Total net sales in second quarter of 2022 was
$10,645,046compared to $14,742,900in second quarter of 2021. Total net sales for the first six months of 2022 was $21,453,316compared to $23,814,411for the first six months of 2021. The Company reported net income of $1,456,826in second quarter of 2022, compared to a net income of $1,724,938in second quarter 2021. Net income for the first six months of 2022 was $2,613,860compared to $2,790,703for the first six months of 2021. According to the Florida Manufactured Housing Association, shipments for the industry in Floridafor the period from November 2021through April 2022were up approximately 23% from the same period last year. Net sales decreased during the three and six months ended May 7, 2022as compared to the same period last year. We continue to experience the negative impact of limitations being placed on certain key production materials from suppliers, the delay or lack of key components from vendors as well as back orders, delayed shipments, price increases and labor shortages. These supply chain issues has caused delays in completion of the homes at the manufacturing facility and the set up process of retail homes in the field, resulting in decreased net sales due to our inability to timely complete and deliver homes to customers. We expect that these challenges will continue for the remainder of fiscal year 2022 and potentially beyond until the industry supply chain normalizes. The following table summarizes certain key sales statistics and percent of gross profit. Three Months Ended Six Months Ended May 7, May 1, May 7, May 1, 2022 2021 2022 2021 New homes sold through Company owned sales centers 77 132 164 214
homes sold through Company owned sales centers 3 5 9 6 Homes sold to independent dealers 5 49 15 89 Total new factory built homes produced 113 178 205 328 Average new manufactured home price-retail
$ 124,855 $ 91,217 $ 115,533 $ 90,080Average new manufactured home price-wholesale $ 73,561 $ 47,578 $ 69,172 $ 47,549As a percent of net sales: Gross profit from the Company owned retail sales centers 19 % 18 % 19 % 18 % Gross profit from the manufacturing facilities - including intercompany sales 13 % 15 % 13 % 15 % Maintaining our strong financial position is vital for future growth and success. Because of very challenging business conditions during economic recessions in our market area, management will continue to evaluate all expenses and react in a manner consistent with maintaining our strong financial position, while exploring opportunities to expand our distribution and manufacturing operations. Our many years of experience in the Floridamarket, combined with home buyers' increased need for more affordable housing, should serve the Company well in the coming years. Management remains convinced that our specific geographic market is one of the best long-term growth areas in the country. On June 5, 2022the Company celebrated its 55th anniversary in business specializing in the design and production of quality, affordable manufactured homes. With multiple retail sales centers in Floridafor over 31 years and an insurance agency subsidiary, we are the only vertically integrated manufactured home company headquartered in Florida. 10
Insurance agent commission revenues in the second quarter of 2022 were
$77,500compared to $82,643in the second quarter of 2021. Total insurance agent commission revenues for the first six months of 2022 were $144,487compared to $148,614for the first six months of 2021. The Company establishes 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 May 7, 2022and November 6, 2021. Gross profit as a percentage of net sales was 28% in the second quarter of 2022 compared to 25% for the second quarter of 2021 and was 27% for the first six months of 2022 compared to 26% for the first six months of 2021. The gross profit in the second quarter of 2022 was $3,021,918compared to $3,612,685in the second quarter of 2021 and was $5,750,146for the first six months of 2022 compared to $6,110,132for the first six months of 2021. The gross profit is dependent on the sales mix of wholesale and retail homes and number of pre-owned homes sold. The increase in gross profit as a percentage of net sales is primarily due to increases in our selling prices to offset the higher inflation costs of building products and labor on each home. The decrease in gross profit dollar amount is primarily due to the decrease in sales due to shortages in many building products, which has limited production and delayed the completion of the homes both at the manufacturing plant and the set up process in the field, resulting in decreased net sale due to our inability to timely complete and deliver homes to customers. Selling, general and administrative expenses as a percent of net sales was 13% in second quarter of 2022 compared to 11% in the second quarter of 2021 and was 13% for the first six months of 2022 compared to 12% for the first six months of 2021. Selling, general and administrative expenses in second quarter of 2022 was $1,378,606compared to $1,550,513in the second quarter of 2021 and was $2,795,149for the first six months of 2022 compared to $2,823,894for the first six months of 2021. The dollar decrease in expenses in the three and six months of 2022 compared to the same period last year were due to reduction of the variable expenses related to the decreased sales. We earned interest income of $39,577for the second quarter of 2022 compared to $52,474for the second quarter of 2021. For the first six months of 2022, interest income was $114,257compared to $83,130in the first six