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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
( x ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period ended _________________________
For Quarter Ended Commission File Number
September 30, 2002 0-13130
UNITED MOBILE HOMES, INC.
(Exact name of registrant as specified in its charter)
New Jersey 22-1890929
(State or other jurisdiction (I.R.S. Employer
incorporation or organization) identification number)
Juniper Business Plaza,3499 Route 9 North, Suite 3-C,Freehold, NJ
07728
Registrant's telephone number, including area code (732) 577-9997
(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 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 outstanding of issuer's common stock as of
October 1, 2002 was 7,626,926 shares.
UNITED MOBILE HOMES, INC.
for the QUARTER ENDED
SEPTEMBER 30, 2002
PART I - FINANCIAL INFORMATION Page No.
Item 1 - Financial Statements
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6-8
Item 2 - Management Discussion and Analysis of
Financial Conditions and Results of 9-11
Operations
Item 3 - Quantitative and Qualitative Disclosures
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 11
PART II OTHER INFORMATION 12
SIGNATURES 13
Page 2
UNITED MOBILE HOMES, INC
CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2002 AND DECEMBER 31, 2001
September 30, December 31,
-ASSETS- 2002 2001
___________ ___________
INVESTMENT PROPERTY AND EQUIPMENT
Land $ 7,212,035 $ 7,212,035
Site and Land Improvements 55,201,620 54,640,298
Buildings and Improvements 2,747,850 2,745,194
Rental Homes and Accessories 8,667,115 8,432,068
Total Investment Property 73,828,620 73,029,595
Equipment and Vehicles 3,858,277 3,611,353
___________ ___________
Total Investment Property and Equipment 77,686,897 76,640,948
Accumulated Depreciation (34,301,657) (32,349,006)
___________ ___________
Net Investment Property and Equipment 43,385,240 44,291,942
___________ ___________
OTHER ASSETS
Cash and Cash Equivalents 634,250 1,567,831
Securities Available for Sale 30,022,610 25,917,748
Inventory of Manufactured Homes 2,733,899 2,782,665
Notes and Other Receivables 4,539,464 3,291,355
Unamortized Financing Costs 435,709 467,107
Prepaid Expenses 701,132 113,680
Land Development Costs 2,452,460 1,902,516
___________ ___________
Total Other Assets 41,519,524 36,042,902
___________ ___________
TOTAL ASSETS $84,904,764 $80,334,844
=========== ===========
- LIABILITIES AND SHAREHOLDERS' EQUITY -
LIABILITIES:
MORTGAGES PAYABLE $44,636,057 $38,652,025
___________ ___________
OTHER LIABILITIES
Accounts Payable 348,332 836,588
Loans Payable 7,634,638 10,692,683
Accrued Liabilities and Deposits 2,235,804 1,711,232
Tenant Security Deposits 514,474 477,782
___________ ___________
Total Other Liabilities 10,733,248 13,718,285
___________ ___________
Total Liabilities 55,369,305 52,370,310
___________ ___________
SHAREHOLDERS' EQUITY:
Common Stock - $.10 par value per share,
10,000,000 shares authorized, 8,014,897
and 7,888,632 shares issued and 7,642,597
and 7,542,332 shares outstanding as of
September 30, 2002 and December, 2001,
respectively 801,490 788,863
Additional Paid-In Capital 28,906,459 27,409,361
Accumulated Other
Comprehensive Income 4,058,769 3,541,001
Accumulated Deficit (690,922) (667,793)
Treasury Stock at Cost (372,300 and
346,300 shares at September 30, 2002
and December 31, 2001, respectively) (3,448,337) (3,106,898)
Notes Receivable from Officers (92,000) -0-
___________ ___________
Total Shareholders' Equity 29,535,459 27,964,534
___________ ___________
TOTAL LIABILITIES AND SHAREHOLDERS'EQUITY $84,904,764 $80,334,844
=========== ===========
-UNAUDITED-
See Accompanying Notes to Consolidated Financial Statements
