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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Under Section 13 or 15(d) of
the Securities and Exchange Act of 1934
For the fiscal year ended October 31, 1998
Commission file number 0-6506
NOBILITY HOMES, INC.
(Name of small business issuer in its charter)
Florida 59-1166102
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
3741 S.W. 7th Street
Ocala, Florida 34474
(Address of principal executive offices) (Zip Code)
(352) 732-5157
(Issuer's telephone number, including area code)
Securities registered under Section 12(b) of the
Act:
Name of each exchange
Title of each class on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $.10 par value
(Title of Class)
Indicate by check mark whether the issuer (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the past 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X ; No .
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. __
State the aggregate market value of the voting stock held by
non-affiliates of the registrant on January 22, 1999, computed by reference to
the average high and low prices on that date: $27,732,000
(APPLICABLE ONLY TO CORPORATE ISSUERS)
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of January 22, 1999: 4,420,251 shares of common
stock
DOCUMENTS INCORPORATED BY REFERENCE Incorporated at
Nobility Homes, Inc. Proxy Statement for the 1999 Part III, Items 10,
Annual Meeting of Shareholders 11, 12 and 13
PART I
Item 1. Description of Business
Nobility Homes, Inc. (the "Registrant or the "Company"), a corporation
organized under the laws of Florida in 1967, designs, manufactures and sells a
broad line of manufactured homes through a network of retail sales centers
throughout north and central Florida. The Registrant also sells its manufactured
homes on a wholesale basis to manufactured home dealers and manufactured home
parks.
Manufactured Homes
Homes manufactured by the Registrant are available in approximately 100
active models, ranging in size from 636 to 2,153 square feet, and contain from
one to five bedrooms. The Registrant's manufactured homes ("homes") are
available in single-wide widths of 14 and 16 feet ranging from 48 to 72 feet in
length, double-wide widths of 24, 26, 28 and 32 feet ranging from 36 to 76 feet
in length and triple-wide widths of 36, 38 and 42 feet ranging from 44 to 68
feet in length. Four new "Special Edition" homes were introduced in fiscal 1998
as a result of the success of the Company's 30th anniversary model sold in
fiscal 1997. In addition, during 1997 the Registrant introduced a four section
model referred to as a quad. Quads are T-shaped and have a total of 2,128 square
feet. The Registrant's homes are sold under the trade names "Kingswood,"
"Richwood," "Springwood," "Tropic Isle," "Regency Manor," "Regency Manor
Special," and "Tropic Manor."
The homes are sold primarily as unfurnished dwellings ready for
permanent occupancy. Interiors are designed and color coordinated in a range of
decors. Depending on the size of the unit and quality of appliances and other
appointments, retail prices for the Registrant's homes typically range from
approximately $14,000 to $60,000. Most of the prices of the Registrant's homes
are considered by it to be within the low to medium price range of the industry.
Both of the Registrant's manufacturing plants utilize assembly line
techniques in manufactured home production. Both plants manufacture and assemble
the floors, sidewalls, end walls, roofs and interior cabinets for their homes.
The Registrant purchases from outside suppliers various other components that
are built into its homes including the axles, frames, tires, doors, windows,
pre-finished sidings, plywood, ceiling panels, lumber, rafters, insulation,
paneling, appliances, heating units, lighting and plumbing fixtures, carpeting
and drapes. The Registrant is not dependent upon any one particular supplier for
its raw materials or component parts, nor is it required to carry significant
amounts of inventory to assure itself of a continuous allotment of goods from
suppliers.
The Registrant's two manufacturing plants continued to operate at an
average of approximately 55% of their single shift capacity in fiscal 1998,
representing no change from fiscal 1997.
The Registrant generally does not manufacture its homes to be held by
it as inventory (except for model home inventory of its retail network
subsidiary, Prestige Home Centers,
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Inc.), but, rather, manufactures its homes after receipt of dealer orders.
Although the Registrant attempts to maintain a consistent level of production of
homes throughout the fiscal year, seasonal fluctuations do occur, with sales of
homes generally lower during the first quarter due to the holiday season.
The sales area for a manufactured home manufacturer is limited by
substantial delivery costs of the finished product. The homes produced by the
Registrant are delivered by outside trucking companies. The Registrant estimates
that it can compete effectively within a range of approximately 350 miles from
its manufacturing plants. During the last two fiscal years, substantially all of
the Registrant's sales were made in Florida.
Retail Sales
Prestige Home Centers, Inc. ("Prestige") operates 22 retail lots in
north and central Florida. Its principal executive offices are located at the
Registrant's headquarters in Ocala, Florida.
