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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, 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
September 30, 2003 0-13130
UNITED MOBILE HOMES, INC.
(Exact name of registrant as specified in its charter)
Maryland 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
November 1, 2003 was 8,027,858 shares.
UNITED MOBILE HOMES, INC.
for the QUARTER ENDED
SEPTEMBER 30, 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 6-10
Item 2 - Management Discussion and Analysis of
Financial Conditions and Results of 11-14
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 14
PART II - OTHER INFORMATION 15
SIGNATURES 16
Page 2
UNITED MOBILE HOMES, INC
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2003 AND DECEMBER 31, 2002
September 30, December 31
-ASSETS- 2003 2002
___________ ___________
(Unaudited)
INVESTMENT PROPERTY AND EQUIPMENT
Land $ 6,927,970 $ 6,850,970
Site and Land Improvements 57,923,642 56,437,044
Buildings and Improvements 2,781,232 2,748,600
Rental Homes and Accessories 9,385,129 8,798,433
___________ ___________
Total Investment Property 77,017,973 74,835,047
Equipment and Vehicles 4,401,702 3,919,983
___________ ___________
Total Investment Property and
Equipment 81,419,675 78,755,030
Accumulated Depreciation (36,964,141) (34,969,453)
___________ ___________
Net Investment Property and Equipment 44,455,534 43,785,577
___________ ___________
OTHER ASSETS
Cash and Cash Equivalents 1,364,858 2,338,979
Securities Available for Sale 31,545,904 32,784,968
Inventory of Manufactured Homes 2,647,307 2,775,459
Notes and Other Receivables 6,536,261 4,800,969
Unamortized Financing Costs 388,491 403,663
Prepaid Expenses 854,279 422,323
Land Development Costs 2,647,371 1,714,568
___________ ___________
Total Other Assets 45,984,471 45,240,929
___________ ___________
TOTAL ASSETS $90,440,005 $89,026,506
=========== ===========
- LIABILITIES AND SHAREHOLDERS' EQUITY -
LIABILITIES:
MORTGAGES PAYABLE $44,659,004 $43,321,884
___________ ___________
OTHER LIABILITIES
Accounts Payable 609,623 956,663
Loans Payable 6,605,299 12,358,965
Accrued Liabilities and Deposits 1,624,059 2,141,636
Tenant Security Deposits 510,996 510,941
___________ ___________
Total Other Liabilities 9,349,977 15,968,205
___________ ___________
Total Liabilities 54,008,981 59,290,089
___________ ___________
SHAREHOLDERS' EQUITY:
Common Stock - $.10 par value per share,
23,000,000 and 15,000,000 shares
authorized, 8,390,558 and 8,063,750
shares issued and 7,998,258 and
7,671,450 shares outstanding as of
September 30, 2003 and December 31,
2002, respectively 839,056 806,375
Additional Paid-In Capital 33,828,387 29,411,328
Accumulated Other
Comprehensive Income 5,308,399 3,988,429
Accumulated Income (Deficit) 165,104 (667,793)
Treasury Stock at Cost (392,300
shares at September 30, 2003 and
December 31, 2002) (3,709,922) (3,709,922)
Notes Receivable from Officers (13,000
shares at December 31, 2002) -0- (92,000)
___________ ___________
Total Shareholders' Equity 36,431,024 29,736,417
___________ ___________
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $90,440,005 $89,026,506
=========== ===========
-UNAUDITED-
See Accompanying Notes to Consolidated Financial Statements
Page 3
UNITED MOBILE HOMES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2003 AND 2002
THREE MONTHS NINE MONTHS
9/30/03 9/30/02 9/30/03 9/30/02
________ ________ ________ ________
REVENUES:
Rental and Related
Income $5,265,197 $5,081,035 $15,641,010 $15,076,014
Sales of
Manufactured
Homes 1,876,398 1,881,037 5,107,063 4,357,699
Interest and
Dividend Income 848,860 812,766 2,545,783 2,149,843
Gain on Securities
Available for
Sales
Transactions, 815,358 92,212 1,486,939 794,950
net
Other Income 28,292 16,941 93,953 64,926
__________ __________ __________ __________
Total Revenues 8,834,105 7,883,991 24,874,748 22,443,432
__________ __________ __________ __________
EXPENSES:
