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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 September 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.
September 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 November 4, 2002 was
2,103,033 shares.
MONMOUTH CAPITAL CORPORATION
FOR THE QUARTER ENDED SEPTEMBER 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 7-9
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10-12
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.
Item 4 - Controls and Procedures 12
PART II - OTHER INFORMATION 13
SIGNATURES 14
2
MONMOUTH CAPITAL CORPORATION
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
ASSETS 2002 2001
_______________ _______________
Real Estate Investments:
Land $2,099,065 $1,659,065
Buildings, Improvements and
Equipment, net of accumulated
depreciation of $194,331 and
$80,000, respectively 9,834,669 6,155,971
___________ ___________
Total Real Estate Investments 11,933,734 7,815,036
Cash and Cash Equivalents 227,840 607,443
Securities Available for Sale, at
Fair Value:
Federal National Mortgage
Association 3,792,468 5,327,937
Government National Mortgage
Association 178,512 205,533
Other Securities Available for
Sale 9,129,983 6,123,300
Accounts Receivable 18,629 157,292
Loans Receivable, net of allowance
for losses of $92,414 and
$58,770, respectively 2,043,002 2,397,698
Inventory 222,993 253,404
Prepaid Expenses and Other Assets 255,349 150,157
___________ ___________
TOTAL ASSETS $27,802,510 $23,037,800
=========== ===========
-UNAUDITED-
See Notes to the Consolidated Financial Statements
3
MONMOUTH CAPITAL CORPORATION
CONSOLIDATED BALANCE SHEETS (CONT'D.)
September 30, December 31,
2002 2001
_____________ _____________
LIABILITIES AND SHAREHOLDERS'
EQUITY
Mortgages Payable $8,693,717 $5,719,724
Accounts Payable and Accrued
Expenses 266,186 158,711
Loans Payable 9,282,490 9,449,933
Dividends Payable 738,658 -0-
Other Liabilities 34,742 34,657
___________ ___________
Total Liabilities 19,015,793 15,363,025
___________ ___________
Minority Interest 352,505 349,053
___________ ___________
Shareholders' Equity:
Common Stock (par value $1.00
Per share; authorized 10,000,000
shares; issued And outstanding
2,072,604 and 1,697,014 shares
respectively 2,072,604 1,697,014
Additional Paid-In Capital 4,520,192 3,640,737
Accumulated Other Comprehensive
Income 1,845,560 1,689,134
Retained Earnings (Deficit) (4,144) 298,837
___________ ___________
Total Shareholders' Equity 8,434,212 7,325,722
___________ ___________
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $27,802,510 $23,037,800
=========== ===========
-UNAUDITED-
See Notes to the Consolidated Financial Statements
4
MONMOUTH CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2002, 2001 AND 2000
Three Months Nine Months
________________________ ________________________
2002 2001 2000 2002 2001 2000
____ ____ ____ ____ ____ ____
Income:
Interest and
Dividend
Income $342,800 $330,550 $208,993 $935,723 $904,042 $522,791
Rental and
Occupancy
Charges 215,189 83,808 7,373 645,614 85,031 56,975
Sales of
Manufactured
Homes 126,499 -0- 1,180,458 285,499 1,258,560 3,014,718
Other Inc 184 211,342 67,401 181,570 296,364 130,615
_______ _______ _________ _________ _________ _________
Total Income 684,672 625,700 1,464,225 2,048,406 2,543,997 3,725,099
_______ _______ _________ _________ _________ _________
Expenses:
Cost of Sales of
Manufactured
Homes 125,988 -0- 1,014,524 278,208 1,098,035 2,652,006
Selling Expense 910 -0- 100,301 6,380 139,793 320,763
Salaries and
Employee Benefits -0- 33,761 56,020 -0- 152,864 210,181
Professional Fees 47,994 34,195 28,179 186,736 91,296 121,429
Interest Expense 183,246 129,371 99,495 553,655 344,028 222,647
Depreciation
Expense 39,000 -0- 13,333 117,000 28,569 62,763
Other Expenses 136,062 116,494 123,381 386,428 286,184 355,659
_______ _______ _________ _________ _________ _________
Total Expenses 533,200 313,821 1,435,233 1,528,407 2,140,769 3,945,448
_______ _______ _________ _________ _________ _________
Income (Loss)
Before Gain on
Sale of Real
Estate
Investment
and Minority
Interest 151,472 311,879 28,992 519,999 403,228 (220,349)
Gain on Sale of Real
Estate Investment -0- -0- -0- -0- -0- 245,419
Minority Interest (9,551) (6,200) -0- (34,322) 6,200) -0-
_______ _______ _________ _________ _________ _________
INCOME BEFORE
INCOME TAXES 141,921 305,679 28,992 485,677 397,028 25,070
INCOME TAXES -0- -0- -0- 50,000 -0- -0-
_______ _______ _________ _________ _________ _________
NET INCOME $141,921 $305,679 $ 28,992 $435,677 $397,028 $25,070
======= ======= ========= ========= ========= =========
NET INCOME (LOSS)
PER SHARE -
BASIC AND
DILUTED $ 0.07 $ 0.19 $ 0.02 $ 0.23 $ 0.25 $ 0.02
======= ======= ========= ========= ========= =========
WEIGHTED AVERAGE
SHARES OUTSTANDING
Basic 1,985,657 1,577,207 1,522,280 1,850,432 1,571,686 1,522,280
