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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (C) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period __________ to __________
Commission File Number 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.)
125 Wyckoff Road, Eatontown, New Jersey 07724
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (732) 542-4927
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $1.00 par value
Indicate by check mark whether the registrant (1) has filed
all reports required by Section 13 or 15(d) of the Securities
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 if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to
this Form 10-K. ____
The aggregate market value of voting stock held by non-
affiliates of the Registrant was $3,179,455 (based on
1,143,689 shares of common stock at $2.78 per share, the
average of the bid and asked price on June 14, 1999).
The number of shares outstanding of issuer's common stock as
of June 14, 1999 was 1,513,891 shares.
PART I
ITEM 1. BUSINESS
General Development of Business
Monmouth Capital Corporation (the Company) sells and
finances manufactured homes and owns one real estate
investment. The Company is a corporation organized in the
State of New Jersey. The Company commenced operations in 1961.
Prior to fiscal 1994, the Company operated as a small
business investment company under the Small Business
Investment Company Act of 1958 and as an investment company
under the Investment Company Act of 1940. As such, the
Company was able to distribute its income prior to income
taxes as dividends to shareholders. The Company was allowed a
deduction from taxable income for these distributions.
With shareholder approval, the Company surrendered its
license to operate as a small business investment company and
deregistered as an investment company. On January 15, 1993,
the Small Business Administration approved the surrender of
the Company's license. On July 20, 1993, the Securities and
Exchange Commission entered an Order that the Company had
ceased to be an investment company. Since the Company is no
longer an investment company, earnings are now fully taxable.
Certain members of the Company's Board of Directors
manage two real estate investment trusts. In 1995, the Company
successfully completed a Rights Offering to its shareholders.
The Company raised approximately $1,600,000 after expenses
bringing total equity to approximately $4,500,000.
Narrative Description of the Business
Prior to fiscal 1994, the Company made loans to small
business concerns located throughout the northeast region of
the United States. Generally, these loans were collateralized
by commercial or residential real property. The Company
currently finances the sales of manufactured homes. A
description of the Company's existing loan portfolio of
$2,863,476 is incorporated herein by reference to Note 3 of
the Notes to Consolidated Financial Statements - Loans
Receivable.
-2-
On March 31, 1994, the Company purchased its first real
estate investment, a net leased industrial building in
Bethlehem, Pennsylvania. This building is currently 67%
occupied with leases expiring from 1999 to 2001. The gross
rent on these leases totaled approximately $155,000 for fiscal
1999. The tenants reimburse the Company for taxes, insurance,
maintenance (other than roof and structural repairs), etc.
The Company purchased this building for cash.
The Company has no limitation on leverage and intends to
use leverage when available. As a practical matter, real
estate with short-term leases or non-rated tenants cannot
generally be leveraged.
During fiscal 1994, the Company formed a wholly-owned
subsidiary, The Mobile Home Store, Inc., to finance and sell
manufactured homes. At March 31, 1999, loans receivable
relating to the financing of manufactured home sales amounted
to $2,658,779.
Management
The management of the Company currently operates Monmouth
Real Estate Investment Corporation (MREIC) and United Mobile
Homes, Inc. (UMH), two real estate investment trusts (REITs).
MREIC is now specializing in net leased industrial properties
to rated tenants on medium term leases. UMH specializes in
investments in manufactured home communities. It is intended
that the Company will invest in real estate ventures that do
not qualify under the investment objectives of MREIC and UMH.
To the extent that there may be conflicts of interest as to
prospective investments, the Company may be deprived of
investment opportunities.
General Risks of Real Estate Ownership
The Company's investment will be subject to the risks
generally associated with the ownership of real property,
including the uncertainty of cash flow to meet fixed
obligations, adverse changes in national economic conditions,
changes in the relative popularity (and thus the relative
price) of the Company's real estate investment when compared
to other investments, adverse local market conditions due to
changes in general or local economic conditions or
neighborhood values, changes in interest rates and in the
availability of mortgage funds, costs and terms of mortgage
funds, the financial conditions of tenants and sellers of
properties, changes in real estate tax rates and other
operating expenses (including corrections of potential
environmental issues as well as more stringent governmental
regulations regarding the environment), governmental rules and
fiscal policies as well as expenses resulting from acts of
God, uninsured losses and other factors which are beyond the
control of the Company.
-3-
Competition
The Company will be competing for real estate investments
with numerous other real estate entities, such as individuals,
corporations, real estate investment trusts and other
enterprises engaged in real estate activities, possibly
including certain affiliates of the Company. In many cases,
the competing concerns may be larger and better financed than
the Company, making it difficult for the Company to secure new
real estate investments.
Environmental, Regulatory and Energy Problems
The Company must comply with certain Federal
Environmental Protection Agency Regulations as well as state
and local governmental regulations.
In conjunction with the purchase of the Bethlehem
building, a Phase I environmental assessment was performed.
This assessment consisted of searches of Federal and State
databases to determine potential sources of contamination,
investigation of the site history, and visual inspection. The
assessment concluded that there was no evidence to suggest
that the site has ever experienced a significant spill or
environmental incident.
Additionally, inspections of properties are usually made
and certificates of compliance are usually obtained upon the
sale of property or upon a change of tenancy. Therefore,
there is no assurance that, in connection with compliance with
environmental regulations, substantial capital expenditure
would not be incurred at the time the Company desired to sell
its properties or at the time of a change of tenancy.
Management is not aware of any material environmental problems
affecting the Company's property.
