UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended November 1, 2003
Commission file number 0-6506
NOBILITY HOMES, INC.
(Name of issuer in its charter)
Florida 59-1166102
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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:
Title of each class Name of each exchange
------------------- 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.
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 22, 2004, computed by reference to the average high
and low prices on that date: $15,817,543.50
(APPLICABLE ONLY TO CORPORATE ISSUERS)
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of January 22, 2004: 4,010,996 shares of common stock.
DOCUMENTS INCORPORATED BY REFERENCE Incorporated at
----------------------------------- ---------------
Nobility Homes, Inc. Proxy Statement for the 2004 Part III, Items 10,
Annual Meeting of Shareholders 11, 12, 13 and 14
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 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," 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 2003 and 2002 and 30% in fiscal 2001.
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 74.7%, 71.7% and
83.0% of Nobility's sales during fiscal 2003, 2002 and 2001, 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.
2
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 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,
automobile, 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 $311,000, $283,000,
and $241,000 in fiscal 2003, 2002 and 2001, 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. Mobile Home Lifestyles, which operates multiple manufactured home
communities, accounted for approximately $4.8 million or 12% of Nobility's total
sales in fiscal 2003 and $4.1 million or 11% in fiscal 2002. No independent
dealer accounted for more than 10% of Nobility's total sales in fiscal 2001.
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 2003, 2002 or 2001. For additional information, see Note 14 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 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.
3
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 stringent 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.
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 5, 2004, Nobility had 218 full-time employees, including 71
employed by Prestige. Approximately 109 employees are factory personnel compared
to approximately 102 in such positions a year ago, and 103 are in management,
administrative, supervisory, sales and clerical positions (including 65
management and sales personnel employed by Prestige) compared to approximately
104 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 1, 2003, Nobility owned and operated two manufacturing plants:
4
Depreciated Cost of
Location Approximate Size Plant and Property at November 1, 2003
-------- ---------------- --------------------------------------
Belleview, Florida 33,500 sq. ft. $546,222
Ocala, Florida(1) 72,000 sq ft. 984,017
(1) Nobility's Ocala facility is a 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 it's 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 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
5
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 2003 and 2002.
Fiscal Year End
------------------------------------------------------------------------
November 1, 2003 November 2, 2002
Fiscal ---------------- ----------------
Quarter High Low High Low
------- ---- --- ---- ---
1st $ 9.75 $ 8.52 $ 9.80 $ 7.05
2nd 9.29 7.73 9.90 8.51
3rd 9.92 7.75 9.50 7.81
4th 10.50 8.79 10.20 7.65
Holders
- -------
At January 21, 2004, the approximate number of holders of record of common stock
was 230 (not including individual participants in security position listings).
Dividends
- ---------
The Board of Directors declared an annual cash dividend of $0.10 per common
share for fiscal year 2003, payable January 12, 2004 to stockholders of record
as of December 29, 2003. The payment of future 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 2003, 2002 and 2001, 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 1, 2003. For further information, see Note 12 of
"Notes to Consolidated Financial Statements."
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
security holders 200,560 $8.18 294,440
Equity compensation
plans not approved
by security holders None
----------------------------- ----------------------- ----------------------------------
Total 200,560 $8.18 294,440
Issuer Purchases of Equity Securities
- -------------------------------------
Nobility did not make any stock repurchases during the fourth quarter of fiscal
2003.
6
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.
Years Ended(1)
- -----------------------------------------------------------------------------------------------------------------------
November 1, November 2, November 3, November 4 November 6,
2003 2002 2001 2000 1999
(In thousands except per share data)
-----------------------------------------------------------------------------------------
Total net sales $39,229 $37,916 $30,288 $29,565 $40,353
Income from
operations 4,078 3,930 3,000 1,874 3,386
Other income 656 880 913 1,650 1,080
Net income 3,079 3,135 2,478 2,268 2,792
Weighted average shares
outstanding
Basic 3,996,424 4,107,748 4,200,863 4,610,220 4,819,823
Diluted 4,021,996 4,130,464 4,286,778 4,610,220 4,839,659
Earnings per share(2)
Basic $ .77 $ .76 $ .59 $ .49 $ .58
Diluted .77 .76 .58 .49 .58
Total assets 32,705 27,496 25,741 23,843 23,122
Long term
obligations -0- -0- -0- -0- -0-
Stockholders'
equity 26,816 23,779 21,724 21,025 20,437
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 1, 2003, November 2, 2002, November 3, 2001
and November 4, 2000, 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 to shareholders.