Page 3
UNITED MOBILE HOMES, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2002 AND 2001
THREE MONTHS
NINE MONTHS
9/30/02 9/30/01 9/30/02 9/30/01
___________ ___________ ___________ ___________
REVENUES:
Rental and Related
Income $5,081,035 $4,809,011 $15,076,014 $14,359,765
Sales of Manufactured
Homes 1,881,037 2,112,264 4,357,699 3,826,986
Interest and Dividend
Income 812,766 620,137 2,149,843 1,611,612
Gain on Securities
Available for Sales
Transactions, net 92,212 200,480 794,950 531,253
Other Income 16,941 30,932 64,926 71,180
___________ __________ ___________ ___________
Total Revenues 7,883,991 7,772,824 22,443,432 20,400,796
___________ __________ ___________ ___________
EXPENSES:
Community Operating
Expenses 2,363,990 2,215,391 6,894,165 6,443,672
Cost of Sales of
Manufactured Homes 1,642,491 1,706,892 3,722,705 3,152,502
Selling Expenses 271,299 234,225 731,782 431,273
General and
Administrative
Expenses 517,341 489,848 1,588,865 1,522,048
Interest Expense 865,372 677,940 2,455,878 2,028,564
Depreciation Expense 695,639 662,408 2,095,664 1,988,014
Amortization of
Financing Costs 26,700 19,500 80,100 58,500
___________ __________ ___________ ___________
Total Expenses 6,382,832 6,006,204 17,569,159 15,624,573
___________ __________ ___________ ___________
Income before Gain on
Sales of Investment
Property and
Equipment 1,501,159 1,766,620 4,874,273 4,776,223
Loss on Sales of
Investment Property
and Equipment (7,258) (15,872) (8,283) (14,891)
___________ __________ ___________ ___________
Net Income $1,493,901 $1,750,748 $4,865,990 $4,761,332
========== ========== ========== ==========
Net Income per Share -
Basic $ 0.19 $ 0.23 $ 0.64 $ 0.64
========== ========== ========== ==========
Diluted $ 0.19 $ .23 $ .63 $ 0.64
========== ========== ========== ==========
Weighted Average
Shares Outstanding -
Basic 7,627,344 7,478,621 7,587,282 7,439,016
========== ========== ========== ==========
Diluted 7,716,161 7,525,926 7,674,636 7,476,831
========== ========== ========== ==========
-UNAUDITED-
See Accompanying Notes to Consolidated Financial Statements
Page 4
UNITED MOBILE HOMES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2002 AND 2001
2002 2001
___________ ___________
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $4,865,990 $4,761,332
Non-Cash Adjustments:
Depreciation 2,095,664 1,988,014
Amortization 80,100 58,500
Gain on Securities Available for Sale
Transactions (794,950) (531,253)
Loss on Sales of Investment Property and
Equipment 8,283 14,891
Changes in Operating Assets and
Liabilities:
Inventory of Manufactured Homes 48,766 (2,025,560)
Notes and Other Receivables (1,248,109) (613,315)
Prepaid Expenses (587,452) (255,665)
Accounts Payable (488,256) (67,822)
Accrued Liabilities and Deposits 524,572 238,832
Tenant Security Deposits 36,692 28,372
___________ ___________
Net Cash Provided by Operating Activities 4,541,300 3,596,326
___________ ___________
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Manufactured Home Community -0- (2,503,126)
Purchase of Investment Property And
Equipment (1,382,909) (1,759,260)
Proceeds from Sales of Assets 185,664 157,477
Additions to Land Development (549,944) (663,252)
Purchase of Securities Available for Sale (6,527,677) (6,872,336)
Proceeds from Sales of Securities 3,735,533 3,998,543
Available for Sale
___________ ___________
Net Cash Used by Investing Activities (4,539,333) (7,641,954)
___________ ___________
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Mortgages and Loans 6,862,500 6,842,066
Principal Payments of Mortgages and Loans (3,936,513) (682,557)
Financing Costs on Debt (48,702) (92,318)
Proceeds from Exercise of Stock Options 137,050 107,500
Collection on Notes Receivable from
