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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 March 31, 2003
( ) 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
March 31, 2003 0-13130
UNITED MOBILE HOMES, INC.
(Exact name of registrant as specified in its charter)
New Jersey 22-1890929
(State or other jurisdiction of (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
May 1, 2003 was 7,725,727 shares.
UNITED MOBILE HOMES, INC.
for the QUARTER ENDED
MARCH 31, 2003
PART I - FINANCIAL INFORMATION Page No.
Item 1 - Financial Statements (Unaudited)
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
Operations 9-11
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
PARTII - OTHER INFORMATION 12
SIGNATURES 13
Page 2
UNITED MOBILE HOMES, INC
CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2003 AND DECEMBER 31, 2002
March 31, December 31,
-ASSETS- 2003 2002
INVESTMENT PROPERTY AND EQUIPMENT
Land $ 6,850,970 $ 6,850,970
Site and Land Improvements 56,550,192 56,437,044
Buildings and Improvements 2,750,014 2,748,600
Rental Homes and Accessories 8,834,022 8,798,433
__________ __________
Total Investment Property 74,985,198 74,835,047
Equipment and Vehicles 3,991,852 3,919,983
__________ __________
Total Investment Property and Equipment 78,977,050 78,755,030
Accumulated Depreciation (35,605,986) (34,969,453)
__________ __________
Net Investment Property and Equipment 43,371,064 43,785,577
__________ __________
OTHER ASSETS
Cash and Cash Equivalents 1,483,105 2,338,979
Securities Available for Sale 32,116,522 32,784,968
Inventory of Manufactured Homes 2,811,919 2,775,459
Notes and Other Receivables 4,841,026 4,800,969
Unamortized Financing Costs 389,511 403,663
Prepaid Expenses 489,312 422,323
Land Development Costs 1,903,743 1,714,568
__________ __________
Total Other Assets 44,035,138 45,240,929
__________ __________
TOTAL ASSETS $87,406,202 $89,026,506
========== ==========
- LIABILITIES AND SHAREHOLDERS' EQUITY -
LIABILITIES:
MORTGAGES PAYABLE $42,952,934 $43,321,884
__________ __________
OTHER LIABILITIES
Accounts Payable 362,143 956,663
Loans Payable 11,356,162 12,358,965
Accrued Liabilities and Deposits 2,129,770 2,141,636
Tenant Security Deposits 509,107 510,941
__________ __________
Total Other Liabilities 14,357,182 15,968,205
__________ __________
Total Liabilities 57,310,116 59,290,089
__________ __________
SHAREHOLDERS' EQUITY:
Common Stock - $.10 par value per share,
10,000,000 shares authorized,
8,118,027 and 8,063,750 shares issued
and 7,725,727 and 7,671,450 shares
outstanding as of March 31, 2003 and
December 31, 2002,respectively 811,803 806,375
Additional Paid-In Capital 30,059,511 29,411,328
Accumulated Other
Comprehensive Income 3,602,247 3,988,429
Accumulated Deficit (575,553) (667,793)
Treasury Stock at Cost (392,300 shares at
March 31, 2003 and December 31, 2002,
respectively (3,709,922) (3,709,922)
Notes Receivable from Officers (13,000
shares) (92,000) (92,000)
__________ __________
Total Shareholders' Equity 30,096,086 29,736,417
__________ __________
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $87,406,202 89,026,506
========== ==========
-UNAUDITED-
See Accompanying Notes to Consolidated Financial Statements
Page 3
UNITED MOBILE HOMES, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED
MARCH 31, 2003 AND 2002
2003 2002
____ ____
REVENUES:
Rental and Related Income $5,149,611 $4,986,988
Sales of Manufactured Homes 1,496,093 913,518
Interest and Dividend Income 885,361 618,115
Gain on Securities Available
for Sales Transactions, net 194,516 532,819
Other Income 25,591 17,917
__________ __________
Total Revenues 7,751,172 7,069,357
__________ __________
EXPENSES:
Community Operating Expenses 2,346,651 2,194,242
Cost of Sales of
Manufactured Homes 1,193,019 810,750
Selling Expenses 275,238 176,942
General and Administrative
Expenses 565,096 536,398
Interest Expense 828,035 773,903
Depreciation Expense 716,659 702,005
Amortization of Financing
Costs 30,300 26,700
__________ __________
Total Expenses 5,954,998 5,220,940
__________ __________
Income before Gain on Sales
of Investment Property and
Equipment 1,796,174 1,848,417
Gain on Sales of Investment
Property and Equipment 6,302 3,327
__________ __________
Net Income $1,802,476 $1,851,744
========== ==========
Net Income per Share -
Basic $ 0.23 $ 0.25
========== ==========
Diluted $ 0.23 $ 0.24
========== ==========
Weighted Average Shares
Outstanding -
Basic 7,692,519 7,551,161
========== ==========
Diluted 7,785,396 7,620,477
========== ==========
-UNAUDITED-
See Accompanying Notes to Consolidated Financial Statements
Page 4
UNITED MOBILE HOMES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
MARCH 31, 2003 AND 2002
2003 2002
