant.
Jean Etheredge (54) Secretary of the Registrant.
Lynn J. Cramer, Jr. (54) 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 2000 annual meeting of shareholders to be filed with the
Commission pursuant to Regulation 14A on or before March 5, 2000.
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 2000 annual meeting of
shareholders to be filed with the Commission pursuant to Regulation 14A on or
before March 5, 2000.
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 March 5, 2000.
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 November 6, 1999 and October 31, 1998
Consolidated Statements of Income for the Years Ended November 6, 1999,
October 31, 1998 and November 1, 1997
Consolidated Statements of Changes in Stockholders' Equity for the
Years Ended November 6, 1999, October 31, 1998 and November 1, 1997
Consolidated Statements of Cash Flows for the Years Ended November 6,
1999, October 31, 1998 and November 1, 1997
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).
17
<PAGE>
(c) 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 1999 Annual Report
to Shareholders.
21. Subsidiaries of Registrant.
23. Consent of PricewaterhouseCoopers LLP.
27. Financial Data Schedule.
- ----------------------
* Management Remuneration Plan.
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: February 2, 2000 By:/s/ Terry E. Trexler
--------------------------------------
Terry E. Trexler, Chairman, President
and Chief Executive Officer
DATE: February 2, 2000 By:/s/ Thomas W. Trexler
--------------------------------------
Thomas W. Trexler, Executive
Vice President and
Chief Financial Officer
DATE: February 2, 2000 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: February 2, 2000 /s/ Terry E. Trexler
--------------------------------------
Terry E. Trexler, Director
DATE: February 2, 2000 /s/ Richard C. Barberie
--------------------------------------
Richard C. Barberie, Director
DATE: February 2, 2000 /s/ Robert Holliday
--------------------------------------
Robert Holliday, Director
DATE: February 2, 2000 /s/ Robert P. Saltsman
--------------------------------------
Robert P. Saltsman, Director
DATE: February 2, 2000 /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 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 1999 Annual Report
to Shareholders.
21. Subsidiaries of Registrant.
23. Consent of PricewaterhouseCoopers LLP.
27. Financial Data Schedule.
_____________________
* Management Remuneration Plan.
20
<PAGE>
Nobility Homes, Inc.
Consolidated Financial Statements
November 6, 1999 and October 31, 1998
<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 November 6, 1999
and October 31, 1998, and the results of their operations and their cash flows
for each of the three years in the period ended November 6, 1999 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
December 15, 1999
F-1
<PAGE>
Nobility Homes, Inc.
Consolidated Balance Sheets
November 6, 1999 and October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 7,973,241 $ 5,891,994
Accounts receivable 167,764 535,615
Inventories 9,149,924 10,391,340
Deferred income taxes - current 179,900 127,000
Prepaid expenses and other current assets 310,642 324,928
----------- -----------
Total current assets 17,781,471 17,270,877
Property, plant and equipment, net 1,987,047 2,037,140
Investment in joint venture - Nobility 21 431,433 428,938
Deferred income taxes - noncurrent 665,400 720,200
Other assets 2,256,984 2,346,051
----------- -----------
Total assets $ 23,122,335 $ 22,803,206
----------- -----------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 1,183,765 $ 1,836,608
Accrued expenses and other current liabilities 974,286 1,367,916
Accrued compensation 428,343 583,889
Income taxes payable 99,150 341,050
----------- -----------
Total current liabilities 2,685,544 4,129,463
----------- -----------
Commitments and contingent liabilities (Note 14) - -
Stockholders' equity:
Preferred stock, $.10 par value, 500,000 shares authorized;
none issued - -
Common stock, $.10 par value, 10,000,000 shares authorized;
5,364,907 and 4,922,087 shares issued in 1999 and
1998, respectively 536,491 492,209
Additional paid-in capital 8,629,144 2,197,185
Retained earnings 14,540,965 18,225,666
Less treasury stock at cost, 633,069 and 501,836 shares,
respectively, in 1999 and 1998 (3,269,809) (2,241,317)
----------- -----------
Total stockholders' equity 20,436,791 18,673,743
----------- -----------
Total liabilities and stockholders' equity $ 23,122,335 $ 22,803,206
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
Nobility Homes, Inc.
