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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, 2003
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, 2003 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 _____
Indicate by check mark whether the registrant is an accelerated
filer (as defined in Rule 12b-2 of the Exchange Act).
Yes ___ No _X_
The number of shares or other units outstanding of each of the
issuer's classes of securities as of November 1, 2003 was
3,031,658 shares.
MONMOUTH CAPITAL CORPORATION
FOR THE QUARTER ENDED SEPTEMBER 30, 2003
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 7-11
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 12-15
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 15
PART II - OTHER INFORMATION 16
SIGNATURES 17
2
MONMOUTH CAPITAL CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2003 AND DECEMBER 31, 2002
September 30, December 31,
ASSETS 2003 2002
____________ ____________
Real Estate Investments:
Land $ 5,838,603 $2,099,065
Buildings, Improvements and
Equipment, net of accumulated
depreciation of $501,035 and
$285,852, respectively 17,371,776 9,750,148
____________ ____________
Total Real Estate Investments 23,210,379 11,849,213
Cash and Cash Equivalents 436,965 174,099
Securities Available for Sale, at
Fair Value:
Federal National Mortgage
Association 744,218 3,348,671
Government National Mortgage
Association 83,277 149,758
Other Securities Available for
Sale 8,754,904 9,346,508
Accounts Receivable 9,528 27,625
Loans Receivable, net of allowance
for losses of $100,845, at
September 30, 2003 and December 31, 2002 1,542,461 1,888,094
Inventory 161,009 118,009
Prepaid Expenses and Other Assets 31,619 13,942
Financing Costs, net of
accumulated amortization 288,536 185,613
Leasing costs, net of accumulated
amortization 389,182 -0-
____________ ____________
TOTAL ASSETS $35,652,078 $27,101,532
============ ============
-UNAUDITED-
See Notes to the Consolidated Financial Statements
3
MONMOUTH CAPITAL CORPORATION
CONSOLIDATED BALANCE SHEETS (CONT'D.)
AS OF SEPTEMBER 30, 2003 AND DECEMBER 31, 2002
September 30, December 31,
2003 2002
____________ ____________
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgages Payable $16,046,135 $8,616,405
Accounts Payable and Accrued Expenses
230,636 327,391
Loans Payable 5,109,235 8,660,162
Other Liabilities 35,000 35,000
____________ ____________
Total Liabilities 21,421,006 17,638,958
____________ ____________
Minority Interest 1,995,377 352,564
____________ ____________
Shareholders' Equity:
Common Stock (par value $1.00 per
share; authorized 10,000,000
shares; issued and outstanding
3,020,681 and 2,277,537
shares respectively 3,020,681 2,277,537
Additional Paid-In Capital 6,956,039 4,993,306
Accumulated Other Comprehensive
Income 1,468,758 1,734,189
Retained Earnings 790,217 104,978
____________ ____________
Total Shareholders' Equity 12,235,695 9,110,010
____________ ____________
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $35,652,078 $27,101,532
============ ============
-UNAUDITED-
See Notes to the Consolidated Financial Statements
4
MONMOUTH CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS AND NINE MONTHS ENDED
SEPTEMBER 30, 2003 AND 2002
THREE MONTH NINE MONTHS
9/30/03 9/30/02 9/30/03 9/30/02
________ ________ ________ ________
Income:
Interest and Dividend
Income $ 255,612 $ 342,800 $ 854,663 $ 935,723
Rental and Occupancy
Charges 443,926 215,189 1,144,487 645,614
Sales of Manufactured
Homes 22,134 126,499 145,890 285,499
Gain on Securities
Available for Sale
Transaction, net 391,668 -0- 667,511 181,002
Other Income 20 184 503 568
__________ __________ __________ __________
Total Income 1,113,360 684,672 2,813,054 2,048,406
__________ __________ __________ __________
Expenses:
Cost of Sales of
Manufactured Homes 22,135 125,988 139,712 278,208
Selling Expense 797 910 1,926 6,380
Professional Fees 51,429 47,994 166,712 186,736
Interest Expense 218,442 183,246 604,422 553,655
Depreciation Expense 88,468 39,000 215,183 117,000
Other Expenses 104,513 136,062 367,712 386,428
__________ __________ __________ __________
Total Expenses 485,784 533,200 1,495,667 1,528,407
__________ __________ __________ __________
Income before Minority
Interest 627,576 151,472 1,317,387 519,999
Minority Interest 28,209 9,551 42,136 34,322
__________ __________ __________ __________
INCOME BEFORE INCOME
TAXES 599,367 141,921 1,275,251 485,677
INCOME TAXES 20,000 -0- 20,000 50,000