____ ____
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $1,802,476 $1,851,744
Non-Cash Adjustments:
Depreciation 716,659 702,005
Amortization 30,300 26,700
Gain on Securities Available for Sale
Transactions (194,516) (532,819)
Gain on Sales of Investment Property and
Equipment (6,302) (3,327)
Changes in Operating Assets and
Liabilities:
Inventory of Manufactured Homes (36,460) 189,590
Notes and Other Receivables (40,057) (247,526)
Prepaid Expenses (66,989) (567,063)
Accounts Payable (594,520) (319,534)
Accrued Liabilities and Deposits (11,866) 272,481
Tenant Security Deposits (1,834) 15,600
__________ __________
Net Cash Provided by Operating Activities 1,596,891 1,387,851
__________ __________
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Investment Property and
Equipment (377,527) (427,021)
Proceeds from Sales of Assets 81,683 86,014
Additions to Land Development (189,175) (157,336)
Purchase of Securities Available for Sale (188,786) (3,031,002)
Proceeds from Sales of Securities
Available for Sale 665,566 2,052,260
__________ __________
Net Cash Used by Investing Activities (8,239) (1,477,085)
__________ __________
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Mortgages and Loans -0- 5,574,723
Principal Payments of Mortgages and Loans (1,371,753) (266,316)
Financing Costs on Debt (16,148) (36,306)
Proceeds from Exercise of Stock Options 201,950 -0-
Dividends Paid (1,258,575) (1,192,194)
__________ __________
Net Cash (Used) Provided by Financing
Activities (2,444,526) 4,079,907
__________ __________
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (855,874) 3,990,673
CASH & CASH EQUIVALENTS - BEGINNING 2,338,979 1,567,831
__________ __________
CASH & CASH EQUIVALENTS - ENDING $1,483,105 $5,558,504
========== ==========
-UNAUDITED-
See Accompanying Notes to Consolidated Financial Statements
Page 5
UNITED MOBILE HOMES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2003
(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 March 31, 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 consolidated financial statements and notes thereto
included in the annual report of United Mobile Homes, Inc. (the
Company) for the year ended December 31, 2002 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 92,877 and 69,316 shares for
the quarters ended March 31, 2003 and 2002, respectively, are
included in the diluted weighted average shares outstanding.
Total comprehensive income, including unrealized gains (losses)
on securities available for sale, amounted to $1,416,294 and
$2,333,205 for the quarters ended March 31, 2003 and 2002,
respectively.
NOTE 3 - DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
On March 17, 2003, the Company paid $1,710,236 as a dividend of
$.2225 per share to shareholders of record as of February 18,
2003. The Company received $451,661 from the Dividend
Reinvestment and Stock Purchase Plan. There were 33,277 new
shares issued under the Plan.
Page 6
NOTE 4 - EMPLOYEE STOCK OPTIONS
The Company has one stock-based employee compensation plan.
Prior to 2003, the Company accounted for this plan under the
recognition and measurement provision of APB Opinion No. 25,
"Accounting for Stock Issued to Employees", and the related
interpretations. No stock-based employee compensation was
reflected in net income prior to 2003. Effective January 1,
2003, the Company adopted the fair value recognition provisions
of SFAS No. 123, "Accounting for Stock Based Compensation". The
Company has selected the prospective method of adoption under the
provisions of SFAS No. 148. No compensation costs have been
recognized in 2003 as the Company has not issued any stock
options during the quarter ended March 31, 2003.
Had compensation cost been determined consistent with SFAS No.
123, the Company's net income and earnings per share for the
quarters ended March 31, 2003 and 2002 would have been reduced to
the pro forma amounts as follows:
2003 2002
____ ____
Net Income as Reported $1,802,476 $1,851,744
Compensation expenses if
the fair value method
had been applied 4,407 9,991
__________ __________
Net Income Pro forma $1,798,069 $1,841,753
========== ==========
Net Income per share -
as reported
Basic $ .23 $ .25
Diluted $ .23 $ .24
Net Income per share -
pro forma
Basic $ .23 $ .24
Diluted $ .23 $ .24
The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option pricing model with the
following weighed-average assumptions used for grants in the
following years:
2002 2001
____ ____
Dividend yield 6.75% 8%
Expected volatility 13% 25%
Risk-free interest rate 3.40% 4.29%
Expected lives 8 5
During the quarter ended March 31, 2003, five employees exercised
their stock options and purchased 21,000 shares for a total of
$201,950.