Consolidated Statements of Income
For the Years Ended November 6, 1999, October 31, 1998 and November 1, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Net sales $ 40,267,679 $ 44,634,753 $ 41,296,594
Net sales - related parties 85,575 195,622 399,853
------------ ------------ ------------
Total net sales 40,353,254 44,830,375 41,696,447
Cost of goods sold (29,808,581) (32,747,216) (30,926,601)
------------ ------------ ------------
Gross profit 10,544,673 12,083,159 10,769,846
Selling, general and administrative expenses (7,004,398) (6,238,730) (6,010,933)
Impairment adjustment of goodwill (Note 2) (154,000) - -
------------ ------------ ------------
Operating income 3,386,275 5,844,429 4,758,913
------------ ------------ ------------
Other income:
Interest income 208,834 291,593 118,336
Undistributed earnings in joint
venture - Nobility 21 388,495 165,914 13,024
Gain on recovery of TLT, Inc. note
receivable (Note 3) 400,000 - -
Miscellaneous income 82,936 80,223 74,305
------------ ------------ ------------
1,080,265 537,730 205,665
------------ ------------ ------------
Income before provision for income taxes 4,466,540 6,382,159 4,964,578
Provision for income taxes (1,675,000) (2,441,000) (1,927,000)
------------ ------------ ------------
Net income $ 2,791,540 $ 3,941,159 $ 3,037,578
------------ ------------ ------------
Average shares outstanding
Basic 4,819,823 4,894,542 4,899,051
Diluted 4,839,659 4,988,506 4,910,157
Earnings per share
Basic $ .58 $ .81 $ .62
Diluted $ .58 $ .79 $ .62
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
Nobility Homes, Inc.
Consolidated Statements of Changes in Stockholders' Equity
For the Years Ended November 6, 1999, October 31, 1998 and November 1, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Additional
Common Paid-in Retained Treasury
Stock Capital Earnings Stock Total
<S> <C> <C> <C> <C> <C>
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
10% stock dividend 44,282 6,431,959 (6,476,241) - -
Purchase of treasury stock - - - (1,028,492) (1,028,492)
Net income - - 2,791,540 - 2,791,540
-------- ---------- ----------- ----------- -----------
Balance at November 6, 1999 $ 536,491 $ 8,629,144 $ 14,540,965 $ (3,269,809) $ 20,436,791
======== ========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
Nobility Homes, Inc.
Consolidated Statements of Cash Flows
For the Years Ended November 6, 1999, October 31, 1998 and November 1, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 2,791,540 $ 3,941,159 $ 3,037,578
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 276,986 216,836 174,375
Impairment adjustment of goodwill 154,000 - -
Gain on recovery of TLT, Inc. note receivable (400,000) - -
Deferred income taxes 1,900 - 5,400
Undistributed earnings in joint venture - Nobility 21 (388,495) (165,914) (13,024)
Distributions from joint venture - Nobility 21 386,000 - -
Decrease (increase) in:
Accounts receivable - trade 367,851 (149,596) 256,607
Accounts receivable - related parties - - 350,379
Inventories 1,241,416 (2,198,238) (213,671)
Prepaid expenses and other current assets 14,286 (183,521) 260,859
(Decrease) increase in:
Accounts payable (652,843) 243,628 224,812
Accrued expenses and other current liabilities (393,630) 323,730 144,443
Accrued compensation (155,546) (22,762) 304,286
Income taxes payable (241,900) (61,929) 358,873
---------- ---------- ----------
Net cash provided by operating activities 3,001,565 1,943,393 4,890,917
---------- ---------- ----------
Cash flows from investing activities:
Purchase of property, plant and equipment (179,162) (796,534) (241,758)
Acquisition of retail centers - (800,000) (85,000)
Investment in joint venture - Nobility 21 - - (250,000)
Increase in cash surrender value of life insurance (92,689) (149,000) (49,444)
Increase in receivable from officers for life
insurance premiums (19,975) (38,539) (19,975)
---------- ---------- ----------
Net cash used in investing activities (291,826) (1,784,073) (646,177)
---------- ---------- ----------
Cash flows from financing activities:
Collection of TLT, Inc. note receivable 400,000 - -
Purchase of treasury stock (1,028,492) (561,250) -
---------- ---------- ----------
Net cash used in financing activities (628,492) (561,250) -
---------- ---------- ----------
Increase (decrease) in cash and cash equivalents 2,081,247 (401,930) 4,244,740
Cash and cash equivalents at beginning of year 5,891,994 6,293,924 2,049,184
---------- ---------- ----------
Cash and cash equivalents at end of year $ 7,973,241 $ 5,891,994 $ 6,293,924
========== ========== ==========
Supplemental disclosure of cash flow information
Interest paid $ - $ - $ -
========== ========== ==========
Income taxes paid $ 1,915,000 $ 2,521,000 $ 1,612,500
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
Nobility Homes, Inc.