Officers 57,500 -0-
Dividends Paid (3,665,944) (3,093,759)
Purchase of Treasury Stock (341,439) (307,791)
___________ ___________
Net Cash (Used) Provided by Financing
Activities (935,548) 2,773,141
___________ ___________
NET DECREASE IN CASH
AND CASH EQUIVALENTS (933,581) (1,272,487)
CASH & CASH EQUIVALENTS - BEGINNING 1,567,831 1,399,259
___________ ___________
CASH & CASH EQUIVALENTS - ENDING $ 634,250 $ 126,772
=========== ===========
-UNAUDITED-
See Accompanying Notes to Consolidated Financial Statements
Page 5
UNITED MOBILE HOMES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
(UNAUDITED)
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 consolidated financial statements and notes thereto
included in the annual report of United Mobile Homes, Inc. (the
Company) for the year ended December 31, 2001 have been omitted.
The Company, through its wholly-owned taxable subsidiary, UMH
Sales and Finance, Inc. (S&F), conducts manufactured home sales
in its communities. This company was established to enhance the
occupancy of the communities. The consolidated financial
statements of the Company include S&F and all of its other wholly-
owned subsidiaries. All intercompany transactions and balances
have been eliminated in consolidation.
Certain reclassifications have been made to the financial
statements for prior periods to conform to the current period
presentation.
NOTE 2 - NET INCOME PER SHARE AND COMPREHENSIVE INCOME
Basic net income per share is calculated by dividing net income
by the weighted average shares outstanding for 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 88,817 and 87,354 shares for
the three and nine months ended September 30, 2002, respectively,
and 47,305 and 37,815 for the three and nine months ended
September 30, 2001, respectively, are included in the diluted
weighted average shares outstanding.
Total comprehensive income, including unrealized gains (losses)
on securities available for sale, amounted to $817,843 and
$5,383,758 for the three and nine months ended September 30,
2002, respectively, and $1,240,617 and $7,615,335 for the three
and nine months ended September 30, 2001, respectively.
NOTE 3 - LOANS AND MORTGAGES PAYABLE
On June 15, 2002, the Company extended its $2,000,000 unsecured
line of credit with Fleet Bank to June 15, 2004.
On June 20, 2002, the Company took down the additional $1,500,000
on the Fairview Manor mortgage. The total balance of $4,000,000
was converted to a fixed rate mortgage with an effective interest
rate of 6.39%. This mortgage is due July 27, 2007.
Page 6
On March 28, 2002, the Company obtained a $5,362,500 mortgage
with Prudential Mortgage Capital Company. This mortgage is at an
interest rate of 7.36% for a ten-year term with a thirty year
amortization schedule. This loan is secured by Port Royal
Village in Belle Vernon, Pennsylvania.
NOTE 4 - DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
On September 16, 2002, the Company paid $1,581,064 as a dividend
of $.2175 per share to shareholders of record as of August 15,
2002. The total dividends paid for the nine months ended
September 30, 2002 amounted to $4,889,119. On September 16,
2002, the Company received $397,907 from the Dividend
Reinvestment and Stock Purchase Plan. There were 31,571 new
shares issued under the Plan. The total amount received from the
Dividend Reinvestment and Stock Purchase Plan for the nine months
ended September 30, 2002 amounted to $1,223,175.
NOTE 5 - TREASURY STOCK
During the nine months ended September 30, 2002, the Company
purchased 26,000 shares of its own stock for a total cost of
$341,439. These shares are accounted for under the cost method
and are included as Treasury Stock in the Consolidated Financial
Statements.