Each of Prestige's retail lots is located within 350 miles of one of
the Registrant's two manufacturing facilities. Prestige leases all but one of
its retail lots from unaffiliated parties under leases with terms of between one
and three years with renewal options.
The primary customers of Prestige are young, first-time home buyers who
generally purchase manufactured homes to place on their own homesites. Prestige
operates its retail sales centers with a model home concept. Each of the homes
displayed at its retail sales centers is furnished and decorated as a model
home. Although the model homes may be purchased from Prestige's model home
inventory, generally, customers order homes which are shipped directly from the
factory to their homesite. Prestige sales generally are to purchasers living
within a radius of approximately 100 miles from the selling retail lot.
The Registrant entered into a joint venture agreement in fiscal 1997
with 21st Century Mortgage Corporation to provide financing to retail customers
purchasing the Registrant's manufactured homes from Prestige. Additionally,
financing for home purchases is provided by nine other independent sources that
specialize in manufactured housing lending and numerous banks which finance
manufactured home purchases. Prestige is not required to sign any recourse
agreements with any of these retail financing sources, nor does Prestige itself
finance customers' new home purchases.
The retail sale of manufactured homes is a highly competitive business.
Because of the large number of retail sales centers located throughout the
Registrant's market area, potential customers typically can find a sales center
within a 100 mile radius of their present home. Prestige competes with over 100
other retailers in its primary market area, some of which may have greater
financial resources than Prestige. In addition, manufactured homes offered by
Prestige compete with conventional site-built housing.
Prestige also provides, through its wholly-owned subsidiary, Prestige
Insurance Services, Inc., an independent insurance agent, credit life and
property and casualty insurance
3
to Prestige customers in connection with their purchase and financing of
manufactured homes. Prestige Insurance Services, Inc. receives a commission on
the insurance premium collected at the time an insurance policy is written and
in future years if the homeowner renews the policy. Its revenues were
approximately $241,000, $34,000 and $16,000 in fiscal 1998, 1997 and 1996,
respectively.
Sales to Independent Dealers and Manufactured Home Communities
The Registrant currently sells its homes on a wholesale basis
exclusively through 3 full-time salespersons to approximately 35 independent
dealers. The Registrant attempts continuously to seek new dealers in the areas
in which it operates as there is ongoing turnover in the dealers with which it
deals at any one time, especially with manufactured home communities as they
achieve full occupancy levels. As is common in the industry, most of the
Registrant's dealers other than its subsidiary, Prestige, are independent
dealers that sell products produced by several manufacturers. No one dealer
accounted for more than 10.0% of the Registrant's total sales in fiscal 1998.
Dealers generally obtain inventory financing from financial
institutions (usually banks and finance companies) on a "floor plan" basis
whereby the financial institution obtains a security interest in all or part of
the dealer's manufactured home inventory. The Registrant, upon request of the
lending institution, enters into repurchase agreements with the lending
institutions which provide that, in the event of a dealer's default, the
Registrant will, at the lender's request, repurchase the home provided that the
Registrant's liability will not exceed the manufacturer's invoice price and that
the repurchased home is new and unused. Generally, the repurchase agreement
expires within one year after a home is sold to the dealer, and the repurchase
price is limited to between 70% to 100% of the original invoice price to the
dealer, depending on the length of time that has expired since the original
sale. Generally, repurchase is conditioned upon the dealer's insolvency. Any
losses incurred as a result of such repurchases would be limited to the
difference between the repurchase price and the subsequent resale value of the
home repurchased. The Registrant was not required to repurchase any homes during
fiscal 1998, 1997 or 1996. For additional information, see Note 13 of "Notes to
Consolidated Financial Statements." The Registrant does not finance retail sales
of new homes for customers of its independent dealers.
The Registrant does not generally offer consigned inventory programs or
other credit terms to dealers and ordinarily receives payment for its homes
within 15 to 30 days of delivery. However, the Registrant offers extended terms
to unrelated park dealers who do a high volume of business with the Registrant.
From time to time, the Registrant has offered extended terms to TLT, Inc.
("TLT"), an affiliate of the Registrant's President, which operates three
manufactured home communities targeted at the retiree market, in return for
which TLT has granted the Registrant exclusive sales rights for the manufactured
homes sold by the communities operated by it. See Note 3 of "Notes to
Consolidated Financial Statements" for additional information concerning the
terms of sales to TLT. In order to stimulate sales, the Registrant sells homes
to selected manufactured home communities for display on special
4
terms. The high visibility of the Registrant's homes in such communities
generates additional sales of the Registrant's homes through such dealers.