Number of Employees
At March 31, 1999, the Company had ten full-time
employees. A Board of Directors consisting of eight directors
is responsible for the general policies of the Company. The
Company utilizes the services of a management company to
manage its property.
ITEM 2. PROPERTIES
The Company has one property, located in Bethlehem,
Pennsylvania. See Item 1 -Narrative Description of the
Business for further information.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
-4-
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Prior to October 19, 1995, the shares of the Company were
traded on the over-the-counter market. As of October 19, 1995,
the Company's shares are traded on the National Association of
Securities Dealers Automatic Quotations (NASDAQ) Small
Capitalization market under the symbol "MONM". The per share
range of high and low market during each quarter of the last
three fiscal years were as follows:
1998-1999 1997-1998 1996-1997
Market Price Market Price Market Price
Qtr. High Low High Low High Low
First 3-1/2 2-3/4 3-5/8 2-1/2 3-3/4 3-3/8
Second 3-3/8 2-3/4 3-5/8 3-1/4 3-3/4 2-3/4
Third 4 2-1/2 3 2-5/8 3 2-1/8
Fourth 3-7/8 2-1/2 2-3/4 2-11/16 3-3/4 2-1/2
The over-the-counter market quotations reflect the inter-
dealer prices, without retail mark-up, mark-down or
commission, and may not necessarily represent actual
transactions.
As of March 31, 1999, there were approximately 449
holders of the Company's common stock based on the number of
record owners.
For the years ended March 31, 1999, 1998 and 1997, total
dividends paid by the Company amounted to $74,666 or $.05 per
share, $73,515 or $.05 per share, and $57,787 or $.05 per
share, respectively.
Future dividend policy will depend on the Company's
earnings, capital requirements, financial condition,
availability and cost of bank financing and other factors
considered relevant by the Board of Directors.
-5-
ITEM 6. SELECTED FINANCIAL DATA
FOR THE YEARS ENDED MARCH 31,
1999 1998 1997 1996 1995
Income Statement Data:
Total Income $5,965,265 $4,288,031 $2,788,741 $2,644,137 $1,338,719
Total Expenses 6,178,666 4,242,531 2,769,531 2,267,250 1,149,667
Income Taxes -0- 34,239 6,700 171,308 87,200
Net Income (Loss) (213,401) 11,261 12,510 205,579 101,852
Net Income (Loss)
Per Share (0.14) 0.01 0.01 0.18 0.16
========================================================================
Balance Sheet Data:
Total Assets $7,760,765 $6,855,686 $5,994,684 $5,752,047 $5,068,042
Shareholders'
Equity $5,348,223 5,518,321 5,342,174 4,706,755 4,477,290
========================================================================
Cash Dividends
Per Share $0.05 $0.05 $0.05 $0.05 $0.05
Average Number
of Shares
Outstanding 1,496,727 1,458,811 1,217,129 1,111,624 646,693
-6-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
Liquidity and Capital Resources
Net cash used by operating activities for the year ended
March 31, 1999 amounted to $870,704 as compared to $663,806
for the year ended March 31, 1998 and $701,318 for the year
ended March 31, 1997. The increase in 1999 was due primarily
to a net loss of $213,401 for the year. Cash used by operating
activities remained relatively stable during 1998.
Inventory increased by $585,851 as a result of increased
purchases of manufactured homes to be used as models for new
sales centers.
Loans receivable increased by $831,824 during 1999. This
increase was the result of new loans of $1,390,025 offset by
$558,201 in principal repayments and other decreases. At March
31, 1999, the Company had one loan which was considered non-
performing.
Inventory financing increased by $1,208,110 due to the
financing of increased inventory.
The Company's ability to generate adequate cash to meet
its needs is dependent primarily on the success of the sale
and financing of manufactured homes, its real estate
investment, leveraging of its real estate investment,
collection of loans receivable, availability of bank
borrowings and access to the capital markets.
Results of Operations
Income is comprised primarily of sales of manufactured
homes, by The Mobile Home Store, Inc. (MHS), the Company's
wholly owned subsidiary, interest income and rental income.
Sales of manufactured homes increased from $2,182,016 in 1997
to $3,730,244 in 1998 and $5,396,530 in 1999. MHS has been
experiencing increased sales since its inception in fiscal
1994.
Interest income remained relatively stable during 1999,
1998 and 1997.
Rental income relating to the Bethlehem, Pennsylvania net-
leased industrial building decreased during 1999 due to the
loss of one tenant and remained relatively stable during 1998
and 1997.
Other income decreased from $107,165 in 1997 to $59,648
in 1998 due primarily to the gain on sale of securities
available for sale in 1997. Other income increased to $82,503
in 1999 due to income received for retail loan volume.
Cost of manufactured home sales increased from $1,689,915
in 1997 to $2,849,627 in 1998 and $4,442,148 in 1999. Selling
expense increased from $191,161 in 1997 to $431,901 in 1998
-7-
and $490,771 in 1999. These increases are directly
attributable to the increase in sales of manufactured homes.
The Company is investing in new sales centers and increasing
market share.
Salaries and Employee Benefits increased from $120,997 in
1997 to $199,080 in 1998 and $318,291 in 1999 due to
additional employees. During 1998, outside professionals were
used rather than employees. There was a corresponding
decrease in professional fees during 1999.
Interest expense decreased from $103,896 in 1997 to
$81,289 in 1998 due primarily to a decrease in rates.
Interest expense increased to $130,706 in 1999 due to an
increase in inventory financing.
Other expenses remained relatively stable during 1997 and
1998. Other expenses increased to $649,905 during 1999 due to
the expansion of the operations of MHS.
