NOBILITY HOMES INC

Previous wording

Prestige’s wholly owned subsidiary, Mountain Financial, Inc., is an independent insurance agent and licensed loan originator. Mountain Financial provides automobile insurance, extended warranty coverage and property and casualty insurance to Prestige customers in connection with their purchase and financing of manufactured homes.

Current wording

Prestige’s wholly owned subsidiary, Mountain Financial, Inc., is an independent insurance agent and licensed loan originator. Mountain Financial provides automobile insurance, extended warranty coverage and property and casualty insurance to Prestige customers in connection with their purchase and financing of manufactured homes as well as to other non-Prestige customers.

Previous wording

The interest rate environment’s future impact on the overall housing market and other, factors impacting the Company, such as production work force, supply of certain building products, and lingering impact from COVID, are difficult to forecast for fiscal year 2024. These factors have had a negative impact on customer traffic (and corresponding sales) within our sales centers, operations of the manufacturing facility and our business partners throughout fiscal years 2023 and 2022.

Current wording

The interest rate environment’s future impact on the overall housing market and other factors impacting the Company, such as production work force and supply of certain building products are difficult to forecast for fiscal year 2025. These factors have had a negative impact on customer traffic (and corresponding sales) within our sales centers, operations of the manufacturing facility and our business partners throughout fiscal years 2024 and 2023.

Previous wording

In fiscal year 2023, Prestige purchased from other manufacturers 44 new homes for an aggregate of ($4,432,483) and in fiscal year 2022 purchased 153 new homes from other manufacturers for an aggregate of ($12,595,593) to help eliminate the backlog from Nobility. Prestige has 76 new homes purchase for an aggregate of ($4,979,162) from Nobility and outside manufacturers, that are included in inventory and are in the field, waiting to be completed and closed as of the year end 2023.

Current wording

In fiscal year 2024, Prestige purchased from other manufacturers 18 new homes for an aggregate of ($1,859,175) for custom ordered presold homes and in fiscal year 2023 purchased 44 new homes from other manufacturers for an aggregate of ($4,432,483) to help eliminate the backlog from Nobility. Prestige has 73 new homes purchase for an aggregate of ($5,969,523) from Nobility and outside manufacturers, that are included in inventory and are in the field, waiting to be completed and closed as of November 2, 2024.

Previous wording

Nobility believes that being located in Florida offers a number of advantages such as an increasing population, a low-tax and business friendly state government. However, Nobility is also aware of climate-related risks such as hurricanes, tornados, sea-level rise, flooding and wildfires which are prone to occur in Florida. To date, management does not believe these climate-related risks have adversely impacted the Company. However, management believes if such climate-related events impacted the Company’s manufacturing or sales facilities, then the Company would be adversely impacted. If such climate-related events should deter future population growth in Florida, then the Company would be adversely impacted. If climate-related disclosures are required in the future by the Securities and Exchange Commission or if customary business practices should change to require greater climate-risk mitigation, then the Company would face increased compliance costs and costs of doing business. Such costs are not currently quantifiable.

Current wording

Nobility believes that being located in Florida offers a number of advantages such as an increasing population, a low-tax and business friendly state government. However, Nobility is also aware of climate-related risks such as hurricanes, tornados, sea-level rise, flooding and wildfires which are prone to occur in Florida. To date, management does not believe these climate-related risks have adversely impacted the Company. However, if such climate-related events impacted the Company’s manufacturing or sales facilities or deter future population growth in Florida, the Company would be adversely impacted.

