About the Company
Nobility Homes, Inc., a Florida corporation incorporated in 1967,
designs, manufactures and sells a broad line of manufactured and modular
homes through 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.
We pride ourselves on providing well-designed and affordably-built
homes that are comfortable, pleasantly decorated, energy efficient and
engineered for years of carefree living. The Company has a manufacturing
plant and corporate headquarters located in Ocala, Florida.
Our homes are available in approximately 100 active models sold under
(cid:87)(cid:75)(cid:72)(cid:3)(cid:87)(cid:85)(cid:68)(cid:71)(cid:72)(cid:3)(cid:81)(cid:68)(cid:80)(cid:72)(cid:86)(cid:3)(cid:179)(cid:46)(cid:76)(cid:81)(cid:74)(cid:86)(cid:90)(cid:82)(cid:82)(cid:71)(cid:180), (cid:179)(cid:53)(cid:76)(cid:70)(cid:75)(cid:90)(cid:82)(cid:82)(cid:71)(cid:180), (cid:179)(cid:55)(cid:85)(cid:82)(cid:83)(cid:76)(cid:70)(cid:3)(cid:44)(cid:86)(cid:79)(cid:72)(cid:180), (cid:179)(cid:53)(cid:72)(cid:74)(cid:72)(cid:81)(cid:70)(cid:92)(cid:3)(cid:48)(cid:68)(cid:81)(cid:82)(cid:85)(cid:180)
(cid:68)(cid:81)(cid:71)(cid:3)(cid:179)(cid:54)(cid:83)(cid:72)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:40)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:180). Our home sales are single and multi-section, range
in size from 431 to 2,650 square feet and contain from one to five
bedrooms.
Prestige Home Centers, Inc., our wholly-owned subsidiary, operates ten
retail sales centers in north and central Florida: Ocala (two), Chiefland,
Auburndale, Inverness, Hudson, Tavares, Yulee, Panama City, Punta
Gorda and executive offices are located at our corporate headquarters in
(cid:50)(cid:70)(cid:68)(cid:79)(cid:68)(cid:15)(cid:3)(cid:41)(cid:79)(cid:82)(cid:85)(cid:76)(cid:71)(cid:68)(cid:17)(cid:3)(cid:3)(cid:40)(cid:68)(cid:70)(cid:75)(cid:3)(cid:82)(cid:73)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:87)(cid:76)(cid:74)(cid:72)(cid:182)(cid:86)(cid:3)(cid:85)(cid:72)(cid:87)(cid:68)(cid:76)(cid:79)(cid:3)(cid:86)(cid:68)(cid:79)(cid:72)(cid:86)(cid:3)(cid:70)(cid:72)(cid:81)(cid:87)(cid:72)(cid:85)(cid:86)(cid:3)(cid:76)(cid:86)(cid:3)(cid:79)(cid:82)(cid:70)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:90)(cid:76)(cid:87)hin 350
miles of (cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:182)(cid:86)(cid:3)(cid:50)(cid:70)(cid:68)(cid:79)(cid:68)(cid:3)manufacturing facility.
The primary customers of Prestige are homebuyers who generally
purchase manufactured homes to place on their own home sites. Prestige
operates its retail sales centers using a model home concept. Each of the
homes displayed at its retail sales centers is furnished and decorated as a
model home.
In an effort to make manufactured homes more competitive with site-
built housing, financing packages are available through 21st Mortgage
Corporation and several other outside financing sources that provide
(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:82)(cid:3)(cid:85)(cid:72)(cid:87)(cid:68)(cid:76)(cid:79)(cid:3)(cid:70)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:86)(cid:3)(cid:90)(cid:75)(cid:82)(cid:3)(cid:83)(cid:88)(cid:85)(cid:70)(cid:75)(cid:68)(cid:86)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:80)(cid:68)(cid:81)(cid:88)(cid:73)(cid:68)(cid:70)(cid:87)(cid:88)(cid:85)(cid:72)(cid:71)(cid:3)
homes at Prestige retail sales centers.
Mountain Financial, Inc., a wholly-owned subsidiary of Prestige Home
Centers, 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.
To Our Shareholders
(cid:60)(cid:82)(cid:88)(cid:85)(cid:3) (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3) (cid:85)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86)(cid:3) (cid:73)(cid:82)(cid:85)(cid:3) (cid:73)(cid:76)(cid:86)(cid:70)(cid:68)(cid:79)(cid:3) (cid:92)(cid:72)(cid:68)(cid:85)(cid:3) (cid:21)(cid:19)(cid:20)7 continue to reflect an
improving environment in the manufactured housing industry and the State of
Florida. The improving housing, financial and credit markets of our country and
market area, coupled with the lower unemployment and better consumer and
business confidence had a positive effect on (cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:85)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86)(cid:17)
Net sales for Nobility during fiscal year 2017 were up 14% to $37,543,071
as compared to $34,053,290 recorded in fiscal year 2016. Income from
operations for fiscal year 2017 was up 11% to $4,355,874 versus $4,153,799 in
the same period a year ago. Net income after taxes was $3,309,983 as compared
to $5,965,194 for the same period last year. Diluted earnings per share for fiscal
year 2017 were $0.83 per share compared to $1.48 per share last year. The
change in net income from fiscal 2016 to 2017 is largely attributable to a one-time
(cid:74)(cid:68)(cid:76)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:7)(cid:22)(cid:15)(cid:28)(cid:28)(cid:19)(cid:15)(cid:19)(cid:19)(cid:19)(cid:3)(cid:76)(cid:81)(cid:3)(cid:73)(cid:76)(cid:86)(cid:70)(cid:68)(cid:79)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:86)(cid:68)(cid:79)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:72)(cid:86)(cid:87)(cid:3)(cid:76)(cid:81)(cid:3)
Cypress Creek.
(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:182)(cid:86)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:83)(cid:82)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:71)(cid:88)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:73)(cid:76)(cid:86)(cid:70)(cid:68)(cid:79)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:3)(cid:21)(cid:19)(cid:20)7 remains very strong
with cash and cash equivalents and short-term investments of $27,910,504 and
no outstanding debt. Working capital is $36,403,372 and our ratio of current
assets to current liabilities is7.4:1(cid:17)(cid:3)(cid:3)(cid:3)(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:72)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:3)(cid:76)(cid:86)(cid:3)(cid:7)47,414,297 and the
book value per share of common stock is $11.86
to
improve. According
The demand for affordable manufactured housing in Florida and the U.S.
continues
the Florida Manufactured Housing
to
Association, shipments in Florida for the period from November 2016 through
October 2017 were up approximately 6% from the same period last year. Our
sales for fiscal 2018 continue to look positive. Shipment of homes in our market
area should improve and, if we can adequately control the material and labor
costs increases that the Company is experiencing because of the improvements
in the total housing picture, then earnings should also improve. 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.
We understand that maintaining our strong financial position is vital for
future growth and success. Because of the recent years of very challenging
business conditions in our market area, management will continue to evaluate all
expenses and react in a manner consistent with maintaining our strong financial
to expand our distribution and
position, while exploring opportunities
manufacturing operations.
Our many years of experience in the Florida market, combined with home
(cid:69)(cid:88)(cid:92)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:76)(cid:81)(cid:70)(cid:85)(cid:72)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:81)(cid:72)(cid:72)(cid:71)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:80)(cid:82)(cid:85)(cid:72)(cid:3)(cid:68)(cid:73)(cid:73)(cid:82)(cid:85)(cid:71)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:75)(cid:82)(cid:88)(cid:86)(cid:76)(cid:81)(cid:74)(cid:15)(cid:3)(cid:86)(cid:75)(cid:82)(cid:88)(cid:79)(cid:71)(cid:3)(cid:86)(cid:72)(cid:85)(cid:89)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)
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, 2017 the Company celebrated its 50th 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.
We appreciate the confidence and support of our shareholders, suppliers
and friends of the Company. We would also like to express our thanks to each of
our employees, whose dedication, focus and energy are key to achieving
(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:182)(cid:86)(cid:3)(cid:74)(cid:82)(cid:68)(cid:79)(cid:86)(cid:17)(cid:3)(cid:3)(cid:58)(cid:76)(cid:87)(cid:75)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:70)(cid:82)(cid:81)fidence and support, along with the able leadership
from the Board of Directors and our management team, we believe your Company
has the human, financial and physical resources to meet the challenges ahead
and the enthusiasm and determination to capitalize upon new opportunities as
they develop.
Terry E. Trexler
Chairman of the Board
and President
Thomas W. Trexler
Executive Vice President
and Chief Financial Officer
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 4, 2017
Commission file number 000-06506
NOBILITY HOMES, INC.
(Exact name of registrant as specified in its charter)
Florida
(State or other jurisdiction of
incorporation or organization)
3741 S.W. 7th Street
Ocala, Florida
(Address of principal executive offices)
59-1166102
(I.R.S. Employer
Identification No.)
34474
(Zip Code)
(352) 732-5157
(cid:11)(cid:53)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:87)(cid:72)(cid:79)(cid:72)(cid:83)(cid:75)(cid:82)(cid:81)(cid:72)(cid:3)(cid:81)(cid:88)(cid:80)(cid:69)(cid:72)(cid:85)(cid:15)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:85)(cid:72)(cid:68)(cid:3)(cid:70)(cid:82)(cid:71)(cid:72)(cid:12)(cid:3)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.10 par value
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes (cid:133) No (cid:95)
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:133) No (cid:95)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 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 (cid:95) No (cid:133)
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). (cid:95) Yes (cid:133) 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
(cid:70)(cid:82)(cid:81)(cid:87)(cid:68)(cid:76)(cid:81)(cid:72)(cid:71)(cid:15)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:69)(cid:72)(cid:86)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:78)(cid:81)(cid:82)(cid:90)(cid:79)(cid:72)(cid:71)(cid:74)(cid:72)(cid:15)(cid:3)(cid:76)(cid:81)(cid:3)(cid:71)(cid:72)(cid:73)(cid:76)(cid:81)(cid:76)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:83)(cid:85)(cid:82)(cid:91)(cid:92)(cid:3)(cid:82)(cid:85)(cid:3)(cid:76)(cid:81)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:76)(cid:81)(cid:3)Part III of this
Form 10-K or any amendment to this Form 10-K. (cid:95)
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company(cid:17)(cid:3)(cid:54)(cid:72)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:71)(cid:72)(cid:73)(cid:76)(cid:81)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:179)(cid:79)(cid:68)(cid:85)(cid:74)(cid:72)(cid:3)(cid:68)(cid:70)(cid:70)(cid:72)(cid:79)(cid:72)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:73)(cid:76)(cid:79)(cid:72)(cid:85)(cid:15)(cid:180)(cid:3)(cid:179)(cid:68)(cid:70)(cid:70)(cid:72)(cid:79)(cid:72)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:73)(cid:76)(cid:79)(cid:72)(cid:85)(cid:15)(cid:180)(cid:3)(cid:179)(cid:86)(cid:80)(cid:68)(cid:79)(cid:79)(cid:72)(cid:85)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:180),
(cid:68)(cid:81)(cid:71)(cid:3)(cid:179)(cid:72)(cid:80)(cid:72)(cid:85)(cid:74)(cid:76)(cid:81)(cid:74)(cid:3)(cid:74)(cid:85)(cid:82)(cid:90)(cid:87)(cid:75)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:180) in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
Emerging growth company
(cid:133)
(cid:133)
(cid:133)(cid:3)
Accelerated filer
(cid:133)
Smaller reporting company (cid:95)
(cid:3)
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. (cid:133)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes (cid:133) No (cid:95)
The aggregate market value of the common stock held by non-affiliates of the registrant (881,045 shares), based on the closing price on the
over-the-counter market on May 5, 2017 (the last business day of the second quarter of fiscal 2017), was approximately $13,744,302.
(cid:55)(cid:75)(cid:72)(cid:3)(cid:81)(cid:88)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:82)(cid:73)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)(cid:3)(cid:82)(cid:88)(cid:87)(cid:86)(cid:87)(cid:68)(cid:81)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:73)(cid:3)(cid:72)(cid:68)(cid:70)(cid:75)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:70)(cid:79)(cid:68)(cid:86)(cid:86)(cid:72)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81)(cid:3)(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:15)(cid:3)as of the latest practicable date:
Title of Class
Common Stock
Shares Outstanding on January 26, 2018
3,997,569
DOCUMENTS INCORPORATED BY REFERENCE
Title
Definitive proxy statement for Annual Meeting of
Shareholders to be held March 2, 2018
Form 10-K
Part III, Items 10-14
Form
10-K
2
4
4
5
5
5
6
7
7
12
13
13
14
15
16
17
18
19
33
33
33
34
34
34
34
34
35
35
35
37
Business
Item 1.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2.
Item 3.
Item 4. Mine Safety Disclosures
Properties
Legal Proceedings
TABLE OF CONTENTS
PART I
PART II
Selected Financial Data
Item 5. (cid:48)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:53)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:38)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81)(cid:3)(cid:40)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:15)(cid:3)(cid:53)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:3)(cid:48)(cid:68)(cid:87)(cid:87)(cid:72)(cid:85)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:44)(cid:86)(cid:86)(cid:88)(cid:72)(cid:85)(cid:3)(cid:51)(cid:88)(cid:85)(cid:70)(cid:75)(cid:68)(cid:86)(cid:72)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:40)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:3)(cid:54)(cid:72)(cid:70)(cid:88)(cid:85)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)
Item 6.
Item 7. (cid:48)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:39)(cid:76)(cid:86)(cid:70)(cid:88)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:36)(cid:81)(cid:68)(cid:79)(cid:92)(cid:86)(cid:76)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:38)(cid:82)(cid:81)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:53)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Item 8.
Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm-WithumSmith+Brown, PC
Consolidated Balance Sheets
Consolidated Statements of Comprehensive Income
Consolidated Statements of (cid:38)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:40)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Item 9.
Item 9A. Controls and Procedures
Item 9B. Other Information
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14.
Principal Accounting Fees and Services
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 15. Exhibits and Financial Statement Schedules
(a) Consolidated Financial Statements and Schedules
(b) Exhibits
SIGNATURES
PART IV
1
PART I
Item 1.
Business
Nobility Homes, Inc., a Florida corporation incorporated in 1967, designs, manufactures and sells a broad line of manufactured and
modular homes through 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. All references in this annual report on
Form 10-(cid:46)(cid:3)(cid:87)(cid:82)(cid:3)(cid:179)(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:15)(cid:180)(cid:3)(cid:179)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:15)(cid:180)(cid:3)(cid:179)(cid:90)(cid:72)(cid:15)(cid:180)(cid:3)(cid:179)(cid:88)(cid:86)(cid:15)(cid:180)(cid:3)(cid:82)(cid:85)(cid:3)(cid:179)(cid:82)(cid:88)(cid:85)(cid:180)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:43)(cid:82)(cid:80)(cid:72)(cid:86)(cid:15)(cid:3)(cid:44)(cid:81)(cid:70)(cid:17)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:76)(cid:87)(cid:86)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:82)(cid:79)(cid:76)(cid:71)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:86)(cid:88)(cid:69)(cid:86)(cid:76)(cid:71)(cid:76)(cid:68)(cid:85)(cid:76)(cid:72)(cid:86)(cid:3)(cid:88)(cid:81)less the
context otherwise suggests.
Manufactured Homes
(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:182)(cid:86)(cid:3)(cid:75)(cid:82)(cid:80)(cid:72)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:68)(cid:89)(cid:68)(cid:76)(cid:79)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:76)(cid:81)(cid:3)(cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:91)(cid:76)(cid:80)(cid:68)(cid:87)(cid:72)(cid:79)(cid:92)(cid:3)(cid:20)(cid:19)(cid:19)(cid:3)(cid:68)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:80)(cid:82)(cid:71)(cid:72)(cid:79)(cid:86)(cid:3)(cid:86)(cid:82)(cid:79)(cid:71)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:87)(cid:85)(cid:68)(cid:71)(cid:72)(cid:3)(cid:81)(cid:68)(cid:80)(cid:72)(cid:86)(cid:3)(cid:179)(cid:46)(cid:76)(cid:81)(cid:74)(cid:86)(cid:90)(cid:82)(cid:82)(cid:71)(cid:15)(cid:180)(cid:3)(cid:179)Richwood(cid:15)(cid:180)(cid:3)(cid:179)(cid:55)(cid:85)(cid:82)(cid:83)(cid:76)(cid:70)(cid:3)
(cid:44)(cid:86)(cid:79)(cid:72)(cid:15)(cid:180)(cid:3)(cid:179)(cid:53)(cid:72)(cid:74)(cid:72)(cid:81)(cid:70)(cid:92)(cid:3)(cid:48)(cid:68)(cid:81)(cid:82)(cid:85)(cid:15)(cid:180)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:179)(cid:54)(cid:83)(cid:72)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:40)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:17)(cid:180)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:75)(cid:82)(cid:80)(cid:72)(cid:86)(cid:15)(cid:3)(cid:85)(cid:68)(cid:81)(cid:74)(cid:76)(cid:81)(cid:74)(cid:3)(cid:76)(cid:81)(cid:3)(cid:86)(cid:76)(cid:93)e from 431 to 2,650 square feet and containing from one to
five bedrooms, are available in:
(cid:135)(cid:3) Single-wide widths of 12, 14 and 16 feet ranging from 35 to 72 feet in length;
(cid:135)(cid:3) Double-wide widths of 20, 24, 26, 28 and 32 feet ranging from 32 to 72 feet in length;
(cid:135)(cid:3) Triple-wide widths of 42 feet ranging from 60 to 72 feet in length; and
(cid:135)(cid:3) Quad-unit with 2 sections 28 feet wide by 48 feet long and 2 sections 28 feet wide by 52 feet long.
Our floor plans can be built as an on-frame modular home. We have been approved to build A.N.S.I. (American National Standards
Institute) Park models less than 400 square feet and exposure D homes.
(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:182)(cid:86)(cid:3)(cid:75)(cid:82)(cid:80)(cid:72)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:86)(cid:82)(cid:79)(cid:71)(cid:3)(cid:83)(cid:85)(cid:76)(cid:80)(cid:68)(cid:85)(cid:76)(cid:79)(cid:92)(cid:3)(cid:68)(cid:86)(cid:3)(cid:88)(cid:81)(cid:73)(cid:88)(cid:85)(cid:81)(cid:76)(cid:86)(cid:75)(cid:72)(cid:71)(cid:3)(cid:71)(cid:90)(cid:72)(cid:79)(cid:79)(cid:76)(cid:81)(cid:74)(cid:86)(cid:3)(cid:85)(cid:72)(cid:68)(cid:71)(cid:92)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:83)(cid:72)(cid:85)(cid:80)(cid:68)(cid:81)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:70)(cid:70)(cid:88)(cid:83)(cid:68)(cid:81)(cid:70)(cid:92)(cid:17)(cid:3)(cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:76)(cid:82)(cid:85)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:71)(cid:72)(cid:86)(cid:76)(cid:74)(cid:81)(cid:72)(cid:71)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:70)(cid:82)(cid:79)(cid:82)(cid:85)(cid:3)
coordinated in a range of decors. Depending on the size of the unit and quality of appliances and other appointments, retail prices for
(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:182)(cid:86)(cid:3)(cid:75)(cid:82)(cid:80)(cid:72)(cid:86)(cid:3)(cid:87)(cid:92)(cid:83)(cid:76)(cid:70)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3)(cid:85)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:91)(cid:76)(cid:80)(cid:68)(cid:87)(cid:72)(cid:79)(cid:92)(cid:3)(cid:7)(cid:22)(cid:19)(cid:15)(cid:19)(cid:19)(cid:19)(cid:3)(cid:87)(cid:82)(cid:3)(cid:7)130,000(cid:17)(cid:3)(cid:48)(cid:82)(cid:86)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:85)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:182)(cid:86)(cid:3)(cid:75)(cid:82)(cid:80)(cid:72)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:71)(cid:72)(cid:85)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:76)(cid:87)(cid:3)
to be within the low to medium price range of the industry.
(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:182)(cid:86)(cid:3)(cid:80)(cid:68)(cid:81)(cid:88)(cid:73)(cid:68)(cid:70)(cid:87)(cid:88)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:83)(cid:79)(cid:68)(cid:81)(cid:87)(cid:3)(cid:88)(cid:87)(cid:76)(cid:79)(cid:76)(cid:93)(cid:72)(cid:86)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:80)(cid:69)(cid:79)(cid:92)(cid:3)(cid:79)(cid:76)(cid:81)(cid:72)(cid:3)(cid:87)(cid:72)(cid:70)hniques in manufactured home production. The plant manufactures and
assembles 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
draperies. 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 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 (cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:76)(cid:81)(cid:76)(cid:86)(cid:75)(cid:72)(cid:71)(cid:3)(cid:83)(cid:85)(cid:82)(cid:71)(cid:88)(cid:70)(cid:87)(cid:17)(cid:3)(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:182)(cid:86)(cid:3)(cid:75)(cid:82)(cid:80)(cid:72)(cid:86)(cid:3)
are delivered by outside trucking companies. Nobility estimates that it can compete effectively within a range of approximately 350
miles from its manufacturing plant in Ocala, Florida. Substantially all of Nobilit(cid:92)(cid:182)(cid:86)(cid:3)(cid:86)(cid:68)(cid:79)(cid:72)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:80)(cid:68)(cid:71)(cid:72)(cid:3)(cid:76)(cid:81)(cid:3)(cid:41)(cid:79)(cid:82)(cid:85)(cid:76)(cid:71)(cid:68)(cid:17)(cid:3)
Retail Sales
Prestige Home Centers, Inc., our wholly-owned subsidiary, operates ten retail sales centers in north and central Florida. Its principal
(cid:72)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:82)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:79)(cid:82)(cid:70)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:68)(cid:87)(cid:3)(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:182)(cid:86)(cid:3)(cid:75)(cid:72)(cid:68)(cid:71)(cid:84)(cid:88)(cid:68)(cid:85)(cid:87)(cid:72)(cid:85)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:50)(cid:70)(cid:68)(cid:79)(cid:68)(cid:15)(cid:3)(cid:41)(cid:79)(cid:82)(cid:85)(cid:76)(cid:71)(cid:68)(cid:17) Sales by Prestige accounted for 72% and 64(cid:8)(cid:3)(cid:82)(cid:73)(cid:3)(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:182)(cid:86)(cid:3)
sales during fiscal years 2017 and 2016, respectively.
(cid:40)(cid:68)(cid:70)(cid:75)(cid:3)(cid:82)(cid:73)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:87)(cid:76)(cid:74)(cid:72)(cid:182)(cid:86)(cid:3)(cid:85)(cid:72)(cid:87)(cid:68)(cid:76)(cid:79)(cid:3)(cid:86)(cid:68)(cid:79)(cid:72)(cid:86)(cid:3)(cid:70)(cid:72)(cid:81)(cid:87)(cid:72)(cid:85)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:79)(cid:82)(cid:70)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:76)(cid:81)(cid:3)(cid:22)(cid:24)(cid:19)(cid:3)(cid:80)(cid:76)(cid:79)(cid:72)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:182)(cid:86)(cid:3)(cid:50)(cid:70)(cid:68)(cid:79)(cid:68)(cid:3)(cid:80)(cid:68)(cid:81)(cid:88)(cid:73)(cid:68)(cid:70)(cid:87)(cid:88)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:73)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:17)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:87)(cid:76)(cid:74)(cid:72)(cid:3)(cid:82)(cid:90)(cid:81)s the land
at six of its retail sales centers and leases the remaining four retail sales centers from unaffiliated parties under leases with terms
between one and three years with renewal options.
The primary customers of Prestige are homebuyers who generally purchase manufactured homes to place on their own home sites.
Prestige operates its retail sales centers with a model home concept. Each of the homes displayed at its retail sales centers is furnished
(cid:68)(cid:81)(cid:71)(cid:3)(cid:71)(cid:72)(cid:70)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:3)(cid:80)(cid:82)(cid:71)(cid:72)(cid:79)(cid:3)(cid:75)(cid:82)(cid:80)(cid:72)(cid:17)(cid:3)(cid:36)(cid:79)(cid:87)(cid:75)(cid:82)(cid:88)(cid:74)(cid:75)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:80)(cid:82)(cid:71)(cid:72)(cid:79)(cid:3)(cid:75)(cid:82)(cid:80)(cid:72)(cid:86)(cid:3)(cid:80)(cid:68)(cid:92)(cid:3)(cid:69)(cid:72)(cid:3)(cid:83)(cid:88)(cid:85)(cid:70)(cid:75)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:87)(cid:76)(cid:74)(cid:72)(cid:182)(cid:86)(cid:3)(cid:80)(cid:82)(cid:71)(cid:72)(cid:79)(cid:3)(cid:75)(cid:82)(cid:80)(cid:72)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:81)(cid:87)(cid:82)(cid:85)(cid:92)(cid:15)(cid:3)(cid:74)(cid:72)(cid:81)(cid:72)(cid:85)(cid:68)(cid:79)(cid:79)(cid:92)(cid:15)(cid:3)
customers order homes which are shipped directly from the factory to their home site. Prestige sales generally are to purchasers living
2
within a radius of approximately 100 miles from the selling retail lot. The Company(cid:182)(cid:86) internet-based marketing program generates
numerous leads which are directed to the Prestige retail sales centers to assist a potential buyer in purchasing a ho me.
The retail sale of manufactured homes is a highly competitive business. Because of the number of retail sales centers located
(cid:87)(cid:75)(cid:85)(cid:82)(cid:88)(cid:74)(cid:75)(cid:82)(cid:88)(cid:87)(cid:3)(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:182)(cid:86)(cid:3)(cid:80)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:3)(cid:68)(cid:85)(cid:72)(cid:68)(cid:15)(cid:3)(cid:83)(cid:82)(cid:87)(cid:72)(cid:81)(cid:87)(cid:76)(cid:68)(cid:79)(cid:3)(cid:70)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:86)(cid:3)(cid:87)(cid:92)(cid:83)(cid:76)(cid:70)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3)(cid:70)(cid:68)(cid:81)(cid:3)(cid:73)(cid:76)(cid:81)(cid:71)(cid:3)(cid:86)(cid:72)(cid:89)(cid:72)(cid:85)(cid:68)(cid:79)(cid:3)(cid:86)(cid:68)(cid:79)(cid:72)(cid:86)(cid:3)(cid:70)(cid:72)(cid:81)(cid:87)(cid:72)(cid:85)(cid:86)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:76)(cid:81)(cid:3)(cid:68)(cid:3)(cid:20)(cid:19)(cid:19)(cid:3)(cid:80)(cid:76)(cid:79)(cid:72)(cid:3)(cid:85)(cid:68)(cid:71)(cid:76)(cid:88)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)heir 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 site-built housing.
