Nobility Homes Inc. (NOBH) filed Quarterly Report for the period ended 2009-08-01.
NOBILITY HOMES INC. designs manufactures and sells a broad line of manufactured homes on a wholesale basis to manufactured home dealers and manufactured home parks. Nobility Homes Inc. has a market cap of $36.5 million; its shares were traded at around $9 with and P/S ratio of 1.21. The dividend yield of Nobility Homes Inc. stocks is 2.78%. Nobility Homes Inc. had an annual average earning growth of 4.2% over the past 5 years.
Highlight of Business Operations:
Insurance agent commissions in the third quarter of 2009 were $62,680 compared to $89,894 in the third quarter of 2008. Total insurance agent commissions for the first nine months of 2009 were $223,582 compared to $328,780 for the first nine months of 2008. The decline in insurance agent commissions resulted from fewer new policies generated, because the decrease in the number of homes sold through the Prestige sales centers. Prestige’s wholly-owned subsidiary, Mountain Financial, Inc., is an independent insurance agent, licensed mortgage lender and mortgage broker. Its principal activity is the performance of retail insurance services, which involves placing various types of insurance, including property and casualty, automobile and extended home warranty coverage, with insurance underwriters on behalf of its Prestige customers in connection with their purchase and financing of manufactured homes. As agent, Mountain Financial solely assists our customers in obtaining various insurance and extended warranty coverage with insurance underwriters. As such, we have no agreements with homeowners and/or third party insurance companies other than agency agreements with various insurance carriers. Mountain Financial, Inc. has no material commitments or contingencies. 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 is deemed necessary for policy cancellations at August 1, 2009 and August 2, 2008.
The Company earned $45,426 from its joint venture, Majestic 21, in the third quarter of 2009 compared to $60,035 for the third quarter of 2008. For the first nine months of 2009, the Company earned from Majestic 21 $137,159 compared to $228,730 for the first nine months of 2008. 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 primary assets are loans that were originated from 1997 until 2003. In 2003, the Company entered into a finance revenue sharing agreement with 21st Mortgage Corporation and all loans originated from that point forward, are owned by 21st Mortgage Corporation pursuant to the finance revenue sharing agreement. Consequently, no additional loans are going into the Majestic 21 joint venture and the balance of the loans/assets of the partnership is declining each month due to amortization and payoffs.
As a result of the factors discussed above, earnings for the third quarter of 2009 were $21,862 or $0.01 per diluted share compared to $397,561 or $0.10 per diluted share for the third quarter of 2008. For the first nine months of 2009 losses were $607,726 or $0.15 per diluted share compared to earnings of $1,606,284 or $0.39 per diluted share in the third quarter 2008.
Cash and cash equivalents were $2,996,853 at August 1, 2009 compared to $8,649,724 at November 1, 2008. The decrease in cash and cash equivalents was primarily due to (i) repurchase of $5,019,855 in defaulted secured loans that were financed under the finance revenue sharing agreement, and (ii) the payment of cash dividends of $1,018,669. Short and long-term investments were $8,026,914 at August 1, 2009 compared to $8,308,436 at November 1, 2008. Working capital was $19,953,772 at August 1, 2009 as compared to $21,232,995 at November 1, 2008. Nobility owns the entire inventory for its Prestige retail sales centers and does not incur any third party floor plan financing expenses.
Accounts payable at August 1, 2009 was $97,144 compared to $186,477 at November 1, 2008. The decrease in accounts payable was primarily due to a decrease in materials purchased since the number of homes produced in third quarter of 2009 at the Company’s manufacturing plants decreased by 65% percent from fourth quarter of 2008. Accrued compensation at August 1, 2008 was $55,259 compared to $201,155 at November 1, 2008. Since accrued compensation consists largely of sales commissions and bonuses, the decrease in accrued compensation was primarily due to the 56% decrease in the number of homes sold at the Company’s retail sales centers in third quarter of 2009 compared to fourth quarter of 2008. Accrued expenses and other current liabilities at August 1, 2009 was $338,590 compared to $355,218 at November 1, 2008. Customer deposits continued to decrease to a below normal historic level due to the deteriorating housing and financial markets resulting in a decrease in the number of sold retail homes and no backlog at the manufacturing facility.
Nobility paid an annual cash dividend of $0.25 per common share for fiscal year 2008 on January 12, 2009 in the amount of $1,018,669. On January 11, 2008, the Company paid an annual cash dividend of $0.50 per common share for fiscal year 2007 in the amount of $2,043,572.
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