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 2, 2002
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. X
Indicate by checkmark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act).
Yes No X
State the aggregate market value of the voting stock held by non-
affiliates of the registrant on January 29, 2003, computed by reference to the
average high and low prices on that date: $13,022,385.60
(APPLICABLE ONLY TO CORPORATE ISSUERS)
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of January 29, 2003: 4,012,213 shares of common
stock.
DOCUMENTS INCORPORATED BY REFERENCE Incorporated at
----------------------------------- ---------------
Nobility Homes, Inc. Proxy Statement Part III, Items 10,
for the 2003 Annual Meeting 11, 12 and 13
of Shareholders
2
PART I
Item 1. Description of Business
- ------ -----------------------
Nobility Homes, Inc., a Florida corporation incorporated in 1967,
designs, manufactures and sells a broad line of manufactured homes through a
network of its own retail sales centers throughout north and central Florida.
Nobility also sells its manufactured homes on a wholesale basis to independent
manufactured home retail dealers and manufactured home communities.
Manufactured Homes
- ------------------
Nobility's homes are available in approximately 100 active models sold
under the trade names "Kingswood," "Richwood," "Springwood," "Springwood
Special," "Tropic Isle Special," "Regency Manor Special," "Tropic Manor," and
"Special Edition." The homes, ranging in size from 672 to 2,259 square feet and
containing from one to five bedrooms, are available in
o single-wide widths of 14 and 16 feet ranging from 48 to 72 feet in
length;
o double-wide widths of 24, 26, 28 and 32 feet ranging from 32 to 76
feet in length; and
o triple-wide widths of 36, 38 and 42 feet ranging from 44 to 72
feet in length.
Nobility's homes are sold primarily as unfurnished dwellings ready for
permanent occupancy. Interiors are designed and color coordinated in a range of
decors. Depending on the size of the unit and quality of appliances and other
appointments, retail prices for Nobility's homes typically range from
approximately $20,000 to $80,000. Most of the prices of Nobility's homes are
considered by it to be within the low to medium price range of the industry.
Both of Nobility'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.
Nobility 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,
gypsum board, appliances, lighting and plumbing fixtures, carpeting and drapes.
Nobility is not dependent upon any one particular supplier for its raw materials
or component parts, and is not required to carry significant amounts of
inventory to assure itself of a continuous allotment of goods from suppliers.
Nobility's two manufacturing plants operated at an average of
approximately 35% of their single shift capacity in fiscal 2002, representing an
increase of approximately 5% from fiscal 2001.
3
Nobility generally does not manufacture its homes to be held by it as
inventory (except for model home inventory of its wholly-owned retail network
subsidiary, Prestige Home Centers, Inc.), but, rather, manufactures its homes
after receipt of orders. Although Nobility attempts to maintain a consistent
level of production of homes throughout the fiscal year, seasonal fluctuations
do occur, with sales of homes generally lower during the first 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. Nobility's homes are
delivered by outside trucking companies. Nobility 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 Nobility's
sales were made in Florida.
Retail Sales
- ------------
Prestige Home Centers, Inc. operates 17 retail sales centers in north
and central Florida. Its principal executive offices are located at Nobility's
headquarters in Ocala, Florida. Sales by Prestige accounted for 71.7%, 83.0% and
89.5% of Nobility's sales during fiscal 2002, 2001 and 2000, respectively.
Each of Prestige's retail sales centers is located within 350 miles of
Nobility's two manufacturing facilities. Prestige owns the land at three of its
retail sales centers and leases the remaining 14 retail sales centers from
unaffiliated parties under leases with terms of between one and three years with
renewal options.
The primary customers of Prestige are homebuyers 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, Nobility entered into a joint venture agreement with
21st Century Mortgage Corporation to provide financing to retail customers
purchasing homes from Prestige. Additionally, financing for home purchases is
provided by eight other independent sources that specialize in manufactured
housing lending and numerous banks that finance manufactured home purchases.