Previous wording

Total net sales in fiscal year 2023 increased 23% to $63,318,392 compared to $51,522,054 in fiscal year 2022. The Company reported a 51% increase in net income to $10,898,864 in fiscal year 2023, compared to a net income of $7,232,029 in fiscal year 2022. The primary reason that sales and net income increased in fiscal 2023 over fiscal 2022 was due to the severe supply chain challenges experienced during the first nine months of fiscal 2022 that negatively impacted our ability to complete and deliver homes to customers. During fiscal year 2023, the supply chain challenges eased compared to the prior year and we were able to complete and deliver more retail customers homes, which included us selling sixty four new homes during fiscal year 2023 purchased for $10,871,250 from other manufacturers, to help reduce our backlog. We continue to experience limitations being placed on certain key production materials from suppliers, the delay or lack of key components from vendors as well as back orders, delayed shipments, price increases and labor shortages. These issues continue to cause delays in the completion of the homes at the Company’s manufacturing facility and the set-up process of retail homes in the field, resulting in decreased net sales due to our inability to timely deliver and set up homes to customers. We expect that these challenges will continue throughout fiscal 2024 and potentially beyond. The Company also continues to experience inflation in some building products resulting in increases to our material and labor costs which may increase the wholesale and retail selling prices of our homes.

Current wording

Total net sales in fiscal year 2024 were $51,933,622 compared to $63,318,392 in fiscal year 2023. The Company reported net income of $8,611,262 in fiscal year 2024, compared to a net income of $10,898,864 in fiscal year 2023. Net sales decreased in fiscal year 2024 as compared to the prior year because of the decrease in the number of retail homes sold and manufactured. In addition, we are building and selling lower-priced homes due to the higher interest rates on mortgages that we believe are negatively impacting sales as compared to the prior years. There also remain delays in the receipt of certain key production materials from suppliers, back orders, price increases and labor shortages which continue to cause delays in the completion of the homes at our manufacturing facility and the set-up process of retail homes in the field. Our inability to timely deliver and set up homes to customers has negatively impacted sales and earnings. We expect these challenges will continue into fiscal year 2025. The Company also continues to experience inflation in several building products resulting in increases in our material and labor costs which may increase the wholesale and retail selling prices of our homes. We believe that potential customers have delayed or deferred purchasing decisions when considering the interest rate environment.

Previous wording

The current demand for affordable manufactured housing in Florida and the U.S. is slowing, which we believe is because of the increased interest rate environment. According to the Florida Manufactured Housing Association, shipments for the industry in Florida for the period from November 2022 through October 2023 declined by approximately 16% from the same period last year.

Current wording

The current demand for affordable manufactured housing in Florida and the U.S. is slowing, which we believe is because of the increased interest rate environment. According to the Florida Manufactured Housing Association, shipments for the industry in Florida for the period from November 2023 through October 2024 declined by approximately 3% from the same period last year.

Previous wording

The following table summarizes certain key sales statistics and percent of gross profit as of and for fiscal years 2023 and 2022.

Current wording

The following table summarizes certain key sales statistics and percent of gross profit for the years ended November 2, 2024 and November 4, 2023.

Previous wording

On June 5, 2023, we celebrated our 56 thanniversary in business specializing in the design and production of quality, affordable manufactured and modular homes. With multiple retail sales centers in Florida for over 33 years and an insurance agency subsidiary, we are the only vertically integrated manufactured home company headquartered in Florida.

Current wording

On June 5, 2024, we celebrated our 57 thanniversary in business specializing in the design and production of quality, affordable manufactured and modular homes. With multiple retail sales centers in Florida for over 34 years and an insurance agency subsidiary, we are the only vertically integrated manufactured home company headquartered in Florida.

Previous wording

Insurance agent commissions in fiscal year 2023 were $340,565 compared to $299,672 in fiscal year 2022. Revenues are generated by new and renewal policies being written which affects agent commission earned. 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 4, 2023 and November 5, 2022.

Current wording

Insurance agent commissions in fiscal year 2024 were $342,254 compared to $340,565 in fiscal year 2023. Revenues are generated by new and renewal policies being written which affects agent commission earned. 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 2, 2024 and November 4, 2023.

Previous wording

Gross profit as a percentage of net sales was 34% in fiscal year 2023 compared to 29% in fiscal year 2022. Our gross profit was $21,487,885 for fiscal year 2023 compared to $14,903,438 for fiscal year 2022. The gross profit is dependent on the sales mix of wholesale and retail homes and number of pre-owned homes sold. The increase in gross profit as a percentage of net sales is primarily due to increases in our selling prices to offset the higher inflation costs of building products and labor cost on each home and the increase in the average gross profit at our retail sales centers.

