"Very competitive and difficult environment." "Reduced Company backlogs." "Volatile pricing."

Those words were still ringing in investors' ears leading up to the fourth-quarter earnings release by manufactured homebuilder Nobility Homes (NASDAQ:NOBH) last week. And when the news came out, all of the above rang true. In a performance considerably weaker than expected, Nobility reported quarterly sales down 8% year over year, and profits per share down a good 26% at just $0.34 per share. Not at all the way the firm had wanted to cap a year in which sales and earnings per share were up over 2005, 6% and 7%, respectively.

Free cash flow
As you may recall from our pre-earnings Foolish Forecast, one point of concern at Nobility is the fact that free cash flow had been halved over the last couple of quarters, in comparison to 2005. Sales were rising, but inventories of unsold homes were rising even faster, tying up working capital. While I had hoped to be able to report better news for the fourth quarter, so far I am unable to, for two reasons:

  • First, inventories continue to outpace sales growth -- although that was pretty much a given this quarter, with sales actually falling 8%. In comparison to the sales decline, inventories at quarter-end stood 30% higher than they did in November of last year.
  • Second, Nobility failed to provide a cash flow statement in its earnings release. Lacking that document, we're unable to confirm whether any other factors might have offset the still inventory-heavy balance sheet to improve free cash flow.

Now, Nobility will certainly provide a cash flow statement in due time, when it files its 10-K with the SEC. It's just that the company usually takes longer to file its 10-Ks than its 10-Qs, which usually appear a few days after a quarterly earnings release (last year, for example, investors had to wait over a month between the annual earnings news and the 10-K's appearance).

Speaking of which, one thing tweaks my interest here. I said that Nobility files its 10-Qs "a few days" after quarterly earnings. But what's interesting is that the "few" days have been trending upwards. Last year's third quarter filing came out the day after earnings. This year's Q1 took a week to arrive; Q2, another week; Q3, 11 days. See the trend? It's taking longer and longer for Nobility to get its numbers straight for the SEC.

Strategic alternatives
Perhaps related to this (and perhaps not), Nobility also updated investors on its quest to find a "strategic alternative" (industry-speak for "selling out" or "going private") for itself. In the first explanation I've seen the company publish in an 8-K, management confided that two reasons for its disillusionment with working as a standalone, public entity, are "the increasing costs related to the Sarbanes-Oxley 404 compliance and the increasing costs of being a public company."

SOX costs have rippled throughout the small cap universe, causing:

Fool Contributor Rich Smith does not own shares of any company named above.