Notes to Consolidated Financial Statements
November 6, 1999 and October 31, 1998
- --------------------------------------------------------------------------------
1. Reporting Entity and Significant Accounting Policies
Description of Business and Principles of Consolidation
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 nineteen Florida retail sales centers in Ocala
(3), Tallahassee, St. Augustine, Tampa, Chiefland (2), Lake City,
Auburndale, Jacksonville, Hudson, Inverness, Fort Walton, Pace, Tavares,
Panama City (2), and Yulee.
All intercompany accounts and transactions have been eliminated in
consolidation.
Fiscal Year
The Company's fiscal year ends on the first Saturday on or after October
31. The year ended November 6, 1999 consisted of a fifty-three week period
and the years ended October 31, 1998 and November 1, 1997 consisted of a
fifty-two week period.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents. As of
November 6, 1999 and October 31, 1998, approximately $4,581,000 and
$2,405,000, respectively, of the cash and cash equivalents were held in the
form of certificates of deposit and governmental securities.
Inventories
Inventories are carried at the lower of cost or market. Cost of finished
home inventories is determined on the specific identification method. Other
inventory costs are determined on a first-in, first-out basis.
Property, Plant and Equipment
Property, plant and equipment are stated at cost and depreciated over their
estimated useful lives using the straight-line method. Routine maintenance
and repairs are charged to expense when incurred. Major replacements and
improvements are capitalized. Gains or losses are credited or charged to
earnings upon disposition.
Investment in Joint Venture - Nobility 21
The Company owns a 50% interest in a joint venture engaged in providing
mortgage financing on manufactured homes. This investment is accounted for
using the equity method of accounting.
F-6
<PAGE>
Nobility Homes, Inc.
Notes to Consolidated Financial Statements
November 6, 1999 and October 31, 1998
- --------------------------------------------------------------------------------
Impairment of Long-Lived Assets
In the event that facts and circumstances indicate that the carrying value
of a long-lived asset, including associated intangibles, may be impaired,
an evaluation of recoverability is performed by comparing the estimated
future undiscounted cash flows associated with the asset to the asset's
carrying amount to determine if a write-down to market value or discounted
cash flow is required.
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.
Fair Value of Financial Instruments
The carrying amount of accounts receivable, accounts payable and accrued
expenses 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.
Stock-Based Compensation
The Company accounts for compensation cost related to employee stock
options and other forms of employee stock-based compensation plans in
accordance with the requirements of APB Opinion No. 25, Accounting for
Stock Issued to Employees ("APB 25"). APB 25 requires compensation cost for
stock-based compensation plans to be recognized based on the difference, if
any, between the fair market value of the stock on the date of grant and
the option exercise price. In October 1995, the Financial Accounting
Standards Board (the "FASB") issued SFAS No. 123, Accounting for
Stock-Based Compensation ("FAS 123"). FAS 123 established a fair value
based method of accounting for compensation cost related to stock options
and other forms of stock-based compensation plans. FAS 123 allows an entity
to continue to measure compensation cost using the principles of APB 25 if
certain pro forma disclosures are made. The Company adopted the provisions
for the pro forma disclosure requirements of FAS 123.
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.
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 $650,000, $530,000
and $710,000 for fiscal years 1999, 1998 and 1997, respectively.