Per share amounts in the table have been restated to give effect to
this stock dividend.
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.
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 831 homes in fiscal 2003, of which 336 homes, representing sales
of $8,427,790, were sold to independent dealers. 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. The
balance of Nobility sales in fiscal 2003, 2002 and 2001, representing 74.7%,
71.7% and 83.0% of net sales, respectively, were made on a retail basis through
Prestige's retail centers.
7
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 2003, 2002 and 2001, 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 retirement buyers who reside in
the 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
services 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 also 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 homeowners insurance,
service warranty products and brokering of mortgage loans to facilitate the home
buying process for the customers of Prestige Home Centers. Mountain Financial,
Inc. also provides automobile and other personal lines insurance products.
The years ended November 1, 2003, November 2, 2002 and November 3, 2001 each
consisted of a fifty-two (52) week period.
Results Of Operations
- ---------------------
For fiscal years ended November 1, 2003, November 2, 2002 and November 3, 2001,
results of operations are as follows. Total net sales in fiscal 2003 were
$39,229,156 compared to $37,916,463 in fiscal 2002 and $30,287,663 in fiscal
2001. Net sales increased 3.5% in fiscal 2003, 25.2% in fiscal 2002 and 2.4% in
fiscal 2001 as compared to the prior year net sales. The increased sales in
fiscal 2003 was primarily due to the 7.9% increase in sales to outside dealers
coupled with an increase of 6.5% in Prestige same store revenues. The increased
sales in fiscal 2002 and fiscal 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. The
Company adopted the Securities and Exchange Commission's Staff Accounting
Bulletin No. 101 (SAB 101) on revenue recognition as of November 5, 2000. Net
sales continued to be impacted by a very competitive market caused by the
industry's excess retail inventory and repossessions. The excess inventory had
developed from industry growth of new retail locations that has outpaced
customer 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 economic uncertainties and continued 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 shipment of multi-section and single-section homes for
the first ten months of calendar 2003 declined approximately 23% from the like
period last year and declined 10% in calendar 2002 and 26% in calendar 2001.
Florida combined industry shipments of multi-section homes and single-section
homes in the first ten months of calendar 2003 declined approximately 6% from
the like period last year and declined 2% in calendar 2002 and 6% in calendar
year 2001. Approximately 97% of Nobility's home sales are multi-section homes.
8
Gross profit as a percentage of net sales was 25.2% in fiscal 2003 compared to
25.9% in fiscal 2002 and 27.9% in fiscal 2001. The decline in gross profit for
2003 was primarily due to higher material costs, primarily in lumber and
oriented strand board (OSB) used in manufacturing. The decline in gross profit
for fiscal 2002 was primarily due to the higher overhead costs at the
manufacturing plants and the increase in gross profit for fiscal 2001 was
primarily as a result of lower material costs in the manufacturing process and
improved operations at the retail sales centers.
Selling, general and administrative expenses as a percent of net sales were
14.8% in fiscal 2003 compared to 15.5% in fiscal 2002 and 18.0% in fiscal 2001.
The decrease in selling, general and administrative expenses, as a percent of
net sales, in fiscal years 2003 and 2002 resulted from the increase in sales
which had a significant impact on selling, general and administration 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 Company earned from interest on cash equivalents and investments $211,018
for fiscal 2003, $196,026 for fiscal 2002 and $365,029 for fiscal 2001. The
decreased interest income in fiscal 2002 was a result of lower interest rates
compared to 2001. Nobility received payments from TLT, Inc. of $320,764 in
fiscal 2002, $200,000 in fiscal 2001. 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 $220,148 in fiscal 2003,
$291,081 in fiscal 2002 and $285,534 in fiscal 2001. Income reported for
Majestic 21 results from the Company's 50% share in 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 resale of the foreclosed units. The Company believes that its historical
loss experience has been favorable impacted 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 2003 were
$3,078,479 or $.77 per diluted share compared to $3,134,902 or $.76 per diluted
share for fiscal 2002 and $2,477,913 or $.58 per diluted share for fiscal 2001.