Prestige and Nobility are 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
Nobility's market area, potential customers typically can find several sales
centers within a 100 mile radius of their present home. Prestige competes with
over 100 other retailers in its primary market area, some of
4
which may have greater financial resources than Prestige. In addition,
manufactured homes offered by Prestige compete with conventional site-built
housing.
Prestige's wholly-owned subsidiary, Mountain Financial, Inc., an
independent insurance agent and mortgage broker, provides mortgage brokerage
services, credit life, extended warranty coverage and property and casualty
insurance to Prestige customers in connection with their purchase and financing
of manufactured homes. Mountain Financial, Inc., receives a mortgage brokerage
fee at the time a loan is originated and a commission on the insurance premium
collected at the time an insurance policy is written and in future years if the
homeowner renews the policy. Its revenues were approximately $283,000, $241,000
and $220,000 in fiscal 2002, 2001 and 2000, respectively.
Wholesale Sales to Independent Dealers and Manufactured Home Communities
- ------------------------------------------------------------------------
Nobility currently sells its homes on a wholesale basis exclusively
through four full-time salespersons to approximately 60 independent dealers.
Nobility continues 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 Nobility's dealers other than its
subsidiary, Prestige, are independent dealers that sell homes produced by
several manufacturers. During fiscal 2002, Mobile Home Lifestyles, which
operates multiple manufactured home communities, accounted for approximately
$4.1 million or 11% of Nobility's total sales. No independent dealer accounted
for more than 10% of Nobility's total sales in fiscal 2001 or 2000.
Dealers generally obtain inventory financing from financial
institutions (usually banks and finance companies) on a "floor plan" basis where
the financial institution obtains a security interest in all or part of the
dealer's manufactured home inventory. Nobility from time to time enters into
repurchase agreements with the lending institutions which provide that, in the
event of a dealer's default, Nobility will, at the lender's request, repurchase
the home provided that Nobility'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. Nobility was not required to repurchase any homes
during fiscal 2002, 2001 or 2000. For additional information, see Note 13 of
"Notes to Consolidated Financial Statements." Nobility does not finance retail
sales of new homes for customers of its independent dealers.
Nobility does not generally offer consigned inventory programs or other
credit terms to independent dealers and ordinarily receives payment for its
homes within 15 to 30 days of delivery. However, Nobility may offer extended
terms to unrelated park dealers who do a high volume of business with Nobility.
In order to stimulate sales, Nobility sells homes for
5
display to selected manufactured home communities on special terms. The high
visibility of Nobility's homes in such communities generates additional sales of
its homes through such dealers.
Regulation
- ----------
The manufacture, distribution and sale of homes is subject to
governmental regulation at the federal, state and local levels. The Department
of Housing and Urban Development has adopted national construction and safety
standards that have priority over existing state standards. In addition, HUD
regulations require that manufactured homes be constructed to more wind load and
thermal 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 addition, some
components of manufactured homes may also be subject to Consumer Product Safety
Commission standards and recall requirements. Nobility also manufactures a small
number of modular homes which are required to comply with the standard building
code established by the Florida Department of Community Affairs.
Nobility 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 manufactured homes 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.
Nobility's homes are subject to the requirements of the Magnuson-Moss
Warranty Act and Federal Trade Commission rulings which regulate warranties on
consumer products. Nobility provides a limited warranty of one year on the
structural components of its homes.
Competition
- -----------
The manufactured home industry is highly competitive. The initial
investment required for entry into the business of manufacturing homes is not
unduly large. State bonding requirements for entry in the business vary from
state to state. The bond requirement for Florida is $50,000. Nobility competes
directly with other manufacturers, some of whom are both considerably larger and
possess greater financial resources than Nobility. Based on number of units
sold, Nobility ranks 6th in the state of Florida out of the top 45 manufacturers
selling manufactured homes in the state. Nobility estimates that of those 45
manufacturers approximately 15 manufacture homes of the same type as Nobility
and compete in the same market area. Nobility believes that it is generally
competitive with most of those manufacturers in terms of price, service,
warranty and product performance.
6
According to statistics compiled by Statistical Surveys, Inc. from
records on file with the State of Florida, Prestige has been one of the largest
retail dealers of multi-section manufactured homes in Florida since 1994, based
on number of home sales.