Community
Operating 2,639,788 2,363,990 7,475,312 6,894,165
Expenses
Cost of Sales of
Manufactured
Homes 1,504,503 1,642,491 4,047,248 3,722,705
Selling Expenses 283,278 271,299 856,156 731,782
General and
Administrative
Expenses 566,584 517,341 1,798,310 1,588,865
Interest Expense 785,933 865,372 2,417,348 2,455,878
Depreciation Expense 723,080 695,639 2,156,519 2,095,664
Amortization of
Financing Costs 30,300 26,700 90,900 80,100
__________ __________ __________ __________
Total Expenses 6,533,466 6,382,832 18,841,793 17,569,159
__________ __________ __________ __________
Income before Gain
on Sales of
Investment
Property and
Equipment 2,300,639 1,501,159 6,032,955 4,874,273
Gain (Loss) on
Sales of
Investment
Property
and Equipment 13,098 (7,258) 50,652 (8,283)
__________ __________ __________ ___________
Net Income $2,313,737 $1,493,901 $6,083,607 $4,865,990
========== ========== ========== ==========
Net Income per
Share -
Basic $ .29 $ .19 $ 0.78 $ .64
========== ========== ========== ==========
Diluted $ .29 $ .19 $ 0.77 $ .63
========== ========== ========== ==========
Weighted Average
Shares
Outstanding -
Basic 7,905,395 7,627,344 7,788,311 7,587,282
========== ========= ========== ==========
Diluted 8,001,633 7,716,161 7,876,576 7,674,636
========== ========= ========== ==========
-UNAUDITED-
See Accompanying Notes to Consolidated Financial Statements
Page 4
UNITED MOBILE HOMES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2003 AND 2002
2003 2002
________ ________
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $6,083,607 $4,865,990
Non-Cash Adjustments:
Depreciation 2,156,519 2,095,664
Amortization 90,900 80,100
Gain on Securities Available for Sale
Transactions (1,486,939) (794,950)
(Gain) Loss on Sales of Investment
Property and Equipment (50,652) 8,283
Changes in Operating Assets and
Liabilities:
Inventory of Manufactured Homes 128,152 48,766
Notes and Other Receivables (1,735,292) (1,248,109)
Prepaid Expenses (431,956) (587,452)
Accounts Payable (347,040) (488,256)
Accrued Liabilities and Deposits (517,577) 524,572
Tenant Security Deposits 55 36,692
___________ ___________
Net Cash Provided by Operating Activities 3,889,777 4,541,300
___________ ___________
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Manufactured Home Community (918,000) -0-
Purchase of Investment Property and
Equipment (2,196,617) (1,382,909)
Proceeds from Sales of Assets 338,793 185,664
Additions to Land Development (932,803) (549,944)
Purchase of Securities Available for Sale (5,741,183) (6,527,677)
Proceeds from Sales of Securities
Available for Sale 9,787,156 3,735,533
Repayment of Notes Receivables from
Officers 92,000 -0-
___________ ___________
Net Cash Provided (Used) by Investing
Activities 429,346 (4,539,333)
___________ ___________
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Mortgages and Loans 3,500,000 6,862,500
Principal Payments of Mortgages and Loans (7,916,546) (3,936,513)
Financing Costs on Debt (75,728) (48,702)
Proceeds from the Dividend Reinvestment
and Stock Purchase Plan 2,350,004 137,050
Proceeds from Exercise of Stock Options 783,513 57,500
Dividends Paid, net of amount reinvested (3,934,487) (3,665,944)
Purchase of Treasury Stock -0- (341,439)
___________ ___________
Net Cash Used by Financing Activities (5,293,244) (935,548)
___________ ___________
NET DECREASE IN CASH
AND CASH EQUIVALENTS (974,121) (933,581)
CASH & CASH EQUIVALENTS - BEGINNING 2,338,979 1,567,831
___________ __________
CASH & CASH EQUIVALENTS - ENDING $ 1,364,858 $ 634,250
=========== ===========
-UNAUDITED-
See Accompanying Notes to Consolidated Financial Statements
Page 5
UNITED MOBILE HOMES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2003 (UNAUDITED)
NOTE 1 - ORGANIZATION AND ACCOUNTING POLICY
On September 29, 2003, United Mobile Homes, Inc. (the Company)
changed its state of incorporation from New Jersey to Maryland.