The Registrant offers a quarterly or yearly volume bonus award to those
dealers who purchase homes from the Registrant in excess of certain specified
dollar amounts during a specified period. As an additional dealer incentive, the
Registrant may assume certain floor plan financing costs for a specified number
of days for dealers who carry in excess of a specified level of the Registrant's
inventory. During fiscal 1998, 1997 and 1996, the Registrant reimbursed dealers
other than TLT $276,000, $152,000 and $112,000, respectively, as volume bonus
awards and for floor plan financing charges under the programs described above.
Volume bonus awards to TLT, which are granted on the same basis as to other
dealers, were $1,900 in fiscal 1998, $8,000 in fiscal 1997 and $28,000 in fiscal
1996.
Regulation
The manufacture, distribution and sale of homes is subject to
governmental regulation at the federal, state and local levels. The Department
of Housing and Urban Development ("HUD") has adopted national construction and
safety standards that have priority over existing state standards. Compliance
with these standards involves submission to and approval by an engineering firm
approved by HUD of engineering plans and specifications on all models. HUD's
standards also require periodic inspection by state or other third party
inspectors of plant facilities and construction procedures, as well as
inspection of manufactured home units during construction. In 1994, HUD
regulations took effect which require that manufactured homes be constructed to
more stringent standards. Florida is split between two wind zones. Homes sold in
Zone II, which includes most of north and central Florida, must be able to
withstand winds of up to 100 miles per hour, while homes sold in Zone III, which
covers primarily the coastal areas of south Florida, must be able to withstand
winds up to 110 miles per hour. Homes built to these standards are significantly
stronger than homes built prior to the effective date. Home set-up was also
affected with much stronger tie down anchoring requirements. Most of the
Registrant's homes are sold in Zone II.
HUD also issued thermal standards for manufacturing housing in 1994.
These regulations mandate a much higher insulation throughout the home including
the floor, walls and roof and an improved ventilation system for the whole
house, including kitchen and baths.
The Registrant estimates that compliance with federal, state and local
environmental protection laws will have no material effect upon capital
expenditures for plant or equipment modifications or earnings for the next
fiscal year.
The transportation of homes manufactured by the Registrant is subject
to state regulation. Generally, special permits must be obtained to transport
the home over public highways, and restrictions are imposed to promote travel
safety including those relating to routes, travel periods, speed limits, safety
equipment and size.
Homes manufactured by the Registrant are subject to the requirements of
the Magnuson-Moss Warranty Act and Federal Trade Commission rulings which
regulate
5
warranties on consumer products. The Registrant provides a limited warranty of
one year on the structural components of the homes it manufactures.
Competition
The manufactured home industry is highly competitive. The initial
investment required for entry into the business of manufacturing homes is not
unduly large. State bonding requirements for entry in the business vary from
state to state. The bond requirement for Florida is $50,000. The Registrant
competes directly with other manufacturers, some of which are considerably
larger than it and possess greater financial resources. Based on number of units
sold, the Registrant ranks 6th in the state of Florida out of the top 45
manufacturers selling manufactured homes in the state; however, the Registrant
estimates that of those 45 manufacturers approximately 15 manufacture homes of
the same type as the Registrant and compete in the same market area. The
Registrant believes that it is generally competitive with most of those
manufacturers in terms of price, service, warranty and product performance.
According to statistics compiled by Statistical Surveys, Inc. from
records on file with the State of Florida, Prestige has been the largest retail
dealer of multi-section manufactured homes in Florida since 1994, based on
number of home sales.
Employees
As of January 2, 1999, the Registrant had 258 full-time employees,
including 93 employed by Prestige. Approximately 140 employees are factory
personnel compared to approximately 116 in such positions a year ago, and 101
are in management, administrative, supervisory, sales and clerical positions
(including 76 management and sales personnel employed by Prestige) compared to
approximately 88 a year ago. In addition, the Registrant employs part-time
employees when necessary.
The Registrant makes a contribution toward employees' group health and
life insurance. The Registrant, which is not subject to any collective
bargaining agreements, has not experienced any work stoppage or labor disputes
and considers its relationship with employees to be generally satisfactory.
6
Item 2. Properties
As of October 31, 1998, two manufacturing plants were owned and
operated by the Registrant as follows:
Depreciated Cost of
Approximate Plant and Property
Location Size at October 31, 1998
Belleview, Florida 33,500 sq. ft. $117,000
Ocala, Florida(1) 72,000 sq. ft. 551,000
- -------------------------
(1) This 72,000 square foot plant is located on approximately 35.5 acres of
land on which an additional two-story structure adjoining the plant
serves as the Registrant's corporate offices.
The Company's Belleview plant is of metal and concrete construction and
the Ocala plant is of metal construction. Both properties are in good condition
and require little maintenance.
The Company acquired the land for its Yulee, Florida sales center in
the fourth quarter of fiscal 1998 at a total cost of approximately $450,000,
including improvements.