F-7
<PAGE>
Nobility Homes, Inc.
Notes to Consolidated Financial Statements
November 6, 1999 and October 31, 1998
- --------------------------------------------------------------------------------
Income Taxes
Income taxes are provided using the liability method in accordance with
SFAS 109, Accounting for Income Taxes. Under this method, deferred tax
assets and liabilities are determined based on differences between
financial reporting and taxes bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when
the differences are expected to reverse.
Earnings Per Share
These financial statements include "basic" and "diluted" earnings per share
information for all periods presented. 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 common shares. The weighted-average number of shares used in
calculating basic earnings per share were 4,819,823, 4,894,542 and
4,899,051, for fiscal years 1999, 1998 and 1997, respectively. In
calculating diluted earnings per share, these amounts were adjusted to
include dilutive common shares of 19,836, 93,964 and 11,106 for fiscal
years 1999, 1998 and 1997, respectively. The Company's dilutive common
shares consist of stock options. Earnings per share information for prior
periods was restated to give effect to the Company's stock split and stock
dividend as discussed in Note 13.
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.
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.
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.
The results of operations of the acquired businesses have been included in
the consolidated financial statements from the date of acquisition.
F-8
<PAGE>
Nobility Homes, Inc.
Notes to Consolidated Financial Statements
November 6, 1999 and October 31, 1998
- --------------------------------------------------------------------------------
The Company evaluated the recoverability of the goodwill recorded in
connection with the six retail centers acquired during the fourth quarter
of fiscal 1998. Since the acquisition, the Florida manufacturing industry
trend has been slower than originally expected. Consequently, the Company
closed two of the six retail centers in fiscal 1999. Accordingly, during
fiscal 1999, the Company recorded an impairment loss of approximately
$154,000.
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
$577,000 and $557,000 at November 6, 1999 and October 31, 1998,
respectively. The advances are non-interest bearing. Net cash surrender
value of approximately $848,000 and $773,000 at November 6, 1999 and
October 31, 1998, respectively, was pledged to the Company as security for
advances under this arrangement.
Affiliated Entities
TLT, Inc.
The President, Chairman of the Board of Directors and 46% 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 since
1990.
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 November 6, 1999, October 31,
1998 and November 1, 1997 resulting from related party transactions:
<TABLE>
<CAPTION>
1999 1998 1997
Net Deferred Net Deferred Net Deferred
Sales Profit Sales Profit Sales Profit
<S> <C> <C> <C> <C> <C> <C>
TLT, Inc. and TLT
Communities $ 85,575 $ - $ 195,622 $ - $ 399,853 $ 19,279
======= ======= ======== ======= ======== =======
</TABLE>
F-9
<PAGE>
Nobility Homes, Inc.
Notes to Consolidated Financial Statements
November 6, 1999 and October 31, 1998
- --------------------------------------------------------------------------------
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 November 6, 1999 and October 31, 1998, the
advances totaled approximately $1,519,000 and $1,919,000, respectively.
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. In the fourth quarter of fiscal 1999, TLT paid $400,000 to the
Company to reduce these outstanding advances. This amount collected has
been recorded as gain on recovery of TLT, Inc.
note receivable in the accompanying consolidated financial statements.
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 $0, $2,000 and $8,000 in fiscal years
1999, 1998 and 1997, respectively.
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.
The following is summarized financial information of the Company's joint
venture:
1999 1998 1997
Total Assets $ 45,554,033 $ 27,714,748 $ 5,878,514
Total Liabilities $ 42,691,167 $ 26,956,872 $ 5,352,466
Total Equity $ 862,866 $ 757,876 $ 526,048
Net Income $ 776,990 $ 231,827 $ 42,996
Distributions received from the joint venture amounted to $386,000 in 1999.
F-10
<PAGE>
Nobility Homes, Inc.
