The demand for affordable manufactured housing in Florida continues to improve. According to the Florida
Manufactured Housing Association, shipments in Florida for the period from November 2017 through October 2018 were up approximately 19% from the same period last year. Constrained consumer credit and the lack of lenders in our industry, partly as a
result of an increase in government regulations, still affects our results by limiting many affordable manufactured housing buyers from purchasing homes. However, recent legislation may help improve this situation in the future.
We understand that maintaining our strong financial position is vital for future growth and success. Because of very challenging business conditions during
economic recessions in our market area, management will continue to evaluate all expenses and react in a manner consistent with maintaining our strong financial position, while exploring opportunities to expand our distribution and manufacturing
Our many years of experience in the Florida market, combined with home buyers increased need for more affordable housing, should serve
the Company well in the coming years. Management remains convinced that our specific geographic market is one of the best long-term growth areas in the country.
On June 5, 2019 the Company will celebrated its 52nd anniversary in business specializing in the design and production of quality, affordable
manufactured homes. With multiple retail sales centers, an insurance agency subsidiary, and an investment in a retirement manufactured home community, we are the only vertically integrated manufactured home company headquartered in Florida.
Insurance agent commissions in fiscal year 2018 were $273,747 compared to $267,933 in fiscal year 2017. We have established appropriate reserves for policy
cancellations based on numerous factors, including past transaction history with customers, historical experience and other information, which is periodically evaluated and adjusted as deemed necessary. In the opinion of management, no reserve was
deemed necessary for policy cancellations at November 3, 2018 and November 4, 2017.
Cost of goods sold at our manufacturing facilities include:
materials, direct and indirect labor and manufacturing expenses (which consists of factory occupancy, salary and salary related, delivery costs, manufactured home service costs and other manufacturing expenses). Cost of goods sold at our retail
sales centers include: appliances, air conditioners, electrical and plumbing hook-ups, furniture, insurance, impact and permit fees, land and home fees, manufactured home, service warranty, setup contractor,
interior drywall finish, setup display, skirting, steps, well, septic tank and other expenses.
Gross profit as a percentage of net sales was 25% in
fiscal year 2018 compared to 23% in fiscal year 2017. Our gross profit of $10,680,027 for 2018 increased 23% compared to $8,661,079 for 2017. The increase in gross profit percentage is primarily due to the increase in the average retail and
wholesale selling price on each home sold.
Selling, general and administrative expenses at our manufacturing facility include salaries, professional
services, advertising and promotions, corporate expense, employee benefits, office equipment and supplies and utilities. Selling, general and administrative expenses at our retail sales center include: advertising, retail sales centers expenses,
salary and salary related, professional fees, corporate expense, employee benefit, office equipment and supplies, utilities and travel. Selling, general and administrative expenses at the insurance company include: advertising, professional fees and
As a percent of net sales, selling, general and administrative expenses was 12% in fiscal year 2018 compared to 11% in fiscal 2017,
which increased $651,996 from fiscal year 2017 to 2018. The increase in selling, general and administrative expenses in 2018 resulted from the increase in compensation expenses directly related to our increased sales.
The Company earned interest in the amount of $362,121 in fiscal year 2018 compared to $149,613 in fiscal year 2017. Interest income is dependent on our cash
balance and available rates of return. The increase is primarily due to the increase in the balances and the interest rate in the money market accounts, certificates of deposit and interest from the note receivable acquired in the sale of the
investment in the Cypress Creek retirement community.
The Company earned $100,137 from its joint venture, Majestic 21, in fiscal year 2018 compared to
$103,533 in fiscal year 2017. The earnings from Majestic 21 represent the allocation of profit and losses which are owned 50% by 21st Mortgage Corporation and 50% by the Company.
We received $172,911 in fiscal year 2018 and $504,548 in fiscal year 2017 under an escrow arrangement related to a Finance Revenue Sharing Agreement between
21st Mortgage Corporation and the Company. The distributions from the escrow account, related to certain loans financed by 21st Mortgage
Corporation, are recorded in income by the Company as received, which has been the Companys past practice.
The Company realized pre-tax income of $6,605,462 in fiscal year 2018 compared to a pre-tax income of $5,168,250 in fiscal year 2017.