Item 3. Pending Legal Proceedings
Certain claims and suits arising in the ordinary course of business
have been filed or are pending against the Company. In the opinion of
management, any related liabilities that might arise would be covered under
terms of the Company's liability insurance policies or would not be material to
the financial statements taken as a whole.
Item 4. Submission of Matters to a Vote of Security Holders
None
7
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters
The Registrant's Common Stock is listed on the Nasdaq National Market
under the symbol NOBH. The following table shows the range of high and low sales
prices for the Common Stock for each fiscal quarter of 1998 and 1997.
Fiscal Year End (1)
-------------------------------------------------------------
Fiscal October 31, 1998 November 1, 1997
Quarter High Low High Low
1st $12.12 $ 7.57 $10.16 $7.33
2nd 15.45 11.06 9.83 7.50
3rd 22.27 14.54 9.16 7.00
4th 18.18 10.68 9.08 7.66
- ---------------
(1) On February 20, 1998, January 31, 1996 and August 16, 1996,
three-for-two stock splits in the form of 50% stock dividends were
paid. Amounts in the table have been restated to give effect to these
stock dividends.
At January 15, 1999, the approximate number of record holders of Common
Stock was 270 (not including individual participants in security position
listings).
The payment of cash dividends is within the discretion of the
Registrant's Board of Directors and will depend, among other factors, on
earnings, capital requirements and the operating and financial condition of the
Registrant. During fiscal 1998, 1997 and 1996, no cash dividends were paid.
On December 16, 1998, the Company declared a 10% stock dividend on its
outstanding common stock payable on February 19, 1999 to shareholders of record
as of January 15, 1999. The per share information presented in this report has
not been restated to give effect to this dividend.
Item 6. Selected Financial Data
The following table sets forth Selected Financial Data for each of the
Registrant's last five fiscal years. This information should be read in
conjunction with the financial statements of the Company (including the related
notes thereto) and Management's Discussion and Analysis of the Financial
Condition and Results of Operations, each included elsewhere in this Form 10-K.
8
Years Ended(1)
- --------------------- ------------ ------------------ ------------- ------------- ----------------
October 31, November 1, November 2, November 4, October 29,
1998 1997 1996 1995 1994
(In thousands except per share data)
Total net sales $44,830 $41,696 $36,455 $30,806 $23,082
Income from
Operations 5,844 4,759 3,839 2,710 1,585
Other income 538 206 47 1,340 374
Net income 3,941 3,038 2,395 2,957 1,769
Net income per
share(2) .87 .68 .54 .68 .41
Total assets 22,803 18,941 14,871 12,896 11,355
Long term
Obligations -0- -0- -0- 659 764
Stockholders
Equity 18,674 15,294 12,256 9,479 6,481
- -----------------------------
(1) The Company's fiscal year ends on the first Saturday on or after
October 31. Prior to 1995, the Company's fiscal year ended on the
Saturday closest to October 31. The years ended November 2, 1996 and
November 4, 1995 consisted of a fifty-three week period and the years
ended October 31, 1998, November 1, 1997, October 29, 1994 and October
30, 1993 consisted of a fifty-two week period.
(2) On February 20, 1998, January 31, 1996 and August 16, 1996,
three-for-two stock splits in the form of 50% stock dividends were paid
to shareholders. Amounts in the table have been restated to give effect
to these stock dividends.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
The Company's primary focus is young, first time homebuyers who
generally purchase their manufactured homes from retail sales centers to locate
on property they own. The Company has aggressively pursued this market through
its Prestige retail sales centers, which have become the principal focus of its
business strategy. While the Company actively seeks to make wholesale sales to
independent retail dealers, the Company's presence as a competitor limits
potential sales to dealers located in the same geographic areas serviced by its
Prestige sales centers.
The Company continues to make sales to the retirement community market,
which is made up of retirees from the north who move to Florida to enjoy its
milder winters and who typically purchase homes to be located on sites leased
from park communities that offer a variety of amenities. While a portion of the
Company's sales in this market are made to communities owned by the Company's
affiliate, TLT, the importance to the Company of the
9
retirement market continues to diminish, both as a focus of its efforts and in
dollars and as a percentage of total sales.
The Company sold 1,262 homes in fiscal 1998, of which 334 homes were
sold to independent dealers, representing sales of $7,260,000, and 8 homes were
sold to TLT communities, representing sales of $197,000. In fiscal 1997, the
Company sold 1,190 homes, of which 361 homes were sold to independent dealers,
representing sales of $7,466,000, and 17 homes were sold to TLT communities,
representing sales of $400,000. In fiscal 1996, the Company sold 1,087 homes, of
which 237 homes were sold to independent dealers, representing sales of
$5,204,000, and 28 homes were sold to TLT communities, representing sales of
$717,000. The balance of the Company's sales in fiscal 1998, 1997 and 1996,
representing 82.0%, 81.1% and 83.8% of net sales, respectively, were made on a
retail basis through Prestige's retail centers.