Liquidity And Capital Resources
- -------------------------------
Cash and cash equivalents were $10,641,748 at November 1, 2003 compared to
$12,481,711 at November 2, 2002. The decrease in cash and cash equivalents was
primarily due to a change in the investment portfolio to long-term marketable
securities to obtain a higher yield. Marketable securities were $5,592,375 at
November 1, 2003. Working capital was $14,736,228 at November 1, 2003 compared
to $17,404,165 at November 2, 2002. Nobility owns the entire inventory for its
Prestige retail sales centers and does not incur any third party floor plan
financing expenses. Inventories decreased to $6,557,659 at November 1, 2003 from
$6,589,076 at November 2, 2002.
Nobility repurchased in the open market 29,700 shares of its common stock for
$260,158 during fiscal 2003 and 127,225 shares of its common stock for
$1,079,712 in fiscal 2002.
Nobility maintains a revolving credit agreement with a major bank providing for
borrowing up to $4,000,000. At November 1, 2003 and November 2, 2002, there were
no amounts outstanding under this agreement.
Consistent with normal practices, Nobility's operations are not expected to
require significant capital expenditures during fiscal 2004. 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.
9
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 was performed by the Company and it was
determined that the estimated fair value of the goodwill in the accounts
exceeded its book value. 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.
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.
Off-balance Sheet Arrangements
- ------------------------------
As part of our ongoing business, we do not participate in transactions that
generate relationships with unconsolidated entities or financial partnerships,
such as entities often referred to as structured finance or special purpose
entities ("SPE's"), which would have been established for the purpose of
facilitating off-balance sheet arrangements or other contractually narrow or
limited purposes. As of November 1, 2003, we are not involved in any material
unconsolidated SPE transactions.
Contractual Obligations
- -----------------------
The impact of our contractual obligations as of November 1, 2003 are expected to
have on our liquidity and cash flow in future periods is as follows:
Payments Due By Period
-------------------------------------------
Less Than
Total 1 Year 1-3 Years
-------------------------------------------
Operating lease obligations $137,000 $77,000 $60,000
10
Forward Looking Statements
- --------------------------
Certain statements in this report are forward-looking statements within the
meaning of the federal securities laws, including our statement that working
capital requirements will be met with internal sources. 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, increasing material costs, 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
- ------- ----------------------------------------------------------
Certain of the Company's financial instruments are subject to market risk,
including interest rate and equity price risks; however, due to the makeup of
our investment portfolio this market risk is considered minimal. The Company
manages its exposure to these risks through its regular operating and financing
activities.
We do not engage in investing in or trading market risk sensitive financial
instruments. We also do not purchase for investing, hedging, or for purposes
"other than trading" financial instruments that are likely to expose us to
significant market risk, whether interest rate, foreign currency, commodity
price, or equity price risk. The Company's financial instruments are not
currently subject to foreign currency or commodity risk. The Company has no
financial instrument held for trading purposes.
We do not have an indebtedness as of November 1, 2003. If we were to borrow from
our revolving credit agreement, 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 2003 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
------------------------------------------------------------------
As previously reported in our report on Form 8-K filed July 22, 2003, on July
15, 2003, we dismissed our auditors, PricewaterhouseCoopers LLP and appointed
Tedder, James, Worden & Associates, P.A. as our new independent auditors,
effective July 15, 2003.
Item 9A. Controls and Procedures
- ------- -----------------------
Evaluation of Disclosure Controls and Procedures. The Company's Chief Executive
Officer and Chief Financial Officer have evaluated the effectiveness of the
Company's disclosure controls and procedures (as such term is defined in Rules
13a - 14c and 15d - 14(o) under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") as of August 2, 2003 (the "Evaluation Date"). Based on such
evaluation such officers have concluded that, as of the Evaluation Date, the
Company's disclosure controls and procedures are effective in alerting them on a
timely basis to material information relating to the Company (including its
consolidated subsidiaries) required to be included in the Company's reports
filed or submitted under the Exchange Act.