The reincorporation was approved by the Company's shareholders at
the Company's annual meeting on August 14, 2003.
The reincorporation was accomplished by the merger of the Company
with and into its wholly-owned subsidiary, United Mobile Homes,
Inc., a Maryland corporation, (United Maryland), which was the
surviving corporation in the merger.
As a result of the merger, each outstanding share of the
Company's Class A common stock, $.10 par value per share, was
converted into one share of common stock, $.10 par value per
share of United Maryland common stock. In addition, each
outstanding option to purchase New Jersey Common Stock was
converted into the right to purchase Maryland Common Stock upon
the same terms and conditions as immediately prior to the
Merger. The Company's 1994 Stock Option Plan, as amended,
was assumed by United Maryland.
The conversion of the New Jersey Common Stock into Maryland
Common Stock occurred without an exchange of certificates.
Accordingly, certificates formerly representing shares of New
Jersey Common Stock are now deemed to represent the same number
of shares of Maryland Common Stock.
Prior to the Merger, United Maryland had no assets or
liabilities, other than nominal assets or liabilities. As a
result of the Merger, United Maryland acquired all of the assets
and all of the liabilities and obligations of the Company. The
Merger was accounted for as if it were a "pooling of interests"
rather than a purchase for financial reporting and related
purposes, with the result that the historical accounts of the
Company and United Maryland have been combined for all periods
presented. United Maryland, has the same business, properties,
directors, management, status as a real estate investment trust
under the Internal Revenue Code of 1986, as amended, and
principal executive offices as United Mobile Homes, Inc., a New
Jersey corporation.
The interim consolidated financial statements furnished herein
reflect all adjustments which were, in the opinion of management,
necessary to present fairly the financial position, results of
operations, and cash flows at September 30, 2003 and for all
periods presented. All adjustments made in the interim period
were of a normal recurring nature. Certain footnote disclosures
which would substantially duplicate the disclosures contained in
the audited consolidated financial statements and notes thereto
included in the annual report of 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.
Page 6
NOTE 1 - ORGANIZATION AND ACCOUNTING POLICY, (CONT'D.)
Employee Stock Options
On August 14, 2003, the shareholders approved and ratified the
Company's 2003 Stock Option Plan authorizing the grant to
officers and key employees of options to purchase up to 1,500,000
shares of common stock. This Plan replaced the Company's 1994
Stock Option Plan which, pursuant to its terms, terminates
December 31, 2003. No future awards will be granted under the
Company's 1994 Stock Option Plan.
Prior to 2003, the Company accounted for its stock option 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 "Accounting for
Stock-Based Compensation Transition and Disclosure". SFAS 123
requires that compensation cost for all stock awards be
calculated and recognized over the service period (generally
equal to the vesting period). This compensation cost is
determined using option pricing models, intended to estimate the
fair value of the awards at the grant date.
Had compensation cost been determined consistent with SFAS No.
