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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from ___________________ to
_____________________
For the Quarter ended Commission File No.
June 30, 2002 0-24282
MONMOUTH CAPITAL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
New Jersey 21-0740878
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Juniper Business Plaza,3499 Route 9 North Suite 3-C, Freehold NJ
07728
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code:(732) 577-9981
_________________________________________________________________
(Former name, former address and former fiscal year, if changed
since last report)
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 and 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 X No _____
The number of shares or other units outstanding of each of the
issuer's classes of securities as of August 1, 2002 was
1,945,052 shares.
MONMOUTH CAPITAL CORPORATION
FOR THE QUARTER ENDED JUNE 30, 2002
CONTENTS
PART I - FINANCIAL INFORMATION PAGE NO.
Item 1 - Financial Statements (Unaudited):
Consolidated Balance Sheets 3-4
Consolidated Statements of Income 5
Consolidated Statements of Cash Flow 6
Notes to Consolidated Financial
Statements 7-8
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9-11
Item 3 - Quantitative and Qualitative Disclosure
About Market Risk
There have been no material changes to information
required regarding quantitative and qualitative
disclosures about market risk from the end of the
preceding year to the date of this Form 10-Q.
PART II - OTHER INFORMATION 12
SIGNATURES 13
2
MONMOUTH CAPITAL CORPORATION
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
ASSETS 2002 2001
___________ ___________
Real Estate Investments:
Land $1,659,065 $1,659,065
Buildings, Improvements and
Equipment, net of accumulated
depreciation of $155,331 and
$80,000, respectively 6,080,669 6,155,971
___________ ___________
Total Real Estate Investments 7,739,734 7,815,036
Cash and Cash Equivalents 147,909 607,443
Securities Available for Sale,
at Fair Value:
Federal National Mortgage
Association 4,498,191 5,327,937
Government National Mortgage
Association 183,388 205,533
Other Securities Available
for Sale 8,917,445 6,123,300
Accounts Receivable 23,625 157,292
Loans Receivable, net of
allowance for losses of
$104,141 and $58,770,
respectively 2,249,430 2,397,698
Inventory 193,234 253,404
Prepaid Expenses and Other
Assets 312,443 150,157
___________ __________
TOTAL ASSETS $24,265,399 $23,037,800
=========== ===========
-UNAUDITED-
See Notes to the Consolidated Financial Statements
3
MONMOUTH CAPITAL CORPORATION
CONSOLIDATED BALANCE SHEETS (CONT'D.)
June 30, December 31,
2002 2001
___________ ___________
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgages Payable $5,640,107 $5,719,724
Accounts Payable and Accrued
Expenses 220,361 158,711
Loans Payable 9,321,570 9,449,933
Other Liabilities 34,743 34,657
___________ ___________
Total Liabilities 15,216,781 15,363,025
___________ ___________
Minority Interest 353,244 349,053
___________ ___________
Shareholders' Equity:
Common Stock (par value $1.00
per share; authorized
10,000,000 shares; issued
and outstanding 1,888,917 and
1,697,014 shares respectively 1,888,917 1,697,014
Additional Paid-In Capital 4,042,375 3,640,737
Accumulated Other Comprehensive
Income 2,171,488 1,689,134
Retained Earnings 592,594 298,837
___________ ___________
Total Shareholders' Equity 8,695,374 7,325,722
___________ ___________
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $24,265,399 $23,037,800
=========== ===========
4
UNAUDITED
See Notes to the Consolidated Financial Statements
MONMOUTH CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2002 , 2001 AND 2000
THREE MONTHS SIX MONTHS
____________ ____________
2002 2001 2000 2002 2001 2000
Income:
Interest and
Dividend Income $314,168 $318,209 $179,828 $592,923 $573,492 $313,798
Rental and
Occupancy
Charges 214,655 -0- -0- 430,425 1,223 49,602
Sales of
Manufactured
Homes 157,500 -0- 1,036,470 159,000 1,258,560 1,834,260
Other Income 37,221 43,689 29,771 181,386 85,022 63,214
________ ________ ________ ________ ________ ________
Total Income 723,544 361,898 1,246,069 1,363,734 1,918,297 2,260,874
________ ________ ________ ________ ________ ________
Expenses:
Cost of Sales of
Manufactured
Homes 150,720 -0- 921,307 152,220 1,098,035 1,637,482
Selling Expense 5,470 -0- 85,082 5,470 139,793 220,462
Salaries and
Employee
Benefits -0- 35,913 66,733 -0- 119,103 154,161
Professional
Fees 43,635 22,123 44,116 138,742 57,101 93,250