11
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 2004 annual meeting of shareholders to be filed with the Commission pursuant
to Regulation 14A on or before February 29, 2004.
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 (64) 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 (40) 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 (57) Vice President of Engineering.
Jean Etheredge (58) Secretary.
Lynn J. Cramer, Jr. (58) 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.
Code of Ethics
- --------------
We have adopted a code of ethics that applies to the principal executive
officer, principal financial officer, executive vice presidents and controller.
The code has been designed in accordance with provisions of the Sarbanes-Oxley
Act of 2002, to promote honest and ethical conduct. The code is included as an
exhibit to this annual report.
Our code of ethics is available on our website at www.nobilityhomes.com. You may
also obtain a copy of the Nobility Homes, Inc. Code of Ethics, at no cost, by
forwarding a written request to the Secretary of Nobility at Post Office Box
1659, Ocala, Florida 34478.
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 2004 annual meeting of shareholders to be filed with the
Commission pursuant to Regulation 14A on or before February 29, 2004.
12
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 2004 annual meeting of
shareholders to be filed with the Commission pursuant to Regulation 14A on or
before February 29, 2004.
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 2004 annual meeting of shareholders to be
filed with the Commission pursuant to Regulation 14A on or before February 29,
2004.
Item 14. Principal Accountant Fees and Services
- ------- --------------------------------------
Information concerning principal accountant fees and services is incorporated by
reference pursuant to Instruction G of Form 10-K from Nobility's definitive
proxy statement for the 2004 annual meeting of shareholders to be filed with the
Commission pursuant to Regulation 14A on or before February 29, 2004.
PART IV
Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K
- ------- ---------------------------------------------------------------
(a) Consolidated Financial Statements and Schedules:
Report of Tedder, James, Worden & Associates, P.A.
Report of PricewaterhouseCoopers LLP
Consolidated Balance Sheets at November 1, 2003 and November 2,
2002
Consolidated Statements of Income for the Years Ended November 1,
2003, November 2, 2002 and November 3, 2001
Consolidated Statements of Changes in Stockholders' Equity for the
Years Ended November 1, 2003, November 2, 2002 and November 3,
2001
Consolidated Statements of Cash Flows for the Years Ended November
1, 2003, November 2, 2002 and November 3, 2001
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.)
13
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 2003 Annual Report to
Shareholders.
14. Code of Ethics
21. Subsidiaries of Nobility.
23. (a) Consent of Tedder, James, Worden & Associates, P.A.
(b) Consent of PricewaterhouseCoopers LLP.
31. (a) Written Statement of Chief Executive Officer pursuant
to Section 302 of the Sarbanes-Oxley Act and Rule
13a-14(a)or 15d-14(a) under the Securities Exchange
Act of 1934.
(b) Written Statement of Chief Executive Officer pursuant
to Section 302 of the Sarbanes-Oxley Act and Rule
13a-14(a)or 15d-14(a) under the Securities Exchange
Act of 1934.
32. (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.
14
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 Executive 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 28, 2003 By: /s/ Richard C. Barberie
----------------------------------------
Richard C. Barberie, Director,
DATE: January 28, 2003 By: /s/ Robert Holliday.
----------------------------------------
Robert Holiday, 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,
15
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 2003 Annual Report to
Shareholders.
14. Code of Ethics
21. Subsidiaries of Nobility.
23. (a) Consent of Tedder, James, Worden & Associates, P.A.
(b) Consent of PricewaterhouseCoopers LLP.
31. (a) Written Statement of Chief Executive Officer pursuant
to Section 302 of the Sarbanes-Oxley Act and Rule
13a-14(a)or 15d-14(a) under the Securities Exchange
Act of 1934.
(b) Written Statement of Chief Executive Officer pursuant
to Section 302 of the Sarbanes-Oxley Act and Rule
13a-14(a)or 15d-14(a) under the Securities Exchange
Act of 1934.
32. (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.
16