123, the Company's net income and earnings per share for the
three and nine months ended September 30, 2003 and 2002 would
have been reduced to the pro forma amounts as follows:
Three Months Nine Months
____________ ____________
9/30/03 9/30/02 9/30/03 9/30/02
________ ________ ________ ________
Net Income prior to
compensation
expense for grants in
2003 $2,320,650 $1,493,901 $6,090,520 $4,865,990
Compensation expense 6,913 -0- 6,913 -0-
________ ________ ________ ________
Net Income as Reported 2,313,737 1,493,901 6,083,607 4,865,990
Compensation expenses if
the fair value method
had been applied -0- 19,084 8,815 39,066
________ ________ ________ ________
Net Income Pro forma $2,313,737 $1,474,817 $6,074,792 $4,826,924
========= ========== ========== ==========
Net Income per share -
as reported
Basic $ .29 $ .19 $ .78 $ .64
Diluted $ .29 $ .19 $ .77 $ .63
Net Income per share -
pro forma
Basic $ .29 $ .19 $ .78 $ .64
Diluted $ .29 $ .19 $ .77 $ .63
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:
2003 2002 2001
____ ____ ____
Dividend yield 6.75% 6.75% 8%
Expected volatility 19% 13% 25%
Risk-free interest rate 3.91% 3.40% 4.29%
Expected lives 8 8 5
Page 7
NOTE 1 - ORGANIZATION AND ACCOUNTING POLICY, (CONT'D.)
The weighted-average fair value of options granted during the
nine months ended September 30, 2003 was $1.30.
During the nine months ended September 30, 2003, the following
stock options were granted:
Number
Date of Number of of Option Expiration
Grant Employees Shares Price Date
8/18/03 1 25,000 16.92 8/18/11
8/25/03 10 39,000 15.00 8/25/11
During the nine months ended September 30, 2003, nine employees
exercised their stock options and purchased 78,000 shares for a
total of $783,513. Additionally, stock options for a total of
31,000 shares expired without being exercised. As of September
30, 2003, there were options outstanding to purchase 343,000
shares and 1,436,000 shares were available for grant under the
Company's 2003 Stock Option Plan.
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 96,238 and 88,265 shares for the
three and nine months ended September 30, 2003 respectively, and
88,817 and 87,354 shares for the three and nine months ended
September 30, 2002, respectively, are included in the diluted
weighted average shares outstanding.
Total comprehensive income, including change in unrealized gains
(losses) on securities available for sale, amounted to $2,764,050
and $7,403,577 for the three and nine months ended September 30,
2003, respectively, and $817,843 and $5,383,758 for the three and
nine months ended September 30, 2002, respectively.
NOTE 3 - INVESTMENT PROPERTY AND EQUIPMENT
On May 15, 2003, the Company acquired Woodland Manor (formerly
Northway Manor), a manufactured home community located in West
Monroe, New York. This community consists of 150 manufactured
home sites, of which 65 are currently occupied. This community
was purchased from MSCI 1998-CF1 West Monroe, LLC, an unrelated
entity, for a purchase price, including closing costs, of
approximately $918,000.
Page 8
NOTE 4 - MORTGAGES PAYABLE
Effective May 1, 2003, the Company extended the D&R Village
mortgage for an additional five years. This mortgage payable
is due on May 1, 2008 with the interest rate reset at 4.625%.
On August 28, 2003, the Company obtained a $3,500,000 mortgage
loan with First National Community Bank, located in Dunmore, PA.
This mortgage payable is due on August 28, 2018 with an interest
rate of prime plus 1/4% (with a minimum rate of 4 1/2% and
a maximum rate of 7 1/4%), for the first seven years.
Effective August 28, 2010, the interest rate will be prime
plus 1% (but not more than 3% greater than the prime rate on
August 28, 2010). This loan is secured by Heather Highlands
Mobile Home Park in Pittston, PA.
NOTE 5 - DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
On March 19, 2003, the Company amended the Dividend Reinvestment
and Stock Purchase Plan to provide for monthly optional cash
payments of not less than $500 per payment nor more than $1,000
unless a request for waiver has been accepted by the Company.
On September 15, 2003, the Company paid $1,797,856 as a dividend
of $.2275 per share to shareholders of record as of August 15,
2003. Gross dividends paid for the nine months ended September
30, 2003 amounted to $5,250,710, of which $1,316,223 was
reinvested.
During the nine months ended September 30, 2003, the Company
received, including dividends reinvested, a total of $3,666,227
from the Dividend Reinvestment and Stock Purchase Plan. There
were 248,808 new shares issued under the Plan.