__________ __________ __________ __________
NET INCOME 579,367 141,921 1,255,251 435,677
========== ========== ========== ==========
NET INCOME PER SHARE -
Basic $ .21 $ .07 $ .46 $ .23
========== ========== ========== ==========
Diluted $ .20 $ .07 $ .45 $ .23
========== ========== ========== ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING
Basic 2,936,289 1,985,657 2,751,740 1,850,432
========== ========== ========== ==========
2,963,730 2,011,105 2,772,909 1,867,049
Diluted ========== ========== ========== ==========
-UNAUDITED-
See Notes to Consolidated Financial Statement
5
MONMOUTH CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
2003 2002
__________ __________
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 1,255,251 $ 435,677
Income Allocated to Minority Interest 42,136 34,322
Depreciation and Amortization 232,688 126,297
Provision for Loan Losses -0- 52,500
Gain on Sale of Securities Available for
Sale (667,511) (181,002)
Changes In Operating Assets and
Liabilities:
Accounts Receivable 18,097 138,663
Inventory -0- 280,508
Prepaid Expenses and Other Assets (410,762) (48,371)
Accounts Payable and Accrued Expenses (96,755) 107,475
Other Liabilities -0- 85
__________ __________
Net Cash Provided by Operating Activities 373,144 946,154
__________ __________
CASH FLOWS FROM INVESTING ACTIVITIES
Loans Made -0- (110,600)
Collections and Other Decreases in Loans 302,633 162,699
Receivable
Purchase of Securities Available for Sale (1,970,579) (3,303,501)
Proceeds from Sales and Other Decreases
in Securities Available for Sale 5,635,197 2,196,736
Additions to Land, Building, Improvements
and Equipment (11,576,349) (4,235,698)
__________ __________
Net Cash Used in Investing Activities (7,609,098) (5,290,364)
__________ __________
CASH FLOWS FROM FINANCING ACTIVITIES
Net Decrease in Loans Payable and Inventory
Financing (3,550,927) (167,443)
Proceeds from Mortgages 7,670,000 3,100,000
Principal Payments on Mortgages (240,270) (126,007)
Increase (Decrease) in Minority Interest 1,600,677 (30,870)
Financing Costs on Debt (116,525) (66,118)
Proceeds from the Issuance of Class A Common
Stock 2,374,939 1,255,045
Proceeds from exercise of stock options 205,000 -0-
Dividends Paid (444,074) -0-
__________ __________
Net Cash Provided by in Financing Activities 7,498,820 3,964,607
__________ __________
Net Increase (Decrease) in Cash 262,866 (379,603)
Cash at Beginning of Period 174,099 607,443
__________ __________
Cash at End of Period $ 436,965 $ 227,840
========== ==========
-UNAUDITED-
See Notes to the Consolidated Financial Statements
6
MONMOUTH CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
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, 2003 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, 2002 have been
omitted.
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.
Certain reclassifications have been made to the financial
statements for the prior period to conform to the current period
presentation.
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 27,441 and
25,448 for the quarter ended September 30, 2003 and 2002,
respectively, and options in the amount of 21,169 and 16,617 for
the nine months ended September 30, 2003 and 2002, 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 for the three and nine months ended
September 30, 2003 and 2002, is as follows:
September 30, September 30,
2003 2002
_____________ _____________
Three Months $262,356 ($184,007)
Nine Months 989,820 592,103
7
NOTE 4 - REAL ESTATE INVESTMENTS
On August 14, 2003, the Company purchased a 107,160 square foot
industrial building in Wheeling, Illinois, from Jones Elgin I,
LLC, an Illinois limited liability company (Jones Elgin). For
purposes of the acquisition, the Company joined with Jones Elgin
to form Wheeling partners LLC, an Illinois limited liability
company, in which the Company holds and equity interest of
approximately 63%. This warehouse facility is 100% subleased to
FedEx Ground Package System, Inc. under a net lease for 12 years
(FedEx lease). The purchase price, including closing costs, was
approximately $11,985,000. The Company borrowed approximately
$2,300,000 against its security portfolio with Prudential
Securities, obtained a bank loan of $500,000 at an interest rate
of 7.23% due August 30, 2004, and obtained a mortgage of
approximately $7,670,000. This mortgage payable is at an
interest rate of 5.68% and is due 2021. The property acquired is
commercial rental property and will continue to be used as such.