NOTE 6 - EMPLOYEE STOCK OPTIONS
During the nine months ended September 30, 2002, the following
stock options were granted:
Date of Number of Number of Option Expiration
Grant Employees Shares Price Date
__________ __________ __________ __________ __________
1/04/02 1 25,000 $12.95 1/4/10
6/20/02 12 43,000 $12.60 6/20/10
During the nine months ended September 30, 2002, seven employees
exercised their stock options and purchased 25,700 shares for a
total of $286,550. Of this amount, 13,000 shares for a total of
$149,500, were exercised through the issuance of notes receivable
from officers. These notes receivable are at an interest rate of
5%, mature on June 25, 2007 and are collateralized by the
underlying common shares. The balance of these notes receivable
at September 30, 2002 amounted to $92,000, collateralized by
8,000 shares.
NOTE 7 - SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the nine months ended September 30, 2002 and
2001 for interest was $2,558,878 and $2,162,864, respectively.
Interest cost capitalized to Land Development was $103,000 and
$134,300 for the nine months ended September 30, 2002 and 2001,
respectively.
Page 7
During the nine months ended September 30, 2002 and 2001, the
Company had dividend reinvestments of $1,223,175 and $1,309,724,
respectively, which required no cash transfers.
During the nine months ended September 30, 2002, two officers
exercised their stock options for 13,000 shares through the
issuance of $149,500 of notes receivable.
NOTE 8 - SUBSEQUENT EVENTS
On October 1, 2002, the Company sold its vacant land consisting
of 65 acres in Chester County, Pennsylvania. Net proceeds from
the sale amounted to approximately $1,385,000, resulting in a
realized gain of approximately $660,000.
Page 8
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
MATERIAL CHANGES IN FINANCIAL CONDITION
United Mobile Homes, Inc. (the Company) owns and operates twenty-
five manufactured home communities. These manufactured home
communities have been generating increased gross revenues and
increased operating income. The Company also purchases and holds
securities of other real estate investment trusts.
The Company generated $4,541,300 net cash provided by operating
activities. The Company received new capital of $1,223,175
through its Dividend Reinvestment and Stock Purchase Plan (DRIP).
The Company purchased $6,527,677 of securities of other real
estate investment trusts. The Company had a decrease in
inventory of manufactured homes of $48,766. Effective April 1,
2001, the Company through its wholly-owned taxable subsidiary,
UMH Sales and Finance, Inc. (S&F) began to conduct manufactured
home sales in its communities. Mortgages Payable increased by
$5,984,032 as a result of new mortgages of $6,862,500 partially
offset by principal repayments of $878,468.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Rental and related income increased from $4,809,011 for the
quarter ended September 30, 2001 to $5,081,035 for the quarter
ended September 30, 2002. Rental and related income increased
from $14,359,765 for the nine months ended September 30, 2001 to
$15,076,014 for the nine months ended September 30, 2002. This
was primarily due to the acquisition of a new community in
September, 2001 and the rental increases to residents. The
Company has been raising rental rates by approximately 3% to 4%
annually. Interest and dividend income rose from $620,137 for
the quarter ended September 30, 2001 to $812,766 for the quarter
ended September 30, 2002. Interest and dividend income rose from
$1,611,612 for the nine months ended September 30, 2001 to
$2,149,843 for the nine months ended September 30, 2002. This
was due primarily to purchases of Securities available for sale
during 2002 and 2001. Gain on securities available for sale
transactions amounted to $92,212 and $794,950 for the quarter and
nine months ended September 30, 2002, respectively, as compared
to $200,480 and $531,253 for the quarter and nine months ended
September 30, 2001, respectively. Included in the Gain on
securities available for sale transactions for the quarter and
nine months ended September 30, 2001 was a writedown of $-0- and
$132,949, respectively, of Securities available for sale which
were considered other than temporarily impaired. Other income
amounted to $16,941 and $64,926 for the quarter and nine months
ended September 30, 2002, respectively, as compared to $30,932
and $71,180 for the quarter and nine months ended September 30,
2001, respectively. This represents miscellaneous income
generated by S&F.