Employees
- ---------
As of January 4, 2003, Nobility had 212 full-time employees, including
68 employed by Prestige. Approximately 102 employees are factory personnel
compared to approximately 93 in such positions a year ago, and 104 are in
management, administrative, supervisory, sales and clerical positions (including
62 management and sales personnel employed by Prestige) compared to
approximately 99 a year ago. In addition, Nobility employs part-time employees
when necessary.
Nobility makes contributions toward employees' group health and life
insurance and to the Nobility 401(k) plan. Nobility, 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.
Item 2. Properties
- ------ ----------
As of November 2, 2002, Nobility owned and operated two manufacturing
plants:
Depreciated Cost of
Approximate Plant and Property
Location Size at November 2, 2002
-------- ----------- -------------------
Belleview, Florida 33,500 sq. ft. $497,262
Ocala, Florida(1) 72,000 sq. ft. 783,258
_________________________
(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 Nobility's corporate offices.
Nobility'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.
Prestige has acquired the properties on which its Pace, Panama City and
Yulee, Florida retail sales centers are located. Prestige leases the property
for its other 14 retail sales centers.
Item 3. Legal Proceedings
- ------ -----------------
Certain claims and suits arising in the ordinary course of business
have been filed or are pending against Nobility or Prestige. In the opinion of
management, any related liabilities that might arise would be covered under
terms of Nobility's liability insurance policies or
7
would not have a material adverse impact on Nobility's financial position,
results of operations or cash flows.
Item 4. Submission of Matters to a Vote of Security Holders
- ------ ---------------------------------------------------
None
PART II
Item 5. Market for the Registrant's Common Stock and Related
- ------ ----------------------------------------------------
Stockholder Matters
-------------------
Market Information
- ------------------
Nobility'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 2002 and 2001.
Fiscal Year End
-------------------------------------------------------------
Fiscal November 2, 2002 November 3, 2001
Quarter High Low High Low
- ------- ---- --- ---- ---
1st $ 9.80 $ 7.05 $ 7.06 $ 5.50
2nd 9.90 8.51 7.00 5.69
3rd 9.50 7.81 10.24 6.45
4th 10.20 7.65 9.38 7.89
Holders
- -------
At January 29, 2003, the approximate number of holders of record of
common stock was 228 (not including individual participants in security position
listings).
Dividends
- ---------
The payment of cash dividends is within the discretion of Nobility's
board of directors and will depend, among other factors, on Nobility's earnings,
capital requirements and operating and financial condition. During fiscal 2002,
2001 and 2000, no cash dividends were paid.
Securities Authorized for Issuance Under Equity Compensation Plans
- ------------------------------------------------------------------
The following table displays equity compensation plan information as of
the fiscal year ended November 2, 2002. For further information, see Note 11 of
"Notes to Consolidated Financial Statements."
8
Equity Compensation Plan Information
Number of securities remaining
available
Number of securities to be Weighted-average for issuance under
issued upon exercise of exercise price of equity compensation plans
outstanding options, outstanding options, (excluding securities reflected
warrants and rights warrants and rights in column(a))
-------------------------- -------------------- --------------------------------
(a) (b) (c)
Equity compensation
plans approved by 215,160 $8.10 279,840
security holders
Equity compensation
plans not approved None
by security holders
Total 215,160 $8.10 279,840
Item 6. Selected Financial Data
- ------ -----------------------
The following table sets forth Selected Financial Data for each of
Nobility's last five fiscal years. This information should be read in
conjunction with Nobility's consolidated financial statements (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.