Prestige does not itself financ(cid:72)(cid:3)(cid:70)(cid:88)(cid:86)(cid:87)(cid:82)(cid:80)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:81)(cid:72)(cid:90)(cid:3)(cid:75)(cid:82)(cid:80)(cid:72)(cid:3)(cid:83)(cid:88)(cid:85)(cid:70)(cid:75)(cid:68)(cid:86)(cid:72)(cid:86)(cid:17)(cid:3)(cid:41)inancing for home purchases has historically been available from
other independent sources that specialize in manufactured housing lending and banks that finance manufactured home purchases.
Prestige and Nobility are not required to sign any recourse agreements with any of these retail financing sources.
Investments in Limited Partnerships
The Company has a 31.3% (cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:72)(cid:86)(cid:87)(cid:3)(cid:76)(cid:81)(cid:3)(cid:58)(cid:68)(cid:79)(cid:71)(cid:72)(cid:81)(cid:3)(cid:58)(cid:82)(cid:82)(cid:71)(cid:86)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:3)(cid:47)(cid:47)(cid:38)(cid:3)(cid:11)(cid:179)(cid:58)(cid:68)(cid:79)(cid:71)(cid:72)(cid:81)(cid:3)(cid:58)(cid:82)(cid:82)(cid:71)(cid:86) South(cid:180)(cid:12)(cid:15)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:82)(cid:90)(cid:81)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)ates a
236 residential lot manufactured home community named Walden Woods South located in Homosassa, Florida. The majority owner
of Walden Woods South (cid:76)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)President (see note 4).
On March 31, 2016, the Company sold its 48.5% limited partners(cid:75)(cid:76)(cid:83)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:72)(cid:86)(cid:87)(cid:3)(cid:76)(cid:81)(cid:3)(cid:38)(cid:53)(cid:41)(cid:3)(cid:44)(cid:44)(cid:44)(cid:15)(cid:3)(cid:47)(cid:87)(cid:71)(cid:17)(cid:3)(cid:11)(cid:179)(cid:38)(cid:92)(cid:83)(cid:85)(cid:72)(cid:86)(cid:86)(cid:3)(cid:38)(cid:85)(cid:72)(cid:72)(cid:78)(cid:180)(cid:12)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:7)(cid:22)(cid:15)(cid:28)(cid:28)(cid:19)(cid:15)(cid:19)(cid:19)(cid:19)(cid:17)(cid:3)
Cypress Creek is a retirement manufactured home community located in Winter Haven, Florida. The Company received $960,000
cash, net of $40,000 cost paid and a note receivable for $3,030,000, that accrues interest at 3.0%, which is payable to the Company in
$500,000 installments each July 1st and January 1st, commencing January 1, 2017 through July 1, 2019. The Company received a
$500,000 payment in June 2016 and a $1,000,000 payment in January 2017. Payments are applied first to any outstanding principal
and then to accrued interest at the end of the term. The Company recognized a gain of $3,990,000 in fiscal year 2016.
Insurance and Financial Services
Mountain Financial, Inc., a wholly-owned subsidiary of Prestige Home Centers, Inc., is an independent insurance agent and licensed
mortgage loan originator. Its principal activity is providing 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, we solely assist our
customers in obtaining various types of 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.
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 for fiscal years 2017 and 2016.
Wholesale Sales to Manufactured Home Communities
Nobility sells its homes on a wholesale basis exclusively through two full-time salespersons to approximately 30 manufactured home
communities. Nobility continues to seek new opportunities in the areas in which it operates, as there is ongoing turnover in the
manufactured home communities as they achieve full occupancy levels. As is (cid:70)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:76)(cid:81)(cid:71)(cid:88)(cid:86)(cid:87)(cid:85)(cid:92)(cid:15)(cid:3)(cid:80)(cid:82)(cid:86)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:182)(cid:86)(cid:3)(cid:76)(cid:81)(cid:71)(cid:72)(cid:83)(cid:72)(cid:81)(cid:71)(cid:72)(cid:81)(cid:87)(cid:3)
dealers sell homes produced by several manufacturers. Sales to one publicly traded REIT (Real Estate Investment Trust) which owns
multiple retirement communities in our market area accounted for $1,602,185 or 4% of our total sales in fiscal year 2017 and sales to
two publicly traded REITs owning multiple retirement communities accounted for $3,581,320 or 11% and $629,345 or 2%
respectively, of our total sales in fiscal year 2016. Other companies which own multiple retirement communities in our market area
accounted for $2,155,575 or 6% of our total sales in fiscal year 2017 and $1,416,180 or 4% of our total sales in fiscal year 2016.
Nobility does not generally offer consigned inventory programs or other credit terms to its dealers and ordinarily receives payment for
its homes within 15 to 30 days of delivery. However, Nobility may offer extended terms to park dealers who do a high volume of
business with Nobility. In order to stimulate sales, Nobility sells homes for display to related manufactured home communities on
(cid:72)(cid:91)(cid:87)(cid:72)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3)(cid:87)(cid:72)(cid:85)(cid:80)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:85)(cid:72)(cid:70)(cid:82)(cid:74)(cid:81)(cid:76)(cid:93)(cid:72)(cid:86)(cid:3)(cid:85)(cid:72)(cid:89)(cid:72)(cid:81)(cid:88)(cid:72)(cid:3)(cid:90)(cid:75)(cid:72)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:75)(cid:82)(cid:80)(cid:72)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:86)(cid:82)(cid:79)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:72)(cid:81)(cid:71)(cid:3)(cid:88)(cid:86)(cid:72)(cid:85)(cid:86)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:75)(cid:76)(cid:74)(cid:75)(cid:3)(cid:89)(cid:76)(cid:86)(cid:76)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:182)(cid:86)(cid:3)(cid:75)(cid:82)(cid:80)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:86)(cid:88)ch
communities generates additional sales of its homes through such dealers.
Regulation
The manufacture, distribution and sale of homes are 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 preempt state
standards. In addition, HUD regulations require that manufactured homes be constructed to more stringent wind load and thermal
standards. Compliance with these standards involves approval by a HUD approved engineering firm of engineering plans and
3
specifications on all models. HUD has also promulgated rules requiring producers of manufactured homes to utilize wood products
(cid:70)(cid:72)(cid:85)(cid:87)(cid:76)(cid:73)(cid:76)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:87)(cid:75)(cid:72)(cid:76)(cid:85)(cid:3)(cid:86)(cid:88)(cid:83)(cid:83)(cid:79)(cid:76)(cid:72)(cid:85)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:80)(cid:72)(cid:72)(cid:87)(cid:3)(cid:43)(cid:56)(cid:39)(cid:182)(cid:86)(cid:3)(cid:72)(cid:86)(cid:87)(cid:68)(cid:69)(cid:79)(cid:76)(cid:86)(cid:75)(cid:72)(cid:71)(cid:3)(cid:79)(cid:76)(cid:80)(cid:76)(cid:87)(cid:86)(cid:3)(cid:82)(cid:81)(cid:3)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:79)(cid:71)(cid:72)(cid:75)(cid:92)(cid:71)(cid:72)(cid:3)(cid:72)(cid:80)(cid:76)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)s and to place in each home written notice to
(cid:83)(cid:85)(cid:82)(cid:86)(cid:83)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:83)(cid:88)(cid:85)(cid:70)(cid:75)(cid:68)(cid:86)(cid:72)(cid:85)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:83)(cid:82)(cid:86)(cid:86)(cid:76)(cid:69)(cid:79)(cid:72)(cid:3)(cid:68)(cid:71)(cid:89)(cid:72)(cid:85)(cid:86)(cid:72)(cid:3)(cid:85)(cid:72)(cid:68)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:68)(cid:76)(cid:85)(cid:69)(cid:82)(cid:85)(cid:81)(cid:72)(cid:3)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:79)(cid:71)(cid:72)(cid:75)(cid:92)(cid:71)(cid:72)(cid:3)(cid:76)(cid:81)(cid:3)(cid:75)(cid:82)(cid:80)(cid:72)(cid:86)(cid:17)(cid:3)(cid:43)(cid:56)(cid:39)(cid:182)(cid:86)(cid:3)(cid:86)(cid:87)(cid:68)(cid:81)(cid:71)(cid:68)(cid:85)(cid:71)(cid:86)(cid:3)(cid:68)(cid:79)(cid:86)(cid:82)(cid:3)(cid:85)(cid:72)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:3)(cid:83)(cid:72)(cid:85)(cid:76)(cid:82)(cid:71)(cid:76)c
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. Modular homes manufactured by Nobility are required to comply with the
Florida Building Code established by the Florida Department of Business and Professional Regulations.
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 restrictions relating to routes, travel
periods, speed limits, safety equipment and size.
(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:182)(cid:86)(cid:3)(cid:75)(cid:82)(cid:80)(cid:72)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:86)(cid:88)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:48)(cid:68)(cid:74)(cid:81)(cid:88)(cid:86)(cid:82)(cid:81)-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. Nobility estimates that of the 18 manufacturers selling in the state, approximately 10
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, warranties and product performance.
Employees
As of January 5, 2018, the Company had 147 full-time employees, including 36 employed by Prestige. Approximately 85 employees
are factory personnel compared to approximately 80 in such positions a year ago and 62 are in management, administrative,
supervisory, sales and clerical positions (including 33 management and sales personnel employed by Prestige) compared to
approximately 60 a year ago. In addition, Nobility employs part-time employees when necessary.
(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:80)(cid:68)(cid:78)(cid:72)(cid:86)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:76)(cid:69)(cid:88)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:87)(cid:82)(cid:90)(cid:68)(cid:85)(cid:71)(cid:3)(cid:72)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:72)(cid:72)(cid:86)(cid:182)(cid:3)(cid:74)(cid:85)(cid:82)(cid:88)(cid:83)(cid:3)(cid:75)(cid:72)(cid:68)(cid:79)(cid:87)(cid:75)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:79)(cid:76)(cid:73)(cid:72)(cid:3)(cid:76)(cid:81)(cid:86)(cid:88)(cid:85)(cid:68)(cid:81)(cid:70)(cid:72)(cid:17)(cid:3)(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:15)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)h 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 1A. Risk Factors
As a smaller reporting company, we are not required to provide the information required by this item.
Item 1B.
Unresolved Staff Comments
None.
4
Properties
Item 2.
As of January 26, 2018, Nobility owned two manufacturing plants:
Location
3741 SW 7th Street
Ocala, Florida
6432 SE 115th Lane
Belleview, Florida
Approximate Size
72,000 sq. ft.
33,500 sq. ft.
(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:182)(cid:86)(cid:3)(cid:50)(cid:70)(cid:68)(cid:79)(cid:68)(cid:3)(cid:73)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:76)(cid:86)(cid:3)(cid:79)(cid:82)(cid:70)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:91)(cid:76)(cid:80)(cid:68)(cid:87)(cid:72)(cid:79)(cid:92)(cid:3)(cid:22)(cid:24)(cid:17)(cid:24)(cid:3)(cid:68)(cid:70)(cid:85)(cid:72)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:79)(cid:68)(cid:81)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:68)(cid:81)(cid:3)(cid:68)(cid:71)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:87)(cid:90)(cid:82)-story structure adjoining the plant
(cid:86)(cid:72)(cid:85)(cid:89)(cid:72)(cid:86)(cid:3)(cid:68)(cid:86)(cid:3)(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:182)(cid:86)(cid:3)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:72)(cid:3)(cid:82)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:86)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:83)(cid:79)(cid:68)(cid:81)(cid:87)(cid:15)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:76)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:80)(cid:72)(cid:87)(cid:68)(cid:79)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:87)(cid:85)(cid:88)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3)(cid:76)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:74)(cid:82)(cid:82)(cid:71)(cid:3)(cid:70)(cid:82)(cid:81)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:85)(cid:72)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:86)(cid:3)(cid:79)(cid:76)(cid:87)tle maintenance.
(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:182)(cid:86)(cid:3)(cid:37)(cid:72)(cid:79)(cid:79)(cid:72)(cid:89)(cid:76)(cid:72)(cid:90)(cid:3)(cid:73)(cid:68)(cid:70)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)has been vacant since June 2015 and is listed for sale with an independent real estate agent. This facility
is included on the balance sheet in property held for sale (non-current asset) for $386,018. This facility is constructed of metal and
concrete construction. The property is in good condition and requires little maintenance. The Belleview manufacturing plant was
closed and its operations were consolidated into the Ocala manufacturing plant in the second quarter of 2009 due to the reduction in
our manufacturing operations.
Prestige owns the properties on which its Ocala North, Auburndale, Inverness, Panama City, Yulee and Punta Gorda, Florida retail
sales centers are located. The Company purchased the land for the Inverness retail sales center for $330,000 in November 2017, after
fiscal year-end, and the land for the Auburndale retail sales center for $750,000 in January 2016. Prestige leases the property for its
other 4 retail sales centers. Our Pace property (closed) is no longer under contract with a buyer and is included on the balance sheet in
property held for sale (non-current asset) for $213,437.
Item 3.
Legal Proceedings
We are a party to various legal proceedings that arise in the ordinary course of our business. We are not currently involved in any
litigation nor to our knowledge, is any litigation threatened against us, the outcome of which would, in our judgment based on
information currently available to us, have a material adverse effect on our financial position or results of operations.
The Company does not maintain casualty insurance on some of its property, including the inventory at its retail centers, its plant
machinery and plant equipment and is at risk for those types of losses.
Mine Safety Disclosures
Item 4.
None.
5
PART II
Item 5.
(cid:48)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:53)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:38)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81)(cid:3)(cid:40)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:15)(cid:3)(cid:53)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:3)(cid:48)(cid:68)(cid:87)(cid:87)(cid:72)(cid:85)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:44)(cid:86)(cid:86)(cid:88)(cid:72)(cid:85)(cid:3)(cid:51)(cid:88)(cid:85)(cid:70)(cid:75)(cid:68)(cid:86)(cid:72)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:40)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:3)(cid:54)(cid:72)(cid:70)(cid:88)(cid:85)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)
Market Information
(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81)(cid:3)(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)(cid:70)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:87)(cid:79)(cid:92)(cid:3)(cid:87)(cid:85)(cid:68)(cid:71)(cid:72)(cid:86)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:86)(cid:92)(cid:80)(cid:69)(cid:82)(cid:79)(cid:3)(cid:49)(cid:50)(cid:37)(cid:43)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72) OTCQX market. The following table shows the range
of high and low sales prices and/or high and low bid quotations (as applicable) for the common stock for each fiscal quarter of 2017
and 2016 on the OTCQX market. Any over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-
down or commission and may not necessarily represent actual transactions.
Fiscal
Quarter
1st
2nd
3rd
4th
Fiscal Year End
November 4, 2017
November 5, 2016
High
Low
High
Low
$ 18.00
17.00
18.06
18.50
$ 15.00
14.25
15.02
16.05
$ 14.00 $ 11.50
12.15
15.00
13.00
15.99
14.06
16.35
Holders
At January 26, 2018, the approximate number of holders of record of common stock was 113 (not including individual participants in
security position listings).
Dividends
On April 17, 2017, the Board of Directors declared a one-time cash dividend of $0.15 per common share in fiscal 2017 payable to
stockholders of record as of March 27, 2017. Any future determination to pay dividends will be at the discretion of our Board of
Directors.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table displays equity compensation plan information as of the end of the fiscal year ended November 4, 2017. For
further information, see Note 13 (cid:82)(cid:73)(cid:3)(cid:179)(cid:49)(cid:82)(cid:87)(cid:72)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:38)(cid:82)(cid:81)(cid:86)(cid:82)(cid:79)(cid:76)(cid:71)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:54)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:180)(cid:17)(cid:3)
Equity Compensation Plan Information
Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
(a)
Number of securities remaining
available for issuance under equity
compensation plans (excluding
securities reflected in column (a))
(c)
5,000
N/A
5,000
$12.10
N/A
$12.10
295,000
N/A
295,000
Equity compensation plans approved
by security holders
Equity compensation plans not
approved by security holders
Total
Recent Sales of Unregistered Securities
During fiscal 2017 and 2016, the Company sold 1,000 and 4,000 shares respectively, of common stock upon the exercise of
outstanding stock options to certain of its employees. The stock options were exercised at a weighted average exercise price
of $8.49 in 2017 and $9.72 in 2016. The shares were issued pursuant to an exemption from the registration requirements of the
Securities Act of 1933 in reliance upon Rule 701 of the Securities Act of 1933.
6
Issuer Repurchases of Equity Securities
The following table represents information with respect to purchases by the Company of its common stock during the months
presented:
Total
number of
shares
purchased
70
7,271
Average
price paid
per share
$17.00
$16.79
Total number of shares
purchased as part of
publicly announced plans
or programs
Maximum number or
approximate dollar value of
shares that may yet be
purchased under the plans
or programs
N/A
N/A
N/A
N/A
Period
Dec 1 (cid:177) Dec 31, 2016
Jul 1 (cid:177) Jul 31, 2017
(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:37)(cid:82)(cid:68)(cid:85)(cid:71)(cid:3)(cid:82)(cid:73)(cid:3)(cid:39)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)(cid:75)(cid:68)(cid:86)(cid:3)(cid:68)(cid:88)(cid:87)(cid:75)(cid:82)(cid:85)(cid:76)(cid:93)(cid:72)(cid:71)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:85)(cid:72)(cid:83)(cid:88)(cid:85)(cid:70)(cid:75)(cid:68)(cid:86)(cid:72)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81)(cid:3)(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)in transactions
up to 200,000 shares or less in the open market.
Selected Financial Data
Item 6.
As a smaller reporting company, we are not required to provide the information required by this item.
(cid:48)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:39)(cid:76)(cid:86)(cid:70)(cid:88)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:36)(cid:81)(cid:68)(cid:79)(cid:92)(cid:86)(cid:76)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:38)(cid:82)(cid:81)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:53)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:50)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)
Item 7.
General
Nobility focuses on home buyers 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 retail sales centers.
Nobility has aggressively targeted the retirement community market, which is made up of retirees moving to Florida and typically
purchasing or renting homes to be located on sites leased from park communities offering a variety of amenities. Sales are not limited
(cid:69)(cid:92)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:85)(cid:72)(cid:86)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:87)(cid:76)(cid:74)(cid:72)(cid:3)(cid:85)(cid:72)(cid:87)(cid:68)(cid:76)(cid:79)(cid:3)(cid:86)(cid:68)(cid:79)(cid:72)(cid:86)(cid:3)(cid:70)(cid:72)(cid:81)(cid:87)(cid:72)(cid:85)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:87)(cid:92)(cid:83)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:85)(cid:85)(cid:68)(cid:81)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:68)s the retirement community sells homes
only within their community.
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 years 2017 and 2016, Nobility continued to experience consumer demand for smaller, less expensive homes. Our three,
four and five bedroom manufactured homes are favored by families, compared with the one, two and three-bedroom homes that
typically appeal to the retirement buyers who reside in the manufactured housing communities.
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.
In the third quarter of fiscal year 2009, Majestic 21, a joint venture that the Company owns 50% of, secured $5,000,000 in financing
from a commercial bank to support loan originations. The Company guarantees 50% of this financing. As of November 4, 2017, the
outstanding principal balance of the note was $536,598 and the amount of collateral held by our joint venture partner for the Majestic
21 note payable was $1,501,617.
Prestige maintains several other outside financing sources that provide financing to retail homebuyers for its manufactured homes. The
Company continually tries to develop relationships with new lenders, since established lenders will occasionally leave manufactured
home lending.
(cid:51)(cid:85)(cid:72)(cid:86)(cid:87)(cid:76)(cid:74)(cid:72)(cid:182)(cid:86)(cid:3)(cid:90)(cid:75)(cid:82)(cid:79)(cid:79)(cid:92)-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.
(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:73)(cid:76)(cid:86)(cid:70)(cid:68)(cid:79)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:3)(cid:72)(cid:81)(cid:71)(cid:86)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:76)(cid:85)(cid:86)(cid:87)(cid:3)(cid:54)(cid:68)(cid:87)(cid:88)(cid:85)(cid:71)(cid:68)(cid:92)(cid:3)(cid:82)(cid:81)(cid:3)(cid:82)(cid:85)(cid:3)(cid:68)(cid:73)(cid:87)(cid:72)(cid:85)(cid:3)(cid:50)(cid:70)(cid:87)(cid:82)(cid:69)(cid:72)(cid:85) 31. The year ended November 4, 2017 (fiscal year 2017)
consisted of a fifty-two week period and the year ended November 5, 2016 (fiscal year 2016) consisted of a fifty-three week period.
7
Results of Operations
Total net sales in fiscal year 2017 were $37,543,071 compared to $34,053,290 in fiscal year 2016. The Company reported net income
of $3,309,983 in fiscal year 2017, compared to a net income of $5,965,194 during fiscal year 2016. The change in net income from
fiscal 2016 to 2017 is largely attributable to a one-time gain of $3,990,000 in fiscal 2016 related to the sale of the (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:72)(cid:86)(cid:87)(cid:3)
in Cypress Creek, as discussed below.
The following table summarizes certain key sales statistics and percent of gross profit as of and for fiscal years ended
November 4, 2017 and November 5, 2016.
New homes sold through Company owned sales centers
Pre-owned homes sold through Company owned sales centers:
Buy Back
Repossessions
Trade-Ins
Homes sold to independent dealers
Total new factory built homes produced
Average new manufactured home price(cid:178)retail
Average new manufactured home price(cid:178)wholesale
As a percent of net sales:
Gross profit from the Company owned retail sales centers
Gross profit from the manufacturing facilities(cid:178)including
intercompany sales
2017
327
12
11
4
249
600
$74,384
$38,208
17%
16%
2016
273
18
3
8
255
584
$70,296
$37,638
17%
18%
Sales to one publicly traded REIT (Real Estate Investment Trust) which owns multiple retirement communities in our market area
accounted for $1,602,185 or 4% of our total sales in fiscal year 2017 and sales to two publicly traded REITs owning multiple
retirement communities accounted for $3,581,320 or 11% and $629,345 or 2%, respectively, of our total sales in fiscal year 2016.
Other companies which own multiple retirement communities in our market area accounted for $2,155,575 or 6% of our total sales in
fiscal year 2017 and $1,416,180 or 4% of our total sales in fiscal year 2016. Accounts receivable due from these customers were
$1,533,014 at November 4, 2017.
The demand for affordable manufactured housing in Florida and the U.S. continues to improve. According to the Florida
Manufactured Housing Association, shipments in Florida for the period from November 2016 through October 2017 were up
approximately 6% from the same period last year. Our sales for fiscal 2018 continue to look positive. Shipment of homes in our
market area should improve and, if we can adequately control the material and labor costs increases that the Company is experiencing
because of the improvements in the total housing picture, then earnings should also improve. 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.
We understand that maintaining our strong financial position is vital for future growth and success. Because of the recent years of very
challenging business conditions 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
operations.
(cid:50)(cid:88)(cid:85)(cid:3)(cid:80)(cid:68)(cid:81)(cid:92)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:85)(cid:76)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:41)(cid:79)(cid:82)(cid:85)(cid:76)(cid:71)(cid:68)(cid:3)(cid:80)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:15)(cid:3)(cid:70)(cid:82)(cid:80)(cid:69)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:75)(cid:82)(cid:80)(cid:72)(cid:3)(cid:69)(cid:88)(cid:92)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:76)(cid:81)(cid:70)(cid:85)(cid:72)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:81)(cid:72)(cid:72)(cid:71)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:80)(cid:82)(cid:85)(cid:72)(cid:3)(cid:68)(cid:73)(cid:73)(cid:82)(cid:85)(cid:71)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:75)(cid:82)(cid:88)(cid:86)(cid:76)(cid:81)(cid:74)(cid:15)(cid:3)(cid:86)(cid:75)ould
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, 2017 the Company celebrated its 50th 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 2017 were $267,933 compared to $235,259 in fiscal year 2016. 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, 2017 and November 5, 2016.
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,
8
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 23% in both fiscal year 2017 and 2016. Our gross profit of $8,661,079 for 2017
increased 9% compared to $7,936,135 for 2016. 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, professio nal 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 office supplies.
Selling, general and administrative expenses increased $522,869 from fiscal year 2016 to 2017. As a percent of net sales, selling,
general and administrative expenses were 11% in both fiscal year 2017 and 2016. The increase in selling, general and administrative
expenses in 2017 resulted from the increase in compensation expenses directly related to our increased sales.
The Company earned interest on cash, cash equivalents, short-term investments, and notes receivable in the amount of $149,613 in
fiscal year 2017 compared to $112,802 in fiscal year 2016. Interest income is dependent on our cash balance and available rates of
return. The increase is primarily due to the increase in accrued interest from the note receivable acquired in the sale of the investment
in the Cypress Creek retirement manufactured home community.
The Company earned $103,533 from its joint venture, Majestic 21, in fiscal year 2017 compared to $123,772 in fiscal year 2016. 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 $504,548 in fiscal year 2017 and $788,566 in fiscal year 2016 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
(cid:69)(cid:72)(cid:72)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:83)(cid:68)(cid:86)(cid:87)(cid:3)(cid:83)(cid:85)(cid:68)(cid:70)(cid:87)(cid:76)(cid:70)(cid:72)(cid:17)
On March 31, 2016, the Company sold its 48.5% limited partnership interest in Cypress Creek for $3,990,000. Cypress Creek is a
retirement manufactured home community. The Company had previously written this investment down to $0, resulting in a gain of
$3,990,000 during fiscal 2016.