The Company has a product line of approximately 100 active models.
Market demand can fluctuate on a fairly short-term basis; however, the
manufacturing process is such that the Company can alter its product mix
relatively quickly in response to changes in the market. During fiscal 1998, the
Company`s product mix was positively affected by the "Special Edition" homes
marketed by Prestige and by larger, more expensive multi-wide homes resulting
from greater consumer confidence and the availability of varied types of
financing at competitive rates. Many family buyers today purchase three-, four-
or five-bedroom manufactured homes, compared with the two-bedroom home that
typically appeals to the retirement community market.
During fiscal 1997, the Company entered into a joint venture agreement
with 21st Century Mortgage Corporation to provide mortgage financing to retail
customers who purchase the Company's manufactured homes at Prestige retail sales
centers. This joint venture, which originates and services loans, has given the
Company more control over the financing aspect of the retail home sales process
and allowed the Company to offer better service to its retail customers.
Management believes that the joint venture gives the Company an additional
potential for profit by providing finance products to retail customers. In
addition, management believes that the Company, has more input in the design of
unique finance programs for prospective homebuyers, and has resulted in more
profitable sales at its Prestige retail sales centers. In an effort to make
manufactured homes more competitive with site-built housing, financing packages
are available to provide 30-year financing, an interest rate reduction program,
combination land/manufactured home loans, and a 5% down payment program for
qualified buyers. The Company also maintains outside financing sources that
provide financing for the Company's manufactured homes for retail homebuyers.
The Company through its wholly-owned subsidiary, Prestige Insurance
Services, Inc., an independent insurance agency, offers credit life, homeowners
and service warranty products to the retail customers.
10
Results of Operations
The Company continued to increase revenues during the fiscal year ended
October 31, 1998. Total net sales in 1998 were $44,830,000 compared to
$41,696,000 in 1997 and $36,455,000 in fiscal 1996. Net sales increased 7.5% in
fiscal 1998 and 14.4% in 1997 and 18.3% in 1996. The increased sales revenue in
fiscal 1998 was primarily due to the 6.8% increase in same store sales revenues
at Prestige. The increase in sales in fiscal 1997 over fiscal 1996 was primarily
due to the increased popularity of higher priced homes and increased sales to
outside dealers. The year ended October 31, 1998 and November 1, 1997 consisted
of a fifty-two (52) week period while the year ended November 2, 1996 consisted
of a fifty-three (53) week period.
Industry-wide shipments of multi-section manufactured homes measured in
number of units continued to improve for the first ten months of 1998, up 10.7%
over 1997, while shipments of single section homes declined approximately 4.0%
for 1998. Combined industry shipments of multi-section and single section homes
increased 7.0% in 1997 and 9.1% in 1996. In fiscal 1998, approximately 94% of
the Company's home sales were multi-section homes. Florida combined industry
shipments of multi-section home and single-section homes, in the first ten
months of 1998 increased 7% compared to a 9% increase in combined shipments of
multi-section and single section homes in both 1997 and 1996.
Gross profit as a percentage of net sales was 27.0% in fiscal 1998
compared to 25.8% in 1997 and 25.5% in fiscal 1996. The increase in gross profit
in fiscal 1998 was due to increased gross margins at the retail sales centers,
primarily from the mix of products sold and cost controls. The increase in gross
profit in fiscal 1997 was primarily a result of improvements in the gross
margins at both the manufacturing plants and retail sales centers. The increase
in gross profit in fiscal 1996 was primarily due to increasing home prices to
offset lumber price increases and continuing improvements in operating
efficiency at the Company's manufacturing plants.
Selling, general and administrative expenses as a percent of net sales
was 13.9% in fiscal 1998 as compared to 14.4% in 1997 and 15.0% in fiscal 1996.
The decline in fiscal 1998 selling, general and administrative expenses as a
percent of net sales, although approximately a $200,000 increase in dollars, was
primarily due to reduced general and administrative costs at the manufacturing
plants, partially offset by increased overhead and start-up costs from the seven
new retail sites added during the fourth quarter of fiscal 1998. The decline in
fiscal 1997 selling, general and administrative expenses as a percent of net
sales was primarily due to better operating efficiencies at the retail sales
centers. The increase in selling, general and administrative expenses in fiscal
1996 was primarily due to start-up expenses associated with the addition of the
three retail sales centers in November 1995, coupled with increased newspaper,
radio and television advertising expense.