The change in income taxes was due to the changes in
income.
Year 2000
The Company is currently in the process of implementing
its Year 2000 compliance plan. The Company has assessed all
hardware and software for Year 2000 readiness. The Company
has developed and is currently implementing renovation plans,
including hardware replacement and software upgrades, to
ensure all hardware and software is Year 2000 compliant. The
Company has no significant suppliers and vendors. Renovation
and testing are scheduled to be completed by September 1999.
The Company has developed contingency plans for each of its
critical systems which includes moving many of the Company's
operations to a manual system. There can be no assurances
given that the Year 2000 Compliance plan will be completed
successfully by the Year 2000, in which event the Company
could incur additional costs to implement its contingency
plans. Management does not anticipate that such costs would
be significant to the Company. The total costs associated
with the Company's Year 2000 plan are anticipated to be
immaterial. Successful and timely completion of the Year 2000
plan is based on management's best estimates derived from
various assumptions of future events, which are inherently
uncertain, including the effectiveness of remediation and
validation plans, and all vendors and suppliers readiness.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data listed in
Part IV, Item 14 (a)(1) are incorporated herein by reference
and filed as a part of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
-8-
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Several of the Directors and Officers of the Company also
serve as directors of Monmouth Real Estate Investment
Corporation (MREIC) and United Mobile Homes, Inc. (UMH), both
publicly-owned real estate investment trusts.
Director Since/
Principal Occupation Shares Owned and
Name, Age and Title Past Five Years % of Total
Ernest V. Treasurer and Director 1961
Bencivenga of MREIC; Owns 6,302 shs
(81) Secretary/Treasurer .42% (1)
Secretary/ and Director of UMH.
Treasurer
and Director
Anna T. Chew Certified Public Accountant 1994
(41) Vice President, Chief Owns 8,347 shs
Controller Financial Officer .55% (2)
and Director and Director of UMH;
Controller and
Director of MREIC.
Boniface DeBlasio Director of MREIC. 1961
(78) Owns 20,452 shs
Chairman of the 1.35% (3)
Board and Director
Charles P. Self-employed 1970
Kaempffer investor; Owns 15,331 shs
(62) Director of MREIC, UMH and 1.01% (4)
Director Community Bank of New Jersey.
Eugene W. Landy Attorney; President of MREIC; 1961
(65) Chairman of the Board of UMH. Owns 193,184 shs
President 12.76% (5)
and Director
Samuel A. Landy Attorney; President and Director 1994
(38) of UMH; Director of MREIC. Owns 58,991 shs
Director 3.90% (6)
-9-
Director Since/
Principal Occupation Shares Owned and
Name, Age and Title Past Five Years % of Total
W. Dunham Morey Certified Public Accountant; 1961
(78) Director of MREIC. Owns 50,609 shs
Director 3.34%
Robert G. Sampson Self-employed investor; 1963
(73) Director of MREIC and UMH; Owns 16,986 shs
Director General Partner for Sampco, Ltd. 1.12%
(1) Includes 4,979 shares held by Mr. Bencivenga's wife.
(2) Held jointly with Ms. Chew's husband.
(3) Includes (a) 3,621 shares held by Mr. DeBlasio's wife.
(4) Includes (a) 726 shares in joint name with Mrs.
Kaempffer; (b) 270 shares held by Mr. Kaempffer's wife; and
(c) 7,000 shares in joint name with Mrs. Kaempffer held as
Trustees for Defined Benefit Pension Plan.
(5) Includes (a) 7,062 shares held by Mr. Landy's wife;
(b) 31,673 shares held in the Landy & Landy Employees' Pension
Plan, of which Mr. Landy is a Trustee with power to vote; and
(c) 66,967 shares held in the Landy & Landy Employees' Profit
Sharing Plan, of which Mr. Landy is Trustee with power to
vote.
(6) Includes (a) 12,108 shares held by Mr. Landy's wife;
(b) 12,936 shares in custodial accounts for Mr. Landy's
children under the Uniform Gift to Minor's Act in which he
disclaims any beneficial interest, but has power to vote; and
(c) 23,564 shares in the Samuel Landy Family Limited
Partnership.
-10-
ITEM 11 - EXECUTIVE COMPENSATION
Summary Compensation Table
The following Summary Compensation Table shows
compensation paid by the Company to its chief executive
officer for services rendered during the fiscal years ended
March 31, 1999, 1998 and 1997. Because no executive officers
received total annual salary and bonus exceeding $100,000,
only the compensation paid to the chief executive officer is
to be disclosed under the Securities and Exchange Commission
disclosure requirements.
Name and Principal Annual Compensation
Position Year Salary Bonus Other(1)
Eugene W. Landy 1999 $37,500 None $15,700
Chief Executive 1998 None None $58,200
Officer 1997 None None $71,700
(1) Represents base compensation, directors' fees as well as
legal and other fees to the firm of Landy & Landy.
Report of the Compensation Committee
Overview and Philosophy
The Company has a Compensation Committee consisting of
two independent outside Directors. This Committee is
responsible for making recommendations to the Board of
Directors concerning executive compensation. The Compensation
Committee takes into consideration three major factors in
setting compensation.
The first consideration is the overall performance of the
Company. The Committee believes that the financial interests
of the executive officers should be aligned with the success
of the Company and the financial interests of its
shareholders.
The second consideration is the individual achievements
made by each officer. The Company is relatively small. The
Committee is aware of the contributions made by each officer
and makes an evaluation of individual performance based on
their own familiarity with the officer.
The final criteria in setting compensation is comparable
wages in the industry.