The Company has accounted for this transaction as a purchase.
NOTE 5 - SECURITIES AVAILABLE FOR SALE AND LOANS PAYABLE
During the nine months ended September 30, 2003, the Company sold
or redeemed $5,635,197 of securities for a net gain of $667,511,
and made purchases of $1,970,579 in securities. During the nine
months ended September 30, 2003, the Company made $3,550,927 net
payments on its margin loans and other notes payable.
NOTE 6 - DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
On June 16, 2003, the Company paid $570,012 as a dividend of $.20
per share to shareholders of record May 15, 2003 of which
$125,938 was reinvested. For the nine months ended September 30,
2003, the Company received $2,500,877 from the Dividend
Reinvestment and Stock Purchase Plan (DRIP), and $205,000 from
exercise of stock options. There were 673,144 shares issued in
the DRIP, and 70,000 shares from stock options exercised,
resulting in 3,020,681 shares outstanding. On October 1, 2003,
the Company declared a dividend of $.20 per share to be paid on
December 15, 2003 to shareholders of record November 17, 2003.
8
NOTE 7 - EMPLOYEE STOCK OPTIONS
The Company had elected to follow APB Opinion No. 25 in
accounting for its stock option plan prior to January 1, 2003,
and accordingly no compensation cost had been recognized prior to
January 1, 2003. Had compensation cost been determined
consistent with SFAS No. 123, the Company's net income and
earnings per share would have been reduced to the pro forma
amounts as follows:
Three Three Nine Nine
Months Months Months Months
9/30/03 9/30/02 9/30/03 9/30/02
____________ ____________ ____________ ____________
Net Income as Reported $579,367 $141,921 $1,255,251 $435,677
Compensation expense if
the fair value method
had been applied -0- 500 -0- 1,500
____________ ____________ ____________ ____________
Net Income Pro forma $579,367 $141,421 $1,255,251 $434,177
============ ============ ============ ============
Net Income per share -
Basic
As Reported $ .21 $ .07 $ .46 $ .23
Pro forma $ .20 $ .07 $ .45 $ .23
Diluted
As Reported $ .20 $ .07 $ .45 $ .23
Pro forma $ .20 $ .07 $ .45 $ .23
The fair value of each option is estimated on the date of grant
using the Black-Scholes option pricing model with the following
weighted-average assumptions used for grants in 2002: dividend
yield of 10%; expected volatility of 25%; risk free interest
rates of 3.4%; and expected lives of five years.
The Company adopted the fair value recognition provisions of SFAS
No. 123, "Accounting for Stock Based Compensation" on January 1,
2003. Under the prospective method of adoption selected by the
Company under the provisions of SFAS No. 148, "Accounting for
Stock Based Compensation, Transition and Disclosure", no
compensation costs have been recognized in 2003, as the Company
did not grant stock-based employee compensation during the nine
months ended September 30, 2003.
Three participants exercised their stock options and purchased
70,000 shares for a total of $205,000 during the nine months
ended September 30, 2003.
As of September 30, 2003, there were options outstanding to
purchase 80,000 shares and 150,000 shares available for grant
under the Company's stock option plan.
9
NOTE 8 - SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest and taxes during the nine months ended
September 30, 2003 and 2002 were as follows:
2003 2002
_____ _____
Interest $598,117 $553,655
Taxes 44,027 41,966
During the nine months ended September 30, 2003 and 2002, the
Company had dividend reinvestments of $125,938 and $-0-,
respectively, which required no cash transfers.
During the nine months ended September 30, 2003 and 2002, the
Company repossessed the collateral for loans receivable of $
43,000 and $250,097, respectively, and placed it into inventory.