Other income for fiscal 1998 was $538,000 of which $292,000 was from
interest on short term investments and $166,000 was from undistributed earnings
from the Nobility 21
11
joint venture. Other income for fiscal 1997 was $206,000 of which $118,000 was
from interest on short term investments. Other income for fiscal 1996 was
$47,000.
As a result of the factors discussed above, earnings for fiscal 1998
were $3,941,000 or $.87 per share compared to $3,038,000 or $.68 per share for
fiscal 1997 and $2,395,000 or $.54 per share for fiscal 1996.
Liquidity and Capital Resources
Cash and cash equivalents were $5,892,000 at October 31, 1998 compared
to $6,294,000 at November 1, 1997. Working capital increased to $13,141,000 in
fiscal 1998 compared to $11,339,000 in fiscal 1997. In fiscal years 1998 and
1997, the Company carried all the inventory for the Prestige retail sales
centers and did not incur third party floor plan financing expenses. Inventories
increased to $10,391,000 in 1998 from $8,041,000 at fiscal year-end 1997. The
increase in inventory was primary due to the $1.6 million dollars of homes
manufactured in the fourth quarter of 1998 for the seven retail sales centers
added in that quarter.
During fiscal 1997 and the first half of fiscal 1998, the Company
maintained a revolving credit agreement with a major bank providing for
borrowings up to $2.5 million. The maximum available amount under the agreement
was increased from $2.5 million to $4.0 million in March 1998. In July 1996, the
Company entered into a second revolving line of credit agreement with a major
bank which provides for borrowings up to $1,500,000. These two agreements
provide the Company with an additional $5.5 million of working capital for use
in connection with its overall operations. At October 31, 1998 and November 1,
1997, there were no amounts outstanding under these agreements.
In July 1997, the Company invested $250,000 in a joint venture with
21st Century Mortgage Corporation to provide additional mortgage financing
services to the Company's retail sales centers. The Company generally does not
have any additional capital contribution obligations with respect to the joint
venture, except to the extent the joint venture may be required to invest in
certain subordinated certificates issued in connection with an asset-backed
security. No such investment is contemplated within the next 12 months.
On August 11, 1998, the Company acquired six manufactured home retail
sales centers located in the panhandle of Florida in an asset acquisition. This
transaction was accounted for using the purchase method of accounting;
accordingly, the purchased assets have been recorded at their estimated fair
market value at the date of acquisition, resulting in approximately $487,000 of
goodwill, which is being amortized on a straight-line basis over 15 years.
On August 18, 1998 the Company opened a retail sales center located in
Yulee, Florida. The cost of the land and land improvements was approximately
$450,000.
The Company acquired one additional existing manufactured home retail
sales center in North Central Florida in March 1997 in an asset acquisition.
This transaction was accounted
12
for using the purchase method of accounting; accordingly, the purchased assets
have been recorded at their estimated fair value at the date of acquisition,
resulting in approximately $37,000 of goodwill, which is being amortized on a
straight-line basis over 15 years.
In January 1997 Prestige closed its sales center in Perry, Florida.
Consistent with normal practice, the Company's operations are not
expected to require significant capital expenditures during fiscal 1998. Working
capital requirements for the home inventory for new retail sales centers will be
met with internal sources.
Forward Looking Statements
Certain statements in this report are forward-looking statements within
the meaning of the federal securities laws. Although the Company believes that
the expectations reflected in such forward-looking statements are based on
reasonable assumptions, there are risks and uncertainties that may cause actual
results to differ materially from expectations. These risks and uncertainties
include, but are not limited to, competitive pricing pressures at both the
wholesale and retail levels, changes in market demand, adverse weather
conditions that reduce sales at retail centers, the risk of manufacturing plant
shutdowns due to storms or other factors, and the impact of marketing and
cost-management programs.
Year 2000 Issue
Many existing computer programs use only two digits to identify a year
in the date field. As the century date change occurs, these programs may
recognize the year 2000 as 1900, or not at all. If not corrected, many computer
systems and applications could fail or create erroneous results by or at the
year 2000 (the "Year 2000 Issue").
The Company has developed plans to address its possible exposures
related to the impact of the Year 2000 Issue on its operations. These plans are
expected to be implemented primarily with the use of internal resources. The
Company has assessed (i) the equipment in its manufacturing operations that
contains microprocessors or relies on software, and (ii) the Company's internal
systems. The Company has determined that its manufacturing equipment does not
have a Year 2000 Issue.
The Company's internal systems consist of its central operating and
accounting systems, which handle the majority of its business transactions. The
Company has completed an assessment of its central operating and accounting
systems which resulted in the identification of certain modifications necessary
to bring these systems into year 2000 compliance. These modifications have been
made, primarily through the purchase of updated hardware and updated
vendor-supplied software. Based on the results of initial testing with respect
to these systems, the Company does not anticipate that the Year 2000 Issue will
materially impact operations or operating results.