NOTE 6 - 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, consolidated balance sheet, 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
consolidated balance sheet or results of operations.
NOTE 7 - SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the nine months ended September 30, 2003 and
2002for interest was $2,529,048 and $2,558,878, respectively.
Interest cost capitalized to Land Development was $111,700 and
$103,000 for the nine months ended September 30, 2003 and 2002,
respectively.
During the nine months ended September 30, 2003 and 2002, the
Company had dividend reinvestments of $1,316,223 and $1,223,175,
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.
Page 9
NOTE 8 - RECENT ACCOUNTING PRONOUNCEMENTS
In January 2003, the Financial Accounting Standards Board
("FASB") issued FASB Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities, an interpretation
of Accounting Research Bulletin No. 51", which addresses
consolidation by business enterprises of variable interest
entities. The Interpretation clarifies the application of
Accounting Research Bulletin No. 51, Consolidated Financial
Statements, to certain entities in which equity investors do not
have the characteristics of a controlling financial interest
or do not have sufficient equity at risk for the entity to
finance its activities without additional subordinated financial
support from other parties. FIN 46 applies immediately to
variable interest entities created after January 31, 2003, and to
variable interest entities in which an enterprise obtains an
interest after that date. Management believes that this
Interpretation will not have a material impact on the Company's
financial statements. On October 9, 2003, the effective date was
deferred until the end of the first interim or annual period
ending after December 15, 2003, for certain interests held by a
public entity in certain variable interest entities or potential
variable interest entities created before February 1, 2003.
In April 2003, the FASB issued Statement No. 149, "Amendment of
Statement 133 on Derivative Instruments and Hedging Activities"
("SFAS No. 149"). SFAS No. 149 amends and clarifies accounting
for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging
activities under Statement 133. SFAS No. 149 is effective for
contracts entered into or modified after September 30, 2003, with
some exceptions, and for hedging relationships designated after
September 30, 2003. The guidance should be applied prospectively.
Management believes that this Statement will not have a material
impact on the Company's financial statements.
In May 2003, the FASB issued Statement No. 150, "Accounting for
Certain Financial Instruments with Characteristics of both
Liabilities and Equity" ("SFAS No. 150). SFAS No. 150
establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both
liabilities and equity. It requires that an issuer classify a
financial instrument that is within its scope as a liability (or
an asset in some circumstances). Many of those instruments were
previously classified as equity. SFAS No. 150 is effective for
financial instruments entered into or modified after May 31,
2003, and otherwise is effective at the beginning of the first
interim period beginning after June 15, 2003. It is to be
implemented by reporting the cumulative effect of a change in an
accounting principle for financial instruments created before the
issuance date of the Statement and still existing at the
beginning of the interim period of adoption. Restatement is not
permitted. Management believes that this Statement will not have
a material impact on the Company's financial statements. On
October 29, 2003, the FASB voted to indefinitely defer certain
provisions of this statement relating to non-controlling
(minority) interests in finite-like entities.
Page 10
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
CHANGES IN FINANCIAL CONDITION
On September 29, 2003, United Mobile Homes, Inc. (the Company)
changed its state of incorporation from New Jersey to Maryland.
The reincorporation was approved by the Company's shareholders at
the Company's annual meeting on August 14, 2003.
The reincorporation was accomplished by the merger of the Company
with and into its wholly-owned subsidiary, United Mobile Homes,
Inc., a Maryland corporation, (United Maryland), which was the
surviving corporation in the merger.
As a result of the merger, each outstanding share of the
Company's Class A common stock, $.10 par value per share, was
converted into one share of common stock, $.10 par value per
share of United Maryland common stock. In addition, each
outstanding option to purchase New Jersey Common Stock was
converted into the right to purchase Maryland Common Stock upon
the same terms and conditions as immediately prior to the
Merger. The Company's 1994 Stock Option Plan, as amended, was
assumed by the United Maryland.
The conversion of the New Jersey Common Stock into Maryland
Common Stock occurred without an exchange of certificates.