9
Years Ended(1)
- ------------------------------------------------------------------------------------------------------------
November 2, November 3, November 4 November 6, October 31,
2002 2001 2000 1999 1998
(In thousands except per share data)
---------------------------------------------------------------------------------------
Total net sales $37,916 $30,288 $29,565 $40,353 $44,830
Income from
operations 3,930 3,000 1,874 3,386 5,844
Other income 880 913 1,650 1,080 538
Net income 3,135 2,478 2,268 2,792 3,941
Weighted
average shares
outstanding
Basic 4,107,748 4,200,863 4,610,220 4,819,823 4,894,542
Diluted 4,130,464 4,286,778 4,610,220 4,839,659 4,988,506
Earnings per
share(2)
Basic .76 .59 .49 .58 .81
Diluted .76 .58 .49 .58 .79
Total assets 27,496 25,741 23,843 23,122 22,803
Long term
obligations -0- -0- -0- -0- -0-
Stockholders'
equity 23,779 21,724 21,025 20,437 18,674
Cash dividends
per common -0- -0- -0- -0- -0-
share
_____________________________
(1) Nobility's fiscal year ends on the first Saturday on or after October
31. The years ended November 2, 2002, November 3, 2001, November 4,
2000 and October 31, 1998, consisted of a fifty-two week period and the
year ended November 6, 1999, consisted of a fifty-three week period.
(2) On February 19, 1999 a 10% stock dividend was paid and on February 20,
1998 a three-for-two stock split in the form of a 50% stock dividend
was 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
-------------------------
General
- -------
Nobility's primary focus is homebuyers who generally purchase their
manufactured homes from retail sales centers to locate on property they own.
Nobility has aggressively pursued this market through its Prestige retail sales
centers. While Nobility actively seeks to make wholesale sales to independent
retail dealers, its presence as a competitor limits potential sales to dealers
located in the same geographic areas serviced by its Prestige sales centers.
10
Nobility has also aggressively targeted the retirement community
market, which is made up of retirees moving to Florida and typically purchasing
homes to be located on sites leased from park communities offering a variety of
amenities.
Nobility sold 832 homes in fiscal 2002, of which 326 homes,
representing sales of $7,808,696, were sold to independent dealers. In fiscal
2001, of the 729 homes sold by Nobility, 229 homes were sold to independent
dealers, representing sales of $4,480,973. In fiscal 2000, of the 625 homes sold
by Nobility, 124 homes were sold to independent dealers, representing sales of
$2,508,440. The balance of Nobility's sales in fiscal 2002, 2001 and 2000,
representing 71.7%, 83.0% and 89.5% of net sales, respectively, were made on a
retail basis through Prestige's retail centers.
Nobility has a product line of approximately 100 active models.
Although market demand can fluctuate on a fairly short-term basis, the
manufacturing process is such that Nobility can alter its product mix relatively
quickly in response to changes in the market. During fiscal 2002, 2001 and 2000,
Nobility's product mix was affected by the number of "Special Edition" homes
marketed by Prestige and by larger, more expensive multi-wide homes resulting
from the availability of varied types of financing at competitive rates. Most
family buyers today purchase three-, four- or five-bedroom manufactured homes,
compared with the two-bedroom home that typically appeals to the buyers who
reside in manufactured housing communities.
Nobility's Majestic 21 joint venture with 21st Century Mortgage
Corporation provides mortgage financing to retail customers who purchase
Nobility's manufactured homes at Prestige retail sales centers. This joint
venture, which originates and services loans, has given Prestige more control
over the financing aspect of the retail home sales process and allowed it to
offer better service to its retail customers. Management believes that the joint
venture gives Prestige an additional potential for profit by providing finance
products to retail customers. In addition, management believes that Prestige has
more input in the design of unique finance programs for prospective homebuyers,
and that the joint venture 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 (1) 30-year
financing, (2) an interest rate reduction program, (3) combination
land/manufactured home loans, and (4) a 5% down payment program for qualified
buyers. Prestige currently maintains eight outside financing sources that
provide financing to retail homebuyers for its manufactured homes.
Through its wholly-owned subsidiary, Mountain Financial, Inc., an
independent insurance agency and mortgage broker, Prestige offers credit life
and homeowners insurance, service warranty products and brokering of mortgage
loans to the retail customers.
The years ended November 2, 2002, November 3, 2001 and November 4, 2000
consisted of a fifty-two (52) week period.