NOTE 9 - RECENT ACCOUNTING PRONOUNCEMENTS
In January 2003, the Financial Accounting Standards Board
("FASB") issued FASB Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities, an interpretation
of Accounting Research Bulletin No. 51", which addresses
consolidation by business enterprises of variable interest
entities. The Interpretation clarifies the application of
Accounting Research Bulletin No. 51, Consolidated Financial
Statements, to certain entities in which equity investors do not
have the characteristics of a controlling financial
interest or do not have equity at risk for the entity to
finance its activities without additional subordinated financial
support from other parties. FIN 46 applies immediately to
variable interest entities created after January 31, 2003, and
to variable interest entities in which an enterprise obtains an
interest after that date. Management believes that this
Interpretation will not have a material impact on the Company's
financial statements.
In April 2003, the FASB issued Statement No. 149, "Amendment of
Statement 133 on Derivative Instruments and Hedging Activities"
("SFAS No. 149"). SFAS No. 149 amends and clarifies accounting
for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging
activities under Statement 133. SFAS No. 149 is effective for
contracts entered into or modified after September 30, 2003, with
some exceptions, and for hedging relationships designated after
September 30, 2003. The guidance should be applied prospectively.
Management believes that this Statement will not have a material
impact on the Company's financial statements.
In May 2003, the FASB issued Statement No. 150, "Accounting for
Certain Financial Instruments with Characteristics of both
Liabilities and Equity" ("SFAS No. 150). SFAS No. 150
establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both
liabilities and equity. It requires that an issuer classify a
financial instrument that is within its scope as a liability (or
an asset in some circumstances). Many of those instruments were
previously classified as equity. SFAS No. 150 is effective for
financial instruments entered into or modified after May 31,
2003, and otherwise is effective at the beginning of the first
interim period beginning after June 15, 2003 It is to be
implemented by reporting the cumulative effect of a change in an
accounting principle for financial instruments created before the
issuance date of the Statement and still existing at the
beginning of the interim period of adoption. Restatement is not
permitted. Management believes that this Statement will not have
a material impact on the Company's financial statements. On
October 29, 2003, the FASB voted to indefinitely defer certain
provisions of this statement relating to non-controlling
(minority) interests in finite-like entities.
10
NOTE 10 - SUBSEQUENT EVENTS
On October 23, 2003, the Company completed a private placement
offering of $5,370,000 (less approximately $400,000 in offering
costs) of 8% Convertible Subordinated Debentures (the
Debentures), due 2013. Interest will be paid semi-annually in
arrears on April 30 and October 31 of each year, commencing April
30, 2004. The Debentures are convertible into common stock of
the Company at any time prior to redemption or maturity, at the
conversion price of $6.00 per share (equivalent to a rate of
166.6667 shares of common stock for each $1,000 principal
amount), subject to adjustment under certain conditions. The
Company may redeem the Debentures, at its option, in whole or in
part, at any time on and after October 31, 2004 at the redemption
prices set below. The redemption price, expressed as a
percentage of principal amount, is as follows for the 12-month
periods beginning on:
Period Redemption
______ __________
October 23, 2004 110%
October 23, 2005 110%
October 23, 2006 110%
October 23, 2007 105%
October 23, 2008
and thereafter 100%
No sinking fund is provided for the Debentures.
The Company may redeem the debentures, at our option, in whole or
in part, at any time prior to October 23, 2004, upon at least 30
and not more than 60 days' notice by mail to the holders of the
debentures, at a redemption price equal to 100% of the principal
amount of the debentures to be redeemed, plus accrued and unpaid
interest to the date fixed for redemption, if the closing price
of our common stock has exceeded 150% of the conversion price for
at least 20 trading days in the consecutive 30-day trading period
ending on the trading day prior to the date we mail the notice of
redemption.
11
MONMOUTH CAPITAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
MATERIAL CHANGES IN FINANCIAL CONDITION
The company operates as a hybrid-diversified REIT and invests in
real estate, mortgages, mortgage-backed securities and other REIT
securities. The Company generated net cash provided for the nine
months ended September 30, 2003 by operating activities of
$373,144. The Company raised $2,500,877 from the issuance of
shares of common stock through its Dividend Reinvestment and
Stock Purchase Plan (DRIP) for the nine months ended September
30, 2003.