The Company realized pre-tax income of $5,168,250 in fiscal year 2017 compared to a pre-tax income of $9,184,236 in fiscal year
2016.
The Company recorded an income tax expense of approximately $1,858,000 in fiscal year 2017 compared to $3,219,000 in fiscal year
2016.
Net income in fiscal year 2017 was $3,309,983 or $0.83 per basic and diluted share and net income in fiscal year 2016 was $5,965,194
or $1.48 per basic and diluted share.
Liquidity and Capital Resources
Cash and cash equivalents were $27,910,504 at November 4, 2017 compared to $24,562,638 at November 5, 2016. Short-term
investments were $627,087 at November 4, 2017 compared to $481,025 at November 5, 2016. The increase in cash was due primarily
to our net income. Working capital was $36,403,372 at November 4, 2017 as compared to $32,761,352 at November 5, 2016. The
Company purchased the land for the Inverness retail sales center in November 2017 for $330,000, after fiscal year-end, and the
Auburndale retail sales center for $750,000 in January 2016. In April 2017, we paid an aggregate of $600,726 as dividends. Nobility
owns the entire inventory for its Prestige retail sales centers which includes new, pre-owned and repossessed or foreclosed homes and
does not incur any third party floor plan financing expenses. The Company has no material commitments for capital expenditures.
The Company currently has no line of credit facility and does not believe that such a facility is currently necessary to its operations.
The Company has no debt. The Company also has approximately $3.3 million of cash surrender value of life insurance which it may
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, 2017, the Company continued to report a strong balance sheet which included total assets of approximately $54 million
which was funded primarily by stockhold(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:72)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:91)(cid:76)(cid:80)(cid:68)(cid:87)(cid:72)(cid:79)(cid:92)(cid:3)(cid:7)47 million.
9
(cid:47)(cid:82)(cid:82)(cid:78)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:75)(cid:72)(cid:68)(cid:71)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:86)(cid:87)(cid:85)(cid:82)(cid:81)(cid:74)(cid:3)(cid:69)(cid:68)(cid:79)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:86)(cid:75)(cid:72)(cid:72)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:86)(cid:76)(cid:74)(cid:81)(cid:76)(cid:73)(cid:76)(cid:70)(cid:68)(cid:81)(cid:87)(cid:3)(cid:70)(cid:68)(cid:86)(cid:75)(cid:3)(cid:85)(cid:72)(cid:86)(cid:72)(cid:85)(cid:89)(cid:72)(cid:86)(cid:3)(cid:68)(cid:70)(cid:70)(cid:88)(cid:80)ulated in profitable years has allowed the
Company to remain sufficiently liquid so as to allow continuation of operations and should enable the Company to take advantage of
market opportunities when presented by an expected improvement in the overall and the industry specific economy in fiscal 2018 and
beyond. 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.
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, accounts receivable, inventory and goodwill. The following explains the basis and the procedure where
judgment and estimates are applied.
Revenue Recognition
The Company recognizes revenue from its retail sales of new manufactured homes upon the occurrence of the following:
Its receipt of a down payment,
(cid:135)
(cid:135)(cid:3) Construction of the home is complete,
(cid:135) (cid:43)(cid:82)(cid:80)(cid:72)(cid:3)(cid:75)(cid:68)(cid:86)(cid:3)(cid:69)(cid:72)(cid:72)(cid:81)(cid:3)(cid:71)(cid:72)(cid:79)(cid:76)(cid:89)(cid:72)(cid:85)(cid:72)(cid:71)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:86)(cid:72)(cid:87)(cid:3)(cid:88)(cid:83)(cid:3)(cid:68)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:87)(cid:68)(cid:76)(cid:79)(cid:3)(cid:75)(cid:82)(cid:80)(cid:72)(cid:3)(cid:69)(cid:88)(cid:92)(cid:72)(cid:85)(cid:182)(cid:86)(cid:3)(cid:86)(cid:76)(cid:87)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:76)(cid:87)(cid:79)(cid:72)(cid:3)(cid:75)(cid:68)(cid:86)(cid:3)(cid:69)(cid:72)(cid:72)(cid:81)(cid:3)(cid:87)(cid:85)(cid:68)(cid:81)(cid:86)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:87)(cid:68)(cid:76)(cid:79)(cid:3)(cid:75)(cid:82)(cid:80)(cid:72)(cid:3)(cid:69)(cid:88)(cid:92)(cid:72)(cid:85)(cid:15)(cid:3)
(cid:135) Remaining funds have been released by the finance company (financed sales transaction), remaining funds have been
committed by the finance company by an agreement with respect to financing obtained by the customer, usually in the
form of a written approval for permanent home financing received from a lending institution, (financed construction sales
transaction) or cash has been received from the home buyer (cash sales transaction), and
(cid:135) Completion of any other significant obligations.
The Company recognizes revenue from the sale of the repurchased homes upon transfer of title to the new purchaser.
The Company recognizes revenue from its 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. For wholesale
shipments to independent dealers, the Company has no obligation to setup the home or to complete any other significant obligations.
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
(cid:80)(cid:68)(cid:81)(cid:92)(cid:3)(cid:70)(cid:68)(cid:86)(cid:72)(cid:86)(cid:15)(cid:3)(cid:76)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:73)(cid:76)(cid:85)(cid:86)(cid:87)(cid:3)(cid:81)(cid:82)(cid:87)(cid:76)(cid:73)(cid:76)(cid:70)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:80)(cid:82)(cid:88)(cid:81)(cid:87)(cid:86)(cid:3)(cid:72)(cid:68)(cid:85)(cid:81)(cid:72)(cid:71)(cid:3)(cid:71)(cid:88)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:79)(cid:68)(cid:70)(cid:78)(cid:3)(cid:82)(cid:73)(cid:3)(cid:83)(cid:82)(cid:79)(cid:76)(cid:70)(cid:92)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:85)(cid:72)(cid:81)(cid:72)(cid:90)(cid:68)(cid:79)(cid:3)(cid:76)(cid:81)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:17)(cid:3)(cid:38)(cid:82)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:72)nt
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
(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:73)(cid:76)(cid:85)(cid:86)(cid:87)(cid:3)(cid:81)(cid:82)(cid:87)(cid:76)(cid:73)(cid:76)(cid:70)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:80)(cid:82)(cid:88)(cid:81)(cid:87)(cid:86)(cid:3)(cid:72)(cid:68)(cid:85)(cid:81)(cid:72)(cid:71)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:72)(cid:86)(cid:3)(cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:83)(cid:85)(cid:76)(cid:68)(cid:87)(cid:72)(cid:3)(cid:85)(cid:72)(cid:86)(cid:72)(cid:85)(cid:89)(cid:72)(cid:86)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:83)(cid:82)(cid:79)(cid:76)(cid:70)(cid:92)(cid:3)(cid:70)(cid:68)(cid:81)(cid:70)(cid:72)(cid:79)(cid:79)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)
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, 2017 or November 5, 2016.
Inventory Impairment Reserve
The Company has raw materials, work-in-process, finished home and pre-owned home inventory. The Company continually reviews
its inventory to determine if there is a decline in the fair value below the cost basis. Historically, the Company has only recorded
valuation allowances for its pre-owned home inventory. The Company acquires pre-owned homes from 21st Mortgage Corporation,
trade-ins on new home sales, and other sources. Management primarily uses current sales values of new and pre-owned homes to
determine market value. When the cost of a housing unit exceeds market value, a valuation reserve is recorded and the loss is
recorded in the accompanying consolidated statements of comprehensive income.
Investments in Retirement Communities
The Company has a 31.3% (cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:72)(cid:86)(cid:87)(cid:3)(cid:76)(cid:81)(cid:3)(cid:58)(cid:68)(cid:79)(cid:71)(cid:72)(cid:81)(cid:3)(cid:58)(cid:82)(cid:82)(cid:71)(cid:86)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:3)(cid:47)(cid:47)(cid:38)(cid:3)(cid:11)(cid:179)(cid:58)(cid:68)(cid:79)(cid:71)(cid:72)(cid:81)(cid:3)(cid:58)(cid:82)(cid:82)(cid:71)(cid:86) South(cid:180)(cid:12)(cid:15)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:82)(cid:90)(cid:81)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:72)(cid:86)(cid:3)(cid:68)(cid:3)
236 residential lot manufactured home community named Walden Woods South located in Homosassa, Florida. The majority owner
of Walden Woods South (cid:76)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86) President (see note 4). The investment in Walden Woods South is accounted for under the
equity method of accounting and all allocations of profit and loss are on pro-(cid:85)(cid:68)(cid:87)(cid:68)(cid:3)(cid:69)(cid:68)(cid:86)(cid:76)(cid:86)(cid:17)(cid:3)(cid:3)(cid:54)(cid:76)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:80)(cid:68)(cid:91)(cid:76)(cid:80)(cid:88)(cid:80)(cid:3)(cid:72)(cid:91)(cid:83)(cid:82)(cid:86)(cid:88)(cid:85)(cid:72)(cid:3)(cid:76)(cid:86)(cid:3)
limited to its investment in Walden Woods South, management has concluded that the Company would not absorb a majority of
10
Walden Woods (cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:182)(cid:86) expected losses nor receive a majority of Walden Woods South(cid:182)s expected residual returns; therefore, the
Company is not required to consolidate Walden Woods South with the accounts of Nobility Homes in accordance with the Financial
Accounting Standards Board (FASB) Accounting Standards Codification (ASC) No. 810(cid:15)(cid:3)(cid:179)(cid:38)(cid:82)(cid:81)(cid:86)(cid:82)(cid:79)(cid:76)(cid:71)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:180)(cid:3)(cid:11)(cid:36)(cid:54)(cid:38)(cid:3)(cid:27)(cid:20)(cid:19)(cid:12)(cid:17)(cid:3)
(cid:50)(cid:81)(cid:3)(cid:48)(cid:68)(cid:85)(cid:70)(cid:75)(cid:3)(cid:22)(cid:20)(cid:15)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:86)(cid:82)(cid:79)(cid:71)(cid:3)(cid:76)(cid:87)(cid:86)(cid:3)(cid:23)(cid:27)(cid:17)(cid:24)(cid:8)(cid:3)(cid:79)(cid:76)(cid:80)(cid:76)(cid:87)(cid:72)(cid:71)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:81)(cid:72)(cid:85)(cid:86)(cid:75)(cid:76)(cid:83)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:72)(cid:86)(cid:87)(cid:3)(cid:76)(cid:81)(cid:3)(cid:38)(cid:53)(cid:41)(cid:3)(cid:44)(cid:44)(cid:44)(cid:15)(cid:3)(cid:47)(cid:87)(cid:71)(cid:17)(cid:3)(cid:11)(cid:179)(cid:38)(cid:92)(cid:83)(cid:85)(cid:72)(cid:86)(cid:86)(cid:3)(cid:38)(cid:85)(cid:72)(cid:72)(cid:78)(cid:180)(cid:12)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:7)(cid:22)(cid:15)(cid:28)(cid:28)(cid:19)(cid:15)(cid:19)(cid:19)(cid:19)(cid:17)
Cypress Creek is a retirement manufactured home community located in Winter Haven, Florida. The Company received $960,000
cash, net of $40,000 cost paid and a note receivable for $3,030,000, plus interest at 3.0%, which is payable to the Company in
$500,000 installments each July 1st and January 1st, commencing January 1, 2017 through July 1, 2019. The Company received a
$500,000 payment in June 2016 and a $1,000,000 payment in January 2017. Payments are applied first to any outstanding principal
and then to accrued interest at the end of the term. The Company recognized a gain of $3,990,000 in fiscal year 2016.
Investment in Majestic 21
On May 20, 2009, the Company became a 50% guarantor on a $5 million note payable entered into by Majestic 21, a joint venture in
which the Company owns a 50% interest. This guarantee was a requirement of the bank that provided a $5 million loan to Majestic 21.
(cid:55)(cid:75)(cid:72)(cid:3)(cid:7)(cid:24)(cid:3)(cid:80)(cid:76)(cid:79)(cid:79)(cid:76)(cid:82)(cid:81)(cid:3)(cid:74)(cid:88)(cid:68)(cid:85)(cid:68)(cid:81)(cid:87)(cid:72)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:48)(cid:68)(cid:77)(cid:72)(cid:86)(cid:87)(cid:76)(cid:70)(cid:3)(cid:21)(cid:20)(cid:182)(cid:86)(cid:3)(cid:71)(cid:72)(cid:69)(cid:87)(cid:3)(cid:76)(cid:86)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:79)(cid:76)(cid:73)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:81)(cid:82)(cid:87)(cid:72). The amount of the guarantee declines with the amortization
and repayment of the loan. As collateral for the loan, 21st Mortgage Corporation (our joint venture partner) has granted the lender a
security interest in a pool of loans encumbering homes sold by Prestige Homes Centers, Inc. If the pool of loans securing this note
should decrease in value so that the notes outstanding principal balance is in excess of 80% of the principal balance of the pool of
(cid:79)(cid:82)(cid:68)(cid:81)(cid:86)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:81)(cid:3)(cid:48)(cid:68)(cid:77)(cid:72)(cid:86)(cid:87)(cid:76)(cid:70)(cid:3)(cid:21)(cid:20)(cid:3)(cid:90)(cid:82)(cid:88)(cid:79)(cid:71)(cid:3)(cid:75)(cid:68)(cid:89)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:83)(cid:68)(cid:92)(cid:3)(cid:71)(cid:82)(cid:90)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:81)(cid:82)(cid:87)(cid:72)(cid:182)(cid:86)(cid:3)(cid:83)(cid:85)(cid:76)(cid:81)(cid:70)(cid:76)(cid:83)(cid:68)(cid:79)(cid:3)(cid:69)(cid:68)(cid:79)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:68)(cid:81)(cid:3)(cid:68)(cid:80)(cid:82)(cid:88)(cid:81)(cid:87)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:76)(cid:86)(cid:3)(cid:81)(cid:82)(cid:3)(cid:80)(cid:82)(cid:85)(cid:72)(cid:3)(cid:87)(cid:75)(cid:68)(cid:81)(cid:3)(cid:27)(cid:19)(cid:8)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:85)(cid:76)(cid:81)cipal
balance of the pool of loans. The Company and 21st Mortgage Corporation are obligated jointly to contribute the amount necessary to
bring the loan balance back down to 80% of the collateral provided. We do not anticipate any required contributions as the pool of
loans securing the note have historically been in excess of 100% of the collateral value. As of November 4, 2017, the outstanding
principal balance of the note was $536,598 and the amount of collateral held by our joint venture partner for the Majestic 21 note
payable was $1,501,617. (cid:37)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:88)(cid:83)(cid:82)(cid:81)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:68)(cid:81)(cid:68)(cid:79)(cid:92)(cid:86)(cid:76)(cid:86)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:68)(cid:76)(cid:85)(cid:3)(cid:89)(cid:68)(cid:79)(cid:88)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:74)(cid:88)(cid:68)(cid:85)(cid:68)(cid:81)(cid:87)(cid:72)(cid:72)(cid:3)(cid:76)(cid:86)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:80)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:3)(cid:85)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:15)(cid:3)(cid:81)(cid:82)(cid:3)(cid:79)(cid:76)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)
for the guarantee has been recorded in the accompanying balance sheets of the Company.
At November 4, 2017, there was approximately $310,772 in loan loss reserves or 3.13% of the portfolio in Majestic 21. The Majestic
21 joint venture partnership is monitoring loan loss reserves on a monthly basis and is adjusting the loan loss reserves as necessary.
(cid:55)(cid:75)(cid:72)(cid:3)(cid:48)(cid:68)(cid:77)(cid:72)(cid:86)(cid:87)(cid:76)(cid:70)(cid:3)(cid:21)(cid:20)(cid:3)(cid:77)(cid:82)(cid:76)(cid:81)(cid:87)(cid:3)(cid:89)(cid:72)(cid:81)(cid:87)(cid:88)(cid:85)(cid:72)(cid:3)(cid:76)(cid:86)(cid:3)(cid:85)(cid:72)(cid:73)(cid:79)(cid:72)(cid:70)(cid:87)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:21)(cid:20)(cid:86)(cid:87)(cid:3)(cid:48)(cid:82)(cid:85)(cid:87)(cid:74)(cid:68)(cid:74)(cid:72)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)ncial
statements of its ultimate parent which is a public company. Management believes the loan loss reserves are adequate based upon its
(cid:85)(cid:72)(cid:89)(cid:76)(cid:72)(cid:90)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:48)(cid:68)(cid:77)(cid:72)(cid:86)(cid:87)(cid:76)(cid:70)(cid:3)(cid:21)(cid:20)(cid:3)(cid:77)(cid:82)(cid:76)(cid:81)(cid:87)(cid:3)(cid:89)(cid:72)(cid:81)(cid:87)(cid:88)(cid:85)(cid:72)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:81)(cid:72)(cid:85)(cid:86)(cid:75)(cid:76)(cid:83)(cid:182)(cid:86)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:17)(cid:3)
Income Taxes
The Company accounts for income taxes utilizing the asset and liability method. This approach requires the recognition of deferred tax
assets and liabilities for the expected future tax consequences attributable to temporary differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be
realized.
Rebate Program
The Company has a rebate program for some dealers, based upon the number and type of homes purchased, which pays rebates based
upon sales volume to the dealers. Volume rebates are recorded as a reduction of sales in the accompanying consolidated financial
statements. The rebate liability is calculated and recognized as eligible homes are sold based upon factors surrounding the activity and
prior experience of specific dealers and is included in accrued expenses in the accompanying consolidated balance sheets.
Off-Balance Sheet Arrangements
As part of our ongoing business, we generally do not participate in transactions that generate relationships with unconsolidated entities
or financial partnerships, suc(cid:75)(cid:3)(cid:68)(cid:86)(cid:3)(cid:72)(cid:81)(cid:87)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:82)(cid:73)(cid:87)(cid:72)(cid:81)(cid:3)(cid:85)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:68)(cid:86)(cid:3)(cid:86)(cid:87)(cid:85)(cid:88)(cid:70)(cid:87)(cid:88)(cid:85)(cid:72)(cid:71)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:82)(cid:85)(cid:3)(cid:89)(cid:68)(cid:85)(cid:76)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:72)(cid:86)(cid:87)(cid:3)(cid:72)(cid:81)(cid:87)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:11)(cid:179)(cid:57)(cid:44)(cid:40)(cid:182)(cid:86)(cid:180)(cid:12)(cid:15)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:90)(cid:82)(cid:88)(cid:79)(cid:71)(cid:3)
have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
As of November 4, 2017, we are not involved in any material unconsolidated entities (other than the Compan(cid:92)(cid:182)(cid:86)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)
Majestic 21 and retirement community limited partnerships).
Forward Looking Statements
Certain statements in this report are forward-looking statements within the meaning of the federal securities laws. Although Nobility
believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, there are risks and
11
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, consumer confidence, adverse weather conditions that reduce sales at retail centers, the risk of manufacturing
plant shutdowns due to storms or other factors, the impact of marketing and cost-management programs, reliance on the Florida
economy, impact of labor shortage, impact of materials shortage, increasing labor cost, cyclical nature of the manufactured housing
industry, impact of rising fuel costs, catastrophic events impacting insurance costs, availability of insurance coverage for various risks
(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:15)(cid:3)(cid:80)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:3)(cid:71)(cid:72)(cid:80)(cid:82)(cid:74)(cid:85)(cid:68)(cid:83)(cid:75)(cid:76)(cid:70)(cid:86)(cid:15)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:87)(cid:82)(cid:3)(cid:68)(cid:87)(cid:87)(cid:85)(cid:68)(cid:70)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:85)(cid:72)(cid:87)(cid:68)(cid:76)(cid:81)(cid:3)(cid:72)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:82)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:78)(cid:72)(cid:92)(cid:3)(cid:83)(cid:72)(cid:85)(cid:86)(cid:82)(cid:81)(cid:81)(cid:72)(cid:79)(cid:15)(cid:3)(cid:76)(cid:81)(cid:70)(cid:85)(cid:72)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)global
tensions, market disruptions resulting from terrorist or other attack and any armed conflict involving the United States and the impact
of inflation.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
As a smaller reporting company, we are not required to provide the information required by this item.
12
Item 8.
Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm-WithumSmith+Brown, PC
Consolidated Balance Sheets
Consolidated Statements of Comprehensive Income
(cid:38)(cid:82)(cid:81)(cid:86)(cid:82)(cid:79)(cid:76)(cid:71)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:54)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:38)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:40)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
14
15
16
17
18
19
13
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
of Nobility Homes, Inc.
We have audited the accompanying consolidated balance sheets (cid:82)(cid:73)(cid:3)(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:43)(cid:82)(cid:80)(cid:72)(cid:86)(cid:15)(cid:3)(cid:44)(cid:81)(cid:70)(cid:17)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:86)(cid:88)(cid:69)(cid:86)(cid:76)(cid:71)(cid:76)(cid:68)(cid:85)(cid:76)(cid:72)(cid:86)(cid:3)(cid:11)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:180)(cid:12)(cid:3)(cid:68)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)
November 4, 2017 and November 5, 2016, and the related consolidated statements of comprehensive income, changes in
(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:72)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:70)(cid:68)(cid:86)(cid:75)(cid:3)(cid:73)(cid:79)(cid:82)(cid:90)(cid:86)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)each of the years in the two-year period ended November 4, 2017. These consolidated
(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:86)(cid:83)(cid:82)(cid:81)(cid:86)(cid:76)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:17)(cid:3)Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
Nobility Homes, Inc. and subsidiaries as of November 4, 2017 and November 5, 2016, and the results of their operations and their
cash flows for each of the years in the two-year period ended November 4, 2017, in conformity with accounting principles generally
accepted in the United States of America.
/s/ WithumSmith+Brown, PC
Orlando, Florida
January 26, 2018
14
Nobility Homes, Inc.
Consolidated Balance Sheets
November 4, 2017 and November 5, 2016
Assets
Current assets:
Cash and cash equivalents
Short-term investments
Accounts receivable - trade
Note receivable
Mortgage notes receivable
Inventories
Pre-owned homes, net
Property held for sale
Prepaid expenses and other current assets
Deferred income taxes
Total current assets
Property, plant and equipment, net
Pre-owned homes, net
Interest receivable
Note receivable, less current portion
Mortgage notes receivable, less current portion
Other investments
Property held for sale
Cash surrender value of life insurance
Other assets
Total assets
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable
Accrued compensation
Accrued expenses and other current liabilities
Income taxes payable
Customer deposits
Total current liabilities
Deferred income taxes
Total liabilities
Commitments and contingent liabilities
Stockholders' equity:
Preferred stock, $.10 par value, 500,000 shares
authorized; none issued and outstanding
Common stock, $.10 par value, 10,000,000
shares authorized; 5,364,907 shares issued
Additional paid in capital
Retained earnings
Accumulated other comprehensive income
Less treasury stock at cost, 1,367,338 shares in 2017 and
1,361,300 shares in 2016
Total stockholders' equity
Total liabilities and stockholders' equity
November 4,
2017
November 5,
2016
$ 27,910,504
627,087
2,934,300
500,000
13,495
7,505,681
1,141,863
-
820,224
609,629
$ 24,562,638
481,025
2,641,763
500,000
9,717
6,969,081
1,295,694
213,437
638,939
556,773
42,062,783
37,869,067
4,304,771
815,358
101,301
1,134,086
240,297
1,471,029
599,455
3,262,848
156,287
4,063,711
1,733,610
48,376
2,030,000
174,270
1,367,496
386,018
3,085,916
156,287
$ 54,148,215
$ 50,914,751
$ 849,782
624,989
1,127,397
260,416
2,796,827
$ 835,279
682,815
1,123,698
759,128
1,706,795
5,659,411
5,107,715
1,074,507
1,140,529
6,733,918
6,248,244
-
-
536,491
10,669,231
46,167,528
412,233
536,491
10,663,348
43,458,271
266,171
(10,371,186)
(10,257,774)
47,414,297
44,666,507
$ 54,148,215
$ 50,914,751
The accompanying notes are an integral part of these financial statements.
15
Nobility Homes, Inc.
Consolidated Statements of Comprehensive Income
For the years ended November 4, 2017 and November 5, 2016
Net sales
Cost of goods sold
Gross profit
Year Ended
November 4,
2017
November 5,
2016
$ 37,543,071
$ 34,053,290
(28,881,992)
(26,117,155)
8,661,079
7,936,135
Selling, general and administrative expenses
(4,305,205)
(3,782,336)
Operating income
4,355,874
4,153,799
Other income
Interest income
Undistributed earnings in joint venture - Majestic 21
Proceeds received under escrow arrangement
Gain on sale of investment in retirement community
Miscellaneous
Total other income
149,613
103,533
504,548
-
54,682
112,802
123,772
788,566
3,990,000
15,297
812,376
5,030,437
Income before provision for income taxes
5,168,250
9,184,236
Income tax expense
Net income
Other comprehensive income
Unrealized investment gain
(1,858,267)
(3,219,042)
3,309,983
5,965,194
146,062
18,447
Comprehensive income
$ 3,456,045
$ 5,983,641
Weighted average number of shares outstanding:
Basic
Diluted
Net income per share:
Basic
Diluted
4,002,436
4,021,019
4,003,768
4,022,083
$ 0.83
$ 0.83
$ 1.48
$ 1.48
The accompanying notes are an integral part of these financial statements.
16
Nobility Homes, Inc.