Current wording

Gross profit as a percentage of net sales was 34% in fiscal year 2024 and in fiscal year 2023. Our gross profit was $17,424,077 for fiscal year 2024 compared to $21,487,885 for fiscal year 2023. The gross profit is dependent on the sales mix of wholesale and retail homes and number of pre-owned homes sold. The gross profit as a percentage of net sales remained consistent due to increases in our selling prices to offset the higher inflation costs of building products and labor cost on each home and the increase in the average gross profit at our retail sales centers.

Previous wording

Selling, general and administrative expenses as a percentage of net sales was 13% in fiscal year 2023 and in fiscal year 2022. Selling, general and administrative expenses were $8,087,534 for fiscal year 2023 compared to $6,477,988 for fiscal year 2022. The dollar increases in expenses in 2023 were due to the increase in variable expenses which were a direct result of employee benefits compensation due to the increase in sales.

Current wording

Selling, general and administrative expenses as a percentage of net sales was 15% in fiscal year 2024 compared to 13% in fiscal year 2023. Selling, general and administrative expenses were $7,842,626 for fiscal year 2024 compared to $8,087,534 for fiscal year 2023. Selling, general and administrative expenses as a percent of net sales increased due to additional costs incurred with respect to the Company's audit, the decrease in sales at the manufacturing plant and retail sales centers and the fixed costs associated with many of the expenses.

Previous wording

The Company earned interest in the amount of $803,622 in fiscal year 2023 compared to $234,804 in fiscal year 2022. Interest income is dependent on our cash balance and available rates of return. The increase during 2023 is primarily due to the increase in the interest rates and an increase in the monies invested.

Current wording

The Company earned interest in the amount of $1,126,951 in fiscal year 2024 compared to $803,622 in fiscal year 2023. Interest income is dependent on our cash balance and available rates of return. The increase during 2024 is primarily due to the increase in the monies invested.

Previous wording

The Company earned $104,306 from its joint venture, Majestic 21, in fiscal year 2023 compared to $60,457 in fiscal year 2022. 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. The earnings from the Majestic 21 loan portfolio could vary year to year, but overall, the earnings will continue to decrease due to the amortization, maturity and payoff of the loans.

Current wording

The Company earned $96,323 from its joint venture, Majestic 21, in fiscal year 2024 compared to $104,306 in fiscal year 2023. 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. The earnings from the Majestic 21 loan portfolio could vary year to year, but overall, the earnings will continue to decrease due to the amortization, maturity and payoff of the loans.

Previous wording

We received $239,736 in fiscal year 2023 and $364,520 in fiscal year 2022 under an escrow arrangement related to a Finance Revenue Sharing Agreement (FRSA) between 21 st Mortgage Corporation and the Company. The distributions from the escrow account, related to certain loans financed by 21 st Mortgage Corporation, are recorded in income by the Company as received, which has been the Company’s past practice due to the uncertainty of the receipts. The earnings overall from the FRSA loan portfolio will continue to decrease due to the amortization and payoff of the loans.

Current wording

We received $147,155 in fiscal year 2024 and $239,736 in fiscal year 2023 under an escrow arrangement related to a Finance Revenue Sharing Agreement (FRSA) between 21 st Mortgage Corporation and the Company. The distributions from the escrow account, related to certain loans financed by 21 st Mortgage Corporation, are recorded in income by the Company as received, which has been the Company’s past practice due to the uncertainty of the receipts. The earnings overall from the FRSA loan portfolio will continue to decrease due to the amortization and payoff of the loans.

Previous wording

The Company realized pre-tax income of $14,579,429 in fiscal year 2023 compared to a pre-tax income of $9,436,534 in fiscal year 2022.

Current wording

The Company realized pre-tax income of $11,471,949 in fiscal year 2024 compared to a pre-tax income of $14,579,429 in fiscal year 2023.

Previous wording

The Company recorded an income tax expense of $3,680,565 in fiscal year 2023 compared to $2,204,505 in fiscal year 2022.