13
Management believes that total pretax costs incurred to date in
connection with the Year 2000 Issue have not materially impacted the Company's
operating results and that future costs of compliance likewise will not be
material.
The Company believes its planning efforts are adequate to address the
Year 2000 Issue and that its risk factors are primarily those that it cannot
directly control, including the readiness of its major suppliers, customers and
service providers. Failure on the part of these entities to timely remediate
their Year 2000 Issue could result in disruptions in the Company's supply of
materials, disruptions in its customers' ability to conduct business and
interruptions to the Company's daily operations. Management believes that its
exposure to third party risk may be minimized to some extent because it does not
rely significantly on any one supplier or customer. There can be no guarantee,
however, that the systems and operations relied on by such third parties will be
corrected on a timely basis and will not have a material adverse effect on the
Company.
Due to the nature of the Company's manufacturing and retail operations,
including the fact that the materials used by the Company in its manufactured
homes are widely available, the Company does not currently have formal
contingency plans or a timetable for implementing them. The Company's suppliers
typically maintain a one-month supply of materials. Contingency plans will be
established, if they are deemed necessary, after the Company has adequately
assessed the impact on its operations should third parties fail to properly
remediate their computer systems. Contingency plans would include such items as
identifying alternative suppliers and increasing inventory levels prior to the
year 2000 to ensure availability of supplies for the Company's manufacturing and
retail operations.
Item 8. Consolidated Financial Statements and Supplementary Data
Financial statements incorporated herein from the Registrant's 1998
Annual Report to Shareholders are attached as Exhibit 13 and are listed at Part
IV, Item 13(a), "Consolidated Financial Statements and Schedules."
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
14
PART III
Item 10. Directors and Executive Officers of the Registrant
Information concerning the directors of the Registrant is incorporated
by reference pursuant to Instruction G of Form 10-K from the Registrant's
definitive proxy statement for the 1999 annual meeting of shareholders to be
filed with the Commission pursuant to Regulation 14A on or before February 28,
1999.
The following table provides the names, ages and business experience
for the past five years for each of the Executive Officers of the Registrant.
Executive officers are each elected for one year terms.
Executive Officers
Terry E. Trexler (59) Chairman of the Board and President of Registrant;
Mr. Trexler is also President of TLT; from April 1996
to March 1997, Mr. Trexler was a director of Citizens
National Bank and its subsidiary, Citi-Bancshares,
Inc. and was Chairman of the Board of Citizens First
Bancshares, Inc. and its subsidiary, Citizens First
Bank of Ocala prior to its acquisition in April 1996.
Thomas W. Trexler (35) Executive Vice President and Chief Financial Officer
of the Registrant since December 1994 and a director
of the Registrant since February 1993; President of
Prestige Insurance Services, Inc. since August 1992;
President of Prestige since June 1995 and Vice
President from 1991 to June 1995; director of
Prestige and Vice President and director of TLT since
September 1991; prior to September 1991, Mr. Trexler
was Vice President of NationsBank (formerly NCNB
National Bank) in Naples, Florida.
Edward C. Sims (52) Vice President of Engineering of the Registrant.
Jean Etheredge (53) Secretary of the Registrant.
Lynn J. Cramer, Jr. (53) Treasurer of the Registrant.
Thomas W. Trexler, Executive Vice President, Chief Financial Officer
and a director of the Registrant, is the son of Terry E. Trexler, the
Registrant's President and Chairman of the Board. There are no other family
relationships between any directors or executive officers of the Registrant.
15
Item 11. Executive Compensation
Information concerning executive compensation is incorporated by
reference pursuant to Instruction G of Form 10-K from the Registrant's
definitive proxy statement for the 1999 annual meeting of shareholders to be
filed with the Commission pursuant to Regulation 14A on or before February 28,
1999.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information concerning security ownership of certain beneficial owners
and management is incorporated by reference pursuant to Instruction G of Form
10-K from the Registrant's definitive proxy statement for the 1999 annual
meeting of shareholders to be filed with the Commission pursuant to Regulation
14A on or before February 28, 1999.
Item 13. Certain Relationships and Related Transactions
Information concerning certain relationships and related transactions
is incorporated by reference pursuant to Instruction G of Form 10-K from the
Registrant's definitive proxy statement for the 1999 annual meeting of
shareholders to be filed with the Commission pursuant to Regulation 14A on or
before February 28, 1999.
