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
<TABLE> <CAPTION> UNITED MOBILE HOMES, INC CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 2002 AND DECEMBER 31, 2001 <S> <C> <C> 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 =========== =========== </TABLE> -UNAUDITED- See Accompanying Notes to Consolidated Financial Statements Page 3
<TABLE> <CAPTION> UNITED MOBILE HOMES, INC. CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001 THREE MONTHS NINE MONTHS <S> <C> <C> <C> <C> 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 ========== ========== ========== ========== </TABLE> -UNAUDITED- See Accompanying Notes to Consolidated Financial Statements Page 4
<TABLE> <CAPTION> UNITED MOBILE HOMES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001 <S> <C> <C> 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 =========== =========== </TABLE> -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