Current wording

The Company recorded an income tax expense of $2,860,687 in fiscal year 2024 compared to $3,680,565 in fiscal year 2023.

Previous wording

Net income in fiscal year 2023 was $10,898,864 or $3.27 per basic and diluted share and net income in fiscal year 2022 was $7,232,029 or $2.10 per basic and diluted share.

Current wording

Net income in fiscal year 2024 was $8,611,262 or $2.63 per basic and diluted share and net income in fiscal year 2023 was $10,898,864 or $3.27 per basic and diluted share.

Previous wording

Cash and cash equivalents were $13,879,358 at November 4, 2023 compared to $16,653,449 at November 5, 2022. Certificates of deposit were $10,204,287 at November 4, 2023 compared to $3,903,888 at November 5, 2022. Short-term investments were $527,899 at November 4, 2023 compared to $589,071 at November 5, 2022. Working capital was $37,871,552 at November 4, 2023 compared to $33,667,732 at November 5, 2022. A cash dividend was paid from our cash reserves in April 2023 in the amount of $1.00 per share ($3,370,912). During fiscal 2023, the Company repurchased an aggregate 102,083 shares of its common stock for an aggregate of $2,853,981 and Prestige purchased from other manufacturers 44 new homes for $4,432,483 to help eliminate the large backlog from Nobility. Prestige new home inventory was $18,968,831 at November 4, 2023 compared to $20,016,093 at November 5, 2022. Prestige has 76 ($4,432,483) new homes from Nobility and other manufacturers that are included in inventory and are in the field waiting to be completed and closed. We own the entire inventory for our Prestige retail sales centers which includes new, pre-owned and repossessed or foreclosed homes and do not incur any third-party floor plan financing expenses. The Company incurred $500,000 in fiscal year 2023 and $1,100,000 in fiscal year 2022 in building an 11,900 square foot frame shop to manufacture steel frames for our homes. In April 2022 Prestige sold .1066 acres of land frontage at the Inverness location for $96,970 to the Florida Department of Transportation for SR 41 road widening project. A cash dividend was paid from our cash reserves in April 2022 in the amount of $1.00 per share ($3,532,976). During fiscal 2022, the Company repurchased an aggregate of 162,570 shares of its common stock for an aggregate of $5,195,267.

Current wording

Cash and cash equivalents were $13,521,296 at November 2, 2024 compared to $13,879,358 at November 4, 2023. Certificates of deposit were $13,021,839 at November 2, 2024 compared to $10,204,287 at November 4, 2023. Short-term investments were $680,017 at November 2, 2024 compared to $527,899 at November 4, 2023. Working capital was $42,927,149 at November 2, 2024 compared to $37,746,552 at November 4, 2023. In the first quarter of fiscal 2024, the Company received a distribution of $1.6 million from 21 st Mortgage Corporation, representing our share of excess capital in the portfolio. A cash dividend was paid from our cash reserves in April 2024 in the amount of $1.50 per share ($4,903,243) and in April 2023 in the amount of $1.00 per share ($3,370,912). During fiscal 2023, the Company repurchased an aggregate 102,083 shares of its common stock for ($2,853,981). In fiscal year 2024, Prestige purchased from other manufacturers 18 new homes for an aggregate of ($1,859,175) for custom ordered presold homes and in fiscal year 2023 purchased 44 new homes from other manufacturers for an aggregate of ($4,432,483) to help eliminate the backlog from Nobility. Prestige has 73 new homes purchase for an aggregate of ($5,969,523) from Nobility and outside manufacturers, that are included in inventory and are in the field, waiting to be completed and closed as of the year end 2024. Prestige new home inventory was $18,475,932 at November 2, 2024 compared to $18,961,131 at November 4, 2023. We own the entire inventory for our Prestige retail sales centers which includes new, pre-owned and repossessed or foreclosed homes and do not incur any third-party floor plan financing expenses. The Company built a 11,900 square foot building at our manufacturing facility with equipment to manufacture steel frames for our homes, which was completed in fiscal 2024 for an approximate cost of $1,752,600 for the building and equipment.