Notes to Consolidated Financial Statements
November 6, 1999 and October 31, 1998
- --------------------------------------------------------------------------------
4. Inventories
Inventories at November 6, 1999 and October 31, 1998 are summarized as
follows:
1999 1998
Raw materials $ 571,151 $ 587,057
Work-in-process 114,733 101,268
Finished homes 7,425,884 8,525,402
Pre-owned manufactured homes 496,593 621,017
Model home furniture 541,563 556,596
---------- -----------
$ 9,149,924 $ 10,391,340
---------- -----------
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 November 6, 1999 and October 31,
1998 are summarized as follows:
<TABLE>
<CAPTION>
Range
of Lives
in Years 1999 1998
<S> <C> <C> <C>
Land - $ 595,009 $ 579,994
Land and leasehold improvements 10-20 425,137 410,798
Buildings and improvements 15-40 1,555,988 1,518,168
Machinery and equipment 3-10 728,812 678,277
Furniture and fixtures 3-10 420,741 389,285
---------- ----------
3,725,687 3,576,522
Less accumulated depreciation (1,738,640) (1,539,382)
---------- ----------
$ 1,987,047 $ 2,037,140
========== ==========
</TABLE>
Depreciation expense totaled approximately $229,000, $177,000 and $158,000
for fiscal years 1999, 1998 and 1997, respectively.
F-11
<PAGE>
Nobility Homes, Inc.
Notes to Consolidated Financial Statements
November 6, 1999 and October 31, 1998
- --------------------------------------------------------------------------------
6. Other Assets
Other assets at November 6, 1999 and October 31, 1998 are comprised of the
following:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Cash surrender value of life insurance $ 1,205,841 $ 1,113,151
Receivable from officers for life insurance premiums 577,049 557,074
Goodwill, net 474,094 675,826
---------- ----------
$ 2,256,984 $ 2,346,051
========== ==========
</TABLE>
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 $1,200,000 at November 6,
1999.
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 $47,000, $40,000 and
$16,000 for fiscal years 1999, 1998 and 1997, respectively.
7. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities at November 6, 1999 and
October 31, 1998 are comprised of the following:
1999 1998
Customer deposits $ 353,475 $ 585,105
Accrued sales taxes 233,597 263,178
Accrued warranty expense 165,000 165,000
Other accrued expenses 222,214 354,633
-------- --------
$ 974,286 $ 1,367,916
======== ==========
F-12
<PAGE>
Nobility Homes, Inc.
Notes to Consolidated Financial Statements
November 6, 1999 and October 31, 1998
- --------------------------------------------------------------------------------
8. Income Taxes
The provision for income taxes for the years ended November 6, 1999,
October 31, 1998 and November 1, 1997 consists of the following:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Current tax expense:
Federal $ 1,445,700 $ 2,094,000 $ 1,669,600
State 227,400 347,000 252,000
---------- ---------- ----------
1,673,100 2,441,000 1,921,600
Deferred tax expense 1,900 - 5,400
---------- ---------- ----------
Provision for income taxes $ 1,675,000 $ 2,441,000 $ 1,927,000
---------- ---------- ----------
</TABLE>
The following table shows the reconciliation between the statutory federal
income tax rate and the actual provision for income taxes for the years
ended November 6, 1999, October 31, 1998 and November 1, 1997.
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Provision - federal statutory tax rate $ 1,519,000 $ 2,234,000 $ 1,688,000
Increase (decrease) resulting from:
State taxes, net of federal tax benefit 162,000 220,000 167,000
Permanent differences:
Other (6,000) (13,000) 72,000
---------- ---------- ----------
Provision for income taxes $ 1,675,000 $ 2,441,000 $ 1,927,000
---------- ---------- ----------
</TABLE>
F-13
<PAGE>
Nobility Homes, Inc.
Notes to Consolidated Financial Statements
November 6, 1999 and October 31, 1998
- --------------------------------------------------------------------------------
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):
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Gross deferred tax assets:
Allowance for doubtful accounts $ 571,500 $ 722,000
Inventories 117,800 -
Other assets 127,300 -
Accrued expenses - 80,200
Reserve for warranty expense 62,100 46,800
-------- --------
Total deferred tax assets 878,700 849,000
-------- --------
Gross deferred tax liabilities:
Depreciation (33,400) (1,800)
-------- --------
Net deferred tax asset $ 845,300 $ 847,200
-------- --------
</TABLE>
The Company believes that, based upon the consistent history of profitable
operations, it is probable that the net deferred tax assets of $845,300 at
November 6, 1999 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% (7.65% at November 6, 1999). The line of credit is due on demand and
includes certain restrictive covenants relating to tangible net worth,
minimum levels of working capital and acquiring new debt. The line of
credit agreement expired in August 1999 and was not renewed by the Company.