Community operating expenses increased from $2,215,391 for the
quarter ended September 30, 2001 to $2,363,990 for the quarter
ended September 30, 2002. Community operating expenses increased
from $6,443,672 for the nine months ended September 30, 2001 to
$6,894,165 for the nine months ended September 30, 2002. This was
primarily due to the acquisition of a new community and increased
insurance expense and personnel costs. General and administrative
Page 9
expenses 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 expense increased
from $677,940 for the quarter ended September 30, 2001 to
$865,372 for the quarter ended September 30, 2002. Interest
expense increased from $2,028,564 for the nine months ended
September 30, 2001 to $2,455,878 for the nine months ended
September 30, 2002. This was primarily due to increased
borrowings. Depreciation expense increased from $662,408 for the
quarter ended September 30, 2001 to $695,639 for the quarter
ended September 30, 2002. Depreciation expense increased from
$1,988,014 for the nine months ended September 30, 2001 to
$2,095,664 for the nine months ended September 30, 2002. This
was primarily due to the acquisition of a new community.
Amortization of financing costs 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.
Sales of manufactured homes amounted to $1,881,037 and $4,357,699
for the quarter and nine months, ended September 30, 2002,
respectively, as compared to $2,112,264 and $3,826,986 for the
quarter and nine months ended September 30, 2001, respectively.
Cost of sales of manufactured homes amounted to $1,642,491 and
$3,722,705 for the quarter and nine months ended September 30,
2002, respectively, as compared to $1,706,892 and $3,152,502 for
the quarter and nine months ended September 30,
2001, respectively. This change is directly attributable to the
change in sales. Selling expenses amounted to $271,299 and
$731,782 for the quarter and nine months ended September 30,
2002, respectively, as compared to $234,225 and $431,273 for the
quarter and nine months ended September 30, 2001, respectively.
This increase is due to additional personnel costs and
advertising. Additionally, since the sales operations did not
start until April, 2001, prior year amounts are not for the full
nine months. Income from the sales operations (defined as sales
of manufactured homes less cost of sales of manufactured homes
less selling expenses) amounted to a loss of $32,753 and $96,788
for the quarter and nine months ended September 30, 2002,
respectively, as compared to income of $171,147 and $243,211 for
the quarter and nine months ended September 30, 2002,
respectively. The sales operation was profitable during the
prior year and was unprofitable during the current year. The
negative swing amounted to $203,900 for the quarter ended
September 30, 2002 and $339,999 for the nine months ended
September 30, 2002 compared to the quarter and nine months ended
September 30, 2001. Although the sales operations have been
experiencing losses, the Company believes that sales of new homes
produces new rental revenue and is an investment in the upgrading
of the communities.
Funds from operations (FFO), defined as net income, excluding
gains (or losses) from sales of depreciable assets, plus
depreciation decreased from $2,429,028 for the quarter ended
September 30, 2001 to $2,196,798 for the quarter ended September
30, 2002. This decrease is due primarily to a loss incurred in
the sales operations. FFO increased from $6,764,237 for the
nine months ended September 30, 2001 to $6,969,937 for the nine
months ended September 30, 2002. 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.
Page 10
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities increased from
$3,596,326 for the nine months ended September 30, 2001 to
$4,541,300 for the nine months ended September 30, 2002. The
Company believes that funds generated from operations together
with the financing and refinancing of its properties will be
sufficient to meet its needs over the next several years.
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.
Page 11
PART II
OTHER INFORMATION
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 - none
Page 12
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
DATE: November 4, 2002 By /s/ Samuel A. Landy,
President
DATE: November 4, 2002 By /s/ Anna T. Chew,
Vice President and
Chief Financial Officer
Page 13