Previous wording

The Company currently has no line of credit facility and no debt and does not believe that such a facility is currently necessary for its operations. The Company also has approximately $4.3 million of cash surrender value of life insurance which it would be able to access as an additional source of liquidity though the Company has not currently viewed this to be necessary. As of November 4, 2023, the Company continued to report a strong balance sheet which included total assets of approximately $65.7 million which was funded primarily by stockholders’ equity of approximately $52.7 million.

Current wording

The Company currently has no line of credit facility and no debt and does not believe that such a facility is currently necessary for its operations. The Company also has approximately $4.5 million of cash surrender value of life insurance which it would be able to access as an additional source of liquidity though the Company has not currently viewed this to be necessary. As of November 2,

Previous wording

Looking ahead, the Company’s strong balance sheet and significant cash reserves accumulated in profitable years has allowed the Company to remain sufficiently liquid to allow the continuation of operations and pay dividends to shareholders and should enable the Company to take advantage of any market opportunities. Management believes it has sufficient levels of liquidity as of the date of the filing of this Form 10-K to allow the Company to operate into the foreseeable future.

Current wording

Looking ahead, the Company’s strong balance sheet and significant cash reserves accumulated in profitable years has allowed the Company to remain sufficiently liquid to allow the continuation of operations and should enable the Company to take advantage of any market opportunities. Management believes it has sufficient levels of liquidity as of the date of the filing of this Form 10-K to allow the Company to operate into the foreseeable future.

Previous wording

The Company recognizes revenue from its wholly owned subsidiary, Mountain Financial, Inc., as follows: commission income (and fees in lieu of commissions) is recorded as of the effective date of insurance coverage or the billing date, whichever is later. Commissions on premiums billed and collected directly by insurance companies are recorded as revenue when received which, in many cases, is the Company’s first notification of amounts earned due to the lack of policy and renewal information. Contingent commissions are recorded as revenue when received. Contingent commissions are commissions paid by insurance underwriters and are based on the estimated profit and/or overall volume of business placed with the underwriter. The data necessary for the calculation of contingent commissions cannot be reasonably obtained prior to the receipt of the commission which, in many cases, is the Company’s first notification of amounts earned. The Company provides 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 on November 4, 2023 or November 5, 2022.

Current wording

The Company recognizes revenue from its wholly owned subsidiary, Mountain Financial, Inc., as follows: commission income (and fees in lieu of commissions) is recorded as of the effective date of insurance coverage or the commission receipt date, whichever is later. Commissions on premiums billed and collected directly by insurance companies are recorded as revenue when received which, in many cases, is the Company’s first notification of amounts earned due to the lack of policy and renewal information. Contingent commissions are recorded as revenue when received. Contingent commissions are commissions paid by insurance underwriters and are based on the estimated profit and/or overall volume of business placed with the underwriter. The data necessary for the calculation of contingent commissions cannot be reasonably obtained prior to the receipt of the commission which, in many cases, is the Company’s first notification of amounts earned. The Company provides 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 on November 2, 2024 or November 4, 2023.

Previous wording

Inventories –New home inventory is carried at a lower of cost or net realizable value. Capitalized manufacturing costs on retail manufactured homes built by the company are valued at manufacturing cost, including materials, labor, and manufacturing overhead, or net purchase price if acquired from unaffiliated third parties. The cost of finished home inventories determined on the specific identification method is removed from inventories and recorded as a component of cost of sales at the time revenue is recognized. Under the specific identification method, if finished home inventory can be sold for a profit there is no basis to write down the inventory below the lower of cost or net realizable value.

Current wording

Inventories –New home inventory is carried at a lower of cost or net realizable value. Capitalized manufacturing costs on retail manufactured homes built by the Company are valued at manufacturing cost, including materials, labor, and manufacturing overhead, or net purchase price if acquired from unaffiliated third parties. The cost of finished home inventories determined on the specific identification method is removed from inventories and recorded as a component of cost of sales at the time revenue is recognized.