Interest Expense 184,011 121,644 76,486 370,409 214,657 123,152
Depreciation
Expense 41,698 -0- 10,650 78,000 28,569 49,430
Other Expenses 119,057 30,739 115,912 250,366 169,690 232,278
________ ________ ________ ________ ________ ________
Total Expenses 544,591 210,419 1,320,286 995,207 1,826,948 2,510,215
________ ________ ________ ________ ________ ________
Income (Loss)
Before Gain on
Sale of Real
Estate Investment
and Minority
Interest 178,953 151,479 (74,217) 368,527 91,349 (249,341)
Gain on Sale of
Real Estate
Investment -0- -0- -0- -0- -0- 245,419
Minority Interest (11,371) -0- -0- (24,771) -0- -0-
________ ________ ________ ________ ________ ________
INCOME (LOSS)
BEFORE INCOME
TAXES 167,582 151,479 (74,217) 343,756 91,349 (3,922)
INCOME TAXES -0- -0- -0- 50,000 -0- -0-
_______ ________ ________ ________ ________ ________
NET INCOME (LOSS) $167,582 $151,479 $ (74,217) $293,756 $ 91,349 $ (3,922)
======== ======== ======== ======== ======== ========
NET INCOME (LOSS)
PER SHARE -
BASIC AND DILUTED $ 0.09 $ 0.10 $ (0.05) $ 0.16 $ 0.06 $ -0-
======== ======== ======== ======= ======== ========
WEIGHTED AVERAGE
SHARES
OUTSTANDING
Basic 1,828,880 1,573,790 1,522,280 1,778,659 1,571,686 1,522,280
======== ======== ======== ======== ======== ========
Diluted 1,853,637 1,576,071 1,522,280 1,793,681 1,575,491 1,522,280
======== ======== ======== ======== ======== ========
-UNAUDITED-
See Notes to Consolidated Financial Statements
5
MONMOUTH CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE SIX MONTHS ENDED JUNE 30, 2002, 2001 AND 2000
2002 2001 2000
__________ __________ __________
CASH FLOWS FROM
OPERATING ACTIVITIES
Net Income (Loss) $293,757 $91,349 $(3,922)
Income Allocated to
Minority Interest 24,771 -0- -0-
Depreciation and
Amortization 84,198 28,569 49,430
Provision for Loan
Losses 52,500 -0- -0-
Gain on Sale of
Securities Available
for Sale (181,002) (68,315) (16,841)
Gain on Sale of Real
Estate Investments -0- -0- (245,419)
Changes In Operating
Assets and
Liabilities:
Accounts Receivable 133,667 67,047 34,537
Interest Receivable -0- (18,024) 18,024
Inventory 152,220 159,820 (450,947)
Prepaid Expenses and
Other Assets (168,484) 15,459 (2,361)
Accounts Payable and
Accrued Expenses 61,650 (529,349) 85,162
Other Assets and
Liabilities 86 (48,799) (36,063)
___________ ___________ ___________
Net Cash Provided
(Used) by Operating
Activities 453,363 (302,243) (568,400)
___________ ___________ ___________
CASH FLOWS FROM
INVESTING ACTIVITIES
Loans Made (110,600) (490,485) (622,117)
Collections and Other
Decreases in Loans
Receivable 114,318 445,786 701,049
Purchase of Securities
Available for Sale (2,670,789) (6,536,860) (3,276,019)
Proceeds from Sales
and Other Decreases
in Securities
Available for Sale 1,391,891 601,928 81,619
Disposition of
Inventory -0- 2,261,624 -0-
Proceeds from Sale of
Real Estate
Investments -0- 347,767 1,257,343
Additions to Land,
Building,
Improvements and
Equipment (2,698) (30,539) (65,887)
___________ ___________ ___________
Net Cash Used by
Investing Activities (1,277,878) (3,400,779) (1,924,012)
___________ ___________ ___________
CASH FLOWS FROM
FINANCING ACTIVITIES
Net Increase (Decrease)
in Loans Payable and
Inventory Financing (128,363) 3,710,811 2,439,329
Principal Payments of
Mortgage (79,617) -0- -0-
Decrease in Minority
Interest (20,580) -0- -0-
Proceeds from the
Issuance of Class A
Common Stock 593,541 40,511 1,009
___________ ___________ ___________
Net Cash Provided by
Financing Activities 364,981 3,751,322 2,440,338
___________ ___________ ___________
Net (Decrease) Increase
in Cash (459,534) 48,300 (52,074)
Cash at Beginning of
Period 607,443 60,062 62,152
___________ ___________ ___________
Cash at End of Period $147,909 $108,362 $10,078
=========== =========== ===========
6
-UNAUDITED-
See Notes to the Consolidated Financial Statements
MONMOUTH CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2002
NOTE 1 - ACCOUNTING POLICY
The interim consolidated financial statements furnished herein
reflect all adjustments which were, in the opinion of management,
necessary to present fairly the financial position, results of
operations, and cash flows at June 30, 2002 and for all periods
presented. All adjustments made in the interim period were of a
normal recurring nature. Certain footnote disclosures which
would substantially duplicate the disclosures contained in the
audited financial statements and notes thereto included in the
annual report of Monmouth Capital Corporation (the Company) for
the year ended December 31, 2001 have been omitted.