Page 7
NOTE 5 - CONTINGENCIES
The Company is under an investigation by the Environmental
Protection Agency regarding its operation of its wastewater
treatment facility at one community. The Company's wastewater
treatment facilities are operated by licensed operators and
supervised by a professional engineer. Management does not
believe that this matter will have a material adverse effect on
its business, assets, or results of operations.
The Company is subject to claims and litigation in the ordinary
course of business. Management does not believe that any such
claim or litigation will have a material adverse effect on the
Company.
NOTE 6 - SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the quarter ended March 31, 2003 and 2002 for
interest was $860,635 and $805,603, respectively.
During the quarter ended March 31, 2003 and 2002, the Company had
dividend reinvestments of $451,661 and $410,552, respectively,
which required no cash transfers.
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 $1,596,891 net cash provided by operating
activities. The Company received new capital of $451,661 through
its Dividend Reinvestment and Stock Purchase Plan (DRIP). The
Company purchased $188,786 of securities of other real estate
investment trusts. The Company had an increase in inventory of
manufactured homes of $40,057. 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 decreased by $368,950 as a
result of principal repayments.
MATERIAL CHANGES IN RESULTS OF OPERATIONS
Rental and related income increased from $4,986,988 for the
quarter ended March 31, 2002 to $5,149,611 for the quarter ended
March 31, 2003. This was primarily due to rental increases to
residents. The Company has been raising rental rates by
approximately 3% to 4% annually. Interest and dividend income
rose from $618,115 for the quarter ended March 31, 2002 to
$885,361 for the quarter ended March 31, 2003. This was due
primarily to purchases of Securities available for sale during
2002. Gain on securities available for sale transactions
amounted to $194,516 and $532,819 for the quarters ended March
31, 2003 and 2002, respectively.
Community operating expenses increased from $2,194,242 for the
quarter ended March 31, 2002 to $2,346,651 for the quarter ended
March 31, 2003. This was primarily due to increased insurance
expense and personnel costs. General and administrative
expenses remained relatively stable for the quarter ended March
31, 2003 as compared to the quarter ended March 31, 2002.
Interest expense increased from $773,903 for the quarter ended
March 31, 2002 to $828,035 for the quarter ended March 31, 2003.
This was primarily due to increased borrowings. Depreciation
expense increased from $702,005 for the quarter ended March 31,
2002 to $716,659 for the quarter ended March 31, 2003.
Depreciation expense and amortization of financing costs remained
relatively stable for the quarter ended March 31, 2003 as
compared to the quarter ended March 31, 2002.
Page 9
MATERIAL CHANGES IN RESULTS OF OPERATIONS, (CONT'D.)
Sales of manufactured homes amounted to $1,496,093 and $913,518
for the quarters ended March 31, 2003 and 2002, respectively.
Cost of sales of manufactured homes increased from $810,750 for
the quarter ended March 31, 2002 to $1,193,019 for the quarter
ended March 31, 2003. Selling expenses increased from $176,942
for the quarter ended March 31, 2002 to $275,238 for the quarter
ended March 31, 2003. These increases are directly attributable
to the increase in sales. Income from the sales operations
(defined as sales of manufactured homes less cost of sales of
manufactured homes less selling expenses) amounted to $27,836 for
the quarter ended March 31, 2003, as compared to a loss of
$74,174 for the quarter ended March 31, 2002. The Company
believes that sales of new homes produces new rental revenue and
is an investment in the upgrading of the communities.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities increased from
$1,387,851 for the quarter ended March 31, 2002 to $1,596,891 for
the quarter ended March 31, 2003. 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.
FUNDS FROM OPERATIONS
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 trust
(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 quarters ended March 31, 2003 and 2002
is calculated as follows:
2003 2002
____ ____
Net Income $1,802,476 $1,851,744
Gain on Sales of (6,302) (3,327)
Depreciable Assets
Depreciation Expense 716,659 702,005
__________ __________
FFO $2,512,833 $2,550,422
========== ==========
Page 10
FUNDS FROM OPERATIONS, (CONT'D.)
The following are the cash flows provided (used) by operating,
investing and financing activities for the quarters ended March
31, 2003 and 2002:
2003 2002
____ ____
Operating Activities $1,596,891 $1,387,851
Investing Activities (8,239) (1,477,085)
Financing Activities (2,444,526) 4,079,907
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.
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; (ii) increased
competition in the geographic areas in which the Company owns and
operates manufactured housing communities; (iii) changes in
government laws and regulations affecting manufactured housing
communities; and (iv) the ability of the Company to continue to
identify, negotiate and acquire manufactured housing communities
and/or vacant land which may be developed into manufactured
housing communities on terms favorable to the Company. 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.
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.
UNITED MOBILE HOMES, INC.
DATE: May 12, 2003 By /s/ Samuel A.Landy
Samuel A. Landy
President
DATE: May 12, 2003 By /s/ Anna T. Chew
Anna T. Chew
Vice President and
Chief Financial Officer
Page 13