16
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Consolidated Financial Statements and Schedules:
Report of PricewaterhouseCoopers LLP
Consolidated Balance Sheets at October 31, 1998 and November 1,
1997
Consolidated Statements of Income for the Years Ended October
31, 1998, November 1, 1997 and November 2, 1996
Consolidated Statements of Changes in Stockholders' Equity for
the Years Ended October 31, 1998, November 1, 1997 and
November 2, 1996
Consolidated Statements of Cash Flows for the Years Ended
October 31, 1998, November 1, 1997 and November 2, 1996
Notes to Consolidated Financial Statements
(b) Reports on Form 8-K:
None
(c) Exhibits:
3. (a) The Registrant's Articles of Incorporation, as
amended (filed as an exhibit to the Registrant's Form
10-K for the fiscal year ended November 1, 1997 and
incorporated herein by reference).
(b) Bylaws, as amended March 28, 1994, (filed as an
exhibit to the Registrant's Form 10-KSB for the
fiscal year ended October 29, 1994 and incorporated
herein by reference.)
10. (a) Joint Venture Agreement with 21st Century Mortgage
Corporation (filed as an exhibit to the Registrant's
Form 10-K for the fiscal year ended November 1, 1997
and incorporated herein by reference).
*(b) Stock Incentive Plan (filed as an exhibit to the
Registrant's registration statement on Form S-8,
registration no. 333-44769, and incorporated herein
by reference).
- -------------
* Management Remuneration Plan.
17
(c) Revolving Credit Agreement dated July 17, 1996 with
AmSouth Bank of Florida (filed as an exhibit to the
Registrant's Form 10-K for the fiscal year ended
November 2, 1996 and incorporated by reference
herein).
(d) Revolving Credit Agreement dated June 7, 1996 with
SunTrust Bank, North Central Florida (filed as an
exhibit to the Registrant's Form 10-K for the fiscal
year ended November 2, 1996 and incorporated by
reference herein).
13. Consolidated Financial Statements from 1998 Annual Report
to Shareholders.
21. Subsidiaries of Registrant.
23. Consent of PricewaterhouseCoopers LLP.
27. Financial Data Schedule.
18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NOBILITY HOMES, INC.
DATE: January 29, 1999 By:/s/ Terry E. Trexler
--------------------------------------
Terry E. Trexler, Chairman, President
and Chief Executive Officer
DATE: January 29, 1999 By:/s/ Thomas W. Trexler
--------------------------------------
Thomas W. Trexler, Executive
Vice President and
Chief Financial Officer
DATE: January 29, 1999 By:/s/ Lynn J. Cramer, Jr.
--------------------------------------
Lynn J. Cramer, Jr., Treasurer and
Principal Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
DATE: January 29, 1999 /s/ Terry E. Trexler
-----------------------------------------
Terry E. Trexler, Director
DATE: January 29, 1999 /s/ Richard C. Barberie
-----------------------------------------
Richard C. Barberie, Director
DATE: January 29, 1999 /s/ Robert Holliday
-----------------------------------------
Robert Holliday, Director
DATE: January 27, 1999 /s/ Robert P. Saltsman
-----------------------------------------
Robert P. Saltsman, Director
DATE: January 29, 1999 /s/ Thomas W. Trexler
-----------------------------------------
Thomas W. Trexler, Director
19
EXHIBIT INDEX
3. (a) The Registrant's Articles of Incorporation, as amended (filed as
an exhibit to the Registrant's Form 10-K for the fiscal year ended
November 1, 1997 and incorporated herein by reference).
(b) Bylaws, as amended March 28, 1994, (filed as an exhibit to the
Registrant's Form 10-KSB for the fiscal year ended October 29,
1994 and incorporated herein by reference.)
10. (a) Joint Venture Agreement with 21st Century Mortgage Corporation
(filed as an exhibit to the Registrant's Form 10-K for the fiscal
year ended November 1, 1997 and incorporated herein by reference).
*(b) Stock Incentive Plan (filed as an exhibit to the Registrant's
registration statement on Form S-8, registration no. 333-44769,
and incorporated herein by reference).
(c) Revolving Credit Agreement dated July 17, 1996 with AmSouth Bank
of Florida (filed as an exhibit to the Registrant's Form 10-K for
the fiscal year ended November 2, 1996 and incorporated by
reference herein).
(d) Revolving Credit Agreement dated June 7, 1996 with SunTrust Bank,
North Central Florida (filed as an exhibit to the Registrant's
Form 10-K for the fiscal year ended November 2, 1996 and
incorporated by reference herein).
13. Consolidated Financial Statements from 1998 Annual Report to
Shareholders.
21. Subsidiaries of Registrant.
23. Consent of PricewaterhouseCoopers LLP.
27. Financial Data Schedule.
- -----------
* Management Remuneration Plan.
20