Accordingly, certificates formerly representing shares of New
Jersey Common Stock are now deemed to represent the same number
of shares of Maryland Common Stock.
Prior to the Merger, United Maryland had no assets or
liabilities, other than nominal assets or liabilities. As a
result of the Merger, United Maryland acquired all of the assets
and all of the liabilities and obligations of the Company.
United Maryland, has the same business, properties, directors,
management, status as a real estate investment trust under the
Internal Revenue Code of 1986, as amended, and principal
executive offices as United Mobile Homes, Inc., a New Jersey
corporation.
On May 15, 2003, the Company acquired a manufactured home
community in West Monroe, New York. The Company now owns and
operates twenty-six 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. 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.
The Company generated $3,889,777 net cash provided by operating
activities. The Company received, including dividends reinvested
of $1,316,223, new capital of $3,666,227 through its Dividend
Reinvestment and Stock Purchase Plan (DRIP). The Company sold
$8,300,217 and purchased $5,741,183 of securities of other real
estate investment trusts. Mortgages Payable increased by
$1,337,120 as a result of a new mortgage of $3,500,000 partially
offset by principal repayments of $2,162,880.
Page 11
CHANGES IN RESULTS OF OPERATIONS
Rental and related income increased from $5,081,035 for the
quarter ended September 30, 2002 to $5,265,197 for the quarter
ended September 30, 2003. Rental and related income increased
from $15,076,014 for the nine months ended September 30, 2002 to
$15,641,010 for the nine months ended September 30, 2003. This
was primarily due to the acquisition of a new community and
rental increases to residents. The Company has been raising
rental rates by approximately 3% to 4% annually. Interest and
dividend income rose from $812,766 for the quarter ended
September 30, 2002 to $848,860 for the quarter ended September
30, 2003. Interest and dividend income rose from $2,149,843 for
the nine months ended September 30, 2002 to $2,545,783 for the
nine months ended September 30, 2003. This was due primarily to
purchases of Securities available for sale during 2003. Gain on
securities available for sale transactions amounted to $815,358
and $1,486,939 for the quarter and nine months ended September
30, 2003, respectively, as compared to $92,212 and $794,950 for
the quarter and nine months ended September 30, 2002,
respectively.
Community operating expenses increased from $2,363,990 for the
quarter ended September 30, 2002 to $2,639,788 for the quarter
ended September 30, 2003. Community operating expenses increased
from $6,894,165 for the nine months ended September 30, 2002 to
$7,475,312 for the nine months ended September 30, 2003. This
was primarily due to the acquisition of a new community and
increased insurance expense, professional fees and personnel
costs. General and administrative expenses increased from
$517,341 for the quarter ended September 30, 2002 to $566,584 for
the quarter ended September 30, 2003. General and administrative
expenses increased from $1,588,865 for the nine months ended
September 30, 2002 to $1,798,310 for the nine months ended
September 30, 2003. This was primarily due to an increase in
professional fees. Interest expense decreased from $865,372 for
the quarter ended September 30, 2002 to $785,933 for the quarter
ended September 30, 2003. Interest expense decreased from
$2,455,878 for the nine months ended September 30, 2002 to
$2,417,348 for the nine months ended September 30, 2003. This
was primarily due to a decrease in loans payable and a decrease
in interest rates. Depreciation expense and amortization of
financing costs remained relatively stable for the quarter and
nine months ended September 30, 2003 as compared to the quarter
and nine months ended September 30, 2002.
Sales of manufactured homes amounted to $1,876,398 and $5,107,063
for the quarter and nine months ended September 30, 2003,
respectively, as compared to $1,881,037 and $4,357,699 for the
quarter and nine months ended September 30, 2002, respectively.
Cost of sales of manufactured homes amounted to $1,504,503 and
$4,047,248 for the quarter and nine months ended September 30,
2003, respectively, as compared to $1,642,491 and $3,722,705 for
the quarter and nine months ended September 30, 2002,
respectively. Selling expenses amounted to $283,278 and $856,156
for the quarter and nine months ended September 30, 2003,
respectively, as compared to $271,299 and $731,782 for the
quarter and nine months ended September 30, 2002, respectively.