-11-
Evaluation
The Committee reviewed the progress made by Eugene W.
Landy, Chief Executive Officer, in locating alternative
business and investment opportunities. The Committee decided
to continue Mr. Landy's annual compensation of $50,000. The
Summary Compensation Table for Mr. Landy shows a salary of
$37,500, base compensation of $12,500 plus $3,200 in
directors' fees for the year ended March 31, 1999.
Other Information
Except for specific agreements, the Company has no
retirement plan in effect for officers, directors or employees
and, at present, has no intention of instituting such a plan.
Comparative Performance
The following line graph compares the total return of the
Company's Common Stock for the last five fiscal years to the
NASDAQ Total Return Index and the NASDAQ Financial Stocks
Total Return Index. The total return reflects stock price
appreciation and dividend reinvestment for all three
comparative indices. The information herein has been obtained
from sources believed to be reliable, but neither its accuracy
nor its completeness is guaranteed.
Monmouth Capital NASDAQ NASDAQ
Year Corporation Total Financial
1994 100 100 100
1995 91 111 112
1996 107 151 154
1997 101 168 198
1998 83 254 311
1999 85 342 275
-12-
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
As of March 31, 1999, no person owned of record or was
known by the Company to beneficially own more than 5% of the
shares, except as follows:
Name and Address Shares Owned Percent
of Beneficial Owner Beneficially of Class
Eugene W. Landy
20 Tuxedo Road 193,184 12.76%
Rumson, NJ 07760
Group consisting of
Walter Carucci, Carucci
Family Partners, and
Carr Securities Corp. 117,810 7.78%
1 Penn Plaza
New York, NY 10114
Group consisting of
Paul H. O'Leary, Raffles
Associates, L.P. and
Channel Partnership II 86,788 5.73%
1 Penn Plaza, Suite 4720
New York, NY 10119
James E. Mitchell &
Mitchell Partners 78,681 5.20%
611 Anton Blvd.
Costa Mesa, CA 92626
The Company believes that during 1998, all persons
required to report ownership and changes in ownership of
common stock pursuant to Section 16(a) of the Securities
Exchange Act of 1934 have complied.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain relationships and related party transactions are
incorporated herein by reference to part IV, Item
14(a)(1)(vi), Note 9 of the Notes to Consolidated Financial
Statements-Payments to Affiliated Persons and Related Party
Transactions.
-13-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND
REPORTS ON FORM 8-K
(a) (1) The following Financial Statements are filed as part
of this report:
Page
(i) Auditors' Report 15
(ii) Consolidated Balance Sheets as of March 31, 16-17
1999 and 1998
(iii) Consolidated Statements of Income for the
years ended March 31, 1999, 1998 and 1997 18
(iv) Consolidated Statements of Shareholders'
Equity for the years ended March 31, 1999, 19
1998 and 1997
(v) Consolidated Statements of Cash Flows for
the years ended March 31, 1999, 1998 and 20
1997
(vi) Notes to Consolidated Financial Statements 21-29
(a) (2) Financial Statement schedules are omitted for the
reason that they are not required, are not applicable, or the
required information is set forth in the financial statements
or notes thereto.
(a) (3) The Exhibits set forth in the following index of
Exhibits are filed as a part of this Report.
Exhibit No. Description
(3) Articles of Incorporation and By-Laws - Reference is
hereby made to that filed with the Securities and Exchange
Commission with the Company's Form 10-K/A No. 2 for the year
ended March 31, 1994.
(21) Subsidiaries of the Registrant - During fiscal 1994, the
Registrant formed a wholly-owned subsidiary, The Mobile Home
Store, Inc. to finance and sell manufactured homes. This
subsidiary was incorporated in the State of New Jersey.
(27) Financial Data Schedule
(a)(3)(b) Reports on Form 8-K - None
-14-
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Monmouth Capital Corporation
Eatontown, New Jersey
We have audited the accompanying consolidated balance
sheets of Monmouth Capital Corporation as of March 31, 1999
and 1998, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three
years in the period ended March 31, 1999. These financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects,
the financial position of Monmouth Capital Corporation at
March 31, 1999 and 1998, and the consolidated results of their
operations and their cash flows for each of the three years in
the period ended March 31, 1999 in conformity with generally
accepted accounting principles.
/s/ Cowan, Gunteski & Co.
June 18, 1999
Toms River, New Jersey
-15-
MONMOUTH CAPITAL CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31,
1999 1998
ASSETS
Current Assets:
Cash and Cash Equivalents $ 102,599 $ 547,020
Accounts Receivable 146,070 86,998
Interest Receivable -0- 3,342
Securities Available for Sale,
at Fair Value 356,789 412,919
Inventory 3,142,702 2,556,851
Prepaid Expenses and Other
Current Assets 45,977 81,714
Current Portion of Loans
Receivable 122,296 80,417
_________ _________
Total Current Assets 3,916,433 3,769,261
_________ _________
Long-Term Assets:
Real Estate Investments:
Land 183,065 178,170
Building, Improvements and
Equipment, net of accumulated
depreciation of $156,790
and $110,987, respectively 985,087 1,022,020
_________ _________
Total Real Estate Investments 1,168,152 1,200,190
_________ _________
Loans Receivable:
Performing 2,565,949 1,951,235
Non-Performing 175,231 -0-
Allowance for Losses (65,000) (65,000)
_________ _________
Total Loans Receivable 2,676,180 1,886,235
_________ _________
Total Long-Term Assets 3,844,332 3,086,425
_________ _________
TOTAL ASSETS $ 7,760,765 $ 6,855,686
========= =========
See Accompanying Independent Auditors' Report and
Notes to Consolidated Financial Statements
-16-
MONMOUTH CAPITAL CORPORATION
CONSOLIDATED BALANCE SHEETS (CONT.)