(cid:38)(cid:82)(cid:81)(cid:86)(cid:82)(cid:79)(cid:76)(cid:71)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:54)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:38)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:40)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:3)
For the years ended November 4, 2017 and November 5, 2016
Common
Stock Shares
Common
Stock
Additional
Paid-in Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Income
Treasury
Stock
Total
Balance at October 31, 2015
4,031,569 $ 536,491 $ 10,650,723 $ 37,493,077 $ 247,724 $ (9,832,263)
$ 39,095,752
Balance at November 5, 2016 4,003,607 $ 536,491 $ 10,663,348 $43,458,271 $ 266,171 $(10,257,774)
Purchase of treasury
stock
Stock-based
compensation
Unrealized investment
loss
Exercise of employee
stock options
Net income
(32,375)
413
(cid:178)
4,000
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
Cash dividend
Purchase of treasury
stock
Stock-based
compensation
Unrealized investment
gain
Exercise of employee
stock options
Net income
(7,341)
303
(cid:178)
1,000
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
3,470
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(458,276)
(458,276)
(cid:178)
3,060
6,530
18,447
(cid:178)
18,447
9,155
(cid:178)
(cid:178)
5,965,194
(cid:178)
(cid:178)
29,705
(cid:178)
38,860
5,965,194
$ 44,666,507
(600,726)
(600,726)
(cid:178)
4,933
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(cid:178)
(123,237)
(123,237)
(cid:178)
2,285
7,218
146,062
(cid:178)
146,062
950
(cid:178)
(cid:178)
3,309,983
(cid:178)
(cid:178)
7,540
(cid:178)
8,490
3,309,983
Balance at November 4, 2017 3,997,569 $ 536,491 $ 10,669,231 $46,167,528 $ 412,233 $(10,371,186)
$47,414,297
The accompanying notes are an integral part of these financial statements.
17
Nobility Homes, Inc.
Consolidated Statements of Cash Flows
For the years ended November 4, 2017 and November 5, 2016
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation
Deferred income taxes
Undistributed earnings in joint venture - Majestic 21
Gain on sale of investment in retirement community
(Gain) loss on disposal of property, plant and equipment
Inventory impairment
Stock-based compensation
Decrease (increase) in:
Accounts receivable - trade
Inventories
Pre-owned homes
Income tax receivable
Prepaid expenses and other current assets
Interest receivable
(Decrease) increase in:
Accounts payable
Accrued compensation
Accrued expenses and other current liabilities
Income taxes payable
Customer deposits
Net cash provided by operating activities
Cash flows from investing activities:
Purchase of property, plant and equipment
Proceeds from sale of property, plant and equipment
Collections on note receivable
Distribution from joint venture - Majestic 21
Proceeds from sale of investment in retirement community
Collections on mortgage notes receivable
Issuance of mortgage note receivable
Collections on equipment notes receivable
Issuance of equipment note receivable
Increase in cash surrender value of life insurance
Net cash provided by investing activities
Cash flows from financing activities:
Payment of cash dividend
Proceeds from exercise of employee stock options
Purchase of treasury stock
Net cash used in financing activities
Increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Supplemental disclosure of cash flow information:
Income taxes paid
Year Ended
November 4,
2017
November 5,
2016
$ 3,309,983
$ 5,965,194
113,757
(118,878)
(103,533)
-
(3,869)
233,000
7,218
(292,537)
(536,600)
839,083
-
(181,285)
(52,925)
98,616
2,449,579
(123,772)
(3,990,000)
32,098
271,583
6,530
296,159
(949,376)
790,277
335
187,241
(48,376)
14,503
(57,826)
3,699
(498,712)
1,090,032
130,812
292,242
197,494
759,128
382,934
3,765,110
6,748,698
(364,698)
13,750
1,000,000
-
-
1,045
(70,850)
4,414
(108,500)
(176,932)
(829,002)
-
500,000
1,000,005
960,000
3,508
-
-
-
(170,447)
298,229
1,464,064
(600,726)
8,490
(123,237)
-
38,860
(458,276)
(715,473)
(419,416)
3,347,866
7,793,346
24,562,638
16,769,292
$ 27,910,504
$ 24,562,638
$ 2,476,500
$ 10,000
Note receivable acquired from sale of investment in retirement community
$ -
$ 3,030,000
The accompanying notes are an integral part of these financial statements.
18
NOTE 1 Reporting Entity and Significant Accounting Policies
Notes to Consolidated Financial Statements
Description of Business and Principles of Consolidation (cid:177) The consolidated financial statements include the accounts of Nobility
(cid:43)(cid:82)(cid:80)(cid:72)(cid:86)(cid:15)(cid:3)(cid:44)(cid:81)(cid:70)(cid:17)(cid:3)(cid:11)(cid:179)(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:180)(cid:12)(cid:15)(cid:3)(cid:76)(cid:87)(cid:86)(cid:3)(cid:90)(cid:75)(cid:82)(cid:79)(cid:79)(cid:92)-(cid:82)(cid:90)(cid:81)(cid:72)(cid:71)(cid:3)(cid:86)(cid:88)(cid:69)(cid:86)(cid:76)(cid:71)(cid:76)(cid:68)(cid:85)(cid:76)(cid:72)(cid:86)(cid:15)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:87)(cid:76)(cid:74)(cid:72)(cid:3)(cid:43)(cid:82)(cid:80)(cid:72)(cid:3)(cid:38)(cid:72)(cid:81)(cid:87)(cid:72)(cid:85)(cid:86)(cid:15)(cid:3)(cid:44)(cid:81)(cid:70)(cid:17)(cid:3)(cid:11)(cid:179)(cid:51)(cid:85)(cid:72)(cid:86)(cid:87)(cid:76)(cid:74)(cid:72)(cid:180)(cid:12), Nobility Parks I, LLC, Nobility
(cid:51)(cid:68)(cid:85)(cid:78)(cid:86)(cid:3)(cid:44)(cid:44)(cid:15)(cid:3)(cid:47)(cid:47)(cid:38)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:87)(cid:76)(cid:74)(cid:72)(cid:182)(cid:86)(cid:3)(cid:90)(cid:75)(cid:82)(cid:79)(cid:79)(cid:92)-owned subsidiaries, Mountain Financial, Inc., an independent insurance agency and licensed
mortgage loan originator and (cid:48)(cid:68)(cid:77)(cid:72)(cid:86)(cid:87)(cid:76)(cid:70)(cid:3)(cid:43)(cid:82)(cid:80)(cid:72)(cid:86)(cid:15)(cid:3)(cid:44)(cid:81)(cid:70)(cid:17)(cid:15)(cid:3)(cid:11)(cid:70)(cid:82)(cid:79)(cid:79)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:79)(cid:92)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:180)(cid:12)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:76)(cid:86)(cid:3)(cid:72)(cid:81)(cid:74)(cid:68)(cid:74)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:80)(cid:68)(cid:81)(cid:88)(cid:73)(cid:68)(cid:70)(cid:87)(cid:88)(cid:85)(cid:72)(cid:3)(cid:68)(cid:81)d
sale of manufactured and modular homes to various dealerships, including its own retail sales centers, and manufactured housing
communities throughout Florida. The Company has one manufacturing plant in operation that is located in Ocala, Florida. At
November 4, 2017 Prestige operated ten Florida retail sales centers: Ocala (2), Chiefland, Auburndale, Inverness, Hudson, Tavares,
Yulee, Panama City and Punta Gorda.
All intercompany accounts and transactions have been eliminated in consolidation. The consolidated financial statements are prepared
in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP).
Use of Estimates (cid:177) The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial statements and accompanying disclosures. These
(cid:72)(cid:86)(cid:87)(cid:76)(cid:80)(cid:68)(cid:87)(cid:72)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:86)(cid:86)(cid:88)(cid:80)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:88)(cid:83)(cid:82)(cid:81)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:69)(cid:72)(cid:86)(cid:87)(cid:3)(cid:78)(cid:81)(cid:82)(cid:90)(cid:79)(cid:72)(cid:71)(cid:74)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:70)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:87)(cid:3)(cid:72)(cid:89)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)any may take in
the future. The Company is subject to uncertainties such as the impact of future events, economic, environmental and political factors
(cid:68)(cid:81)(cid:71)(cid:3)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:72)(cid:81)(cid:89)(cid:76)(cid:85)(cid:82)(cid:81)(cid:80)(cid:72)(cid:81)(cid:87)(cid:30)(cid:3)(cid:87)(cid:75)(cid:72)(cid:85)(cid:72)(cid:73)(cid:82)(cid:85)(cid:72)(cid:15)(cid:3)(cid:68)(cid:70)(cid:87)(cid:88)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86)(cid:3)(cid:70)(cid:82)(cid:88)(cid:79)(cid:71)(cid:3)(cid:71)(cid:76)(cid:73)(cid:73)(cid:72)(cid:85)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:87)(cid:75)(cid:72)(cid:86)(cid:72)(cid:3)(cid:72)(cid:86)(cid:87)(cid:76)mates. Accordingly, the
(cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:72)(cid:86)(cid:87)(cid:76)(cid:80)(cid:68)(cid:87)(cid:72)(cid:86)(cid:3)(cid:88)(cid:86)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:85)(cid:72)(cid:83)(cid:68)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:82)(cid:79)(cid:76)(cid:71)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:90)(cid:76)(cid:79)(cid:79)(cid:3)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3)(cid:68)(cid:86)(cid:3)(cid:81)(cid:72)(cid:90)(cid:3)(cid:72)(cid:89)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:82)(cid:70)(cid:70)ur, as
(cid:80)(cid:82)(cid:85)(cid:72)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:85)(cid:76)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:76)(cid:86)(cid:3)(cid:68)(cid:70)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:71)(cid:15)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:71)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:68)(cid:79)(cid:3)(cid:76)(cid:81)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:76)(cid:86)(cid:3)(cid:82)(cid:69)(cid:87)(cid:68)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:72)(cid:81)vironment changes. Changes in
estimates are made when circumstances warrant. Such changes in estimates and refinements in estimation methodologies are reflected
in the reported financial condition and results of operations; if material, the effects of changes in estimates are disclosed in the notes to
the consolidated financial statements. Significant estimates and assumptions by management affect: valuation of pre-owned homes,
the allowance for doubtful accounts, the carrying value of long-lived assets, the provision for income taxes and related deferred tax
accounts, certain accrued expenses and contingencies, warranty reserve and stock-based compensation.
Fiscal Year (cid:177) (cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:73)(cid:76)(cid:86)(cid:70)(cid:68)(cid:79)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:3)(cid:72)(cid:81)(cid:71)(cid:86)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:76)(cid:85)(cid:86)(cid:87)(cid:3)(cid:54)(cid:68)(cid:87)(cid:88)(cid:85)(cid:71)(cid:68)(cid:92)(cid:3)(cid:82)(cid:81)(cid:3)(cid:82)(cid:85)(cid:3)(cid:68)(cid:73)(cid:87)(cid:72)(cid:85)(cid:3)(cid:50)(cid:70)(cid:87)(cid:82)(cid:69)(cid:72)(cid:85) 31. The year ended November 4, 2017 (fiscal
year 2017) consisted of a fifty-two week period and the year ended November 5, 2016 (fiscal year 2016) consisted of a fifty-three
week period.
Revenue Recognition (cid:177) The Company recognizes revenue from its retail sales of new manufactured homes upon the occurrence of the
following:
Its receipt of a down payment,
(cid:135)(cid:3)
(cid:135) Construction of the home is complete,
(cid:135)(cid:3) Home has been delivered and set up at the retail home buyer(cid:182)(cid:86)(cid:3)(cid:86)(cid:76)(cid:87)(cid:72)(cid:15)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:76)(cid:87)(cid:79)(cid:72)(cid:3)(cid:75)(cid:68)(cid:86)(cid:3)(cid:69)(cid:72)(cid:72)(cid:81)(cid:3)(cid:87)(cid:85)(cid:68)(cid:81)(cid:86)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:87)(cid:68)(cid:76)(cid:79)(cid:3)(cid:75)(cid:82)(cid:80)(cid:72)(cid:3)(cid:69)(cid:88)(cid:92)(cid:72)(cid:85)(cid:15)(cid:3)
(cid:135)(cid:3) Remaining funds have been released by the finance company (financed sales transaction), remaining funds have been
committed by the finance company by an agreement with respect to financing obtained by the customer, usually in the
form of a written approval for permanent home financing received from a lending institution, (financed construction sales
transaction) or cash has been received from the home buyer (cash sales transaction), and
(cid:135)(cid:3) Completion of any other significant obligations.
The Company recognizes revenue from the sale of the repurchased homes upon transfer of title to the new purchaser.
The Company recognizes revenues from its 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. For wholesale
shipments to independent dealers, the Company has no obligation to setup the home or to complete any other significant obligations.
The Company recognizes revenues 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
(cid:80)(cid:68)(cid:81)(cid:92)(cid:3)(cid:70)(cid:68)(cid:86)(cid:72)(cid:86)(cid:15)(cid:3)(cid:76)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:73)(cid:76)(cid:85)(cid:86)(cid:87)(cid:3)(cid:81)(cid:82)(cid:87)(cid:76)(cid:73)(cid:76)(cid:70)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:80)(cid:82)(cid:88)(cid:81)(cid:87)(cid:86)(cid:3)(cid:72)(cid:68)(cid:85)(cid:81)(cid:72)(cid:71)(cid:3)(cid:71)(cid:88)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:79)(cid:68)(cid:70)(cid:78) 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
(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:73)(cid:76)(cid:85)(cid:86)(cid:87)(cid:3)(cid:81)(cid:82)(cid:87)(cid:76)(cid:73)(cid:76)(cid:70)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:80)(cid:82)(cid:88)(cid:81)(cid:87)(cid:86)(cid:3)(cid:72)(cid:68)(cid:85)(cid:81)(cid:72)(cid:71)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:72)(cid:86)(cid:3)(cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:83)(cid:85)(cid:76)(cid:68)(cid:87)(cid:72) 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, 2017 or November 5, 2016.
19
Notes to Consolidated Financial Statements
Revenues by Products and Services (cid:177) Revenues by net sales from manufactured housing, pre-owned homes, and insurance agent
commissions for the years ended November 4, 2017 and November 5, 2016 are as follows:
Manufactured housing
Pre-owned homes
Insurance agent commissions
Total net sales
2017
2016
$35,689,014
1,586,124
267,933
$32,189,695
1,628,336
235,259
$37,543,071
$34,053,290
Cash and Cash Equivalents (cid:177) The Company considers all money market accounts and highly liquid debt instruments purchased with
an original maturity of three months or less to be cash equivalents.
Accounts Receivable (cid:177) Accounts receivable are stated at net realizable value. An allowance for doubtful accounts is provided based
on prior (cid:70)(cid:82)(cid:79)(cid:79)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:85)(cid:76)(cid:72)(cid:81)(cid:70)(cid:72)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:68)(cid:81)(cid:68)(cid:79)(cid:92)(cid:86)(cid:76)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:86)(cid:83)(cid:72)(cid:70)(cid:76)(cid:73)(cid:76)(cid:70)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:86)(cid:17)(cid:3)(cid:36)(cid:87)(cid:3)November 4, 2017 or November 5, 2016, in the
opinion of management, all accounts were considered fully collectible and, accordingly, no allowance was deemed necessary.
Accounts receivable fluctuate due to the number of homes sold to independent dealers. The Company recognizes revenues from its
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.
Investments (cid:177) (cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:86)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:72)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:3)(cid:86)(cid:72)(cid:70)(cid:88)(cid:85)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:3)(cid:83)(cid:88)(cid:69)(cid:79)(cid:76)(cid:70)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:17)(cid:3)(cid:44)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:80)(cid:68)(cid:87)(cid:88)(cid:85)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:79)(cid:72)(cid:86)(cid:86)(cid:3)(cid:87)(cid:75)(cid:68)(cid:81)(cid:3)
one year are classified as short-term investment(cid:86)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:72)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:76)(cid:81)(cid:3)(cid:68)(cid:3)(cid:83)(cid:88)(cid:69)(cid:79)(cid:76)(cid:70)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:76)(cid:86)(cid:3)(cid:70)(cid:79)(cid:68)(cid:86)(cid:86)(cid:76)(cid:73)(cid:76)(cid:72)(cid:71)(cid:3)(cid:68)(cid:86)(cid:3)(cid:179)(cid:68)(cid:89)(cid:68)(cid:76)(cid:79)(cid:68)(cid:69)(cid:79)(cid:72)-
for-(cid:86)(cid:68)(cid:79)(cid:72)(cid:180)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:70)(cid:68)(cid:85)(cid:85)(cid:76)(cid:72)(cid:71)(cid:3)(cid:68)(cid:87)(cid:3)(cid:73)(cid:68)(cid:76)(cid:85)(cid:3)(cid:89)(cid:68)(cid:79)(cid:88)(cid:72)(cid:17)(cid:3)(cid:56)(cid:81)(cid:85)(cid:72)(cid:68)(cid:79)(cid:76)(cid:93)(cid:72)(cid:71)(cid:3)(cid:74)(cid:68)(cid:76)(cid:81)(cid:86)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:89)(cid:68)(cid:76)(cid:79)(cid:68)(cid:69)(cid:79)(cid:72)-for-sale securities, net of taxes, are recorded in accumulated other
comprehensive income.
The Company continually reviews its investments to determine whether a decline in fair value below the cost basis is other than
temporary. If the decline in fair value is judged to be other than temporary, the cost basis of the security is written down to fair value
and the amount of the write-down is included in the accompanying consolidated statements of income and other comprehensive
income.
Inventories (cid:177) New home inventory is carried at the lower of cost or market value. 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. In addition, an allocation of depreciation and amortization is included in cost of goods sold. 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 fair market value.
The Company acquired certain repossessed pre-owned inventory (Buy Back Inventory) in 2011 as part of an Amendment of the
Finance Revenue Sharing Agreement with 21st Mortgage Corporation. This inventory is valued at the Com(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:70)(cid:82)(cid:86)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:68)(cid:70)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:3)
determined on the specific identification method, plus refurbishment costs (any item on the home that needs to be repaired or
replaced) incurred to date to bring the inventory to a more saleable state. The Buy Back inventory amount is reduced where necessary
on a unit specific basis by a valuation reserve which management believes results in inventory being valued at market.
Other pre-owned homes are acquired (Repossessions Inventory) as a convenience to the (cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:77)(cid:82)(cid:76)(cid:81)(cid:87)(cid:3)(cid:89)(cid:72)(cid:81)(cid:87)(cid:88)(cid:85)(cid:72)(cid:3)(cid:83)artner, 21st
Mortgage Corporation. This inventory has been repossessed by 21st Mortgage Corporation or through mortgage foreclosure. The
Company acquired this inventory at the amount of the uncollected balance of the financing at the time of the foreclosure/repossessions
by 21st Mortgage Corporation. The Company records this inventory at cost determined on the specific identification method. All of
the refurbishment costs are paid by 21st Mortgage Corporation. This arrangement assists 21st Mortgage Corporation with liquidation
their repossessed inventory. The timing of these repurchases by the Company is unpredictable as it is based on the repossessions 21st
Mortgage Corporation incurs in the portfolio. When the home is sold, the Company retains the cost of the home, an interest factor on
the cost of the home and a sales commission for the sale of the home, from the sales proceeds. Any additional proceeds are paid to
21st Mortgage. Any shortfall from the proceeds to cover these amounts is paid by 21st Mortgage to the Company. As the Company has
no risk of loss on the sale, there is no valuation allowance necessary for this inventory.
Pre-owned homes are also taken as trade-ins on new home sales (Trade-in Inventory). This inventory is recorded at estimated actual
wholesale value which is generally lower then market value, determined on the specific identification method, plus refurbishment
20
costs incurred to date to bring the inventory to a more saleable state. The Trade-in inventory amount is reduced where necessary on a
unit specific basis by a valuation reserve which management believes results in inventory being valued at market.
Notes to Consolidated Financial Statements
Other inventory costs are determined on a first-in, first-out basis.
See Note 6 for further discussion of inventories.
Property, Plant and Equipment (cid:177) Property, plant and equipment are stated at cost and depreciated over their estimated useful lives
using the straight-line method. Routine maintenance and repairs are charged to expense when incurred. Major replacements and
improvements are capitalized. Gains or losses are credited or charged to earnings upon disposition.
Investment in Majestic 21 (cid:177) Majestic 21 was formed in 1997 as a joint venture with our joint venture partner, an unrelated entity, 21st
(cid:48)(cid:82)(cid:85)(cid:87)(cid:74)(cid:68)(cid:74)(cid:72)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:11)(cid:179)(cid:21)(cid:20)st (cid:48)(cid:82)(cid:85)(cid:87)(cid:74)(cid:68)(cid:74)(cid:72)(cid:180)(cid:12)(cid:17)(cid:3)(cid:58)(cid:72)(cid:3)(cid:75)(cid:68)(cid:89)(cid:72)(cid:3)(cid:69)(cid:72)(cid:72)(cid:81)(cid:3)(cid:68)(cid:79)(cid:79)(cid:82)(cid:70)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:81)(cid:72)(cid:87)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:71)(cid:76)(cid:86)(cid:87)(cid:85)(cid:76)(cid:69)(cid:88)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:82)(cid:81)(cid:3)(cid:68)(cid:3)(cid:24)(cid:19)(cid:18)(cid:24)(cid:19)(cid:3)(cid:69)(cid:68)(cid:86)(cid:76)(cid:86)(cid:3)(cid:86)(cid:76)(cid:81)(cid:70)(cid:72)(cid:3)
(cid:48)(cid:68)(cid:77)(cid:72)(cid:86)(cid:87)(cid:76)(cid:70)(cid:3)(cid:21)(cid:20)(cid:182)(cid:86)(cid:3)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:17)(cid:3)(cid:58)(cid:75)(cid:76)(cid:79)(cid:72)(cid:3)(cid:48)(cid:68)(cid:77)(cid:72)(cid:86)(cid:87)(cid:76)(cid:70)(cid:3)(cid:21)(cid:20)(cid:3)(cid:75)(cid:68)(cid:86)(cid:3)(cid:69)(cid:72)(cid:72)(cid:81)(cid:3)(cid:71)(cid:72)(cid:72)(cid:80)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:69)(cid:72)(cid:3)(cid:68)(cid:3)(cid:89)(cid:68)(cid:85)(cid:76)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:72)(cid:86)(cid:87)(cid:3)(cid:72)(cid:81)(cid:87)(cid:76)(cid:87)(cid:92)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:82)(cid:81)(cid:79)(cid:92)(cid:3)(cid:75)(cid:82)(cid:79)(cid:71)(cid:86)(cid:3)(cid:68)(cid:3)(cid:24)0% interest in
this entity and all allocations of profit and loss are on a 50/50 basis. Since all allocations are to be made on a 50/50 basis and joint
decisions with the joint venture partner are made which most significantly impact Majestic 21 economic performance therefore, the
Company is not required to consolidate Majestic 21 with the accounts of Nobility Homes in accordance with the Financial Accounting
Standards Board (FASB) Accounting Standards Codification (ASC) No. 810(cid:15)(cid:3)(cid:179)(cid:38)(cid:82)(cid:81)(cid:86)(cid:82)(cid:79)(cid:76)(cid:71)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:180)(cid:3)(cid:11)(cid:36)(cid:54)(cid:38)(cid:3)(cid:27)(cid:20)(cid:19)(cid:12). Management believes that
(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:80)(cid:68)(cid:91)(cid:76)(cid:80)(cid:88)(cid:80)(cid:3)(cid:72)(cid:91)(cid:83)(cid:82)(cid:86)(cid:88)(cid:85)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:79)(cid:82)(cid:86)(cid:86)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:3)(cid:85)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:76)(cid:87)(cid:86)(cid:3)(cid:76)(cid:81)(cid:89)(cid:82)(cid:79)(cid:89)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:48)(cid:68)(cid:77)(cid:72)(cid:86)(cid:87)(cid:76)(cid:70)(cid:3)(cid:21)(cid:20)(cid:3)(cid:76)(cid:86)(cid:3)(cid:76)(cid:87)(cid:86)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:77)(cid:82)(cid:76)(cid:81)(cid:87)(cid:3)(cid:89)(cid:72)(cid:81)(cid:87)(cid:88)(cid:85)(cid:72)
recorded in the accounts of Nobility Homes as of November 4, 2017 or November 5, 2016. Based on manageme(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:72)(cid:89)(cid:68)(cid:79)(cid:88)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:85)(cid:72)(cid:3)
was no impairment of this investment at November 4, 2017 or November 5, 2016.
The Company entered into an arrangement in 2002 with 21st Mortgage to repurchase certain pre-owned homes. Under this
arrangement or any other arrangement, the Company is not obligated to repurchase any foreclosed/repossessed units of Majestic 21 as
it does not have a repurchase agreement or any other guarantees with Majestic 21. However, the Company buys from 21st Mortgage
foreclosed/repossessed units from the Majestic 21 portfolio and acts as a remarketing agent. It resells those units through the
(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:81)(cid:72)(cid:87)(cid:90)(cid:82)(cid:85)(cid:78)(cid:3)(cid:82)(cid:73)(cid:3)(cid:85)(cid:72)(cid:87)(cid:68)(cid:76)(cid:79)(cid:3)(cid:70)(cid:72)(cid:81)(cid:87)(cid:72)(cid:85)(cid:86)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:69)(cid:72)(cid:79)(cid:76)(cid:72)(cid:89)(cid:72)(cid:86)(cid:3)(cid:69)(cid:72)nefits the historical loss experience of the joint venture. The only
(cid:76)(cid:80)(cid:83)(cid:68)(cid:70)(cid:87)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:68)(cid:85)(cid:85)(cid:68)(cid:81)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:76)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:72)(cid:68)(cid:85)(cid:81)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:86)(cid:68)(cid:79)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:86)(cid:72)(cid:3)(cid:88)(cid:81)(cid:76)(cid:87)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:72)(cid:86)(cid:87)(cid:3)(cid:72)(cid:68)(cid:85)ned for
(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:70)(cid:68)(cid:85)(cid:85)(cid:92)(cid:76)(cid:81)(cid:74)(cid:3)(cid:70)(cid:82)(cid:86)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:88)(cid:81)(cid:76)(cid:87)(cid:86)(cid:3)(cid:90)(cid:75)(cid:76)(cid:79)(cid:72)(cid:3)(cid:76)(cid:81)(cid:3)(cid:76)(cid:81)(cid:89)entory.