Real estate investments increased by $11,361,166 due to the
acquisition of the Wheeling, Illinois property on August 14,
2003, net of depreciation expense for the nine month period ended
September 30, 2003. The Company plans to make additional
acquisitions as properties which meet the Company's investment
criteria become available.
Securities available for sale decreased by $3,262,538 primarily
as a result of sales of other securities of $3,080,933, and
principal repayments of $2,670,934 on the mortgage-backed
securities. These sales were offset by purchases of $1,970,579
in the nine months ended September 30, 2003.
Loans receivable decreased by $345,633 during the nine months
ended September 30, 2003. This was primarily the result of
collections of $302,633 on loans for sales of mobile homes made
before March 31, 2001, and repossession of the collateral on
those loans of $43,000.
Deferred leasing costs increased by $389,182 due to a lease
commission paid on the acquisition and leasing of the Wheeling,
Illinois property of $393,085, less amortization.
Mortgages payable increased by $7,429,730 during the nine months
ended September 30, 2003 due to the mortgage related to the
acquisition of the Wheeling, Illinois property of $7,670,000
offset by principal repayments of $240,270.
Loans payable decreased by $3,550,927 during the nine months
ended September 30, 2003. This was primarily the result of
repayments on margin loans as securities are sold or redeemed.
Minority interest increased due to the addition of the 37%
minority investors in the Wheeling, Illinois acquisition.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Income is comprised primarily of interest and dividend income and
rental and occupancy charges. Sales of mobile homes result from
the sales of repossessed mobile homes held in inventory. The
Company was engaged in mobile homes sales before March 31, 2001.
12
MATERIAL CHANGES IN RESULTS OF OPERATIONS, (CONT'D.)
Interest and dividend income decreased by $87,188 for the three
months ended September 30, 2003 as compared to the three months
ended September 30, 2002, and by $81,060 for the nine months
ended September 30, 2003 as compared to the nine months ended
September 30, 2002. This was primarily due to sales and
redemptions of securities available for sale during 2003. These
securities sold had higher yields than the yields of securities
purchases made in 2003. The decrease in yield is due to the
current interest rate environment.
Rental and occupancy charges increased by $228,737 for the three
months ended September 30, 2003 as compared to the three months
ended September 30, 2002, and $498,873 for the nine months ended
September 30, 2003 as compared to the nine months ended September
30, 2002, primarily due to collection of rents and reimbursements
for a full nine months on properties purchased in 2002 and the
purchase of the Wheeling, Illinois property in August, 2003.
Professional fees increased from $47,994 for the three months
ended September 30, 2002 to $51,429 for the for the three months
ended September 30, 2003 and decreased from $186,736 for the nine
months ended September 30, 2002 to $166,712 for the nine month
ended September 30, 2003. The increase for the three months is
due to increased personnel costs. Management of the Company also
manages two affiliated REIT's, United Mobile Homes, Inc. and
Monmouth Real Estate Investment Corporation. (the affiliated
REIT's). The Company receives an allocation of salaries and
benefits from the affiliated REIT's based on the time the
employees devote to each REIT. The decrease for the nine months
relates to decreased legal fees.
Sales of manufactured homes and Cost of sales of manufactured
homes for the nine months ended September 30, 2003 relate to the
disposition of repossessed inventory, which originally were sold
when the Company operated as a manufactured home sales business
prior to March 30, 2001.
Interest expense increased from $183,246 for the three months
ended September 30, 2002 to $218,422 for the three months ended
September 30, 2003 and from $553,655 for the nine months ended
September 30, 2002 to $604,422 for the nine months ended
September 30, 2003. This was primarily the result of the
purchases of securities available for sale on margin and the
mortgage on the acquisition of the Wheeling, Illinois property.
Depreciation expense increased from $39,000 for the three months
ended September 30, 2002 to $88,468 for the three months ended
September 30, 2003, and from $117,000 for the nine months ended
September 30, 2002 to $215,183 for the nine months ended
September 30, 2003 due to the new acquisition during 2002 and
2003.
Other expenses decreased from $136,062 for the three months ended
September 30, 2002 to $104,513 for the three months ended
September 30, 2003 and from $386,428 for the nine months ended
September 30, 2002 to $367,712 for the nine months ended
September 30, 2003 due mainly to decreases in bad debt expense,
accounting fees and miscellaneous operating expenses, partially
offset by increases in insurance and real estate taxes related to
the new acquisitions.