On September 26, 2001, the Company adopted a change in fiscal
year end from June 30 to December 31, effective for the short
year ended December 31, 2001. For purposes of this report, the
Company has furnished consolidated financial statements for the
corresponding period of the prior years. Certain
reclassifications have been made to the financial statements for
prior periods to conform to the current period presentation.
The Company has elected to be taxed as a real estate investment
trust (REIT). As a REIT, the Company would not be taxed on the
portion of its income which is distributed to shareholders,
provided it meets certain requirements.
NOTE 2 - NET INCOME PER SHARE
Basic net income per share is calculated by dividing net income
by the weighted-average number of common shares outstanding
during the period. Diluted net income per share is calculated by
dividing net income by the weighted-average number of common
shares outstanding plus the weighted-average number of net shares
that would be issued upon exercise of stock options pursuant to
the treasury stock method. Options in the amount of 24,757 and
2,281 for the quarter ended June 30, 2002 and 2001, respectively,
and 15,022 and 3,805 for the six months ended June 30, 2002 and
2001, respectively, are included in the diluted weighted average
shares outstanding.
NOTE 3 - COMPREHENSIVE INCOME
Total comprehensive income, including unrealized gains (loss) on
securities available for sale, amounted to $629,202, $565,905 and
$251,455 for the quarter ended June 30, 2002, 2001 and 2000,
respectively, and $776,110 $1,437,573 and $309,483 for the six
months ended June 30, 2002, 2001 and 2000, respectively.
NOTE 4 - SECURITIES AVAILABLE FOR SALE
During the six months ended June 30, 2002, the Company purchased
$2,670,789 of securities on margin. The margin loan is at 3.875%
and due on demand.
7
During the six months ended June 30, 2002, the Company sold
$1,210,889 of securities for a net gain of $181,002 which has
been included in Other Income.
NOTE 5 - DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
For the six months ended June 30, 2002, the Company received
$593,541 from the Dividend Reinvestment and Stock Purchase Plan.
There were 191,903 shares issued, resulting in 1,888,917 shares
outstanding.
On March 16, 2002, the Board of Directors declared a dividend of
$.35 a share, payable December 16, 2002 to shareholders of record
November 15, 2002.
NOTE 6 - EMPLOYEE STOCK OPTIONS
During the six months ended June 30, 2002, the following stock
options were granted:
Number of Number of Option Expiration
Date of Grant Employees Shares Price Date
1/16/02 2 10,000 $2.90 1/16/07
As of June 30, 2002, there were options outstanding to purchase
150,000 shares and 150,000 shares available for grant under the
Company's stock option plan.
NOTE 7 - SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest and taxes during the six months ended June
30, 2002, 2001, 2000 were as follows:
2002 2001 2000
Interest $370,409 $214,657 $123,152
Taxes 42,266 17,252 12,913
During the six months ended June 30, 2002, the Company
repossessed the collateral for loans receivable of $92,050 and
placed it into inventory.
8
MONMOUTH CAPITAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
MATERIAL CHANGES IN FINANCIAL CONDITION
On March 30, 2001, the Company exited the manufactured home sales
business since it has not proven to be profitable. On September
26, 2001, the Company adopted a change in fiscal year end from
June 30 to December 31, effective for the short year ended
December 31, 2001. The Company has elected to be taxed as a real
estate investment trust (REIT).
Net cash provided by operating activities for the six months
ended June 30, 2002 amounted to $453,363. Net cash used by
operating activities for the six months ended June 30, 2001 and
2000 amounted to $302,243 and $568,400, respectively. The
increase at June 30, 2002 was due primarily to profitable
operations.
Securities available for sale increased by $1,942,254 primarily
as a result of purchases of $2,670,789 and an increase in the
unrealized gain of $482,354, partially offset by sales of
$1,210,889.
Loans receivable decreased by $148,268 during the six months
ended June 30, 2002. This was primarily the result of
collections and other decreases of $114,318, an increase in the
provision for losses of $52,500 partially offset by new loans of
$110,600. The Company also repossessed the collateral for loans
receivable of $92,050 and placed it into inventory.
Prepaid expenses and other assets increased by $162,286 as a
result of a deposit on a future acquisition.
Mortgages payable and loans payable decreased by $79,617 and
$128,363, respectively during the six months ended June 30, 2002.