See Note 15 (cid:73)(cid:82)(cid:85)(cid:3)(cid:71)(cid:76)(cid:86)(cid:70)(cid:88)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:74)(cid:88)(cid:68)(cid:85)(cid:68)(cid:81)(cid:87)(cid:72)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:3)(cid:7)(cid:24)(cid:3)(cid:80)(cid:76)(cid:79)(cid:79)(cid:76)(cid:82)(cid:81)(cid:3)(cid:81)(cid:82)(cid:87)(cid:72)(cid:3)(cid:83)(cid:68)(cid:92)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:48)(cid:68)(cid:77)(cid:72)(cid:86)(cid:87)(cid:76)(cid:70)(cid:3)(cid:21)(cid:20)(cid:17)(cid:3)
Other Investments - The Company has a 31.3% (cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:72)(cid:86)(cid:87)(cid:3)(cid:76)(cid:81)(cid:3)(cid:58)(cid:68)(cid:79)(cid:71)(cid:72)(cid:81)(cid:3)(cid:58)(cid:82)(cid:82)(cid:71)(cid:86)(cid:3)(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:3)(cid:47)(cid:47)(cid:38)(cid:3)(cid:11)(cid:179)(cid:58)(cid:68)(cid:79)(cid:71)(cid:72)(cid:81)(cid:3)(cid:58)(cid:82)(cid:82)(cid:71)(cid:86) South(cid:180)(cid:12)(cid:15)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)
owns and operates a retirement manufactured home community located in Homosassa, Florida. The Company has the right to assign
some of its ownership to partners other than Nobility Homes. (cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:76)(cid:81)(cid:3)(cid:58)(cid:68)(cid:79)(cid:71)(cid:72)(cid:81)(cid:3)(cid:58)(cid:82)(cid:82)(cid:71)(cid:86)(cid:3)South is fully impaired.
The majority owner of Walden Woods South (cid:76)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)President (see note 4).
(cid:50)(cid:81)(cid:3)(cid:48)(cid:68)(cid:85)(cid:70)(cid:75)(cid:3)(cid:22)(cid:20)(cid:15)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:86)(cid:82)(cid:79)(cid:71)(cid:3)(cid:76)(cid:87)(cid:86)(cid:3)(cid:23)(cid:27)(cid:17)(cid:24)(cid:8)(cid:3)(cid:79)(cid:76)(cid:80)(cid:76)(cid:87)(cid:72)(cid:71)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:81)(cid:72)(cid:85)(cid:86)(cid:75)(cid:76)(cid:83)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:72)(cid:86)(cid:87)(cid:3)(cid:76)(cid:81)(cid:3)(cid:38)(cid:53)(cid:41)(cid:3)(cid:44)(cid:44)(cid:44)(cid:15)(cid:3)(cid:47)(cid:87)(cid:71)(cid:17)(cid:3)(cid:11)(cid:179)(cid:38)(cid:92)(cid:83)(cid:85)(cid:72)(cid:86)(cid:86)(cid:3)(cid:38)(cid:85)(cid:72)(cid:72)(cid:78)(cid:180)(cid:12)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:7)(cid:22)(cid:15)(cid:28)(cid:28)(cid:19)(cid:15)(cid:19)(cid:19)(cid:19)(cid:17)
Cypress Creek is a retirement manufactured home community located in Winter Haven, Florida. The Company received $960,000
cash, net of $40,000 cost paid and a note receivable for $3,030,000, plus interest at 3.0%, which is payable to the Company in
$500,000 installments each July 1st and January 1st, commencing January 1, 2017 through July 1, 2019. The Company received a
$500,000 payment in June 2016 and a $1,000,000 payment in January 2017. Payments are applied first to any outstanding principal
and then to accrued interest at the end of the term. The Company recognized a gain of $3,990,000 in fiscal year 2016.
See further discussion of these other investments in Note 5.
Impairment of Long-Lived Assets (cid:177) In the event that facts and circumstances indicate that the carrying value of a long-lived asset may
be impaired, an evaluation of recoverability is performed by comparing the estimated future undiscounted cash flows associated with
(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:182)(cid:86)(cid:3)(cid:70)(cid:68)(cid:85)(cid:85)(cid:92)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:80)(cid:82)(cid:88)(cid:81)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:71)(cid:72)(cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:72)(cid:3)(cid:76)(cid:73)(cid:3)(cid:68)(cid:3)(cid:90)(cid:85)(cid:76)(cid:87)(cid:72)-down is required. If such evaluations indicate that the future
undiscounted cash flows of certain long-lived assets are not sufficient to recover the carrying value of such assets, the assets are
adjusted to their fair values.
Customer Deposits (cid:177) A retail customer is required to make a down payment ranging from $500 to 35% of the retail contract price
based upon the credit worthiness of the customer. The retail customer receives the full down payment back when the Company is not
able to obtain retail financing. If the retail customer receives retail financing and decides not to go through with the retail sale, the
Company can withhold 20% of the retail contract price. The Company does not typically receive any deposits from independent
dealers.
21
Notes to Consolidated Financial Statements
Company Owned Life Insurance (cid:177) The Company has purchased life insurance policies on certain key executives. Company owned
life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash
surrender value adjusted for other charges or other amounts due that are probable at settlement.
Warranty Costs (cid:177) The Company provides for a warranty as the manufactured homes are sold. Amounts related to these warranties for
fiscal years 2017 and 2016 are as follows:
Beginning accrued warranty expense
Less: reduction for payments
Plus: additions to accrual
Ending accrued warranty expense
2017
125,000
(408,925 )
408,925
125,000
$
$
2016
100,000
(476,039 )
501,039
125,000
$
$
(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:79)(cid:76)(cid:80)(cid:76)(cid:87)(cid:72)(cid:71)(cid:3)(cid:90)(cid:68)(cid:85)(cid:85)(cid:68)(cid:81)(cid:87)(cid:92)(cid:3)(cid:70)(cid:82)(cid:89)(cid:72)(cid:85)(cid:86)(cid:3)(cid:86)(cid:88)(cid:69)(cid:86)(cid:87)(cid:68)(cid:81)(cid:87)(cid:76)(cid:68)(cid:79)(cid:3)(cid:71)(cid:72)(cid:73)(cid:72)(cid:70)(cid:87)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:80)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79)(cid:3)(cid:82)(cid:85)(cid:3)(cid:90)(cid:82)(cid:85)(cid:78)(cid:80)(cid:68)(cid:81)(cid:86)(cid:75)(cid:76)(cid:83)(cid:3)(cid:76)(cid:81)(cid:3)(cid:86)(cid:83)(cid:72)(cid:70)(cid:76)(cid:73)(cid:76)(cid:72)(cid:71)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:82)(cid:81)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:75)(cid:82)(cid:80)(cid:72)(cid:3)
including structural elements, plumbing systems, electrical systems, and heating and cooling systems which are supplied by the
Company that may occur under normal use and service during a period of twelve (12) months from the date of delivery to the original
homeowner, and applies to the original homeowner or any subsequent homeowner to whom this product is transferred during the
duration of this twelve (12) month period.
The Company tracks the warranty claims per home. Based on the history of the warranty claims, the Company has determined that a
majority of warranty claims usually occur within the first three months after the home is sold. The Company determines its warranty
accrual using the last three months of home sales. Accrued warranty costs are included in accrued expenses in the accompanying
consolidated balance sheets.
Accrued Home Setup Costs (cid:177) Accrued home setup costs represent amounts due to vendors and/or independent contractors for various
(cid:76)(cid:87)(cid:72)(cid:80)(cid:86)(cid:3)(cid:85)(cid:72)(cid:79)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:70)(cid:87)(cid:88)(cid:68)(cid:79)(cid:3)(cid:86)(cid:72)(cid:87)(cid:88)(cid:83)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:75)(cid:82)(cid:80)(cid:72)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:87)(cid:68)(cid:76)(cid:79)(cid:3)(cid:75)(cid:82)(cid:80)(cid:72)(cid:3)(cid:69)(cid:88)(cid:92)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:86)(cid:76)(cid:87)(cid:72)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:86)(cid:72)(cid:3)(cid:70)(cid:82)(cid:86)(cid:87)(cid:86)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:3)(cid:68)(cid:83)(cid:83)(cid:79)(cid:76)(cid:68)(cid:81)(cid:70)(cid:72)(cid:86)(cid:15)(cid:3)(cid:68)(cid:76)(cid:85)(cid:3)(cid:70)(cid:82)(cid:81)(cid:71)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:72)rs,
electrical/plumbing hook-ups, furniture, insurance, impact/permit fees, land/home fees, extended service plan, freight, skirting, steps,
well, septic tanks and other setup costs and are included in accrued expenses in the accompanying consolidated balance sheets.
Stock-Based Compensation (cid:177) T(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:75)(cid:68)(cid:86)(cid:3)(cid:68)(cid:3)(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)(cid:76)(cid:81)(cid:70)(cid:72)(cid:81)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:83)(cid:79)(cid:68)(cid:81)(cid:3)(cid:11)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)(cid:51)(cid:79)(cid:68)(cid:81)(cid:180)(cid:12)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:68)(cid:88)(cid:87)(cid:75)(cid:82)(cid:85)(cid:76)(cid:93)(cid:72)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:76)(cid:86)(cid:86)(cid:88)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)
purchase common stock. Stock-based compensation is measured at the grant date based on the fair value of the award and is
recognized as expense over the period during which an employee is required to provide service in exchange for the award (usually the
vesting period).
Rebate Program (cid:177) The Company has a rebate program for some dealers based upon the number and type of home purchased, which
pays rebates based upon sales volume to the dealers. Volume rebates are recorded as a reduction of sales in the accompanying
consolidated financial statements. The rebate liability is calculated and recognized as eligible homes are sold based upon factors
surrounding the activity and prior experience of specific dealers and is included in accrued expenses in the accompanying consolidated
balance sheets. There were no rebates earned by dealers during fiscal years 2017 and 2016.
Advertising (cid:177) Advertising for Prestige retail sales centers consists primarily of newspaper, radio and television advertising. All costs
are expensed as incurred. Advertising expense amounted to approximately $190,000 and $211,000 for fiscal years 2017 and 2016,
respectively.
Income Taxes (cid:177) The Company accounts for income taxes utilizing the asset and liability method. This approach requires the
recognition of deferred tax assets and liabilities for the expected future tax consequences attributable to temporary differences between
the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets are reduced
by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax
assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be recovered or settled. Deferred tax assets and liabilities are
adjusted for the effects of changes in tax laws and rates on the date of enactment.
Net Income per Share (cid:177) (cid:55)(cid:75)(cid:72)(cid:86)(cid:72)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:3)(cid:179)(cid:69)(cid:68)(cid:86)(cid:76)(cid:70)(cid:180)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:179)(cid:71)(cid:76)(cid:79)(cid:88)(cid:87)(cid:72)(cid:71)(cid:180)(cid:3)(cid:81)(cid:72)(cid:87)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:83)(cid:72)(cid:85)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:3)(cid:76)(cid:81)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:68)(cid:79)(cid:79)(cid:3)(cid:83)(cid:72)(cid:85)(cid:76)(cid:82)(cid:71)(cid:86)(cid:3)
presented. The basic net income per share is calculated by dividing net income by the weighted-average number of shares outstanding.
The diluted net income per share is calculated by dividing net income by the weighted-average number of shares outstanding, adjusted
for dilutive common shares.
22
Notes to Consolidated Financial Statements
Shipping and Handling Costs (cid:177) Net sales include the revenue related to shipping and handling charges billed to customers. The
related costs associated with shipping and handling is included as a component of cost of goods sold.
Comprehensive Income (cid:177) Comprehensive income includes net income as well as other comprehensive income or loss. The
(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:85)(cid:72)(cid:75)(cid:72)(cid:81)(cid:86)(cid:76)(cid:89)(cid:72)(cid:3)(cid:76)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)or loss consists of unrealized gains or losses on available-for-sale securities, net of related
taxes.
Segments (cid:177) (cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:70)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:71)(cid:72)(cid:70)(cid:76)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:80)(cid:68)(cid:78)(cid:72)(cid:85)(cid:3)(cid:76)(cid:86)(cid:3)(cid:76)(cid:87)(cid:86)(cid:3)(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:50)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:15)(cid:3)(cid:90)(cid:75)(cid:82)(cid:3)(cid:85)(cid:72)(cid:89)(cid:76)(cid:72)(cid:90)(cid:86)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:76)(cid:81)(cid:73)(cid:82)(cid:85)(cid:80)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:81)(cid:3)(cid:68)(cid:3)
company-wide or consolidated basis. Accordingly, the Company accounts for its operations in accordance with FASB ASC No. 280,
(cid:179)(cid:54)(cid:72)(cid:74)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:17)(cid:180)(cid:3)(cid:49)(cid:82)(cid:3)(cid:86)(cid:72)(cid:74)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:71)(cid:76)(cid:86)(cid:70)(cid:79)(cid:82)(cid:86)(cid:88)(cid:85)(cid:72)(cid:86)(cid:3)(cid:75)(cid:68)(cid:89)(cid:72)(cid:3)(cid:69)(cid:72)(cid:72)(cid:81)(cid:3)(cid:80)(cid:68)(cid:71)(cid:72)(cid:3)(cid:68)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:71)(cid:72)(cid:85)(cid:86)(cid:3)(cid:76)(cid:87)(cid:86)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:68)(cid:70)(cid:87)(cid:76)(cid:89)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:3)(cid:86)(cid:76)(cid:81)(cid:74)(cid:79)(cid:72)(cid:3)(cid:86)(cid:72)(cid:74)(cid:80)(cid:72)(cid:81)(cid:87)(cid:17)(cid:3)
Major Customers (cid:177) Sales to one publicly traded REIT (Real Estate Investment Trust) which owns multiple retirement communities in
our market area accounted for $1,602,185 or 4% of our total sales in fiscal year 2017 and sales to two publicly traded REITs owning
multiple retirement communities accounted for $3,581,320 or 11% and $629,345 or 2% respectively, of our total sales in fiscal year
2016. Other companies which own multiple retirement communities in our market area accounted for $2,155,575 or 6% of our total
sales in fiscal year 2017 and $1,416,180 or 4% of our total sales in fiscal year 2016. Accounts receivable due from these customers
were $1,533,014 and $1,196,813 at November 4, 2017 and November 5, 2016, respectively.
Concentration of Credit Risk (cid:177) (cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:76)(cid:81)(cid:86)(cid:87)(cid:85)(cid:88)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:72)(cid:91)(cid:83)(cid:82)(cid:86)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:70)(cid:82)(cid:81)(cid:70)(cid:72)(cid:81)(cid:87)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:70)(cid:85)(cid:72)(cid:71)(cid:76)(cid:87)(cid:3)(cid:85)(cid:76)(cid:86)(cid:78)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:86)(cid:87)(cid:3)
primarily of cash and cash equivalents, short-term and long-(cid:87)(cid:72)(cid:85)(cid:80)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:86)(cid:3)(cid:85)(cid:72)(cid:70)(cid:72)(cid:76)(cid:89)(cid:68)(cid:69)(cid:79)(cid:72)(cid:17)(cid:3)(cid:36)(cid:87)(cid:3)(cid:87)(cid:76)(cid:80)(cid:72)(cid:86)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)
deposits may exceed federally insured limits. However, the Company has not experienced any losses in such accounts and
(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:69)(cid:72)(cid:79)(cid:76)(cid:72)(cid:89)(cid:72)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:76)(cid:86)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:72)(cid:91)(cid:83)(cid:82)(cid:86)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:68)(cid:81)(cid:92)(cid:3)(cid:86)(cid:76)(cid:74)(cid:81)(cid:76)(cid:73)(cid:76)(cid:70)(cid:68)(cid:81)(cid:87)(cid:3)(cid:70)(cid:85)(cid:72)(cid:71)(cid:76)(cid:87)(cid:3)(cid:85)(cid:76)(cid:86)(cid:78)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:86)(cid:72)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:86)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:80)(cid:68)(cid:77)(cid:82)(cid:85)(cid:76)(cid:87)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)s
sales are credit sales which are made primarily to customers whose ability to pay is dependent upon the industry economics prevailing
in the areas where they operate; however, concentrations of credit risk with respect to accounts receivables is limited due to generally
short payment terms. The Company also performs ongoing credit evaluations of its customers to help further reduce credit risk. The
Company maintains reserves for potential credit losses when deemed necessary and such losses have historically been within
(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:70)(cid:87)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:17)(cid:3)
Concentration of Retail Financing Sources (cid:177)There are two national lenders that service the manufactured housing industry with
several others who specialize in government insured loans (Fannie, Freddie, FHA, VA, etc.). With only a few lenders dedicated to our
industry, the loss of any of them could adversely affect our retail sales.
Recently Issued Accounting Pronouncements (cid:177) In February 2016, the FASB issued Accounting Standards Update (ASU) No. 2016-
(cid:19)(cid:21)(cid:15)(cid:3)(cid:179)(cid:47)(cid:72)(cid:68)(cid:86)(cid:72)(cid:86)(cid:180)(cid:3)(cid:11)(cid:36)(cid:54)(cid:56)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)-02). The core principle of ASU 2016-02 is that an entity should recognize on its balance sheet assets and
liabilities arising from a lease. In accordance with that principle, ASU 2016-02 requires that a lessee recognize a liability to make
lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying leased asset for the lease term.
The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee will depend on the lease
classification as finance or operating lease. This new accounting guidance is effective for public companies for fiscal years beginning
after December 15, 2018 (i.e., calendar years beginning on January 1, 2019), including interim periods within those fiscal years. Early
adoption is permitted. The Company believes the implementation of this guidance will not have a material impact on its consolidated
financial statements.
In January 2016, the FASB issued ASU No. 2016-01(cid:15)(cid:3)(cid:179)Financial Instruments(cid:177)Overall: Recognition and Measurement of Financial
Assets and Financial Liabilities(cid:180)(cid:17)(cid:3)The amendments require all equity investments to be measured at fair value with changes in the fair
value recognized through net income (other than those accounted for under the equity method of accounting or those that result in
consolidation of the investee). The amendments also require an entity to present separately in other comprehensive income the portion
of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has
elected to measure the liability at fair value in accordance with the fair value option for financial instruments. In addition, the
amendments eliminate the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is
required to be disclosed for financial instruments measured at amortized cost on the balance sheet. The amendments in this update are
effective for public companies for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years.
The Company does not expect this amendment to have a material impact on its consolidated financial statements.
In November 2015, the FASB issued ASU No. 2015-(cid:20)(cid:26)(cid:3)(cid:179)(cid:44)(cid:81)(cid:70)(cid:82)(cid:80)(cid:72)(cid:3)(cid:55)(cid:68)(cid:91)(cid:72)(cid:86)(cid:3)(cid:11)(cid:55)(cid:82)(cid:83)(cid:76)(cid:70)(cid:3)(cid:26)(cid:23)(cid:19)(cid:12)(cid:29)(cid:3)(cid:37)(cid:68)(cid:79)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:54)(cid:75)(cid:72)(cid:72)(cid:87)(cid:3)(cid:38)(cid:79)(cid:68)(cid:86)(cid:86)(cid:76)(cid:73)(cid:76)(cid:70)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:39)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71)(cid:3)(cid:55)(cid:68)(cid:91)(cid:72)(cid:86)(cid:180)
(ASU 2015-17). ASU 2015-17 simplifies the presentation of deferred income taxes by eliminating the separate classification of
deferred income tax liabilities and assets into current and noncurrent amounts in the consolidated balance sheet statement of financial
position. The amendments in the update require that all deferred tax liabilities and assets be classified as noncurrent in the
consolidated balance sheet. The amendments in this update are effective for annual periods beginning after December 15, 2016, and
interim periods therein and may be applied either prospectively or retrospectively to all periods presented. Early adoption is permitted.
23
Notes to Consolidated Financial Statements
The Company has not adopted ASU 2015-17 and believes the implementation of this guidance will have no material impact on its
consolidated financial statements.
In July 2015, the FASB issued ASU No. 2015-11, (cid:179)(cid:44)(cid:81)(cid:89)(cid:72)(cid:81)(cid:87)(cid:82)(cid:85)(cid:92)(cid:3)(cid:11)(cid:55)(cid:82)(cid:83)(cid:76)(cid:70)(cid:3)(cid:22)(cid:22)(cid:19)(cid:12)(cid:29)(cid:3)(cid:54)(cid:76)(cid:80)(cid:83)(cid:79)(cid:76)(cid:73)(cid:92)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:48)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:44)(cid:81)(cid:89)(cid:72)(cid:81)(cid:87)(cid:82)(cid:85)(cid:92)(cid:180)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)
amendments require an entity to measure in scope inventory at the lower of cost and net realizable value. Net realizable value is the
estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and
transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. The
amendments do not apply to inventory that is measured using last-in, first-out (LIFO) or the retail inventory method. The amendments
apply to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost. The
amendments in this update are effective for public companies for fiscal years beginning after December 15, 2016. The Company does
not expect this amendment to have a material impact on its consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09, (cid:179)Revenue from Contracts with Customers (Topic 606)(cid:180) (ASU 2014-09), which
requires an entity to recognize revenue from the transfer of promised goods or services to customers in an amount that reflects the
consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance addresses, in particular,
contracts with more than one performance obligation, as well as the accounting for some costs to obtain or fulfill a contract with a
customer; and provides for additional disclosures with respect to revenues and cash flows arising from contracts with customers. With
respect to public entities, this update is effective for fiscal years, and interim periods within those years, beginning after December 15,
2017 and early adoption is not permitted. The Company believes the implementation of this guidance will have no material impact on
its consolidated financial statements.
The core principal of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to
customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or
services. Using this principle, a comprehensive framework was established for determining how much revenue to recognize and when
it should be recognized. To be consistent with this core principle, an entity is required to apply the following five-step approach:
(cid:135)(cid:3)
(cid:135)(cid:3)
Identify the contract(s) with a customer;
Identify each performance obligation in the contract;
(cid:135)(cid:3) Determine the transaction price;
(cid:135)(cid:3) Allocate the transaction price to each performance obligation; and
(cid:135)(cid:3) Recognize revenue when or as each performance obligation is satisfied.
(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:85)(cid:72)(cid:89)(cid:72)(cid:81)(cid:88)(cid:72)(cid:3)(cid:70)(cid:82)(cid:80)(cid:72)(cid:86)(cid:3)(cid:86)(cid:88)(cid:69)(cid:86)(cid:87)(cid:68)(cid:81)(cid:87)(cid:76)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:86)(cid:68)(cid:79)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:80)(cid:68)(cid:81)(cid:88)(cid:73)(cid:68)(cid:70)(cid:87)(cid:88)(cid:85)(cid:72)(cid:71)(cid:3)(cid:75)(cid:82)(cid:88)(cid:86)(cid:76)(cid:81)(cid:74)(cid:15)(cid:3)(cid:80)(cid:82)(cid:71)(cid:88)(cid:79)(cid:68)(cid:85)(cid:3)(cid:75)(cid:82)(cid:88)(cid:86)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:83)(cid:68)(cid:85)(cid:78)(cid:3)(cid:80)(cid:82)(cid:71)(cid:72)(cid:79)(cid:86)(cid:15)(cid:3)(cid:68)(cid:79)(cid:82)(cid:81)(cid:74)(cid:3)(cid:90)ith
freight billed to customers, parts sold and aftermarket services.
The Corporation has evaluated how the adoption of ASU 2014-09 will impact its financial position and result of operations by
applying the five-step approach to each revenue stream. No material changes resulting from this pending adoption were identified with
the modified retrospective method being utilized.
The Corporation, will greatly increase the amount of required disclosures, including but not limited to:
(cid:135)(cid:3) Disaggregation of revenue in to categories that depict how the nature, amount, timing and uncertainty of revenue and cash
flows are affected by economic factors;
(cid:135)(cid:3) The opening and closing balances of receivables, contract assets, and contract liabilities from contracts with customers, if
not otherwise separately presented or disclosed;
(cid:135)(cid:3) Revenue recognized in the reporting period that was included in the contract liability balance at the beginning of the
(cid:135)(cid:3)
(cid:135)(cid:3)
period;
Information about performance obligations in contracts with customers; and
Judgments that significantly affect the determination of the amount and timing of revenue from contracts with customers,
including the timing of satisfaction of performance obligation, and the transaction price and the amounts allocation to
performance obligations.
24
NOTE 2 Investments
The following is a summary of short-term investments (available for sale):
Notes to Consolidated Financial Statements
Equity securities in a public company
Amortized Cost
167,930
$
Equity securities in a public company
Amortized Cost
$
167,930
November 4, 2017
Gross
Unrealized
Gains
$459,157
Gross
Unrealized
Losses
$ (cid:178)
November 5, 2016
Gross
Unrealized
Gains
$313,095
Gross
Unrealized
Losses
$ (cid:178)
Estimated Fair
Value
627,087
$
Estimated Fair
Value
481,025
$
The fair values were estimated based on unadjusted quoted prices at each respective period end.
NOTE 3 Fair Values of Financial Investments
The carrying amount of cash and cash equivalents, accounts and notes receivable, accounts payable and accrued expenses
approximates fair value because of the short maturity of those instruments.
The Company accounts for the fair value of financial investments in accordance with FASB ASC No. 820, (cid:179)(cid:41)(cid:68)(cid:76)(cid:85)(cid:3)(cid:57)(cid:68)(cid:79)(cid:88)(cid:72)(cid:3)
(cid:48)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:180)(cid:3)(ASC 820).
ASC 820 defines fair value as the price that would be received upon the sale of an asset or paid to transfer a liability (i.e. exit price) in
an orderly transaction between market participants at the measurement date. ASC 820 requires disclosures that categorize assets and
liabilities measured at fair value into one of three different levels depending on the assumptions (i.e. inputs) used in the valuation.
Financial assets and liabilities are classified in their entirety based on the lowest level of input significant to the fair value
measurement. The ASC 820 fair value hierarchy is defined as follows:
(cid:135)(cid:3) Level 1(cid:178)Valuations are based on unadjusted quoted prices in active markets for identical assets or liabilities.
(cid:135)(cid:3) Level 2(cid:178)Valuations are based on quoted prices for similar assets or liabilities in active markets, or quoted prices in
markets that are not active for which significant inputs are observable, either directly or indirectly.