AS OF MARCH 31,
1999 1998
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts Payable and Accrued
Expenses $ 139,956 $ 241,609
Loans Payable -0- 35,671
Inventory Financing 2,193,343 985,233
_________ _________
Total Current Liabilities 2,333,299 1,262,513
Other Liabilities 79,243 74,852
_________ _________
Total Liabilities 2,412,542 1,337,365
_________ _________
Shareholders' Equity:
Common Stock (par value $1.00
per share; authorized 10,000,000
shares; issued and outstanding
1,513,891 and 1,477,839 shares,
respectively in 1999 and 1998 1,513,891 1,477,839
Additional Paid-In Capital 3,304,657 3,225,605
Accumulated Other Comprehensive
Income 3,083 218
Retained Earnings 526,592 814,659
_________ _________
Total Shareholders' Equity 5,348,223 5,518,321
_________ _________
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 7,760,765 $ 6,855,686
========= =========
See Accompanying Independent Auditors' Report and
Notes to Consolidated Financial Statements
-17-
MONMOUTH CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED MARCH 31,
1999 1998 1997
Income:
Sales of Manufactured Homes $ 5,396,530 $3,730,244 $2,182,016
Interest Income 331,298 309,828 322,080
Rental Income 154,934 188,311 177,480
Other Income 82,503 59,648 107,165
_________ _________ _________
Total Income 5,965,265 4,288,031 2,788,741
_________ _________ _________
Expenses:
Cost of Sales of
Manufactured Homes 4,442,148 2,849,627 1,689,915
Selling Expense 490,771 431,901 191,161
Salaries and Employee Benefits 318,291 199,080 120,997
Professional Fees 146,845 226,947 211,334
Interest Expense 130,706 81,289 103,896
Other Expenses 649,905 453,687 452,228
_________ _________ _________
Total Expenses 6,178,666 4,242,531 2,769,531
_________ _________ _________
Income (Loss) Before
Income Taxes (213,401) 45,500 19,210
Income Taxes -0- 34,239 6,700
_________ _________ _________
NET INCOME (LOSS) $ (213,401) $ 11,261 $ 12,510
========= ========= =========
NET INCOME (LOSS) PER
SHARE-BASIC AND DILUTED $ (0.14) $ 0.01 $ 0.01
========= ========= =========
WEIGHTED AVERAGE
SHARES OUTSTANDING 1,496,727 1,458,811 1,217,129
========= ========= =========
See Accompanying Independent Auditors' Report and
Notes to Consolidated Financial Statements
-18-
MONMOUTH CAPITAL CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Additional
Common Stock Paid-In
Number Amount Capital
Balance March 31, 1996 1,139,184 $1,139,184 $2,662,555
Common Stock Issued
with the DRIP* 269,280 269,280 423,915
Net Income -0- -0- -0-
Distributions -0- -0- -0-
Unrealized Investment
Loss -0- -0- -0-
_________ _________ _________
Balance March 31, 1997 1,408,464 1,408,464 3,086,470
Common Stock Issued
with the DRIP* 69,375 69,375 139,135
Net Income -0- -0- -0-
Distributions -0- -0- -0-
Unrealized Investment
Loss -0- -0- -0-
_________ _________ _________
Balance March 31, 1998 1,477,839 1,477,839 3,225,605
Common Stock Issued
with the DRIP* 36,052 36,052 79,052
Net Income -0- -0- -0-
Distributions -0- -0- -0-
Unrealized Investment
Loss -0- -0- -0-
_________ _________ _________
Balance March 31, 1999 1,513,891 $1,513,891 $3,304,657
========= ========= =========
-19a-
Accumulated
Other
Comprehensive Retained Comprehensive
Income Earnings Income
Balance March 31, 1996 $ (17,174) $ 922,190
Common Stock Issued
with the DRIP* -0- -0-
Net Income -0- 12,510 $ 12,510
Distributions -0- (57,787)
Unrealized Investment
Loss (12,499) -0- (12,499)
_________ _________ _________
Balance March 31, 1997 (29,673) 876,913 $ 11
=========
Common Stock Issued
with the DRIP* -0- -0-
Net Income -0- 11,261 $ 11,261
Distributions -0- (73,515)
Unrealized Investment
Gain 29,891 -0- 29,891
_________ _________ _________
Balance March 31, 1998 218 814,659 $ 41,152
=========
Common Stock Issued
with the DRIP* -0- -0-
Net Loss -0- (213,401) $ (213,401)
Distributions -0- (74,666)
Unrealized Investment
Gain 2,865 -0- 2,865
_________ _________ _________
Balance March 31, 1999 $ 3,083 $ 526,592 $ (210,536)
========= ========= =========
*Dividend Reinvestment and Stock Purchase Plan
See Accompanying Independent Auditors' Report and
Notes to Consolidated Financial Statements
-19b-
MONMOUTH CAPITAL CORPORATION CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31,
1999 1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ (213,401) $ 11,261 $ 12,510
Adjustments to reconcile net
income to net cash used by
operating activities:
Depreciation and Amortization 45,803 48,384 25,116
Gain on Sale of Securities
Available for Sale -0- -0- (64,346)
Changes In Operating Assets
and Liabilities:
Accounts Receivable (59,072) (66,874) 55,628
Interest Receivable 3,342 38,811 (9,311)
Inventory (585,851) (946,945) (441,690)
Prepaid Expenses and
Other Current Assets 35,737 113,362 (138,786)
Accounts Payable and
Accrued Expenses (101,653) 124,910 (124,102)
Other Liabilities 4,391 13,285 (16,337)
_________ _________ _________
Net Cash Used by Operating Activities (870,704) (663,806) (701,318)
_________ _________ _________
CASH FLOWS FROM INVESTING ACTIVITIES
Loans Made (1,390,025) (1,024,608) (726,665)
Collections and Other Decreases 558,201 1,443,855 589,261
Purchase of Securities
Available for Sale -0- -0- (171,020)
Sales and Other Decreases in
Securities Available for Sale 58,995 37,958 768,495
Additions to Building,
Improvements and Equipment (13,765) (156,962) (7,515)
Net Cash Provided (Used) by _________ _________ _________
Investing Activities (786,594) 300,243 452,556
_________ _________ _________
CASH FLOWS FROM FINANCING ACTIVITIES