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% (7.75% at November 6, 1999) on the outstanding balance. The line of
credit is due on demand and includes certain restrictive covenants relating
to tangible net worth and acquiring new debt.
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.
F-14
<PAGE>
Nobility Homes, Inc.
Notes to Consolidated Financial Statements
November 6, 1999 and October 31, 1998
- --------------------------------------------------------------------------------
There are no commitment fees or compensating balance arrangements
associated with the line of credit or the Agreement. At November 6, 1999
and October 31, 1998, 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 131,233 and 36,000 shares of its common stock
during fiscal years 1999 and 1998, respectively. These shares were acquired
for general corporate needs.
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
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 245,660 at November 6, 1999 and 262,500 at October 31,
1998 and November 1, 1997. Options were held by 30 persons at November 6,
1999.
In December 1998, the Company granted 13,090 options to key employees.
These options are exercisable in one or more years and expire in December
2004.
F-15
<PAGE>
Nobility Homes, Inc.
Notes to Consolidated Financial Statements
November 6, 1999 and October 31, 1998
- --------------------------------------------------------------------------------
Information with respect to options granted at November 6, 1999 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 2, 1996 165,000 $ 8.03 $ 8.03 - $ -
--------- ------------ ------- ----------- ------
Granted 41,250 7.73 7.73 - -
Exercised - - - - -
Canceled - - - - -
--------- ------------- ------- ----------- ------
Outstanding at November 1, 1997 206,250 $ 7.73 - 8.03 $ 7.97 33,000 $ 8.03
--------- ------------- ------- ----------- ------
Granted 44,000 19.20 19.20 - -
Exercised - - - - -
Canceled - - - - -
--------- ------------- ------- ----------- ------
Outstanding at October 31, 1998 250,250 $ 7.73 - 19.20 $ 9.95 70,125 $ 8.01
--------- ------------ ------- ----------- ------
Granted 13,090 12.81 12.81 - -
Exercised - - - - -
Canceled (44,000) 19.20 19.20 - -
--------- ------------ ------- ----------- ------
Outstanding at November 6, 1999 219,340 $ 7.73 - 12.81 $ 8.26 109,313 $ 8.00
--------- ------------ ------- ----------- ------
</TABLE>
The following table summarizes information about the Plan's stock options at
November 6, 1999:
<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>
$7.73 41,250 3.8 $ 7.73 10,313 $ 7.73
$8.03 165,000 6.8 $ 8.03 99,000 $ 8.03
$12.81 13,090 4.8 $ 12.81 - $ -
--------------
219,340
==============
</TABLE>
F-16
<PAGE>
Nobility Homes, Inc.
Notes to Consolidated Financial Statements
November 6, 1999 and October 31, 1998
- --------------------------------------------------------------------------------
The Company has adopted the disclosure-only provisions of FAS 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 FAS 123, the
Company's net income and earnings per share would have been as follows:
1999 1998 1997
Net income:
As reported $2,791,540 $3,941,159 $3,037,578
Pro forma $2,653,378 $3,850,663 $3,015,917
Earnings per share:
As reported $ .58 $ .81 $ .62
Pro forma $ .55 $ .79 $ .62
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 4.56% - 5.86%, 4.68% - 4.74% and 6.41% -6.60% for fiscal
years 1999, 1998 and 1997, respectively; a weighted average expected option
term of 2-4 years for all periods; and a volatility factor of 45% for
fiscal year 1999, 45% for fiscal year 1998 and 46% for fiscal year 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 $6,000, $28,000 and $18,000 in
fiscal years 1999, 1998 and 1997, respectively.