11
Results of Operations
- ---------------------
For the fiscal years ended November 2, 2002, November 3, 2001 and
November 4, 2000 results of operations are as follows. Total net sales in fiscal
2002 were $37,916,463 compared to $30,287,663 in fiscal 2001 and $29,565,434 in
fiscal 2000. Net sales increased 25.2% in fiscal 2002 and 2.4% in fiscal 2001
and declined 26.7% in fiscal 2000 as compared to the prior year net sales. The
Company adopted the Securities and Exchange Commission's Staff Accounting
Bulletin No. 101 (SAB 101) on revenue recognition as of November 5, 2000. The
increased sales in fiscal 2002 and 2001 were primarily due to a 78.3% and 75.0%
increase, respectively, in sales to outside park dealers as a result of
aggressively pursuing that market. Prestige same store revenues increased 9.0%
in fiscal year 2002 compared to a decline of 5.4% in fiscal year 2001. Net sales
continued to be impacted by a very competitive market caused by the industry's
excess retail inventory. The excess inventory had developed from industry growth
of new retail locations that has outpaced consumer demand plus an increase in
the number of repossessions returning to the marketplace. Tighter credit
standards and management's decision not to discount homes to maintain sales
volume also adversely impacted sales in the last three fiscal years.
In spite of increased economic uncertainties, including the possible
war with Iraq and continuing unemployment, management expects the demand for our
homes to continue, bolstered by continuing low interest rates and by reductions
in the industry's excess home inventory and repossessions at retail sales
centers.
Combined industry-wide shipments of multi-section and single section
homes for the first ten months of calendar 2002 declined approximately 10.2%
from the like period last year and declined 26.3% in calendar 2001 and 26.0% in
calendar 2000. Florida combined industry shipments of multi-section home and
single-section homes in the first ten months of calendar 2002 declined
approximately 2.3% from the like period last year and declined 6.2% in calendar
2001 and 29.9% in calendar 2000. Approximately 97% of Nobility's home sales are
multi-section homes.
Gross profit reflects gross profit earned on all sales at retail as
well as the manufacturing gross profit sales of units manufactured by the
Company. Gross profit as a percentage of net sales was 25.9% in fiscal 2002
compared to 27.9% in fiscal 2001 and 25.7% in fiscal 2000. The decline in gross
profit for fiscal 2002 was primarily due to the higher overhead costs at the
manufacturing plants. The increase in gross profit for fiscal 2001 was primarily
as a result of lower material costs in manufacturing and improved operations at
retail. The $2,957,802 decline in gross profit, from 26.1% to 25.7% of net
sales, for fiscal 2000 was primarily due to the lower sales volume and a decline
in Nobility's outside dealer sales.
Selling, general and administrative expenses as a percent of net sales
were 15.5% in fiscal 2002 compared to 18.0% in fiscal 2001 and 19.0% in fiscal
2000. The decrease in selling, general and administrative expenses, as a percent
of net sales, in fiscal year 2002 resulted from the increase in sales which had
a significant impact on selling, general and
12
administrative expenses as a percentage because most of these expenses are
fixed, except for compensation expenses. The decrease in selling, general and
administrative expenses, as a percent of net sales, in fiscal 2001 was primarily
due to reduced general and administrative cost at the manufacturing plants. The
increase in selling, general and administrative expenses, as a percent of net
sales, in fiscal year 2000 was due to the fixed overhead cost associated with
the lower sales volume.
Prestige recorded an impairment adjustment to goodwill in the amount of
$89,000 in fiscal 2000 in connection with closing of an under performing retail
sales center.
The Company earned from interest on cash equivalents $196,026 for
fiscal 2002, $365,029 for fiscal 2001 and $355,845 for fiscal 2000. The decrease
in interest income was a result of lower interest rates in fiscal 2002. Nobility
received payments from TLT, Inc. of $320,764 in fiscal 2002, $200,000 in fiscal
2001 and $766,100 in fiscal 2000. The remaining advances to TLT, Inc. of
approximately $232,000 are non-interest bearing and have been fully reserved
since 1991.