months of 2021. The increase in interest income for the first six months of 2022 is primarily due to the interest earned from the sale of pre-owned (repossessed) inventory acquired from the Company's joint venture partner, 21st Mortgage Corporationin the first quarter of 2022. Our earnings from Majestic 21 in the second quarter of 2022 were $12,665compared to $12,049, for the second quarter of 2021. Earnings from Majestic 21 for the first six months of 2022 were $25,222compared to $25,757for the first six months of 2021. The earnings from Majestic 21 represent the allocation of profit and losses which are owned 50% by 21st Mortgage Corporationand 50% by the Company. The earnings from the Majestic 21 loan portfolio will continue to decrease due to the amortization, maturity and payoff of the loans. We received distributions in the second quarter of 2022 of $115,454compared to no distributions in the second quarter of 2021 and $233,499for the first six months of 2022 compared to $45,868for the first six months of 2021. The increase in distributions in the first six months of 2022 is due to the timing of the reserve balances. The distributions are from an escrow arrangement related to a Finance Revenue Sharing Agreement (FRSA) between 21 st Mortgage Corporationand the Company. The distributions from the escrow arrangement, relates to certain loans financed by 21 st Mortgage Corporation, are recorded as income by the Company when received. The earnings from the FRSA loan portfolio will continue to decrease due to the amortization and payoff of the loans. The Company realized pre-tax income in the second quarter of 2022 of $1,892,615as compared to $2,268,443in the second quarter of 2021. The pre-tax income for the first six months of 2022 was $3,419,045as compared to $3,670,017in first six months of 2021. 11
The Company recorded an income tax expense in the amount of
$435,789in the second quarter of 2022 as compared to $543,505in second quarter 2021. Income tax expense for the six months of 2022 was $805,185compared to $879,314for the six months of 2021. We reported net income of $1,456,826for the second quarter of 2022 or $0.42per share, compared to $1,724,938or $0.47per share, for the second quarter of 2021. For the first six months of 2022 net income was $2,613,860or $0.75per share ( $0.74diluted), compared to $2,790,703or $0.77per share, in the first six months of 2021.
Cash and capital resources
Cash and cash equivalents were
$26,530,111at May 7, 2022compared to $36,126,059at November 6, 2021. Certificates of deposit were $0at May 7, 2022compared to $2,093,015at November 6, 2021. Short-term investments were $598,154at May 7, 2022compared to $621,928at November 6, 2021. Working capital was $29,601,962at May 7, 2022as compared to $35,563,355at November 6, 2021. During the first six months of 2022, the Company repurchased an aggregate of 162,300 shares of its common stock for an aggregate of $5,186,070. A cash dividend was paid from our cash reserves in April 2022in the amount of $1.00per share ( $3,532,976). We own the entire inventory for our Prestige retail sales centers, which includes new and pre-owned homes, and do not incur any third party floor plan financing expenses. As of May 7, 2022the Company has incurred approximately $531,906of the estimated construction cost of the approximately $1.1allocated to build an 11,900 square foot frame shop on the Company's property in Ocala, Florida. The Company currently has no line of credit facility and no debt and does not believe that such a facility is currently necessary to its operations. The Company also has approximately 4.1 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 May 7, 2022, the Company continued to report a strong balance sheet which included total assets of approximately $60.8 millionwhich was funded primarily by stockholders' equity of approximately 43.3 million.
Significant Accounting Policies and Estimates
In Item 7 of our Form 10-K, under the heading "Critical Accounting Policies and Estimates," we have provided a discussion of the critical accounting policies and estimates that management believes affect its more significant judgments and estimates used in the preparation of our Consolidated Financial Statements. No significant changes have occurred since that time.
Certain statements in this report are unaudited or forward-looking statements within the meaning of the federal securities laws. Although Nobility believes that the amounts and expectations reflected in such forward-looking statements are based on reasonable assumptions, there are risks and uncertainties that may cause actual results to differ materially from expectations. These risks and uncertainties include, but are not limited to, the potential adverse impact on our business caused by the COVID-19 pandemic or other health pandemics, competitive pricing pressures at both the wholesale and retail levels, inflation, increasing material costs (including forest based products) or availability of materials due to supply chain interruptions (such as current inflation with forest products and supply issues with vinyl siding and PVC piping), changes in market demand, increase 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
Floridaeconomy, impact of 12
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 to Nobility, market demographics, management's ability to attract and retain executive officers and key personnel, increased global tensions, market disruptions resulting from terrorist or other attack, any armed conflict involving
the United Statesand the impact of inflation. 13
© Edgar Online, source