(cid:135)
Level 3(cid:178)Valuations are based on prices or valuation techniques that require inputs that are both unobservable and
(cid:86)(cid:76)(cid:74)(cid:81)(cid:76)(cid:73)(cid:76)(cid:70)(cid:68)(cid:81)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:68)(cid:79)(cid:79)(cid:3)(cid:73)(cid:68)(cid:76)(cid:85)(cid:3)(cid:89)(cid:68)(cid:79)(cid:88)(cid:72)(cid:3)(cid:80)(cid:72)(cid:68)(cid:86)(cid:88)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:17)(cid:3)(cid:44)(cid:81)(cid:83)(cid:88)(cid:87)(cid:86)(cid:3)(cid:85)(cid:72)(cid:73)(cid:79)(cid:72)(cid:70)(cid:87)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:69)(cid:72)(cid:86)(cid:87)(cid:3)(cid:72)(cid:86)(cid:87)(cid:76)(cid:80)(cid:68)(cid:87)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:90)(cid:75)(cid:68)(cid:87)(cid:3)(cid:80)(cid:68)(cid:85)(cid:78)(cid:72)(cid:87)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:76)(cid:70)(cid:76)(cid:83)(cid:68)(cid:81)(cid:87)(cid:86)(cid:3)
would use in valuing the asset or liability at the measurement date.
25
The following table represe(cid:81)(cid:87)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:79)(cid:76)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:70)(cid:68)(cid:85)(cid:85)(cid:76)(cid:72)(cid:71)(cid:3)(cid:68)(cid:87)(cid:3)(cid:73)(cid:68)(cid:76)(cid:85)(cid:3)(cid:89)(cid:68)(cid:79)(cid:88)(cid:72)(cid:3)(cid:68)(cid:87)(cid:3)November 4, 2017 and
November 5, 2016.
Notes to Consolidated Financial Statements
Equity securities in a public company
Equity securities in a public company
NOTE 4 Related Party Transactions
Affiliated Entities
November 4, 2017
Level 1
Level
2
Level 3
$ 627,087
$ (cid:178)
$ (cid:178)
November 5, 2016
Level 1
Level
2
Level 3
$ 481,025
$ (cid:178)
$ (cid:178)
TLT, Inc. (cid:177) Our President and Chairman of the Board of (cid:39)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)(cid:11)(cid:179)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:180)(cid:12)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:57)(cid:76)(cid:70)(cid:72)(cid:3)(cid:51)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:72)(cid:81)(cid:87)(cid:3)(cid:72)(cid:68)(cid:70)(cid:75)(cid:3)(cid:82)(cid:90)(cid:81)(cid:3)(cid:24)(cid:19)(cid:8)(cid:3)(cid:82)(cid:73)(cid:3)
the stock of TLT, Inc. TLT, Inc. is the general partner of limited partnerships which are developing manufactured housing
(cid:70)(cid:82)(cid:80)(cid:80)(cid:88)(cid:81)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:38)(cid:72)(cid:81)(cid:87)(cid:85)(cid:68)(cid:79)(cid:3)(cid:41)(cid:79)(cid:82)(cid:85)(cid:76)(cid:71)(cid:68)(cid:3)(cid:11)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)(cid:55)(cid:47)(cid:55)(cid:3)(cid:38)(cid:82)(cid:80)(cid:80)(cid:88)(cid:81)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:180)(cid:12)(cid:17)(cid:3)(cid:50)(cid:88)(cid:85)(cid:3)(cid:51)resident owns between a 24.75% and a 49.5% direct and indirect
interest in each of these limited partnerships. Our Executive Vice President owns between a 49.5% and a 57.75% direct and indirect
interest in each of these limited partnerships. The TLT Communities have purchased manufactured homes exclusively from the
Company since 1990. Sales to TLT Communities were not significant during fiscal years 2017 and 2016.
Walden Woods South (cid:177) (cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)President owns 51% of Walden Woods South LLC, which owns the Walden Woods South
retirement community.
NOTE 5 Other Investments
Investment in Joint Venture (cid:177) Majestic 21 (cid:177) During fiscal 1997, the Company contributed $250,000 for a 50% interest in a joint
venture engaged in providing mortgage financing on manufactured homes. This investment is accounted for under the equity method
of accounting.
While Majestic 21 has been deemed to be a variable interest entity, the Company only holds a 50% interest in this entity and all
(cid:68)(cid:79)(cid:79)(cid:82)(cid:70)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:83)(cid:85)(cid:82)(cid:73)(cid:76)(cid:87)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:79)(cid:82)(cid:86)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:82)(cid:81)(cid:3)(cid:68)(cid:3)(cid:24)(cid:19)(cid:18)(cid:24)(cid:19)(cid:3)(cid:69)(cid:68)(cid:86)(cid:76)(cid:86)(cid:17)(cid:3)(cid:54)(cid:76)(cid:81)(cid:70)(cid:72)(cid:3)(cid:68)(cid:79)(cid:79)(cid:3)(cid:68)(cid:79)(cid:79)(cid:82)(cid:70)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:69)(cid:72)(cid:3)(cid:80)(cid:68)(cid:71)(cid:72)(cid:3)(cid:82)(cid:81)(cid:3)(cid:68)(cid:3)(cid:24)(cid:19)(cid:18)(cid:24)(cid:19)(cid:3)(cid:69)(cid:68)(cid:86)(cid:76)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3) maximum
exposure is limited to its investment in Majestic 21, management has concluded that the Company would not absorb a majority of
(cid:48)(cid:68)(cid:77)(cid:72)(cid:86)(cid:87)(cid:76)(cid:70)(cid:3)(cid:21)(cid:20)(cid:182)(cid:86)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:70)(cid:87)(cid:72)(cid:71)(cid:3)(cid:79)(cid:82)(cid:86)(cid:86)(cid:72)(cid:86)(cid:3)(cid:81)(cid:82)(cid:85)(cid:3)(cid:85)(cid:72)(cid:70)(cid:72)(cid:76)(cid:89)(cid:72)(cid:3)(cid:68)(cid:3)(cid:80)(cid:68)(cid:77)(cid:82)(cid:85)(cid:76)(cid:87)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:48)(cid:68)(cid:77)(cid:72)(cid:86)(cid:87)(cid:76)(cid:70)(cid:3)(cid:21)(cid:20)(cid:182)(cid:86)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:70)(cid:87)(cid:72)(cid:71)(cid:3)(cid:85)(cid:72)(cid:86)(cid:76)(cid:71)(cid:88)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:87)(cid:88)(cid:85)(cid:81)(cid:86)(cid:30)(cid:3)(cid:87)(cid:75)(cid:72)(cid:85)(cid:72)(cid:73)(cid:82)(cid:85)(cid:72)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:76)(cid:86)(cid:3)(cid:81)(cid:82)t required
to consolidate Majestic 21 with the accounts of Nobility Homes in accordance with ASC 810.
See Note 15 for (cid:71)(cid:76)(cid:86)(cid:70)(cid:88)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:74)(cid:88)(cid:68)(cid:85)(cid:68)(cid:81)(cid:87)(cid:72)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:3)(cid:7)(cid:24)(cid:3)(cid:80)(cid:76)(cid:79)(cid:79)(cid:76)(cid:82)(cid:81)(cid:3)(cid:81)(cid:82)(cid:87)(cid:72)(cid:3)(cid:83)(cid:68)(cid:92)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:48)(cid:68)(cid:77)(cid:72)(cid:86)(cid:87)(cid:76)(cid:70)(cid:3)(cid:21)(cid:20)(cid:17)(cid:3)
We received no distributions from the joint venture in fiscal year 2017 compared to approximately $1,000,000 for fiscal year 2016.
With regard to our investment in Majestic 21, there are no differences between our investment balance and the amount of underlying
equity in net assets owned by Majestic 21.
Investment in Retirement Community Limited Partnerships (cid:177) The Company has a 31.3% investment interest in Walden Woods
(cid:54)(cid:82)(cid:88)(cid:87)(cid:75)(cid:3)(cid:47)(cid:47)(cid:38)(cid:3)(cid:11)(cid:179)(cid:58)(cid:68)(cid:79)(cid:71)(cid:72)(cid:81)(cid:3)(cid:58)(cid:82)(cid:82)(cid:71)(cid:86) South(cid:180)(cid:12)(cid:15)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:82)(cid:90)(cid:81)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:72)(cid:86)(cid:3)(cid:68)(cid:3)(cid:85)(cid:72)(cid:87)(cid:76)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:80)(cid:68)(cid:81)(cid:88)(cid:73)(cid:68)(cid:70)(cid:87)(cid:88)(cid:85)(cid:72)(cid:71)(cid:3)(cid:75)(cid:82)(cid:80)(cid:72)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:88)(cid:81)(cid:76)(cid:87)(cid:92)(cid:3)(cid:81)(cid:68)(cid:80)(cid:72)(cid:71)(cid:3)(cid:58)(cid:68)(cid:79)(cid:71)(cid:72)(cid:81)(cid:3)(cid:58)(cid:82)(cid:82)(cid:71)(cid:86)
South located in Homosassa, Florida. (cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:76)(cid:81)(cid:3)(cid:58)(cid:68)(cid:79)(cid:71)(cid:72)(cid:81)(cid:3)(cid:58)(cid:82)(cid:82)(cid:71)(cid:86)(cid:3)South is fully impaired. The majority owner of
Walden Woods South (cid:76)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)President(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)President guaranteed the financing used to purchase Walden
Woods South a retirement community, which created an implicit guarantee from the Company. The implicit guarantee caused Walden
Woods South to be a variable interest entity as defined in ASC 810. The Company is considered to currently have an implicit
guarantee with Walden Woods South because it is a related party to the primary guarantor. In determining the primary beneficiary of
the variable interest entity, the Company has determined the President has the power to direct the activities that most significantly
impact the economic performance of Walden Woods South. As a result, in accordance with ASC 810, Walden Woods South has not
been consolidated in the financial statements of the Company.
26
Notes to Consolidated Financial Statements
The investment in Walden Woods South is accounted for under the equity method of accounting and all allocations of profit and loss
are on pro-rata basis. Since (cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:80)(cid:68)(cid:91)(cid:76)(cid:80)(cid:88)(cid:80)(cid:3)(cid:72)(cid:91)(cid:83)(cid:82)(cid:86)(cid:88)(cid:85)(cid:72)(cid:3)(cid:76)(cid:86)(cid:3)(cid:79)(cid:76)(cid:80)(cid:76)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:82)(cid:3)(cid:76)(cid:87)(cid:86)(cid:3)(cid:76)(cid:81)(cid:89)(cid:72)(cid:86)(cid:87)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:76)(cid:81)(cid:3)(cid:58)(cid:68)(cid:79)(cid:71)(cid:72)(cid:81)(cid:3)(cid:58)(cid:82)(cid:82)(cid:71)(cid:86) South, management has
concluded that the Company would not absorb a majority of Walden Woods South(cid:182)s expected losses nor receive a majority of Walden
Woods South(cid:182)s expected residual returns; therefore, the Company is not required to consolidate Walden Woods South with the
accounts of Nobility Homes in accordance with ASC 810.
The Company has no obligation to fund future operating losses of Walden Woods South and accordingly, has not reduced the
investment carrying value to less than zero.
(cid:50)(cid:81)(cid:3)(cid:48)(cid:68)(cid:85)(cid:70)(cid:75)(cid:3)(cid:22)(cid:20)(cid:15)(cid:3)(cid:21)(cid:19)(cid:20)(cid:25)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:86)(cid:82)(cid:79)(cid:71)(cid:3)(cid:76)(cid:87)(cid:86)(cid:3)(cid:23)(cid:27)(cid:17)(cid:24)(cid:8)(cid:3)(cid:79)(cid:76)(cid:80)(cid:76)(cid:87)(cid:72)(cid:71)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:81)(cid:72)(cid:85)(cid:86)(cid:75)(cid:76)(cid:83)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:72)(cid:86)(cid:87)(cid:3)(cid:76)(cid:81)(cid:3)(cid:38)(cid:53)(cid:41)(cid:3)(cid:44)(cid:44)(cid:44)(cid:15)(cid:3)(cid:47)(cid:87)(cid:71)(cid:17)(cid:3)(cid:11)(cid:179)(cid:38)(cid:92)(cid:83)(cid:85)(cid:72)(cid:86)(cid:86)(cid:3)(cid:38)(cid:85)(cid:72)(cid:72)(cid:78)(cid:180)(cid:12)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:7)(cid:22)(cid:15)(cid:28)(cid:28)(cid:19)(cid:15)(cid:19)(cid:19)(cid:19)(cid:17)
Cypress Creek is a retirement manufactured home community located in Winter Haven, Florida. The Company received $960,000
cash, net of $40,000 cost paid and a note receivable for $3,030,000, plus interest at 3.0%, which is payable to the Company in
$500,000 installments each July 1st and January 1st, commencing January 1, 2017 through July 1, 2019. The Company received a
$500,000 payment in June 2016 and a $1,000,000 payment in January 2017. Payments are applied first to any outstanding principal
and then to accrued interest at the end of the term. The Company recognized a gain of $3,990,000 in fiscal 2016.
NOTE 6 Inventories
The Company acquired a significant amount of repossessed pre-owned (Buy Back) inventory in 2011. Other pre-owned homes are
(cid:83)(cid:72)(cid:85)(cid:76)(cid:82)(cid:71)(cid:76)(cid:70)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3)(cid:68)(cid:70)(cid:84)(cid:88)(cid:76)(cid:85)(cid:72)(cid:71)(cid:3)(cid:11)(cid:53)(cid:72)(cid:83)(cid:82)(cid:86)(cid:86)(cid:72)(cid:86)(cid:86)(cid:76)(cid:82)(cid:81)(cid:86)(cid:12)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:3)(cid:70)(cid:82)(cid:81)(cid:89)(cid:72)(cid:81)(cid:76)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:77)oint venture partner. Pre-owned homes are also taken as
trade-ins on new home sales (Trade-Ins). This inventory consists of individual homes and homes on a real estate parcel. The
Company continually monitors this inventory and records a valuation allowance where necessary on a unit specific basis which
management believes results in inventory being valued at market. The Company could experience additional losses on the disposition
of these homes beyond the level of the reserve recorded by the Company.
A breakdown of the elements of inventory at November 4, 2017 and November 5, 2016 is as follows:
Raw materials
Work-in-process
Finished homes
Model home furniture
Inventories
Pre-owned homes *
Inventory impairment reserve **
Less homes expected to sell in 12 months
Pre-owned homes, long-term
November 4, 2017
November 5, 2016
$
896,954
110,847
6,369,495
128,385
$
717,525
120,693
6,025,268
105,595
$
7,505,681
$ 6,969,081
$
2,736,946
(779,725)
1,957,221
(1,141,863)
$
815,358
$ 4,014,119
(984,815)
3,029,304
(1,295,694)
$ 1,733,610
* The following table summarizes a breakdown of pre-owned homes inventory for fiscal years 2017 and 2016:
Balance at October 31, 2015
Additions
Sales
Balance at November 5, 2016
Additions
Sales
Buy Back
Repossessions
Trade-Ins
Total
$ 4,315,238
(cid:178)
(1,745,955 )
2,569,283
(cid:178)
(1,156,381 )
$ 1,158,109
350,735
(106,453)
1,402,391
235,417
(373,881)
$
42,925
56,486
(56,966)
42,445
57,101
(39,429)
$ 5,516,272
407,221
(1,909,374)
4,014,119
292,518
(1,569,691)
Balance at November 4, 2017
$ 1,412,902
$ 1,263,927
$
60,117
$ 2,736,946
27
** An analysis of the pre-owned home inventory impairment reserve at November 4, 2017 and November 5, 2016 is as follows:
Notes to Consolidated Financial Statements
Balance at beginning of year
Less: Reductions for homes sold
Inventory holding costs
Additions to impairment reserve
Balance at end of year
November 4, 2017
November 5, 2016
$
984,815
(354,168 )
(83,922 )
233,000
$
779,725
$ 1,425,108
(568,797 )
(143,079 )
271,583
$
984,815
NOTE 7 Property Held for Sale
The Company has offered for sale its former sales center in Pace, Florida and its former manufacturing facility in Belleview,
Florida. Accordingly, these assets have been reclassified from property, plant and equipment as property held for sale in the
accompanying balance sheet as of November 5, 2016. The Company has determined the fair value of its property held for sale
exceeds its carrying value and no valuation allowance is necessary. At November 4, 2017, the net book value of the Pace property was
reclassified from current assets to non-current assets in the accompanying balance sheet as the property is no longer under contract for
sale. The combined net book value of the Belleview facility and Pace property in the amount of $599,455 has been presented in the
accompanying balance sheet as property held for sale (non-current asset) at November 4, 2017.
NOTE 8 Property, Plant and Equipment
Property, plant and equipment, along with their estimated useful lives and related accumulated depreciation are summarized as
follows:
Land
Land improvements
Buildings and improvements
Machinery and equipment
Furniture and fixtures
Less accumulated depreciation
$
Range of Lives in Years
(cid:178)
10-20
15-40
3-10
3-10
November 4, 2017
November 5, 2016
2,870,463
743,956
2,194,435
786,708
277,386
6,872,948
(2,568,177 )
$
2,870,463
689,043
2,019,429
749,360
223,537
6,551,832
(2,488,121)
$
4,304,771
$
4,063,711
Depreciation expense during the years ended November 4, 2017 and November 5, 2016 totaled $113,757 and $98,616, respectively.
NOTE 9 Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities are comprised of the following:
Accrued warranty expense
Accrued property and sales taxes
Other accrued expenses
Total accrued expenses and other current liabilities
November 4, 2017
November 5, 2016
$
$
125,000
359,957
642,440
$
125,000
299,710
698,988
1,127,397
$
1,123,698
NOTE 10 Proceeds Received Under Escrow Arrangement
We received $504,548 in fiscal year 2017 and $788,566 in fiscal year 2016 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 when received, which
(cid:75)(cid:68)(cid:86)(cid:3)(cid:69)(cid:72)(cid:72)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:83)(cid:68)(cid:86)(cid:87)(cid:3)(cid:83)(cid:85)(cid:68)(cid:70)(cid:87)(cid:76)(cid:70)(cid:72)(cid:17)
28
NOTE 11 Income Taxes
Notes to Consolidated Financial Statements
The Company computes income tax expense using the liability method. Under this method, deferred income taxes are provided, to the
extent considered realizable by management, for basis differences of assets and liabilities for financial reporting and income tax
purposes.
The Company follows guidance issued by the FASB with respect to accounting for uncertainty in income taxes. A tax position is
recognized as a benefit only if i(cid:87)(cid:3)(cid:76)(cid:86)(cid:3)(cid:179)(cid:80)(cid:82)(cid:85)(cid:72)-likely-than-(cid:81)(cid:82)(cid:87)(cid:180)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:87)(cid:68)(cid:91)(cid:3)(cid:83)(cid:82)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:90)(cid:82)(cid:88)(cid:79)(cid:71)(cid:3)(cid:69)(cid:72)(cid:3)(cid:86)(cid:88)(cid:86)(cid:87)(cid:68)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:68)(cid:3)(cid:87)(cid:68)(cid:91)(cid:3)(cid:72)(cid:91)(cid:68)(cid:80)(cid:76)(cid:81)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:68)(cid:3)(cid:87)(cid:68)(cid:91)(cid:3)
examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of
being realized on examination. (cid:41)(cid:82)(cid:85)(cid:3)(cid:87)(cid:68)(cid:91)(cid:3)(cid:83)(cid:82)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:80)(cid:72)(cid:72)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)(cid:80)(cid:82)(cid:85)(cid:72)-likely-than-(cid:81)(cid:82)(cid:87)(cid:180)(cid:3)(cid:87)(cid:72)(cid:86)(cid:87)(cid:15)(cid:3)(cid:81)(cid:82)(cid:3)(cid:87)(cid:68)(cid:91)(cid:3)(cid:69)(cid:72)(cid:81)(cid:72)(cid:73)(cid:76)(cid:87)(cid:3)(cid:76)(cid:86)(cid:3)(cid:85)(cid:72)(cid:70)(cid:82)(cid:85)(cid:71)(cid:72)(cid:71)(cid:17)(cid:3)
The Company and its subsidiaries are subject to U.S. federal income tax, as well as income tax of the state of Florida. (cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)
income tax returns for the past three years are subject to examination by tax authorities, and may change upon examination.
The Company recognizes interest and/or penalties related to income tax matters in income tax expense. The Company did not reflect
any amounts for interest and penalties in its 2017 or 2016 statements of operations, nor are any amounts accrued for interest and
penalties at November 4, 2017 and November 5, 2016.
The provision for income taxes for the years ended consists of the following:
Current tax expense:
Federal
State
Deferred tax (benefit) expense
Provision for income taxes
November 4, 2017
November 5, 2016
$
1,689,446
287,699
1,977,145
(118,878)
$
769,463
(cid:178)
769,463
2,449,579
$
1,858,267
$
3,219,042
The following table shows the reconciliation between the statutory federal income tax rate and the actual provision for income taxes
for the years ended:
Provision(cid:178)federal statutory tax rate
Increase (decrease) resulting from:
State taxes, net of federal tax benefit
Permanent differences:
Stock option expirations
Other
Income tax expense
November 4, 2017
November 5, 2016
$
1,757,205
$
3,122,640
187,606
253,435
3,910
(90,454)
(cid:178)
(157,033)
$
1,858,267
$
3,219,042
The types of temporary differences between the tax bases of assets and liabilities and their financial reporting amounts and the related
deferred tax assets and deferred tax liabilities are as follows:
Deferred tax assets:
Allowance for doubtful accounts
Inventories
Accrued expenses
Stock-based compensation
Total deferred tax assets
Deferred tax liabilities:
Depreciation
Installment sale of Cypress Creek
Carrying value of investments
Amortization
29
November 4, 2017
November 5, 2016
$
$
87,261
339,954
192,427
1,052
620,694
(80,858)
(547,348 )
(388,543 )
(58,810 )
87,261
440,988
156,260
4,717
689,226
(38,050 )
(871,277 )
(295,834 )
(58,810 )
Notes to Consolidated Financial Statements
Prepaid expenses
November 4, 2017
November 5, 2016
(10,013 )
(9,011 )
Net deferred tax assets (liabilities)
$
(464,878 )
$
(583,756)
These amounts are included in the accompanying consolidated balance sheets under the following captions:
Current assets (liabilities):
Deferred tax assets
Deferred tax liabilities
Net current deferred tax assets
Non-current assets (liabilities):
Deferred tax assets
Deferred tax liabilities
Net non-current deferred tax liabilities
November 4, 2017
November 5, 2016
$
$
619,642
(10,013 )
609,629
684,509
(127,736 )
556,773
9,012
(1,083,519 )
(1,074,507 )
11,030
(1,151,559 )
(1,140,529 )
Net deferred tax liabilities
$
(464,878 )
$
(583,756 )
In assessing the ability to realize a portion of the deferred tax assets, management considers whether it is more likely than not that
some portion or all of the deferred tax assets will not be realized. For fiscal years 2017 and 2016, the Company determined that a
(cid:89)(cid:68)(cid:79)(cid:88)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:85)(cid:72)(cid:86)(cid:72)(cid:85)(cid:89)(cid:72)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:71)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71)(cid:3)(cid:87)(cid:68)(cid:91)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)(cid:3)(cid:90)(cid:68)(cid:86)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:71)(cid:72)(cid:85)(cid:72)(cid:71)(cid:3)(cid:81)(cid:72)(cid:70)(cid:72)(cid:86)(cid:86)(cid:68)(cid:85)(cid:92)(cid:3)(cid:68)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:71)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71)(cid:3)(cid:87)(cid:68)(cid:91)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)(cid:3)(cid:90)(cid:72)(cid:85)(cid:72)(cid:3)(cid:73)(cid:88)(cid:79)(cid:79)(cid:92)(cid:3)(cid:85)(cid:72)alizable.
On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (H.R. 1) (cid:11)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)(cid:36)(cid:70)(cid:87)(cid:180)(cid:12)(cid:17) The Act
includes a number of changes in existing tax law impacting businesses including, among other things, a permanent reduction in the
corporate income tax rate from 34% to 21%. The rate reduction took effect on January 1, 2018.
As of November 4, 2017, the Company had a net deferred tax liability totaling approximately $465,000. Deferred tax assets and
liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts
of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The
(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:81)(cid:72)(cid:87)(cid:3)(cid:71)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71)(cid:3)(cid:87)(cid:68)(cid:91)(cid:3)(cid:79)(cid:76)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:68)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:49)(cid:82)(cid:89)(cid:72)(cid:80)(cid:69)(cid:72)(cid:85)(cid:3)(cid:23)(cid:15)(cid:3)(cid:21)(cid:19)(cid:20)(cid:26)(cid:3)(cid:90)(cid:68)(cid:86)(cid:3)(cid:71)(cid:72)(cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3)(cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:88)(cid:85)(cid:85)(cid:72)(cid:81)(cid:87)(cid:3)(cid:72)(cid:81)(cid:68)(cid:70)(cid:87)(cid:72)(cid:71)(cid:3)(cid:73)(cid:72)(cid:71)(cid:72)(cid:85)(cid:68)(cid:79)(cid:3)(cid:87)(cid:68)(cid:91)(cid:3)(cid:85)(cid:68)(cid:87)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:22)4%
prior to the passage of the Act. As a result of the reduction in the corporate income tax rate to 21% from 34% under the Act, the
Company will need to revalue its net deferred tax assets and liabilities as of January 31, 2018. The Company estimates that this will
result in a reduction in its net deferred tax liability of approximately $150,000, which will reduce income tax expense in the first
quarter of 2018.