Net Increase (Decrease) in Loans
Payable and Inventory Financing 1,172,439 546,660 (252,343)
Dividends Paid (53,575) (52,751) (43,808)
Proceeds from the Issuance of
Class A Common Stock 94,013 187,746 679,216
Net Cash Provided by Financing _________ _________ _________
Activities 1,212,877 681,655 383,065
_________ _________ _________
Net Increase (Decrease) in Cash
and Cash Equivalents (444,421) 318,092 134,303
Cash and Cash Equivalents at
Beginning of Year 547,020 228,928 94,625
_________ _________ _________
Cash and Cash Equivalents at
End of Year $ 102,599 $ 547,020 $ 228,928
========= ========= =========
See Accompanying Independent Auditors' Report and
Notes to Consolidated Financial Statements
-20-
MONMOUTH CAPITAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of the Business
Monmouth Capital Corporation (the Company) is a
corporation organized in New Jersey which commenced operations
in 1961. Prior to fiscal 1994, the Company was an investment
company under the Investment Company Act of 1940 and a small
business investment company licensed under the Small Business
Investment Company Act of 1958. The Company currently
sells and finances manufactured homes. The Company also
receives rental income from one real estate investment.
Revenue Recognition
Sale of manufactured homes is recognized on the full
accrual basis when certain criteria are met. These criteria
include the following: (a) initial and continuing payment by
the buyer must be adequate; (b) the receivable, if any, is not
subject to future subordination; (c) the benefits and risks of
ownership are substantially transferred to the buyer; and (d)
the Company does not have a substantial continued involvement
with the home after the sale. Alternatively, when the
foregoing criteria are not met, the Company recognizes gains
by the installment method. Interest income on loans receivable
is not accrued when, in the opinion of management, the
collection of such interest appears doubtful. Rental income is
recognized on the straight-line basis over the term of the
lease.
Use of Estimates
The preparation of the financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
Building, Improvements and Equipment
Building, Improvements and Equipment are stated at the
lower of depreciated cost or net realizable value.
Depreciation is computed based on the straight-line method
over the estimated useful life of the assets (5 to 39 years).
If there is an event or change in circumstances that indicates
that the basis of an investment property may not be
recoverable, management assesses the possible impairment of
value through evaluation of the estimated future cash flows of
the property, on an undiscounted basis, as compared to the
property's current carrying value. A property's carrying
value would be adjusted, if necessary, to reflect an
impairment in the value of the property.
-21-
Investments in Debt and Equity Securities
The Company's securities are classified as Available-for-
Sale, and are carried at fair value. Unrealized holding gains
and losses are excluded from earnings and reported as a
separate component of Shareholders' Equity until realized.
Inventories
Inventories, consisting of manufactured homes for sale,
are valued at the lower of cost or market value and are
determined by the specific identification method. All
inventories are considered finished goods.
Income Taxes
The Company accounts for income taxes in accordance with
Statement of Financial Accounting Standards (SFAS) No. 109,
"Accounting for Income Taxes". Income taxes are accounted for
by the asset/liability method.
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 (1,496,727, 1,458,811 and
1,217,129 in 1999, 1998 and 1997, respectively). 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 (See Note 6). There were no dilutive stock options as
of March 31, 1999, 1998 and 1997.
Stock Option Plan
The Company's stock option plan is accounted for under
the intrinsic value based method as prescribed by Accounting
Principles Board (APB) Opinion No. 25, "Accounting for Stock
Issued to Employees". As such, compensation expense would be
recorded on the date of grant only if the current market price
on the underlying stock exceeds the exercise price. Included
in these Notes to Consolidated Financial Statements are the
pro forma disclosures required by SFAS No. 123, "Accounting
for Stock-Based Compensation," which assumes the fair value
based method of accounting has been adopted.
Other Comprehensive Income
On April 1, 1998, the Company adopted the provisions of
SFAS No. 130, "Reporting Comprehensive Income". SFAS No. 130
establishes standards for reporting and presentation of
comprehensive income and its components in a full set of
financial statements. Comprehensive income consists of net
income and net unrealized gains or losses on securities
available for sale and is presented in the consolidated
statements of shareholders' equity.
-22-
Reclassification
Certain amounts in the financial statements for the prior
years have been reclassified to conform to the statement
presentation for the current year.
NOTE 2 - INVESTMENT IN SUBSIDIARY
The Company formed a wholly-owned subsidiary, The Mobile
Home Store, Inc. (MHS), to finance and sell manufactured
homes. MHS was incorporated in the State of New Jersey on
July 28, 1993. The consolidated financial statements of the
Company include the accounts of MHS. All intercompany
transactions and balances have been eliminated in
consolidation.
