Results of Operations



Total net sales in the first quarter of 2023 were up 59% to $17,164,753 compared
to $10,808,270 in the first quarter of 2022. The Company reported an increase of
164% in net income to $3,056,967 in the first quarter of 2023, compared to a net
income of $1,157,034 in the first quarter 2022. The primary reason that sales
increased was due to the supply chain challenges a year ago which affected sales
in the first quarter of fiscal 2022, while in the first quarter of fiscal 2023
we were able to complete more retail customers homes resulting in an increase in
sales. The current demand for affordable manufactured housing in Florida and the
U.S. is slowing as a result of the increased interest rate environment driven by
the Federal Reserve. Although net sales increased during the three months ended
February 4, 2023, as compared to the same period last year, we continued to
experience some 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 have caused delays in the 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 deliver and setup homes to customers. We expect that
these challenges will continue for most of the fiscal year 2023 or until the
industry supply chain normalizes. The Company has continued to experience
inflation in some building products resulting in increases to our material and
labor costs which may increase the wholesale and retail selling prices of our
homes. In addition, potential customers may delay or defer purchasing decisions
in light of the rising interest rate environment. According to the Florida
Manufactured Housing Association, shipments for the industry in Florida for the
period from November 2022 through January 2023 were approximately a breakeven
from the same period last year.

The following table summarizes certain key sales statistics and percentage of
gross profit.

                                                                   (unaudited)
                                                               Three Months Ended
                                                         February 4,         February 5,
                                                            2023                2022
New homes sold through Company owned sales centers                105                  87

Pre-owned


homes sold through Company owned sales centers                      2                   6
Homes sold to independent dealers                                  36                  10
Total new factory built homes produced                            117                  92
Average new manufactured home price - retail            $     144,178       $     107,281
Average new manufactured home price - wholesale         $      75,350       $      63,781
As a percent of net sales:
Gross profit from the Company owned retail sales
centers                                                            23 %                18 %
Gross profit from the manufacturing facilities
-including intercompany sales                                      26 %                13 %

Maintaining our strong financial position is vital for future growth and success. Our many years of experience in the Florida market, combined with home buyers' increased need for more affordable housing, should serve the Company well in the coming years. Management remains convinced that our specific geographic market is one of the best long-term growth areas in the country.



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On June 5, 2022, the Company celebrated its 55th anniversary in business specializing in the design and production of quality, affordable manufactured homes. With multiple retail sales centers in Florida for over 32 years and an insurance agency subsidiary, we are the only vertically integrated manufactured home company headquartered in Florida.

Insurance agent commission revenues in the first quarter of 2023 were $75,608 compared to $66,988 in the first quarter of 2022. Revenues are generated by new and renewal policies being written which affects agent commission earned. 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 February 4, 2023, and November 5, 2022.



Gross profit as a percentage of net sales was 34% in the first quarter of 2023
compared to 25% for the first quarter of 2022. The gross profit in the first
quarter of 2023 was up 115% to $5,871,596 compared to $2,728,228 in the first
quarter of 2022. The gross profit is dependent on the sales mix of wholesale and
retail homes and number of
pre-owned
homes sold. The increase in gross profit as a percentage of net sales is
primarily due to increases in our selling prices to offset the higher inflation
costs of building products and labor cost on each home and the increase in the
average gross profit at our retail sales centers.

Selling, general and administrative expenses as a percent of net sales was 12% in the first quarter of 2023 compared to 13% in the first quarter of 2022. Selling, general and administrative expenses in the first quarter of 2023 were $2,035,477 compared to $1,416,543 in the first quarter of 2022. The dollar increases in expenses in the first quarter of 2023 were due to the increase in variable expenses which were a direct result of employee sales compensation due to the increase in sales.

We earned interest income of $140,033 for the first quarter of 2023 compared to $74,680 for the first quarter of 2022. The increase in interest income for the first three months of 2023 is primarily due to the interest earned from the increase in the investment rates and the increase in the monies invested.

Our earnings from Majestic 21 in the first quarter of 2023 were $22,826 compared to $12,557 for the first quarter of 2022. The earnings from Majestic 21 represent the allocation of profit and losses which are owned 50% by 21st Mortgage Corporation and 50% by the Company. The earnings from the Majestic 21 loan portfolio could vary quarter to quarter, but overall, the earnings will decrease due to the amortization, maturity and payoff of the loans.



We received no distributions from 21
st
Mortgage Corporation in the first quarter of 2023 compared to $118,045 in the
first quarter of 2022. The distributions are from an escrow arrangement related
to a Finance Revenue Sharing Agreement (FRSA) between 21
st
Mortgage Corporation and 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
decrease in distributions in the first three months of 2023 is due to the timing
of the reserve balances. The earnings from the FRSA loan portfolio will decrease
due to the amortization and payoff of the loans.

The Company realized
pre-tax
income in the first quarter of 2023 of $3,988,808 as compared to $1,526,430 in
the first quarter of 2022.

The Company recorded an income tax expense in the amount of $931,841 in the first quarter of 2023 as compared to $369,396 in first quarter of 2022.



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We reported net income of $3,056,967 for the first quarter of 2023 or $0.91 per share, compared to $1,157,034 or $0.33 per share, for the first quarter of 2022.

Liquidity and Capital Resources

Cash and cash equivalents were $17,849,343 at February 4, 2023 compared to $16,653,449 at November 5, 2022. Certificates of deposit were $5,853,611 at February 4, 2023 compared to $3,903,888 at November 5, 2022. Short-term investments were $571,129 at February 4, 2023 compared to $589,071 at November 5, 2022. Working capital was $36,499,462 at February 4, 2023 as compared to $33,667,732 at November 5, 2022. Prestige purchased during the first quarter of 2023 from other manufacturers 26 ($2,419,865) new homes to help eliminate the backlog from Nobility. Prestige new home inventory was $20,435,538 at February 4, 2023 compared to $20,016,093 at November 5, 2022. Prestige has 84 ($7,436,333) new homes from Nobility and other manufacturers that are included in inventory and are in the field waiting to be completed and closed. We own the entire inventory for our Prestige retail sales centers, which includes new and pre-owned homes, and do not incur any third-party floor plan financing expenses.

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 $4.2 million of cash surrender value of life insurance which can be accessed as an additional source of liquidity though the Company has not currently viewed this to be necessary. As of February 4, 2023, the Company continued to report a strong balance sheet which included total assets of approximately $66 million which was funded primarily by stockholders' equity of approximately $51 million.



The Board of Directors declared a
one-time
cash dividend of $1.00 per common share for the fiscal year 2022. The cash
dividend is payable on April 3, 2023, to stockholders of record as of March 20,
2023.

Critical 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.

Forward-Looking Statements



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
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 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 States and
the impact of inflation.

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