Majestic 21 is a financing joint venture accounted for under the equity
method of accounting. The Company earned from Majestic 21 $291,081 in fiscal
2002, $285,534 in fiscal 2001 and $380,208 in fiscal 2000. Income reported for
Majestic 21 results from the Company's 50% share of the equity in the earnings
of this joint venture. Income for the joint venture fluctuates due to loan
origination volume, foreclosure/repossession frequency and the severity of loss
on the re-sale of the foreclosed units. The Company believes that its historical
loss experience has been favorably affected by its ability to resell
foreclosed/repossessed units through its network of retail sales centers.
As a result of the factors discussed above, earnings for fiscal 2002
were $3,134,902 or $.76 per diluted share compared to $2,477,913 or $.58 per
diluted share for fiscal 2001 and $2,268,103 or $.49 per diluted share for
fiscal 2000.
Liquidity and Capital Resources
- -------------------------------
Cash and cash equivalents were $12,481,711 at November 2, 2002 compared
to $11,005,012 at November 3, 2001. Working capital was $17,404,615 at November
2, 2002, compared to $15,939,196 at November 3, 2001. Nobility owns the entire
inventory for the Prestige retail sales centers and does not incur any third
party floor plan financing expenses. Inventories decreased to $6,589,076 at
November 2, 2002, from $7,606,911 at November 3, 2001.
Nobility repurchased in the open market 127,255 shares of its common
stock for $1,079,712 during fiscal 2002 and 277,500 shares of its common stock
for $1,779,182 in fiscal 2001.
Nobility maintains a revolving credit agreement with a major bank
providing for borrowings up to $2,500,000 with an option to increase the line to
$4,000,000. At November 2, 2002 and November 3, 2001, there were no amounts
outstanding under this agreement.
13
Consistent with normal practice, Nobility's operations are not expected
to require significant capital expenditures during fiscal 2003. Working capital
requirements for the home inventory for existing and any new retail sales
centers will be met with internal sources.
Critical Accounting Policies and Estimates
- ------------------------------------------
The Company applies judgment and estimates, which may have a material
effect in the eventual outcome of assets, liabilities, revenues and expenses,
for accounts receivable, inventory and goodwill. The following explains the
basis and the procedure for each asset account where judgment and estimates are
applied.
Revenue Recognition
The Company recognizes revenue for the majority of retail sales upon
the occurrence of the following:
o its receipt of a down payment,
o completion of the home,
o title having passed to the retail home buyer,
o funds having been deposited into the Company's account,
o the home having been delivered and set up at the retail
home buyer's site, and
o completion of any other significant obligations.
The Company recognizes sales to independent dealers upon receiving
wholesale floor plan financing or establishing retail credit approval for terms,
shipping of the home, and transferring title and risk of loss to the independent
dealer.
Goodwill
Between 1995 and 1998 the Company acquired retail sales centers using
the purchase method of accounting. As a result, goodwill is reflected on the
consolidated balance sheets. A valuation based on the cash flow method was
performed and it was determined that the value of the goodwill and the net
assets in the accounts exceeded the estimated cash flow valuation. There is no
assurance that the value of the acquired sales centers will not decrease in the
future due to changing business conditions.
Vendor Rebates
The Company receives volume rebates from its vendors based upon
reaching a certain level of purchased materials during a specified period of
time. Volume rebates are estimated based upon annual purchases, and are adjusted
quarterly if the accrued volume rebate is applicable.
14
Dealer Volume Rebate
The Company pays a volume rebate to independent dealers based upon the
dollar volume of homes purchased and paid for by the dealer in excess of a
certain specific dollar amount during a specific time period. Dealer volume
rebates are accrued when sales are recognized.
Forward Looking Statements
- --------------------------
Certain statements in this report are forward-looking statements within
the meaning of the federal securities laws. Although Nobility 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, continued excess retail inventory, increase in
repossessions, changes in market demand, changes in interest rates, availability
of financing for retail and wholesale purchasers, realization of deferred tax
assets, consumer confidence, 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.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
- ------- ----------------------------------------------------------
We do not engage in investing in or trading market risk sensitive
instruments. We also do not purchase, for investing, hedging, or for purposes
"other than trading", instruments that are likely to expose us to market risk,
whether interest rate, foreign currency exchange, commodity price or equity
price risk. We have not entered into any forward or futures contracts, purchased
any options or entered into any interest rate swaps.