This was primarily the result of repayments.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Income is comprised primarily of interest and dividend income and
rental and occupancy charges.
Interest and dividend income remained relatively stable for the
quarter and six months ended June 30, 2002 as compared to the
quarter and six months ended June 30, 2001. Interest and
dividend income increased by $138,381 and $259,694, respectively,
for the quarter and six months ended June 30, 2001 as compared to
the quarter and six months ended June 30, 2000. This was
primarily due to purchases of securities available for sale.
Rental and occupancy charges increased by $214,655 and $429,202,
respectively, for the quarter and six months ended June 30, 2002
as compared to the quarter ended June 30, 2001 primarily due to
the purchase of two warehouse facilities during 2001.
9
Other income remained relatively stable for the quarters ended
June 30, 2002, 2001 and 2000. Other income increased by $96,364
for the six months ended June 30, 2002 as compared to the six
months ended June 30, 2001 due primarily to a gain on sales of
securities available for sale of $181,002. Other income remained
relatively stable for the six months ended June 30, 2001 as
compared to the six months ended June 30, 2000.
Sales of manufactured homes, Cost of sales of manufactured homes
and Selling expense for the quarter and six months ended June
30, 2002 relate to the disposition of repossessed inventory.
For the quarter and six months ended June 30, 2002, the decrease
in salaries and employee benefits is primarily offset by the
increase in professional fees. Beginning in 2002, the Company
utilized outside professionals.
Interest expense increased from $76,486 for the quarter ended
June 30, 2000 to $121,644 for the quarter ended June 30, 2001 to
$184,011 for the quarter ended June 30, 2002. Interest expense
increased from $123,152 for the six months ended June 30, 2000 to
$214,657 for the six months ended June 30, 2001 to $340,409 for
the six months ended June 30, 2002. This was primarily the
result of the purchases of securities available for sale on
margin and the mortgages on the new acquisitions.
Depreciation expense decreased from $10,650 for the quarter ended
June 30, 2000 to $-0- for the quarter ended June 30, 2001 and
from $49,430 for the six months ended June 30, 2000 to $28,569
for the six months ended June 30, 2001 due to the sale of an
industrial building in March 2000. Depreciation expense
increased to $41,698 and $78,000, respectively, for the quarter
and six months ended June 30, 2002 due to the new acquisitions
during 2001.
Other expenses increased by $88,318 and $80,676, respectively,
for the quarter and six months ended June 30, 2002 as compared to
the quarter and six months ended June 30, 2001 due primarily to
an increase in real estate taxes, insurance costs and occupancy
charges.
All other income and expense items decreased for the quarter and
six months ended June 30, 2001 as compared to the quarter and six
months ended June 30, 2000 due to the Company exiting the
manufactured home sales business.
Funds from operations (FFO), defined as net income, excluding
gains (or losses) from sales of depreciable assets, plus
depreciation amounted to $209,280, $151,479 and ($63,567) for the
quarter ended June 30, 2002, 2001 and 2000, respectively. FFO
amounted to $371,756, $119,918 and ($199,911) for the six months
ended June 30, 2002, 2001 and 2000, respectively. FFO does not
replace net income (determined in accordance with generally
accepted accounting principles) as a measure of performance or
net cash flows as a measure of liquidity. FFO should be
considered as a supplemental measure of operating performance
used by real estate investment trusts.
10
LIQUIDITY AND CAPITAL RESOURCES
The Company's ability to generate cash adequate to meet its needs
is dependent primarily on income from its real estate investments
and its securities portfolio, the sale of real estate investments
and securities, refinancing of mortgage debt, leveraging of real
estate investments, availability of bank borrowings, proceeds
from the Dividend Reinvestment and Stock Purchase Plan, and
access to the capital markets. Purchases of new properties,
purchases of securities, payments of expenses related to real
estate operations, capital improvements programs, debt service,
management and professional fees, and dividend requirements place
demands on the Company's liquidity.
11
MONMOUTH CAPITAL CORPORATION
PART II - OTHER INFORMATION
FOR THE QUARTER ENDED JUNE 30, 2002
Item 1 - Legal Proceedings - None
Item 2 - Changes in Securities - None
Item 3 - Defaults Upon Senior Securities - None
Item 4 - Submission of Matters to a Vote of Security Holders - None
Item 5 - Other Information - None
Item 6 - Exhibits and Reports on Form 8-K -
99.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
99.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
12
SIGNATURES
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
MONMOUTH CAPITAL CORPORATION
Date: August 6, 2002 By: /s/ Eugene W. Landy
EUGENE W. LANDY
President
Date: August 6, 2002 By: /s/ Anna T. Chew
ANNA T. CHEW
Vice President
and Controller
13