========= ========= ========= ========= ========= =========
2,011,105 1,582,919 1,522,280 1,867,049 1,575,491 1,522,280
Diluted ========= ========= ========= ========= ========= =========
-UNAUDITED-
See Notes to Consolidated Financial Statements
5
MONMOUTH CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002, 2001 AND 2000
2002 2001 2000
____ ____ ____
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ 435,677 $ 397,028 $ 25,070
Income Allocated to Minority
Interest 34,322 6,200 -0-
Depreciation and Amortization 126,297 44,569 60,080
Provision for Loan Losses 52,500 68,000 -0-
Gain on Sale of Securities Available
for Sale (181,002) (279,310) (21,555)
Gain on Sale of Real Estate
Investments -0- -0- (245,419)
Changes In Operating Assets and
Liabilities:
Accounts Receivable 138,663 77,640 94,450
Inventory 280,508 159,820 152,194
Prepaid Expenses, Other Assets and
Other Liabilities (48,286) (223,664) (34,571)
Accounts Payable and Accrued
Expenses 107,475 (535,451) 447,503
_________ _________ _________
Net Cash Provided (Used) by
Operating Activities 946,154 (285,168) 477,752
_________ _________ _________
CASH FLOWS FROM INVESTING ACTIVITIES
Loans Made (110,600) (490,485) (958,345)
Collections and Other Decreases in
Loans Receivable 162,699 532,424 773,145
Purchase of Securities Available for
Sale (3,303,501) (6,536,860) (3,639,763)
Proceeds from Sales and Other
Decreases in Securities Available
for Sale 2,196,736 1,262,496 131,113
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 (4,235,698) (3,145,510) (65,887)
_________ _________ _________
Net Cash Used by Investing Activities (5,290,364) (5,768,544) (2,502,394)
_________ _________ _________
CASH FLOWS FROM FINANCING ACTIVITIES
Net Increase (Decrease) in Loans
Payable and Inventory Financing (167,443) 3,522,199 2,023,841
Proceeds from Mortgages 3,100,000 2,332,158 -0-
Principal Payments of Mortgage (126,007) -0- -0-
Increase/Decrease in Minority
Interest (30,870) 339,950 -0-
Financing Cost on Debt (66,118) (56,404) -0-
Proceeds from the Issuance of Class A
Common Stock 1,255,045 81,512 1,009
_________ _________ _________
Net Cash Provided by Financing
Activities 3,964,607 6,219,415 2,024,850
_________ _________ _________
Net (Decrease) Increase in Cash (379,603) 165,703 208
Cash at Beginning of Period 607,443 60,062 62,152
_________ _________ _________
Cash at End of Period $ 227,840 $ 225,765 $ 62,360
========= ========= =========
-UNAUDITED-
See Notes to the Consolidated Financial Statements
6
MONMOUTH CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 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 September 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 March 31 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 25,448 and
5,712 for the quarter ended September 30, 2002 and 2001,
respectively, and 16,617 and 3,805 for the nine months ended
September 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 $(184,007), $182,687
and $208,503 for the quarter ended September 30, 2002, 2001 and
2000, respectively, and $592,103, $1,620,260 and $517,986 for the
nine months ended September 30, 2002, 2001 and 2000,
respectively.
7
NOTE 4 - REAL ESTATE INVESTMENTS
On September 18, 2002, the Company purchased a leasehold interest
in a 62,986 square foot warehouse facility in Erie County,
Cheektowaga, New York from FedJones Cheektowaga, LLC (FedJones),
an unrelated entity. This lease was between FedJones and the
Erie County Industrial Development Agency (ECIDA). This
warehouse facility is 100% subleased to FedEx Ground Package
System, Inc. under a net lease. The purchase price, including
closing costs, was approximately $4,200,000. The Company
borrowed approximately $1,100,000 against its security portfolio
with Prudential Securities and obtained a mortgage of
approximately $3,100,000. This mortgage payable is at an
interest rate of 6.875% and is due October 1, 2017. At the end
of the lease term, the Company may purchase the warehouse
facility from ECIDA for $10. The Company has accounted for this
transaction as a purchase.
NOTE 5 - SECURITIES AVAILABLE FOR SALE
During the nine months ended September 30, 2002, the Company
purchased $3,303,501 of securities on margin. The margin loan is
at 3.75% and due on demand.
During the nine months ended September 30, 2002, the Company sold
$2,015,734 of securities for a net gain of $181,002 which has
been included in Other Income.
NOTE 6 - DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
For the nine months ended September 30, 2002, the Company
received $1,255,045 from the Dividend Reinvestment and Stock
Purchase Plan. There were 375,590 shares issued, resulting in
2,072,604 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 7 - EMPLOYEE STOCK OPTIONS
During the nine months ended September 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 September 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.