We do not currently have any indebtedness as of November 2, 2002. If we
were to borrow from our revolving line of credit facility, we would be exposed
to changes in interest rates. Under our current policies, we do not use interest
rate derivative instruments to manage exposure to interest rate changes.
Item 8. Consolidated Financial Statements and Supplementary Data
- ------ --------------------------------------------------------
Financial statements incorporated herein from Nobility's 2002 Annual
Report to Shareholders are attached as Exhibit 13 and are listed at Part IV,
Item 15(a), "Consolidated Financial Statements and Schedules."
Item 9. Changes in and Disagreements with Accountants on Accounting
- ------ -----------------------------------------------------------
and Financial Disclosure
------------------------
None
15
PART III
Item 10. Directors and Executive Officers of the Registrant
- ------- --------------------------------------------------
Information concerning Nobility's directors is incorporated by
reference pursuant to Instruction G of Form 10-K from its definitive proxy
statement for the 2003 annual meeting of shareholders to be filed with the
Commission pursuant to Regulation 14A on or before March 2, 2003.
The following table provides the names, ages and business experience
for the past five years for each of Nobility's executive officers. Executive
officers are each elected for one year terms.
Executive Officers
- ------------------
Terry E. Trexler (63) Chairman of the Board and President; Mr. Trexler
is also President of TLT; from April 1996 to March
1997, Mr. Trexler was a director of Citizens
National Bank and its subsidiary, Citi-Bancshares,
Inc. and was Chairman of the Board of Citizens
First Bancshares, Inc. and its subsidiary,
Citizens First Bank of Ocala prior to its
acquisition in April 1996.
Thomas W. Trexler (39) Executive Vice President and Chief Financial
Officer since December 1994 and a director 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.
Edward C. Sims (56) Vice President of Engineering.
Jean Etheredge (57) Secretary.
Lynn J. Cramer, Jr. (57) Treasurer.
Thomas W. Trexler, Executive Vice President, Chief Financial Officer
and a director, is the son of Terry E. Trexler, Nobility's President and
Chairman of the Board. There are no other family relationships between any
directors or executive officers.
Item 11. Executive Compensation
- ------- ----------------------
Information concerning executive compensation is incorporated by
reference pursuant to Instruction G of Form 10-K from Nobility's definitive
proxy statement for the 2003 annual meeting of shareholders to be filed with the
Commission pursuant to Regulation 14A on or before March 2, 2003.
16
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 Nobility's definitive proxy statement for the 2003 annual meeting of
shareholders to be filed with the Commission pursuant to Regulation 14A on or
before March 2, 2003.
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
Nobility's definitive proxy statement for the 2003 annual meeting of
shareholders to be filed with the Commission pursuant to Regulation 14A on or
before March 2, 2003.
Item 14. Controls and Procedures
- ------- -----------------------
Under the supervision and with the participation of the Company's
management, including the Company's principal executive officer and principal
financial officer, the Company conducted an evaluation of its disclosure
controls and procedures, as such term is defined under Rule 13a-14(c)
promulgated under the Securities Exchange Act of 1934, as amended, within 90
days of the filing date of this report. Based on such evaluation, the Company's
principal executive officer and principal financial officer have concluded that
the Company's disclosure controls and procedures are effective.
There have been no significant changes (including corrective actions
with regard to significant deficiencies or material weaknesses) in internal
controls or in other factors that could significantly affect these controls
subsequent to the date of the evaluation referenced above.
PART IV
Item 15. 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 2, 2002 and
November 3, 2001
Consolidated Statements of Income for the Years Ended November
2, 2002, November 3, 2001 and November 4, 2000
Consolidated Statements of Changes in Stockholders' Equity for
the Years Ended November 2, 2002, November 3, 2001 and
November 4, 2000
17
Consolidated Statements of Cash Flows for the Years Ended
November 2, 2002, November 3, 2001 and November 4, 2000
Notes to Consolidated Financial Statements
(b) Reports on Form 8-K:
None
(c) Exhibits:
3. (a) Nobility's Articles of Incorporation, as
amended (filed as an exhibit to Nobility'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 Nobility'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 Nobility'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
Nobility's registration statement on Form
S-8, registration no. 333-44769, and
incorporated herein by reference).