These fluctuations are directly attributable to the fluctuations
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 $88,617 and $203,659 for the
quarter and nine months ended September 30, 2003, respectively,
as compared to $32,753 and a loss of $96,788 for the quarter and
nine months ended September 30, 2002, respectively. The Company
has been experiencing an increase in gross margin. The Company
believes that sales of new homes produces new rental revenue and
is an investment in the upgrading of the communities.
Page 12
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities decreased from
$4,541,300 for the nine months ended September 30, 2002 to
$3,889,777 for the nine months ended September 30, 2003 primarily
due to an increase in notes and other receivables and a decrease
in accrued liabilities and deposits. 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 quarter and nine months ended September
30, 2003 and 2002 is calculated as follows:
Three Months Nine months
9/30/03 9/30/02 9/30/03 9/30/02
_________ _________ _________ __________
Net Income $2,313,737 $1,493,901 $6,083,607 $4,865,990
Loss(Gain)on
Sales of
Depreciable
Assets (13,098) 7,258 (50,652) 8,283
Depreciation
Expense 723,080 695,639 2,156,519 2,095,664
_________ _________ _________ __________
FFO $3,023,719 $2,196,798 $8,189,474 $6,969,937
========= ========= ========= =========
The following are the cash flows provided (used) by operating,
investing and financing activities for the nine months ended
September 30, 2003 and 2002:
2003 2002
_____ _____
Operating Activities $3,889,777 $4,541,300
Investing Activities 429,346 (4,539,333)
Financing Activities (5,293,244) (935,548)
Page 13
CONTROLS AND PROCEDURES
The Company's Chief Executive Officer and Chief Financial
Officer, with the assistance of other members of the Company's
management, have evaluated the effectiveness of the Company's
disclosure controls and procedures as of the end of the period
covered by this Quarterly Report on Form 10-Q. Based on such
evaluation, the Company's Chief Executive Officer and Chief
Financial Officer have concluded that the Company's disclosure
controls and procedures are effective.
The Company's Chief Executive Officer and Chief Financial Officer
have also concluded that there have not been any changes in the
Company's internal control over financial reporting that has
materially affected, or is reasonably likely to materially
affect, the Company's internal control over financial reporting.
SAFE HARBOR STATEMENT
This Form 10-Q contains various "forward-looking statements"
within the meaning of the Securities Act of 1933 and the
Securities Exchange Act of 1934, and the Company intends that
such forward-looking statements be subject to the safe harbors
created thereby. The words "may", "will", "expect", "believe",
"anticipate", "should", "estimate", and similar expressions
identify forward-looking statements. These forward-looking
statements reflect the Company's current views with respect to
future events and finance performance, but are based upon current
assumptions regarding the Company's operations, future results
and prospects, and are subject to many uncertainties and factors
relating to the Company's operations and business environment
which may cause the actual results of the Company to be
materially different from any future results expressed or implied
by such forward-looking statements.
Such factors include, but are not limited to, the following: (i)
changes in the general economic climate; (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 14
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 -
The annual meeting of shareholders was held on August 14, 2003 to
elect a Board of Directors for the ensuing year, to approve the
selection of independent auditors, to approve a proposal by the
Board of Directors to reincorporate the Company as a Maryland
Corporation, and to approve the Company's 2003 Stock Option Plan.
Proxies for the meeting were solicited pursuant to Regulation 14
under the Securities and Exchange Act of 1934.
Item 5 - Other Information - none
Item 6 - Exhibits and Reports on Form 8-K -
(a) Exhibits -
31.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
31.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
32
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(b) Reports on Form 8-K - none
Page 15
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: November 10, 2003 By /s/ Samuel A. Landy
Samuel A. Landy
President
DATE: November 10, 2003 By /s/ Anna T. Chew
Anna T. Chew
Vice President and
Chief Financial Officer
Page 16