8
NOTE 8 - SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest and taxes during the nine months ended
September 30, 2002, 2001, 2000 were as follows:
2002 2001 2000
Interest $553,655 $344,028 $222,647
Taxes 41,966 17,252 (8,138)
During the nine months ended September 30, 2002, the Company
repossessed the collateral for loans receivable of $250,097 and
placed it into inventory.
9
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).
The Company generated net cash provided by operating activities
of $946,154. The Company raised $1,255,045 from the issuance of
shares of common stock through its Dividend Reinvestment and
Stock Purchase Plan (DRIP).
The Company increased its real estate investments by $4,235,698
as a result of the purchase of a warehouse facility in Erie
County, Cheektowaga, New York.
Securities available for sale increased by $1,444,193 primarily
as a result of purchases of $3,303,501 and an increase in the
unrealized gain of $156,426, partially offset by sales of
$2,015,734.
Loans receivable decreased by $354,696 during the nine months
ended September 30, 2002. This was primarily the result of
collections and other decreases of $162,699, 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 $250,097 and placed it into inventory.
Prepaid expenses and other assets increased by $105,192 as a
result of financing costs on debt.
Mortgages payable increased by $2,973,993 due to the $3,100,000
mortgage on the new acquisition partially offset by principal
repayments of $126,007.
Loans payable decreased by $167,443 during the nine months ended
September 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 nine months ended September 30, 2002 as compared to
the quarter and nine months ended September 30, 2001. Interest
and dividend income increased by $121,557 and $381,251,
respectively, for the quarter and nine months ended September
30, 2001 as compared to the quarter and nine months ended
September 30, 2000. This was primarily due to purchases of
securities available for sale.
10
Rental and occupancy charges increased by $131,381 and $560,583,
respectively, for the quarter and nine months ended September
30, 2002 as compared to the quarter ended September 30, 2001
primarily due to the purchase of two warehouse facilities during
2001.
Other income decreased by $211,158 and $114,794, respectively,
for the quarter and nine months ended September 30, 2002 as
compared to the quarter and nine months ended September 30, 2001,
and increased by $143,941 and $165,749, respectively, for the
quarter and nine months ended September 30, 2001 as compared to
the quarter and nine months ended September 30, 2000. This was
due primarily to gains on sales of securities available for sale
during 2001.
Sales of manufactured homes, Cost of sales of manufactured homes
and Selling expense for the quarter and nine months ended
September 30, 2002 relate to the disposition of repossessed
inventory.
For the quarter and nine months ended September 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 $99,495 for the quarter ended
September 30, 2000 to $129,371 for the quarter ended September
30, 2001 to $183,246 for the quarter ended September 30, 2002.
Interest expense increased from $222,647 for the nine months
ended September 30, 2000 to $344,028 for the nine months ended
September 30, 2001 to $553,655 for the nine months ended
September 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 $13,333 for the quarter ended
September 30, 2000 to $-0- for the quarter ended September 30,
2001 and from $62,763 for the nine months ended September 30,
2000 to $28,569 for the nine months ended September 30, 2001 due
to the sale of an industrial building in March 2000.
Depreciation expense increased to $39,000 and $117,000,
respectively, for the quarter and nine months ended September
30, 2002 due to the new acquisitions during 2001.
Other expenses increased by $19,568 and $100,244, respectively,
for the quarter and nine months ended September 30, 2002 as
compared to the quarter and nine months ended September 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
nine months ended June 30, 2001 as compared to the quarter and
nine 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 $180,921, $305,679 and 42,325 for the
quarter ended September 30, 2002, 2001 and 2000, respectively.
FFO amounted to $552,677, $425,597 and ($157,586) for the nine
months ended September 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.
11
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.
CONTROLS AND PROCEDURES
Within the 90 days prior to the date of this report, the
Company carried out an evaluation, under the supervision of the
Company's Chief Executive Officer and Chief Financial Officer and
with the participation of the Company's management, including the
effectiveness of the design and operation of the Company's
disclosure controls and procedures pursuant to the Securities
Exchange Act Rule 13a-14. Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that the
Company's disclosure controls and procedures are effective in
timely alerting them to material information relating to the
Company required to be included in the Company's periodic
Securities and Exchange Commission filings. No significant
changes were made in the Company's internal controls or in other
factors that could significantly affect these controls subsequent
to the date of their evaluation.
12
MONMOUTH CAPITAL CORPORATION
PART II - OTHER INFORMATION
FOR THE QUARTER ENDED SEPTEMBER 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 -
(a) Exhibits
99.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
99.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
99.3
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
99.4
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(b) Reports on Form 8-K
Form 8-K dated September 18, 2002 was filed to
report the purchase of a warehouse facility in
Cheektowaga, New York.
13
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: November 4, 2002 By: /s/ Eugene W. Landy
EUGENE W. LANDY
President
Date: November 4, 2002 By: /s/ Anna T. Chew
ANNA T. CHEW
Vice President
and Controller
14