NOTE 3 - LOANS RECEIVABLE
The following is a summary of the loans held by the
Company at March 31, 1999 and 1998:
Maturity Balance
Rate Date 3/31/99 3/31/98
Financed Manufactured
Home Units 10%-15% various $2,658,779 $1,824,064
Other* various various 204,697 207,588
_________ _________
Total Loans Receivable 2,863,476 2,031,652
Current Portion 122,296 80,417
_________ _________
Long-Term Portion $2,741,180 $1,951,235
========= =========
* Includes a non-performing loan of $175,231 in 1999. In
April, 1999, the Company repossessed the property that
collateralized this loan. The Company is currently in the
process of releasing this property.
During 1994, MHS began selling manufactured home units
and financing these sales. At March 31, 1999 and 1998,
financed manufactured home units consist of 116 and 78 loans,
respectively. These loans range from approximately $5,000 to
approximately $60,000 and are collateralized by manufactured
homes.
-23-
NOTE 4 - INVESTMENTS IN DEBT AND EQUITY SECURITIES
The following is a summary of investments in debt and
equity securities at March 31, 1999 and 1998:
Cost Fair Value
Description 3/31/99 3/31/98 3/31/99 3/31/98
Government National
Mortgage Association
6.5%, 2/20/2014 $343,799 $402,576 $338,414 $394,544
Tork Time Control, Inc.
1,500 shares 10,125 10,125 18,375 18,375
_______ _______ _______ _______
$353,924 $412,701 $356,789 $412,919
======= ======= ======= =======
NOTE 5 - INVENTORY FINANCING
The Company had a line of credit with Deutsche Financial
Services to finance inventory purchases. Total advances at
March 31, 1998 under this line of credit amounted to $101,304.
During 1998, the Company replaced this line of credit and
entered into a $2,500,000 agreement with Greentree Financial
Servicing Corporation to finance inventory purchases. The
interest rates range from prime for each advance to prime plus
2.75% after one year. Advances under this line of credit are
secured by the manufactured home units for which the advances
were made. Total advances under this line of credit at March
31, 1999 and 1998 amounted to $2,193,343 and $883,929,
respectively.
NOTE 6 - EMPLOYEE STOCK OPTION PLAN
On July 14, 1994, the shareholders approved and ratified
the Company's 1994 Stock Option Plan authorizing the grant to
officers and key employees of options to purchase up to
300,000 shares of common stock. Options may be granted any
time up to December 31, 2003. No option shall be available
for exercise beyond ten years. All options are exercisable
after one year from the date of grant. The option price shall
not be below the fair market value at date of grant. Canceled
or expired options are added back to the "pool" of shares
available under the plan.
-24-
The Company elected to continue following APB Opinion No.
25 in accounting for its stock option plans and, accordingly,
no compensation cost has been recognized. 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:
1999 1998 1997
Net Income As reported $(213,401) $11,261 $12,510
(Loss) Pro forma (225,169) 3,387 4,636
Net Income (Loss) As reported (.14) .01 .01
Per Share Pro forma (.15) -0- -0-
The fair value of each option grant is estimated on the
date of the grant using the Black-Scholes option-pricing model
with the following weighted-average assumptions used for
grants in 1999, 1998 and 1997: dividend yield of .3 percent;
expected volatility of 25 percent; risk-free interest rates of
6.5 percent; and expected lives of five years.
A summary of the status of the Company's stock option
plans as of March 31, 1999, 1998, and 1997 and changes during
the years then ended are as follows:
1999 1998 1997
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
Outstanding at
beginning of year 35,000 $3.21 35,000 $3.21 35,000 $3.21
Issued 20,000 2.75 -0- -0- -0- -0-
Outstanding at ______ ______ ______
end of year 55,000 3.04 35,000 3.21 35,000 3.21
====== ====== ======
Weighted-average
fair value of
options granted
during the year .97 -0- -0-
===== ===== =====
-25-
The following is a summary of stock options outstanding
as of March 31, 1999:
Date of Number of Number of Option Expiration
Grant Employees Shares Price Date
1/4/95 2 20,000 $3.00 1/4/2000
3/4/96 3 15,000 3.50 3/4/2001
4/8/98 2 20,000 2.75 4/8/2003
______
55,000
======
As of March 31, 1999, there were 245,000 shares available
for grant under the Plan.
NOTE 7 - DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
Effective August 28, 1995, the Company implemented a
Dividend Reinvestment and Stock Purchase Plan (DRIP). Under
the terms of the DRIP, shareholders who participate may
reinvest all or part of their dividends in additional shares
of the Company at approximately 95% of the market price.
Shareholders may also purchase additional shares at
approximately 95% of its market price by making optional cash
payments. For the years ended March 31, 1999 and 1998, the
Company received $115,104 and $208,510 from the DRIP,
respectively. There were 36,052 and 69,375 new shares issued,
respectively.
On December 15, 1998, the Company paid $74,666 as a
dividend of $.05 per share to shareholders of record November
16, 1998.
NOTE 8 - INCOME TAXES
For the years ended March 31, 1999, 1998 and 1997, total
income tax expense amounted to $-0-, $34,239, and $6,700,
respectively. For the year ended March 31, 1999, the Company
had a net operating loss carryforward of approximately
$200,000 to offset future taxable income.