13
MATERIAL CHANGES IN RESULTS OF OPERATIONS, (CONT'D.)
Funds from operations (FFO), is defined as net income, excluding
gains (or losses) from sales of depreciable assets, plus
depreciation. FFO should be considered as a supplemental measure
of operating performance used by real estate investment trusts
(REITs).
FFO excludes historical cost depreciation as an expense and may
facilitate the comparison of REITs which have different cost
bases. The items excluded from FFO are significant components in
understanding and assessing the Company's financial performance.
FFO (1) does not represent cash flow from operations as defined
by generally accepted accounting principles; (2) should not be
considered as an alternative to net income as a measure of
operating performance or to cash flows from operating, investing
and financing activities; and (3) is not an alternative to cash
flow as a measure of liquidity. FFO, as calculated by the
Company, may not be comparable to similarly entitled measures
reported by other REITs.
The Company's FFO for the three and nine months ended September
30, 2003 and 2002 is calculated as follows:
Three Months Nine Months
2003 2002 2003 2002
____ ____ ____ ____
Net Income $579,367 $141,921 $1,255,251 $435,677
Depreciation
Expense 88,468 39,000 215,183 117,000
__________ __________ __________ _________
FFO $667,835 $180,921 $1,470,434 $552,677
========== ========== ========== =========
The following are the cash flows provided (used) by operating,
investing and financing activities for the nine months ended
September 30, 2003 and 2002:
2003 2002
______ ______
Operating $ 373,144 $ 946,154
Activities
Investing (7,609,098) (5,290,364)
Activities
Financing 7,498,820 3,964,607
Activities
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.
14
MATERIAL CHANGES IN RESULTS OF OPERATIONS, (CONT'D.)
CONTROLS AND PROCEDURES
The Company's Chief Executive Officer and Chief Financial
Officer, with the assistance of other members of the Company's
management, have evaluated the effectiveness of the Company's
disclosure controls and procedures as of the end of the period
covered by this Quarterly Report on Form 10-Q. Based on such
evaluation, the Company's Chief Executive Officer and Chief
Financial Officer have concluded that the Company's disclosure
controls and procedures are effective.
The Company's Chief Executive Officer and Chief Financial Officer
have also concluded that there have not been any changes in the
Company's internal control over financial reporting that has
materially affected, or is reasonably likely to materially
affect, the Company's internal control over financial reporting.
SAFE HARBOR STATEMENT
This Form 10-Q contains various "forward-looking statements"
within the meaning of the Securities Act of 1933 and the
Securities Exchange Act of 1934, and the Company intends that
such forward-looking statements be subject to the safe harbors
created thereby. The words "may", "will", "expect", "believe",
"anticipate", "should", "estimate", and similar expressions
identify forward-looking statements. These forward-looking
statements reflect the Company's current views with respect to
future events and finance performance, but are based upon current
assumptions regarding the Company's operations, future results
and prospects, and are subject to many uncertainties and factors
relating to the Company's operations and business environment
which may cause the actual results of the Company to be
materially different from any future results expressed or implied
by such forward-looking statements.
Such factors include, but are not limited to, the following: (i)
changes in the general economic climate, including interest
rates; (ii) increased competition in the geographic areas in
which the Company operates; and (iii) changes in government laws.
The Company undertakes no obligation to publicly update or revise
any forward-looking statements whether as a result of new
information, future events, or otherwise.
15
MONMOUTH CAPITAL CORPORATION
PART II - OTHER INFORMATION
FOR THE QUARTER ENDED SEPTEMBER 30, 2003
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
31.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
31.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
32
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 August 14, 2003, was filed to report that
the Company issued a press release dated August 14, 2003
announcing a new property acquisition.
Form 8-K dated August 14, 2003, was filed to report the
purchase of an industrial building in Wheeling, Illinois
and to disclose the material factors of the acquisition.
16
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 10, 2003 By: /s/ Eugene W. Landy
EUGENE W. LANDY
President and Chief
Executive Officer
Date: November 10, 2003 By: /s/ Anna T. Chew
ANNA T. CHEW
Chief Financial Officer
17