13. Stock Split and Stock Dividend
On January 6, 1998, the Company declared a three-for-two stock split in the
form of a stock dividend, payable on February 20, 1998 to stockholders of
record as of January 30, 1998. Stockholders' equity has been restated to
give retroactive recognition to the stock split in prior periods by
reclassifying from additional paid-in-capital to common stock the par value
of the 148,540 shares arising from the split.
F-17
<PAGE>
Nobility Homes, Inc.
Notes to Consolidated Financial Statements
November 6, 1999 and October 31, 1998
- --------------------------------------------------------------------------------
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. As a result of the stock dividend, 442,820
shares were issued during fiscal 1999.
All references in the financial statements to share and per share amounts
of the Company's common stock have been restated.
14. Commitments and Contingent Liabilities
Operating Leases
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 $651,000,
$493,000 and $414,000 in fiscal years 1999, 1998 and 1997, 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 November 6, 1999 are as
follows:
Fiscal Year Ending
2000 $ 131,000
2001 48,000
2002 48,000
2003 2,000
2004 -
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 $588,000, $575,000 and $2,097,000 at November 6,
1999, October 31, 1998 and November 1, 1997, 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 1999, 1998 or 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.
F-18
<PAGE>
Nobility Homes, Inc.
Notes to Consolidated Financial Statements
November 6, 1999 and October 31, 1998
- --------------------------------------------------------------------------------
15. Quarterly Financial Summary (Unaudited)
Following is a summary of the unaudited interim results of operations for
each quarter in the years ended November 6, 1999 and October 31, 1998.
<TABLE>
<CAPTION>
First Second Third Fourth
<S> <C> <C> <C> <C>
Year ended November 6, 1999
Net sales $ 10,106,902 $ 10,925,834 $ 9,424,872 $ 9,895,646
Cost of goods sold 7,312,538 7,837,079 7,133,791 7,525,173
Net income 718,245 896,217 451,507 725,571
Earnings per share
Basic .15 .18 .09 .15
Diluted .15 .18 .09 .15
Composite stock price range:
High $ 12.63 $ 9.00 $ 8.44 $ 5.63
Low $ 12.25 $ 8.50 $ 8.00 $ 5.50
Close $ 12.63 $ 8.75 $ 8.44 $ 5.63
Year ended October 31, 1998
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 .16 .21 .21 .23
Diluted .16 .20 .21 .22
Composite stock price range:
High $ 11.67 $ 15.11 $ 19.09 $ 13.86
Low $ 11.37 $ 14.55 $ 17.73 $ 13.18
Close $ 11.37 $ 15.00 $ 17.73 $ 13.64
</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 $93,000,
$149,000 and $49,000 in fiscal years 1999, 1998 and 1997, respectively, to
insurance expense in the fourth quarter of the respective years.
F-19
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 the Registration
Statement on Form S-8 (No. 333-44769) of our report dated December 15, 1999
relating to the financial statements, which appear in the 1999 Annual Report to
Shareholders of Nobility Homes, Inc., which is incorporated by reference in
Nobility Homes, Inc.'s Annual Report on Form 10-K for the fiscal year ended
November 6, 1999.
PricewaterhouseCoopers LLP
Orlando, Florida
February 4, 2000
<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 YEAR ENDED NOVEMBER 6, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000072205
<NAME> NOBILITY HOMES, INC.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-06-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> NOV-06-1999
<CASH> 7,973,241
<SECURITIES> 0
<RECEIVABLES> 167,764
<ALLOWANCES> 0
<INVENTORY> 9,149,924
<CURRENT-ASSETS> 17,781,471
<PP&E> 3,725,687
<DEPRECIATION> 1,738,640
<TOTAL-ASSETS> 23,122,335
<CURRENT-LIABILITIES> 2,685,544
<BONDS> 0
0
0
<COMMON> 536,491
<OTHER-SE> 20,436,791
<TOTAL-LIABILITY-AND-EQUITY> 23,122,335
<SALES> 40,353,254
<TOTAL-REVENUES> 40,353,254
<CGS> 29,808,581
<TOTAL-COSTS> 7,004,398
<OTHER-EXPENSES> 154,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,466,540
<INCOME-TAX> 1,675,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,791,640
<EPS-BASIC> 0.58
<EPS-DILUTED> 0.58
</TABLE>