(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:85)(cid:72)(cid:89)(cid:68)(cid:79)(cid:88)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:76)(cid:87)(cid:86)(cid:3)(cid:71)(cid:72)(cid:73)(cid:72)(cid:85)(cid:85)(cid:72)(cid:71)(cid:3)(cid:87)(cid:68)(cid:91)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:87)(cid:86)(cid:3)(cid:76)(cid:86)(cid:3)(cid:86)(cid:88)(cid:69)(cid:77)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:73)(cid:88)(cid:85)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:70)(cid:79)(cid:68)(cid:85)(cid:76)(cid:73)(cid:76)(cid:70)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:81)(cid:72)(cid:90)(cid:3)(cid:79)(cid:68)(cid:90)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:70)(cid:68)(cid:81)(cid:81)(cid:82)(cid:87)(cid:3)(cid:69)(cid:72)(cid:3)(cid:72)(cid:86)(cid:87)(cid:76)(cid:80)(cid:68)ted at this
time. As such, the Company is currently unable to make a final determination of the effect on annual earnings for the fiscal year
ending 2018. Additionally, the Company is evaluating the other provisions of the Act and is unable to assess the effect on the
Company at this time.
NOTE 12 (cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:40)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:3)
Authorized preferred stock may be issued in series with rights and preferences designated by the Board of Directors at the time it
authorizes the issuance of such stock. The Company has never issued any preferred stock. Treasury stock is recorded at cost and is
presented as a (cid:85)(cid:72)(cid:71)(cid:88)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:72)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:76)(cid:81)(cid:74)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:82)(cid:79)(cid:76)(cid:71)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:85)(cid:72)(cid:83)(cid:88)(cid:85)(cid:70)(cid:75)(cid:68)(cid:86)(cid:72)d
7,341 and 32,375 shares of its common stock during fiscal years 2017 and 2016, respectively.
NOTE 13 Stock Option Plan
In June 2011, the Com(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:37)(cid:82)(cid:68)(cid:85)(cid:71)(cid:3)(cid:82)(cid:73)(cid:3)(cid:39)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)(cid:68)(cid:71)(cid:82)(cid:83)(cid:87)(cid:72)(cid:71)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:3)(cid:79)(cid:68)(cid:87)(cid:72)(cid:85)(cid:3)(cid:68)(cid:83)(cid:83)(cid:85)(cid:82)(cid:89)(cid:72)(cid:71)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:43)(cid:82)(cid:80)(cid:72)(cid:86)(cid:15)(cid:3)(cid:44)(cid:81)(cid:70)(cid:17)(cid:3)
(cid:21)(cid:19)(cid:20)(cid:20)(cid:3)(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)(cid:44)(cid:81)(cid:70)(cid:72)(cid:81)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:51)(cid:79)(cid:68)(cid:81)(cid:3)(cid:11)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)(cid:51)(cid:79)(cid:68)(cid:81)(cid:180)(cid:12)(cid:15)(cid:3)(cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:76)(cid:86)(cid:86)(cid:88)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:87)(cid:82)(cid:3)(cid:83)(cid:88)(cid:85)(cid:70)(cid:75)(cid:68)(cid:86)(cid:72)(cid:3)(cid:86)(cid:75)(cid:68)(cid:85)(cid:72)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:82)(cid:81)(cid:3)(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:15)(cid:3)(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)(cid:68)(cid:83)(cid:83)(cid:85)(cid:72)ciation
rights and other stock-based awards to employees and non-employee directors. A total of 300,000 shares were reserved for issuance
under the Plan, all of which may be issued pursuant to the exercise of incentive stock options. At November 4, 2017, options available
for future grant under the plan were 295,000 and 5,000 options were outstanding.
30
Notes to Consolidated Financial Statements
The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date
fair value of the award. The cost is to be recognized over the period during which an employee is required to provide service in
exchange for the award (usually the vesting period). The grant date fair value of employee share options and similar instruments will
be estimated using option-pricing models adjusted for the unique characteristics of those instruments (unless observable market prices
for the same or similar instruments are available). If an equity award is modified after the grant date, incremental compensation cost
will be recognized in an amount equal to the excess of the fair value of the modified award over the fair value of the original award
immediately before the modification. During fiscal years 2017 and 2016, the Company recognized approximately $1,800 and $1,500
in compensation cost related to stock options respectively.
A summary of information with respect to options granted is as follows:
Outstanding at October 31, 2015
Granted
Exercised
Canceled
Outstanding at November 5, 2016
Granted
Exercised
Canceled
Outstanding at November 4, 2017
5,000
5,000
(4,000)
(cid:178)
6,000
(cid:178)
(1,000)
(cid:178)
5,000
Number of
Shares
Stock Option Price
Range
$8.49 - 10.45
12.10
8.49 - 10.45
(cid:178)
Aggregate
Intrinsic
Value
Weighted
Average
Exercise
Price
$ 9.47
12.10
9.72
(cid:178)
$8.49 (cid:177) 12.10
$ 11.50
(cid:178)
8.49
(cid:178)
$12.10
(cid:178)
8.49
(cid:178)
$ 12.10
$ 24,500
The aggregate intrinsic value in the table above represents total intrinsic value (of options in the money), which is the difference
(cid:69)(cid:72)(cid:87)(cid:90)(cid:72)(cid:72)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:70)(cid:79)(cid:82)(cid:86)(cid:76)(cid:81)(cid:74)(cid:3)(cid:86)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)(cid:83)(cid:85)(cid:76)(cid:70)(cid:72)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:79)(cid:68)(cid:86)(cid:87)(cid:3)(cid:87)(cid:85)(cid:68)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:71)(cid:68)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:73)(cid:76)(cid:86)(cid:70)(cid:68)(cid:79)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:3)(cid:21)(cid:19)(cid:20)7 and the exercise price times the number of
shares, that would have been received by the option holders had the option holders exercised their options on November 4, 2017.
The following table summarizes information about the outstanding stock options at November 4, 2017:
Options Outstanding
Options Exercisable
Exercise
Price
Shares
Outstanding
Weighted
Average
Remaining
Contractual
Life (years)
$ 12.10
5,000
5,000
4
4
Weighted
Average
Exercise
Price
$ 12.10
$ 12.10
Number
Exercisable
Weighted
Average
Exercise Price
5,000
5,000
$ 12.10
$
12.10
The fair value of each option is determined using the Black-Scholes option-pricing model which values options based on the stock
price at the grant date, the expected life of the option, the estimated volatility of the stock, expected dividend payments, and the risk-
free interest rate over the expected life of the option. The dividend yield was calculated by dividing the current annualized dividend by
(cid:87)(cid:75)(cid:72)(cid:3)(cid:82)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:72)(cid:91)(cid:72)(cid:85)(cid:70)(cid:76)(cid:86)(cid:72)(cid:3)(cid:83)(cid:85)(cid:76)(cid:70)(cid:72)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:72)(cid:68)(cid:70)(cid:75)(cid:3)(cid:74)(cid:85)(cid:68)(cid:81)(cid:87)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:70)(cid:87)(cid:72)(cid:71)(cid:3)(cid:89)(cid:82)(cid:79)(cid:68)(cid:87)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:90)(cid:68)(cid:86)(cid:3)(cid:71)(cid:72)(cid:87)(cid:72)(cid:85)(cid:80)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3)(cid:70)(cid:82)(cid:81)(cid:86)(cid:76)(cid:71)(cid:72)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)historical stock prices for
the fiscal year the grant occurred and prior fiscal years for a period equal to the expected life of the option. The risk-free interest rate
was the rate available on zero coupon U.S. government obligations with a term equal to the expected life of the option. The expected
life of the option was estimated based on the exercise history from previous grants.
NOTE 14 Employee Benefit Plan
(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:3)(cid:75)(cid:68)(cid:86)(cid:3)(cid:68)(cid:3)(cid:71)(cid:72)(cid:73)(cid:76)(cid:81)(cid:72)(cid:71)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:76)(cid:69)(cid:88)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:85)(cid:72)(cid:87)(cid:76)(cid:85)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:83)(cid:79)(cid:68)(cid:81)(cid:3)(cid:11)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)(cid:51)(cid:79)(cid:68)(cid:81)(cid:180)(cid:12)(cid:3)(cid:84)(cid:88)(cid:68)(cid:79)(cid:76)(cid:73)(cid:92)(cid:76)(cid:81)(cid:74)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:54)(cid:72)(cid:70)(cid:87)(cid:76)(cid:82)(cid:81) 401(k) of the Internal Revenue Code.
The Plan covers employees who have met certain service requirements. The Company makes a discretionary matching contribution of
(cid:88)(cid:83)(cid:3)(cid:87)(cid:82)(cid:3)(cid:21)(cid:19)(cid:8)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:81)(cid:3)(cid:72)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:72)(cid:72)(cid:182)(cid:86)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:76)(cid:69)(cid:88)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3)(cid:88)(cid:83)(cid:3)(cid:87)(cid:82)(cid:3)(cid:68)(cid:3)(cid:80)(cid:68)(cid:91)(cid:76)(cid:80)(cid:88)(cid:80)(cid:3)(cid:82)(cid:73)(cid:3)(cid:25)(cid:8)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:81)(cid:3)(cid:72)(cid:80)(cid:83)(cid:79)(cid:82)(cid:92)(cid:72)(cid:72)(cid:182)(cid:86)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:72)(cid:81)(cid:86)(cid:68)(cid:87)(cid:76)(cid:82)n. The contribution expense charged
to operations amounted to approximately $19,000 and $20,000 in fiscal years 2017 and 2016, respectively.
31
NOTE 15 Commitments and Contingent Liabilities
Notes to Consolidated Financial Statements
Operating Leases (cid:177) The Company leases the property for several Prestige retail sales centers from various unrelated entities under
operating lease agreements expiring through November 2020. The Company also leases certain equipment under unrelated operating
leases. These leases have varying renewal options. Total rent expense for operating leases, including those with terms of less than one
year, amounted to $182,721 and $188,416 in fiscal year 2017 and 2016, respectively.
Future minimum payments by year and in the aggregate, under the aforementioned leases and other non-cancelable operating leases
with initial or remaining terms in excess of one year, as of November 4, 2017 are as follows for the fiscal years ending:
2018
2019
2020
Total minimum payments required
$ 26,400
26,400
26,400
$ 79,200
Majestic 21 (cid:177) On May 20, 2009, the Company became a 50% guarantor on a $5 million note payable entered into by Majestic 21, a
joint venture in which the Company owns a 50% interest. This guarantee was a requirement of the bank that provided the $5 million
loan to Maj(cid:72)(cid:86)(cid:87)(cid:76)(cid:70)(cid:3)(cid:21)(cid:20)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:7)(cid:24)(cid:3)(cid:80)(cid:76)(cid:79)(cid:79)(cid:76)(cid:82)(cid:81)(cid:3)(cid:74)(cid:88)(cid:68)(cid:85)(cid:68)(cid:81)(cid:87)(cid:72)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:48)(cid:68)(cid:77)(cid:72)(cid:86)(cid:87)(cid:76)(cid:70)(cid:3)(cid:21)(cid:20)(cid:182)(cid:86)(cid:3)(cid:71)(cid:72)(cid:69)(cid:87)(cid:3)(cid:76)(cid:86)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:79)(cid:76)(cid:73)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:81)(cid:82)(cid:87)(cid:72). The amount of the guarantee declines
with the amortization and repayment of the loan. As collateral for the loan, 21st Mortgage Corporation (our joint venture partner) has
granted the lender a security interest in a pool of loans encumbering homes sold by Prestige Homes Centers, Inc. If the pool of loans
securing this note should decrease in value so that the notes outstanding principal balance is in excess of 80% of the principal balance
(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:82)(cid:82)(cid:79)(cid:3)(cid:82)(cid:73)(cid:3)(cid:79)(cid:82)(cid:68)(cid:81)(cid:86)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:81)(cid:3)(cid:48)(cid:68)(cid:77)(cid:72)(cid:86)(cid:87)(cid:76)(cid:70)(cid:3)(cid:21)(cid:20)(cid:3)(cid:90)(cid:82)(cid:88)(cid:79)(cid:71)(cid:3)(cid:75)(cid:68)(cid:89)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:83)(cid:68)(cid:92)(cid:3)(cid:71)(cid:82)(cid:90)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:81)(cid:82)(cid:87)(cid:72)(cid:182)(cid:86)(cid:3)(cid:83)(cid:85)(cid:76)(cid:81)(cid:70)(cid:76)(cid:83)(cid:68)(cid:79)(cid:3)(cid:69)(cid:68)(cid:79)(cid:68)(cid:81)(cid:70)(cid:72)(cid:3)(cid:87)(cid:82)(cid:3)(cid:68)(cid:81)(cid:3)(cid:68)(cid:80)(cid:82)(cid:88)(cid:81)(cid:87)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:76)(cid:86)(cid:3)(cid:81)(cid:82)(cid:3)(cid:80)(cid:82)(cid:85)(cid:72)(cid:3)(cid:87)(cid:75)(cid:68)(cid:81)(cid:3)80% of
the principal balance of the pool of loans. The Company and 21st Mortgage Corporation are obligated jointly to contribute the amount
necessary to bring the loan balance back down to 80% of the collateral provided. We do not anticipate any required contributions as
the pool of loans securing the note have historically been in excess of 100% of the collateral value. As of November 4, 2017, the
outstanding principal balance of the note was $536,598 and the amount of collateral held by our joint venture partner for the Majestic
21 note payable was $1,501,617(cid:17)(cid:3)(cid:54)(cid:75)(cid:82)(cid:88)(cid:79)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:82)(cid:79)(cid:79)(cid:68)(cid:87)(cid:72)(cid:85)(cid:68)(cid:79)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:69)(cid:72)(cid:3)(cid:86)(cid:88)(cid:73)(cid:73)(cid:76)(cid:70)(cid:76)(cid:72)(cid:81)(cid:87)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:80)(cid:68)(cid:91)(cid:76)(cid:80)(cid:88)(cid:80)(cid:3)(cid:72)(cid:91)(cid:83)(cid:82)(cid:86)(cid:88)(cid:85)(cid:72)(cid:3)(cid:68)(cid:87)(cid:3)November 4, 2017,
would be 50% or $268,299 of the outstanding principal balance. (cid:37)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:88)(cid:83)(cid:82)(cid:81)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:68)(cid:81)(cid:68)(cid:79)(cid:92)(cid:86)(cid:76)(cid:86)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:68)(cid:76)(cid:85)(cid:3)(cid:89)(cid:68)(cid:79)(cid:88)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:74)(cid:88)(cid:68)(cid:85)(cid:68)(cid:81)(cid:87)(cid:72)(cid:72)(cid:3)
is not material and as a result, no liability for the guarantee has been recorded in the accompanying balance sheets of the Company.
On November 4, 2017, there was approximately $310,772 in loan loss reserves or 3.13% of the portfolio in Majestic 21. The Majestic
21 joint venture partnership is monitoring loan loss reserves on a monthly basis and is adjusting the loan loss reserves as necessary.
(cid:55)(cid:75)(cid:72)(cid:3)(cid:48)(cid:68)(cid:77)(cid:72)(cid:86)(cid:87)(cid:76)(cid:70)(cid:3)(cid:21)(cid:20)(cid:3)(cid:77)(cid:82)(cid:76)(cid:81)(cid:87)(cid:3)(cid:89)(cid:72)(cid:81)(cid:87)(cid:88)(cid:85)(cid:72)(cid:3)(cid:76)(cid:86)(cid:3)(cid:85)(cid:72)(cid:73)(cid:79)(cid:72)(cid:70)(cid:87)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:21)(cid:20)(cid:86)(cid:87)(cid:3)(cid:48)(cid:82)(cid:85)(cid:87)(cid:74)(cid:68)(cid:74)(cid:72)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:182)(cid:86)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)ncial
statements of its ultimate parent which is a public company. Management believes the loan loss reserves are adequate based upon its
(cid:85)(cid:72)(cid:89)(cid:76)(cid:72)(cid:90)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:48)(cid:68)(cid:77)(cid:72)(cid:86)(cid:87)(cid:76)(cid:70)(cid:3)(cid:21)(cid:20)(cid:3)(cid:77)(cid:82)(cid:76)(cid:81)(cid:87)(cid:3)(cid:89)(cid:72)(cid:81)(cid:87)(cid:88)(cid:85)(cid:72)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:81)(cid:72)(cid:85)(cid:86)(cid:75)(cid:76)(cid:83)(cid:182)(cid:86)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:17)(cid:3)
Other Contingent Liabilities (cid:177) 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, the ultimate outcome of these matters will not have a material adverse effect on
(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:83)(cid:82)(cid:86)(cid:76)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3)(cid:85)(cid:72)(cid:86)(cid:88)(cid:79)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:82)(cid:83)(cid:72)(cid:85)(cid:68)(cid:87)(cid:76)ons or cash flows. Accordingly, the Company has not made any accrual provisions
for litigation in the accompanying consolidated financial statements.
The Company does not maintain casualty insurance on some of its property, including the inventory at our retail centers, our plant
machinery and plant equipment and is at risk for those types of losses.
32
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
There were no disagreements with accountants on accounting and financial disclosure matters.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:50)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:3)(cid:11)(cid:83)(cid:85)(cid:76)(cid:81)(cid:70)(cid:76)(cid:83)(cid:68)(cid:79)(cid:3)(cid:72)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:82)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:12)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)
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(as such term is defined in Rules 13a(cid:177)15(e) and 15d(cid:177)(cid:20)(cid:24)(cid:11)(cid:72)(cid:12)(cid:3)(cid:88)(cid:81)(cid:71)(cid:72)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:54)(cid:72)(cid:70)(cid:88)(cid:85)(cid:76)(cid:87)(cid:76)(cid:72)(cid:86)(cid:3)(cid:40)(cid:91)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3)(cid:36)(cid:70)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:20)(cid:28)(cid:22)(cid:23)(cid:15)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:80)(cid:72)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3)(cid:11)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)(cid:40)(cid:91)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3)
(cid:36)(cid:70)(cid:87)(cid:180)(cid:12)(cid:12)(cid:3)(cid:68)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:72)(cid:81)(cid:71)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:72)(cid:85)(cid:76)(cid:82)(cid:71)(cid:3)(cid:70)(cid:82)(cid:89)(cid:72)(cid:85)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:11)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)(cid:40)(cid:89)(cid:68)(cid:79)(cid:88)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:39)(cid:68)(cid:87)(cid:72)(cid:180)(cid:12)(cid:17)(cid:3)(cid:37)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:76)(cid:85)(cid:3)(cid:72)(cid:89)(cid:68)(cid:79)(cid:88)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:38)(cid:75)(cid:76)(cid:72)(cid:73)(cid:3)(cid:40)(cid:91)(cid:72)(cid:70)(cid:88)tive
Officer and Chief Financial Officer have c(cid:82)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:71)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:71)(cid:76)(cid:86)(cid:70)(cid:79)(cid:82)(cid:86)(cid:88)(cid:85)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:83)(cid:85)(cid:82)(cid:70)(cid:72)(cid:71)(cid:88)(cid:85)(cid:72)(cid:86)(cid:3)were effective as of the
Evaluation Date.
(cid:48)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:36)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:82)(cid:81)(cid:3)(cid:44)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3)(cid:38)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:41)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:17)(cid:3)(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:76)(cid:86)(cid:3)(cid:85)(cid:72)(cid:86)(cid:83)(cid:82)(cid:81)(cid:86)(cid:76)(cid:69)(cid:79)(cid:72)(cid:3)(cid:73)(cid:82)(cid:85)
establishing and maintaining adequate and effective internal control over financial reporting in order to provide reasonable assurance
(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:79)(cid:76)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:83)(cid:85)(cid:72)(cid:83)(cid:68)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:72)(cid:91)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:83)(cid:88)(cid:85)(cid:83)(cid:82)(cid:86)es in
accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting
involves policies and procedure that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the
transactions and disposition of assets of the issuer; (ii) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the issuer are being made in accordance with authorizations of management and directors of the issuer; and
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer
Company assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
(cid:55)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:80)(cid:68)(cid:81)(cid:68)(cid:74)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:68)(cid:86)(cid:86)(cid:72)(cid:86)(cid:86)(cid:72)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:72)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:76)(cid:87)(cid:86)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)nal control over financial reporting as of November 4, 2017 based
on criteria established in Internal Control Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission and determined that its internal controls were effective.
(cid:55)(cid:75)(cid:76)(cid:86)(cid:3)(cid:68)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:71)(cid:82)(cid:72)(cid:86)(cid:3)(cid:81)(cid:82)(cid:87)(cid:3)(cid:76)(cid:81)(cid:70)(cid:79)(cid:88)(cid:71)(cid:72)(cid:3)(cid:68)(cid:81)(cid:3)(cid:68)(cid:87)(cid:87)(cid:72)(cid:86)(cid:87)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:72)(cid:85)(cid:72)(cid:71)(cid:3)(cid:83)(cid:88)(cid:69)(cid:79)(cid:76)(cid:70)(cid:3)(cid:68)(cid:70)(cid:70)(cid:82)(cid:88)(cid:81)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:73)(cid:76)(cid:85)(cid:80)(cid:3)(cid:85)(cid:72)(cid:74)(cid:68)(cid:85)(cid:71)(cid:76)(cid:81)(cid:74)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)al
control over financial reporting.
Changes in internal control over financial reporting. There were no changes in our internal controls over financial reporting that
occurred during the fourth quarter of fiscal 2017 that have materially affected, or are reasonably likely to materially affect, the
(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:86)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:17)(cid:3)
Item 9B. Other Information
None.
33
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Information is incorporated by reference pursuant to Instruction G of Form 10-K from its definitive proxy statement for the 2018
annual meeting of shareholders.
(cid:55)(cid:75)(cid:72)(cid:3)(cid:73)(cid:82)(cid:79)(cid:79)(cid:82)(cid:90)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:83)(cid:85)(cid:82)(cid:89)(cid:76)(cid:71)(cid:72)(cid:86)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:81)(cid:68)(cid:80)(cid:72)(cid:86)(cid:15)(cid:3)(cid:68)(cid:74)(cid:72)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:69)(cid:88)(cid:86)(cid:76)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:72)(cid:91)(cid:83)(cid:72)(cid:85)(cid:76)(cid:72)(cid:81)(cid:70)(cid:72)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:83)(cid:68)(cid:86)(cid:87)(cid:3)(cid:73)(cid:76)(cid:89)(cid:72)(cid:3)(cid:92)(cid:72)(cid:68)(cid:85)(cid:86)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:72)(cid:68)(cid:70)(cid:75)(cid:3)(cid:82)(cid:73)(cid:3)(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:182)(cid:86)(cid:3)(cid:72)(cid:91)(cid:72)(cid:70)(cid:88)(cid:87)(cid:76)(cid:89)(cid:72) officers.
Executive officers are each elected for one year terms.
Executive Officers
Terry E. Trexler (78)
Thomas W. Trexler (54)
Chairman of the Board and President of Nobility since 1967; Mr. Trexler is also President of TLT,
Inc.
Executive Vice President and Chief Financial Officer of Nobility since December 1994; President of
Prestige Home Centers, Inc. since June 1995; Director of Prestige since 1993 and Vice President from
1991 to June 1995; President of Mountain Financial, Inc. since August 1992; Vice President of TLT,
Inc. since September 1991.
Jean Etheredge (72)
Secretary since 1967.
Lynn J. Cramer, Jr. (72)
Treasurer since 1980.
Thomas W. Trexler, Executive Vice President, Chief Financial Officer and a director, is the son of Terry E. Trexler, Nobility(cid:182)(cid:86)(cid:3)
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.
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, Nobility Homes, Inc., 3741 SW 7th Street, Ocala, Florida
34474.
Item 11. Executive Compensation
Information concerning executive compensation is incorporated by reference pursuant to Instruction G of Form 10-(cid:46)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:182)(cid:86)(cid:3)
definitive proxy statement for the 2018 annual meeting of shareholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information concerning security ownership of certain beneficial owners and management is incorporated by reference pursuant to
Instruction G of Form 10-(cid:46)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:182)(cid:86)(cid:3)(cid:71)(cid:72)(cid:73)(cid:76)(cid:81)(cid:76)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:83)(cid:85)(cid:82)(cid:91)(cid:92)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)2018 annual meeting of shareholders.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Information concerning certain relationships and related transactions is incorporated by reference pursuant to Instruction G of Form
10-(cid:46)(cid:3)(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:182)(cid:86)(cid:3)(cid:71)(cid:72)(cid:73)(cid:76)(cid:81)(cid:76)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:83)(cid:85)(cid:82)(cid:91)(cid:92)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)2018 annual meeting of shareholders.
Item 14. Principal Accounting Fees and Services
Information concerning principal accountant fees and services is incorporated by reference pursuant to Instruction G of Form 10-K
(cid:73)(cid:85)(cid:82)(cid:80)(cid:3)(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:182)(cid:86)(cid:3)(cid:71)(cid:72)(cid:73)(cid:76)(cid:81)(cid:76)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:83)(cid:85)(cid:82)(cid:91)(cid:92)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)2018 annual meeting of shareholders.
34
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a) Consolidated Financial Statements and Schedules
Report of WithumSmith+Brown, PC
Consolidated Balance Sheets at November 4, 2017 and November 5, 2016
Consolidated Statements of Comprehensive Income for the Years Ended November 4, 2017 and November 5, 2016
(cid:38)(cid:82)(cid:81)(cid:86)(cid:82)(cid:79)(cid:76)(cid:71)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:54)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:38)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:86)(cid:3)(cid:76)(cid:81)(cid:3)(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182)(cid:3)(cid:40)(cid:84)(cid:88)(cid:76)(cid:87)(cid:92)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:60)(cid:72)(cid:68)(cid:85)(cid:86)(cid:3)(cid:40)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3)November 4, 2017 and November 5,
2016
Consolidated Statements of Cash Flows for the Years Ended November 4, 2017 and November 5, 2017
Notes to Consolidated Financial Statements
(b) Exhibits:
In reviewing the agreements included as exhibits to this report, please remember they are included to provide you with
information regarding their terms and are not intended to provide any other factual or disclosure information about the
Company, its subsidiaries or other parties to the agreements. The agreements contain representations and warranties by
each of the parties to the applicable agreement. These representations and warranties have been made solely for the
benefit of the other parties to the applicable agreement and:
(cid:135)
(cid:135)
should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to
one of the parties if those statements prove to be inaccurate;
have been qualified by disclosures that were made to the other party in connection with the negotiation of the
applicable agreement, which disclosures are not necessarily reflected in the agreement;
(cid:135)(cid:3) may apply standards of materiality in a way that is different from what may be viewed as material to you or other
investors; and
(cid:135)(cid:3) were made only as of the date of the applicable agreement or such other date or dates as may be specified in the
agreement and are subject to more recent developments.
Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were
made or at any other time. Additional information about the Company may be found elsewhere in this report and the
(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:182)(cid:86)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:83)(cid:88)(cid:69)(cid:79)(cid:76)(cid:70)(cid:3)(cid:73)(cid:76)(cid:79)(cid:72)(cid:86)(cid:15)(cid:3)(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:68)(cid:89)(cid:68)(cid:76)(cid:79)(cid:68)(cid:69)(cid:79)(cid:72)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:82)(cid:88)(cid:87)(cid:3)(cid:70)(cid:75)(cid:68)(cid:85)(cid:74)(cid:72)(cid:3)(cid:87)(cid:75)(cid:85)(cid:82)(cid:88)(cid:74)(cid:75)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:54)(cid:40)(cid:38)(cid:182)(cid:86)(cid:3)(cid:90)(cid:72)(cid:69)(cid:86)(cid:76)(cid:87)(cid:72)(cid:3)(cid:68)(cid:87)(cid:3)(cid:75)(cid:87)(cid:87)(cid:83)(cid:29)//www.sec.gov.
3.(a)
(b)
(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:182)(cid:86)(cid:3)(cid:36)(cid:85)(cid:87)(cid:76)(cid:70)(cid:79)(cid:72)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:44)(cid:81)(cid:70)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:15)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:80)(cid:72)(cid:81)(cid:71)(cid:72)(cid:71)(cid:3)(cid:11)(cid:73)(cid:76)(cid:79)(cid:72)(cid:71)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:81)(cid:3)(cid:72)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-K for the fiscal
year ended November 1, 1997 and incorporated herein by reference).
Bylaws, as amended March 28, 1994 (filed as an (cid:72)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-KSB for the fiscal year
ended October 29, 1994 and incorporated herein by reference.)
10.(a)
(cid:45)(cid:82)(cid:76)(cid:81)(cid:87)(cid:3)(cid:57)(cid:72)(cid:81)(cid:87)(cid:88)(cid:85)(cid:72)(cid:3)(cid:36)(cid:74)(cid:85)(cid:72)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:90)(cid:76)(cid:87)(cid:75)(cid:3)(cid:21)(cid:20)(cid:86)(cid:87)(cid:3)(cid:38)(cid:72)(cid:81)(cid:87)(cid:88)(cid:85)(cid:92)(cid:3)(cid:48)(cid:82)(cid:85)(cid:87)(cid:74)(cid:68)(cid:74)(cid:72)(cid:3)(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:11)(cid:73)(cid:76)(cid:79)(cid:72)(cid:71)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:81)(cid:3)(cid:72)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)
10-K for the fiscal year ended November 1, 1997 and incorporated herein by reference).
(b)
(c)
(d)
(e)
(cid:21)(cid:19)(cid:20)(cid:20)(cid:3)(cid:54)(cid:87)(cid:82)(cid:70)(cid:78)(cid:3)(cid:44)(cid:81)(cid:70)(cid:72)(cid:81)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:51)(cid:79)(cid:68)(cid:81)(cid:3)(cid:11)(cid:73)(cid:76)(cid:79)(cid:72)(cid:71)(cid:3)(cid:68)(cid:86)(cid:3)(cid:83)(cid:68)(cid:85)(cid:87)(cid:3)(cid:82)(cid:73)(cid:3)(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:182)(cid:86)(cid:3)(cid:71)(cid:72)(cid:73)(cid:76)(cid:81)(cid:76)(cid:87)(cid:76)(cid:89)(cid:72)(cid:3)(cid:83)(cid:85)(cid:82)(cid:91)(cid:92)(cid:3)(cid:86)(cid:87)(cid:68)(cid:87)(cid:72)(cid:80)(cid:72)(cid:81)(cid:87)(cid:3)(cid:73)(cid:76)(cid:79)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:45)(cid:88)(cid:81)(cid:72) 7, 2011 and
incorporated herein by reference).
Agreement dated September 7, 2001 between Nobility and Terry E. Trexler relating to use of life insurance
(cid:83)(cid:85)(cid:82)(cid:70)(cid:72)(cid:72)(cid:71)(cid:86)(cid:3)(cid:11)(cid:73)(cid:76)(cid:79)(cid:72)(cid:71)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:81)(cid:3)(cid:72)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-K for the fiscal year ended November 3, 2001 and
incorporated herein by reference).
Finance Revenue Sharing Agreement dated April 10, 2004 between 21st Mortgage Corporation, Prestige
(cid:43)(cid:82)(cid:80)(cid:72)(cid:3)(cid:38)(cid:72)(cid:81)(cid:87)(cid:72)(cid:85)(cid:86)(cid:15)(cid:3)(cid:44)(cid:81)(cid:70)(cid:17)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:48)(cid:68)(cid:77)(cid:72)(cid:86)(cid:87)(cid:76)(cid:70)(cid:3)(cid:43)(cid:82)(cid:80)(cid:72)(cid:86)(cid:15)(cid:3)(cid:44)(cid:81)(cid:70)(cid:17)(cid:3)(cid:11)(cid:73)(cid:76)(cid:79)(cid:72)(cid:71)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:81)(cid:3)(cid:72)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-K for the fiscal
year ended October 31, 2009 and incorporated herein by reference).
Seventh Amendment to the Finance Revenue Sharing Agreement dated April 10, 2004 with 21st Mortgage
(cid:38)(cid:82)(cid:85)(cid:83)(cid:82)(cid:85)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:11)(cid:73)(cid:76)(cid:79)(cid:72)(cid:71)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:81)(cid:3)(cid:72)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:27)-K filed November 14, 2011 and incorporated herein
by reference).
35
(f)
(g)
(h)
21.1
23.1
Loan and Security Agreement dated May 20, 2009, by and among Clayton Bank & Trust, Majestic 21
Partnership, 21st Mortgage Corporation, Majestic Homes, Inc. and the Company, as guarantor (filed as an
(cid:72)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)(cid:20)(cid:19)-K for the fiscal year ended October 31, 2009 and incorporated herein by
reference).
Term Note dated May 20, 2009 in favor of Clayton Bank (cid:9)(cid:3)(cid:55)(cid:85)(cid:88)(cid:86)(cid:87)(cid:3)(cid:11)(cid:73)(cid:76)(cid:79)(cid:72)(cid:71)(cid:3)(cid:68)(cid:86)(cid:3)(cid:68)(cid:81)(cid:3)(cid:72)(cid:91)(cid:75)(cid:76)(cid:69)(cid:76)(cid:87)(cid:3)(cid:87)(cid:82)(cid:3)(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:182)(cid:86)(cid:3)(cid:41)(cid:82)(cid:85)(cid:80)(cid:3)
10-K for the fiscal year ended October 31, 2009 and incorporated herein by reference).
Promissory Note dated March 31, 2016, payable to Nobility Parks II, LLC and incorporated herein by
reference).
Subsidiaries of Nobility and incorporated herein by reference).
Consent of WithumSmith+Brown, PC
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 Financial 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. §1350.
Written Statement of Chief Financial Officer pursuant to 18 U.S.C. §1350.
Interactive data filing formatted in XBRL.
101.
(b)
36
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.
Signatures
NOBILITY HOMES, INC.
DATE: January 26, 2018
DATE: January 26, 2018
DATE: January 26, 2018
By: /s/ Terry E. Trexler
Terry E. Trexler, Chairman,
President and Chief Executive Officer (Principal Executive
Officer)
By: /s/ Thomas W. Trexler
Thomas W. Trexler, Executive Vice President
and Chief Financial Officer (Principal Financial Officer)
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 26, 2018
DATE: January 26, 2018
DATE: January 26, 2018
DATE: January 26, 2018
By: /s/ Terry E. Trexler
Terry E. Trexler, Director
By: /s/ Richard C. Barberie
Richard C. Barberie, Director
By: /s/ Robert P. Saltsman
Robert P. Saltsman, Director
By: /s/ Thomas W. Trexler
Thomas W. Trexler, Director
37
Consent of Independent Registered Public Accounting Firm
Exhibit 23.1
We consent to the incorporation by reference in Registration Statements (No. 333-102919 and 333-193608) on Form S-8 of Nobility
Homes, Inc., of our report dated January 26, 2018, relating to our audits of the consolidated financial statements, which appears in this
Annual Report on Form 10-K of Nobility Homes, Inc., for the years ended November 4, 2017 and November 5, 2016.
/s/ WithumSmith+Brown, PC
Orlando, Florida
January 26, 2018
Certifications 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
Exhibit 31(a)
I, Terry E. Trexler, certify that:
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of Nobility Homes, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
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(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) (cid:40)(cid:89)(cid:68)(cid:79)(cid:88)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:72)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:71)(cid:76)(cid:86)(cid:70)(cid:79)(cid:82)(cid:86)(cid:88)(cid:85)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:83)(cid:85)(cid:82)(cid:70)(cid:72)(cid:71)(cid:88)(cid:85)(cid:72)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:83)(cid:85)(cid:72)(cid:86)(cid:72)(cid:81)(cid:87)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) (cid:39)(cid:76)(cid:86)(cid:70)(cid:79)(cid:82)(cid:86)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:68)(cid:81)(cid:92)(cid:3)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:82)(cid:70)(cid:70)(cid:88)(cid:85)(cid:85)(cid:72)(cid:71)(cid:3)(cid:71)(cid:88)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)
regi(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:80)(cid:82)(cid:86)(cid:87)(cid:3)(cid:85)(cid:72)(cid:70)(cid:72)(cid:81)(cid:87)(cid:3)(cid:73)(cid:76)(cid:86)(cid:70)(cid:68)(cid:79)(cid:3)(cid:84)(cid:88)(cid:68)(cid:85)(cid:87)(cid:72)(cid:85)(cid:3)(cid:11)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:73)(cid:82)(cid:88)(cid:85)(cid:87)(cid:75)(cid:3)(cid:73)(cid:76)(cid:86)(cid:70)(cid:68)(cid:79)(cid:3)(cid:84)(cid:88)(cid:68)(cid:85)(cid:87)(cid:72)(cid:85)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:68)(cid:86)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:81)(cid:3)(cid:68)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:12)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:75)(cid:68)(cid:86)(cid:3)
(cid:80)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3)(cid:68)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:72)(cid:71)(cid:15)(cid:3)(cid:82)(cid:85)(cid:3)(cid:76)(cid:86)(cid:3)(cid:85)(cid:72)(cid:68)(cid:86)(cid:82)(cid:81)(cid:68)(cid:69)(cid:79)(cid:92)(cid:3)(cid:79)(cid:76)(cid:78)(cid:72)(cid:79)(cid:92)(cid:3)(cid:87)(cid:82)(cid:3)(cid:80)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3)(cid:68)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74);
and
5.
The (cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:70)(cid:72)(cid:85)(cid:87)(cid:76)(cid:73)(cid:92)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:44)(cid:3)(cid:75)(cid:68)(cid:89)(cid:72)(cid:3)(cid:71)(cid:76)(cid:86)(cid:70)(cid:79)(cid:82)(cid:86)(cid:72)(cid:71)(cid:15)(cid:3)(cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:80)(cid:82)(cid:86)(cid:87)(cid:3)(cid:85)(cid:72)(cid:70)(cid:72)(cid:81)(cid:87)(cid:3)(cid:72)(cid:89)(cid:68)(cid:79)(cid:88)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)
(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:15)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:87)(cid:72)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:69)(cid:82)(cid:68)(cid:85)(cid:71)(cid:3)(cid:82)(cid:73)(cid:3)(cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)(cid:11)(cid:82)(cid:85)(cid:3)(cid:83)(cid:72)(cid:85)(cid:86)(cid:82)(cid:81)(cid:86)(cid:3)
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:85)(cid:72)(cid:68)(cid:86)(cid:82)(cid:81)(cid:68)(cid:69)(cid:79)(cid:92)(cid:3)(cid:79)(cid:76)(cid:78)(cid:72)(cid:79)(cid:92)(cid:3)(cid:87)(cid:82)(cid:3)(cid:68)(cid:71)(cid:89)(cid:72)(cid:85)(cid:86)(cid:72)(cid:79)(cid:92)(cid:3)(cid:68)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:87)(cid:82)(cid:3)(cid:85)(cid:72)(cid:70)(cid:82)(cid:85)(cid:71)(cid:15)(cid:3)(cid:83)(cid:85)(cid:82)(cid:70)(cid:72)(cid:86)(cid:86)(cid:15)(cid:3)(cid:86)(cid:88)(cid:80)(cid:80)arize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:17)(cid:3)
DATE: January 26, 2018
By: /s/ Terry E. Trexler
Terry E. Trexler, Chairman,
President and Chief Executive Officer
(Principal Executive Officer)
Certifications of Chief Financial 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
Exhibit 31(b)
I, Thomas W. Trexler, certify that:
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of Nobility Homes, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
(cid:55)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:70)(cid:72)(cid:85)(cid:87)(cid:76)(cid:73)(cid:92)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:44)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:85)(cid:72)(cid:86)(cid:83)(cid:82)(cid:81)(cid:86)(cid:76)(cid:69)(cid:79)(cid:72)(cid:3)(cid:73)(cid:82)(cid:85)(cid:3)(cid:72)(cid:86)(cid:87)(cid:68)(cid:69)(cid:79)(cid:76)(cid:86)(cid:75)(cid:76)(cid:81)(cid:74)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:80)(cid:68)(cid:76)(cid:81)(cid:87)(cid:68)(cid:76)(cid:81)(cid:76)(cid:81)(cid:74)(cid:3)(cid:71)(cid:76)(cid:86)(cid:70)(cid:79)(cid:82)(cid:86)(cid:88)(cid:85)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:83)(cid:85)(cid:82)(cid:70)edures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) (cid:40)(cid:89)(cid:68)(cid:79)(cid:88)(cid:68)(cid:87)(cid:72)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:72)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:76)(cid:89)(cid:72)(cid:81)(cid:72)(cid:86)(cid:86)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:71)(cid:76)(cid:86)(cid:70)(cid:79)(cid:82)(cid:86)(cid:88)(cid:85)(cid:72)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:83)(cid:85)(cid:82)(cid:70)(cid:72)(cid:71)(cid:88)(cid:85)(cid:72)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:83)(cid:85)(cid:72)(cid:86)(cid:72)(cid:81)(cid:87)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) (cid:39)(cid:76)(cid:86)(cid:70)(cid:79)(cid:82)(cid:86)(cid:72)(cid:71)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:76)(cid:86)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:3)(cid:68)(cid:81)(cid:92)(cid:3)(cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:82)(cid:70)(cid:70)(cid:88)(cid:85)(cid:85)(cid:72)(cid:71)(cid:3)(cid:71)(cid:88)(cid:85)(cid:76)(cid:81)(cid:74)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)
reg(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:80)(cid:82)(cid:86)(cid:87)(cid:3)(cid:85)(cid:72)(cid:70)(cid:72)(cid:81)(cid:87)(cid:3)(cid:73)(cid:76)(cid:86)(cid:70)(cid:68)(cid:79)(cid:3)(cid:84)(cid:88)(cid:68)(cid:85)(cid:87)(cid:72)(cid:85)(cid:3)(cid:11)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:73)(cid:82)(cid:88)(cid:85)(cid:87)(cid:75)(cid:3)(cid:73)(cid:76)(cid:86)(cid:70)(cid:68)(cid:79)(cid:3)(cid:84)(cid:88)(cid:68)(cid:85)(cid:87)(cid:72)(cid:85)(cid:3)(cid:76)(cid:81)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:70)(cid:68)(cid:86)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:68)(cid:81)(cid:3)(cid:68)(cid:81)(cid:81)(cid:88)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:12)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:3)(cid:75)(cid:68)(cid:86)(cid:3)
(cid:80)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3)(cid:68)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:72)(cid:71)(cid:15)(cid:3)(cid:82)(cid:85)(cid:3)(cid:76)(cid:86)(cid:3)(cid:85)(cid:72)(cid:68)(cid:86)(cid:82)(cid:81)(cid:68)(cid:69)(cid:79)(cid:92)(cid:3)(cid:79)(cid:76)(cid:78)(cid:72)(cid:79)(cid:92)(cid:3)(cid:87)(cid:82)(cid:3)(cid:80)(cid:68)(cid:87)(cid:72)(cid:85)(cid:76)(cid:68)(cid:79)(cid:79)(cid:92)(cid:3)(cid:68)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:15)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74);
and
5.
Th(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:82)(cid:87)(cid:75)(cid:72)(cid:85)(cid:3)(cid:70)(cid:72)(cid:85)(cid:87)(cid:76)(cid:73)(cid:92)(cid:76)(cid:81)(cid:74)(cid:3)(cid:82)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:44)(cid:3)(cid:75)(cid:68)(cid:89)(cid:72)(cid:3)(cid:71)(cid:76)(cid:86)(cid:70)(cid:79)(cid:82)(cid:86)(cid:72)(cid:71)(cid:15)(cid:3)(cid:69)(cid:68)(cid:86)(cid:72)(cid:71)(cid:3)(cid:82)(cid:81)(cid:3)(cid:82)(cid:88)(cid:85)(cid:3)(cid:80)(cid:82)(cid:86)(cid:87)(cid:3)(cid:85)(cid:72)(cid:70)(cid:72)(cid:81)(cid:87)(cid:3)(cid:72)(cid:89)(cid:68)(cid:79)(cid:88)(cid:68)(cid:87)(cid:76)(cid:82)(cid:81)(cid:3)(cid:82)(cid:73)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)
(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:15)(cid:3)(cid:87)(cid:82)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:68)(cid:88)(cid:71)(cid:76)(cid:87)(cid:3)(cid:70)(cid:82)(cid:80)(cid:80)(cid:76)(cid:87)(cid:87)(cid:72)(cid:72)(cid:3)(cid:82)(cid:73)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:69)(cid:82)(cid:68)(cid:85)(cid:71)(cid:3)(cid:82)(cid:73)(cid:3)(cid:71)(cid:76)(cid:85)(cid:72)(cid:70)(cid:87)(cid:82)(cid:85)(cid:86)(cid:3)(cid:11)(cid:82)(cid:85)(cid:3)(cid:83)(cid:72)(cid:85)(cid:86)(cid:82)(cid:81)(cid:86)(cid:3)
performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
(cid:90)(cid:75)(cid:76)(cid:70)(cid:75)(cid:3)(cid:68)(cid:85)(cid:72)(cid:3)(cid:85)(cid:72)(cid:68)(cid:86)(cid:82)(cid:81)(cid:68)(cid:69)(cid:79)(cid:92)(cid:3)(cid:79)(cid:76)(cid:78)(cid:72)(cid:79)(cid:92)(cid:3)(cid:87)(cid:82)(cid:3)(cid:68)(cid:71)(cid:89)(cid:72)(cid:85)(cid:86)(cid:72)(cid:79)(cid:92)(cid:3)(cid:68)(cid:73)(cid:73)(cid:72)(cid:70)(cid:87)(cid:3)(cid:87)(cid:75)(cid:72)(cid:3)(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:68)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:87)(cid:82)(cid:3)(cid:85)(cid:72)(cid:70)(cid:82)(cid:85)(cid:71)(cid:15)(cid:3)(cid:83)(cid:85)(cid:82)(cid:70)(cid:72)(cid:86)(cid:86)(cid:15)(cid:3)(cid:86)(cid:88)(cid:80)marize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
(cid:85)(cid:72)(cid:74)(cid:76)(cid:86)(cid:87)(cid:85)(cid:68)(cid:81)(cid:87)(cid:182)(cid:86)(cid:3)(cid:76)(cid:81)(cid:87)(cid:72)(cid:85)(cid:81)(cid:68)(cid:79)(cid:3)(cid:70)(cid:82)(cid:81)(cid:87)(cid:85)(cid:82)(cid:79)(cid:3)(cid:82)(cid:89)(cid:72)(cid:85)(cid:3)(cid:73)(cid:76)(cid:81)(cid:68)(cid:81)(cid:70)(cid:76)(cid:68)(cid:79)(cid:3)(cid:85)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:76)(cid:81)(cid:74)(cid:17)(cid:3)
DATE: January 26, 2018
By: /s/ Thomas W. Trexler
Thomas W. Trexler, Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
Written Statement of the Chief Executive Officer
Pursuant to 18 U.S.C. §1350
Exhibit 32(a)
Solely for the purposes of complying with 18 U.S.C. Section 1350, I, the undersigned Chairman and Chief Executive Officer of
(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:43)(cid:82)(cid:80)(cid:72)(cid:86)(cid:15)(cid:3)(cid:44)(cid:81)(cid:70)(cid:17)(cid:3)(cid:11)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:180)(cid:12)(cid:15)(cid:3)(cid:75)(cid:72)(cid:85)(cid:72)(cid:69)(cid:92)(cid:3)(cid:70)(cid:72)(cid:85)(cid:87)(cid:76)(cid:73)(cid:92)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:29)(cid:3)
1.
2.
The Annual Report on Form 10-K of the Company for the year ended November 4, 2017 (cid:11)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:180)(cid:12)(cid:3)(cid:73)(cid:88)(cid:79)(cid:79)(cid:92)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:79)(cid:76)(cid:72)(cid:86)(cid:3)
with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
DATE: January 26, 2018
By: /s/ Terry E. Trexler
Terry E. Trexler, Chairman,
President and Chief Executive Officer
Written Statement of the Chief Financial Officer
Pursuant to 18 U.S.C. §1350
Exhibit 32(b)
Solely for the purposes of complying with 18 U.S.C. Section 1350, I, the undersigned Executive Vice President and Chief Financial
(cid:50)(cid:73)(cid:73)(cid:76)(cid:70)(cid:72)(cid:85)(cid:3)(cid:82)(cid:73)(cid:3)(cid:49)(cid:82)(cid:69)(cid:76)(cid:79)(cid:76)(cid:87)(cid:92)(cid:3)(cid:43)(cid:82)(cid:80)(cid:72)(cid:86)(cid:15)(cid:3)(cid:44)(cid:81)(cid:70)(cid:17)(cid:3)(cid:11)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)(cid:38)(cid:82)(cid:80)(cid:83)(cid:68)(cid:81)(cid:92)(cid:180)(cid:12)(cid:15)(cid:3)(cid:75)(cid:72)(cid:85)(cid:72)(cid:69)(cid:92)(cid:3)(cid:70)(cid:72)(cid:85)(cid:87)(cid:76)(cid:73)(cid:92)(cid:3)(cid:87)(cid:75)(cid:68)(cid:87)(cid:29)(cid:3)
1.
2.
The Annual Report on Form 10-K of the Company for the year ended November 4, 2017 (cid:11)(cid:87)(cid:75)(cid:72)(cid:3)(cid:179)(cid:53)(cid:72)(cid:83)(cid:82)(cid:85)(cid:87)(cid:180)(cid:12)(cid:3)(cid:73)(cid:88)(cid:79)(cid:79)(cid:92)(cid:3)(cid:70)(cid:82)(cid:80)(cid:83)(cid:79)(cid:76)(cid:72)(cid:86)(cid:3)
with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
DATE: January 26, 2018
By: /s/ Thomas W. Trexler
Thomas W. Trexler, Executive Vice President
and Chief Financial Officer
Directors
TERRY E. TREXLER
Chairman of the Board and
President of Nobility.
THOMAS W. TREXLER
Executive Vice President and
Chief Financial Officer of Nobility;
President of Prestige Home
Centers, Inc; President of
Mountain Financial, Inc.
Officers
(cid:83)(cid:132)(cid:161)RICHARD C. BARBERIE
Vice President of
Purchasing of Nobility
(Retired).
(cid:83) Audit Committee
(cid:132) Salary Review Committee
(cid:161) Nominating Committee
(cid:83)(cid:132)(cid:161)ROBERT P. SALTSMAN
Attorney and CPA in
Private practice.
TERRY E. TREXLER
President
JEAN ETHEREDGE
Secretary
THOMAS W. TREXLER
Executive Vice-President and
Chief Financial Officer
LYNN J. CRAMER, JR.
Treasurer
(cid:42)(cid:72)(cid:81)(cid:72)(cid:85)(cid:68)(cid:79)(cid:3)(cid:54)(cid:75)(cid:68)(cid:85)(cid:72)(cid:75)(cid:82)(cid:79)(cid:71)(cid:72)(cid:85)(cid:86)(cid:182) Information
Transfer Agent and Registrar
Broadridge
Philadelphia, Pennsylvania
General Counsel
Wayne Argo, P.A.
Ocala, Florida
Independent Auditors
WithumSmith+Brown, PC
Orlando, Florida
Stock Exchange Listing
OTCQX
Symbol: NOBH
Special Counsel
Foley & Lardner LLP
Jacksonville, Florida
General Information
PLEASE TAKE NOTICE
The annual meeting of the
shareholders of the Company
will be held at 10:00 A.M.
local time, on Friday, March 2,
2018, at the Executive Offices,
3741 S. W. 7th Street (I-75 and
SR40) Ocala, Florida. All
shareholders are cordially
invited to attend the meeting.
Executive Offices
Manufacturing Locations
3741 S.W. 7th Street
Ocala, Florida 34474
Phone (352)732-5157
Fax (352)732-3711
www.nobilityhomes.com
Ocala Plant
3741 S.W. 7th Street
Ocala, Florida 34474
Phone (352)732-6110
Fax (352)732-4203
Belleview Plant (closed in 2009)
6432 S.E. 115th Lane
Belleview, Florida 34421
A copy of the Company's current Annual Report on Form 10-K may be obtained from the Company free of charge
by writing to the Secretary, Nobility Homes, Inc., 3741 SW 7th Street, Ocala, Florida 34474 or online at
www.NobilityHomes.com.
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