-26-
The following is a reconciliation of income tax expense
at the statutory rate to income tax expense at the Company's
effective rate for the years ended March 31, 1998 and 1997,
respectively:
1998 1997
Computed tax at the expected
statutory rate $15,470 $ 6,531
Surtax Exemption (8,645) (3,650)
Deferred income/expense 2,255 (1,614)
State income taxes-net
of federal tax benefits 23,205 5,695
tax benefits
Other 1,954 (262)
______ ______
Income tax expense $34,239 $ 6,700
====== ======
There were no deferred tax assets or liabilities
recognized as of March 31, 1999, 1998 and 1997.
NOTE 9 - PAYMENTS TO AFFILIATED PERSONS AND RELATED PARTY
TRANSACTIONS
Payments to Affiliated Persons
Total payments to all officers, directors and affiliated
persons during the fiscal years ended March 31, 1999, 1998 and
1997 amounted to $104,850, $110,200, and $125,000,
respectively. Eugene W. Landy, President of the Company,
received $53,200 in salary, management and director fees
during each of the years ended March 31, 1999, 1998 and 1997,
respectively. In addition, Mr. Landy received $-0-, $5,000,
and $18,500 in legal fees, respectively.
Transactions with United Mobile Homes, Inc.
MHS has rental expenses to United Mobile Homes, Inc.
(United). United owns and operates manufactured home
communities. Six Directors of the Company are also Directors
and shareholders of United. MHS pays United market rent on
sites where MHS has a home for sale. Total site rental
expense to United amounted to $148,249, $129,603, and
$113,182, respectively, for the years ended March 31, 1999,
1998 and 1997. MHS also leases space from United to be used
as sales lots, at market rates, at most of United's
communities. Total rental expense relating to these sales
lots amounted to $139,200, $102,300, and $90,000 for the years
ended March 31, 1999, 1998 and 1997, respectively.
-27-
During fiscal 1999, 1998 and 1997, MHS sold to United
fifteen, four, and fifteen homes, respectively, for a total
sales price of $370,908, $90,532, and $381,501, respectively,
at MHS's cost. These sales represented 7%, 2%, and 17%,
respectively, of total sales made by MHS. These manufactured
homes were available through MHS, but could have been acquired
by United from a third party at approximately the same price.
During the years ended March 31, 1999, 1998 and 1997,
MHS acquired certain inventory from United. These purchases
amounted to $155,400, $133,791, and $30,905 representing 3%,
4%, and 1%, respectively, of total purchases made by MHS
during fiscal 1999, 1998 and 1997. This inventory was
available through United, but could have been acquired from a
third-party at approximately the same cost.
NOTE 10 - GROUP CONCENTRATIONS OF CREDIT RISK
The Company has made loans to small business concerns and
to individuals located throughout the Northeast region of the
United States. The loan portfolio is diversified. Generally,
loans are collateralized by commercial or residential real
property, including manufactured homes. At March 31, 1999 and
1998, all loans were secured.
NOTE 11 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose certain information
about fair values of financial instruments, as defined in
Statement of Financial Accounting Standards No. 107,
"Disclosures About Fair Value of Financial Instruments.
Limitations
Estimates of fair value are made at a specific point in
time based upon where available, relevant market prices and
information about the financial instrument. Such estimates do
not include any premium or discount that could result from
offering for sale at one time the Company's entire holdings of
a particular financial instrument. For a portion of the
Company's financial instruments, no quoted market value
exists. Therefore, estimates of fair value are necessarily
based on a number of significant assumptions (many of which
involve events outside the control of management). Such
assumptions include assessments of current economic
conditions, perceived risks associated with these financial
instruments and their counterparties, future expected loss
experience and other factors. Given the uncertainties
surrounding these assumptions, the reported fair values
represent estimates only, and, therefore, cannot be compared
to the historical accounting model. Use of different
assumptions or methodologies is likely to result in
significantly different fair value estimates.
The fair value of cash and cash equivalents and loans
receivable approximates their current carrying amounts since
all such items are short-term in nature. The fair value of
securities available for sale is based upon quoted market
values (See Note 4). The fair value of loans payable
approximates their current carrying amounts since such amounts
payable are at a current market rate of interest.
-28-
NOTE 12 - SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the years ended March 31, 1999, 1998 and
1997 for interest and taxes are as follows:
3/31/99 3/31/98 3/31/97
Interest $130,706 $81,289 $103,896
Taxes 17,800 36,591 (5,729)
During the year ended March 31, 1999, 1998 and 1997 the
Company had dividend reinvestments of $21,091, $13,979 and -0-
respectively, which required no cash transfers.
-29-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
BY: /s/ Eugene W. Landy
EUGENE W. LANDY
President
Dated: June 16, 1999
Pursuant to the requirements of the Securities and
Exchange Act of 1934, this report has been duly signed below
by the following persons on behalf of the registrant and in
the capacities and on the date indicated.
Title Date
/s/Boniface DeBlasio Chairman of the Board
BONIFACE DEBLASIO and Director June 16, 1999
/s/Eugene W. Landy
EUGENE W. LANDY President and Director June 16, 1999
/s/Ernest V. Bencivenga Secretary/Treasurer
ERNEST V. BENCIVENGA and Director June 16, 1999
/s/Anna T. Chew Controller
ANNA T. CHEW and Director June 16, 1999
/s/Charles P. Kaempffer
CHARLES P. KAEMPFFER Director June 16, 1999
/s/Samuel A. Landy
SAMUEL A. LANDY Director June 16, 1999
/s/W. Dunham Morey
W. DUNHAM MOREY Director June 16, 1999
/s/Robert G. Sampson
ROBERT G. SAMPSON Director June 16, 1999
-30-