(c) Revolving Credit Agreement dated April 18,
2001 with SunTrust Bank, a Georgia
state-chartered bank (filed as an exhibit to
Nobility's Form 10-K for the fiscal year
ended November 3, 2001 and incorporated
herein by reference).
(d) Agreement dated September 7, 2001 between
Nobility and Terry E. Trexler relating to
use of life insurance proceeds (filed as an
exhibit to Nobility's Form 10-K for the
fiscal year ended November 3, 2001 and
incorporated herein by reference).
13. Consolidated Financial Statements from 2002 Annual
Report to Shareholders.
21. Subsidiaries of Nobility.
- --------
* Management Remuneration Plan.
18
23. Consent of PricewaterhouseCoopers LLP.
99. (a) Written Statement of Chief Executive Officer
pursuant to 18 U.S.C. ss.1350.
(b) Written Statement of Chief Financial Officer
pursuant to 18 U.S.C. ss.1350.
19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NOBILITY HOMES, INC.
DATE: January 28, 2003 By: /s/Terry E. Trexler
---------------------------------
Terry E. Trexler, Chairman,
President and Chief
Executive Officer
DATE: January 28, 2003 By: /s/Thomas W. Trexler
---------------------------------
Thomas W. Trexler, Executive
Vice President and
Chief Financial Officer
DATE: January 28, 2003 By: /s/Lynn J. Cramer, Jr.
---------------------------------
Lynn J. Cramer, Jr.,
Treasurer and Principal
Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
DATE: January 28, 2003 By: /s/Terry E. Trexler
---------------------------------
Terry E. Trexler, Director
DATE: January 29, 2003 By: /s/Richard C. Barberie
---------------------------------
Richard C. Barberie,
Director
DATE: January 28, 2003 By: /s/Robert Holliday
---------------------------------
Robert Holliday, Director
DATE: January 28, 2003 By: /s/Robert P. Saltsman
---------------------------------
Robert P. Saltsman,
Director
DATE: January 28, 2003 By: /s/Thomas W. Trexler
---------------------------------
Thomas W. Trexler, Director
20
CERTIFICATIONS
I, Terry E. Trexler, certify that:
1. I have reviewed this annual report on Form 10-K of Nobility Homes, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: January 28, 2003
/s/ Terry E. Trexler
- -----------------------------
Terry E. Trexler
Chief Executive Officer
21
I, Thomas W. Trexler, certify that:
1. I have reviewed this annual report on Form 10-K of Nobility Homes, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report is
being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: January 28, 2003
/s/ Thomas W. Trexler
- -----------------------------
Thomas W. Trexler
Chief Financial Officer
22
Exhibit Index
3. (a) Nobility's Articles of Incorporation, as
amended (filed as an exhibit to Nobility'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 Nobility'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 Nobility'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
Nobility's registration statement on Form
S-8, registration no. 333-44769, and
incorporated herein by reference).
(c) Revolving Credit Agreement dated April 18,
2001 with SunTrust Bank, a Georgia
state-chartered bank (filed as an exhibit to
Nobility's Form 10-K for the fiscal year
ended November 3, 2001 and incorporated
herein by reference).
(d) Agreement dated September 7, 2001 between
Nobility and Terry E. Trexler relating to
use of life insurance proceeds (filed as an
exhibit to Nobility's Form 10-K for the
fiscal year ended November 3, 2001 and
incorporated herein by reference).
13. Consolidated Financial Statements from 2002 Annual
Report to Shareholders.
21. Subsidiaries of Nobility.
23. Consent of PricewaterhouseCoopers LLP.
99. (a) Written Statement of Chief Executive Officer
pursuant to 18 U.S.C. ss.1350.
(b) Written Statement of Chief Financial Officer
pursuant to 18 U.S.C. ss.1350.
- ---------------------
* Management Remuneration Plan.
23