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, 2001 ( ) 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, 2001 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 November 9, 2001 was 7,504,493 shares.
UNITED MOBILE HOMES, INC. for the QUARTER ENDED SEPTEMBER 30, 2001 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 6-9 Item 2 - Management Discussion and Analysis of 10-11 Financial Conditions and Results of 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. PART II OTHER INFORMATION 12 - - SIGNATURES 13 2
<TABLE> <CAPTION> UNITED MOBILE HOMES, INC. CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2001 and DECEMBER 31, 2000 September 30, December 31 2000 2001 <S> <C> <C> -ASSETS- INVESTMENT PROPERTY AND EQUIPMENT Land $ 7,212,035 $ 6,779,335 Site and Land Improvements 53,526,610 50,707,021 Buildings and Improvements 2,738,964 2,705,636 Rental Homes and Accessories 8,501,316 8,088,015 __________ __________ Total Investment Property 71,978,925 68,280,007 Equipment and Vehicles 3,515,618 3,282,681 __________ __________ Total Investment Property and Equipment 75,494,543 71,562,688 Accumulated Depreciation (31,692,127) (29,862,276) __________ __________ Net Investment Property and Equipment 43,802,416 41,700,412 __________ __________ OTHER ASSETS Cash and Cash Equivalents 126,772 1,399,259 Securities Available for Sale 21,753,967 15,494,918 Inventory of Manufactured Homes 2,025,560 -0- Notes and Other Receivables 2,527,761 1,914,446 Unamortized Financing Costs 314,545 280,727 Prepaid Expenses 371,298 115,633 Land Development Costs 2,703,454 2,040,202 __________ __________ Total Other Assets 29,823,357 21,245,185 __________ __________ TOTAL ASSETS 73,625,773 62,945,597 ========== ========== -LIABILITIES AND SHAREHOLDERS' EQUITY - MORTGAGES PAYABLE 33,123,282 32,055,839 __________ __________ OTHER LIABILITIES Accounts Payable 271,352 339,174 Loans Payable 10,731,536 5,639,470 Accrued Liabilities and Deposits 1,861,104 1,622,272 Tenant Security Deposits 477,788 449,416 __________ __________ Total Other Liabilities 13,341,780 8,050,332 __________ __________ TOTAL LIABILITIES 46,465,062 40,106,171 __________ __________ SHAREHOLDERS' EQUITY Common Stock - $.10 par value per share 10,000,000 Shares authorized 7,850,793 and 7,711,141 shares issued And 7,504,493 and 7,394,241 outstanding, respectively 785,079 771,114 Additional Paid-In Capital 27,429,265 26,026,006 Accumulated Other Comprehensive Income 2,363,208 (490,795) Accumulated Deficit (309,944) (667,793) Treasury Stock, at cost (346,300 and 316,900 shares, respectively) (3,106,897) (2,799,106) ___________ ___________ Total Shareholders' Equity 27,160,711 22,839,426 __________ __________ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $73,625,773 $62,945,597 =========== =========== </TABLE> -UNAUDITED- See Notes to Consolidated Financial Statements 3
<TABLE> <CAPTION> UNITED MOBILE HOMES, INC. CONSOLIDATED STATEMENTS OF INCOME For the THREE AND NINE MONTHS ended SEPTEMBER 30, 2001 THREE MONTHS NINE MONTHS 9/30/01 9/30/00 9/30/01 9/30/00 <S> <C> <C> <C> <C> REVENUES: Rental and Related Income $ 4,809,011 $ 4,672,427 $14,359,765 $13,914,882 Sales of Manufactured Homes 2,112,264 -0- 3,826,986 -0- Interest and Dividend Income 620,137 448,788 1,611,612 1,231,395 Gain on Securities Available for Sales Transactions, net 200,480 32,735 531,253 177,149 Other Income 30,932 -0- 71,180 -0- __________ __________ __________ __________ Total Revenues 7,772,824 5,153,950 20,400,796 15,323,426 __________ __________ __________ __________ Community Operating Expenses 2,215,391 1,950,648 6,443,672 5,918,548 Cost of Sales of Manufactured Homes 1,706,892 -0- 3,152,502 -0- Selling Expenses 234,225 -0- 431,273 -0- General and Administrative Expenses 489,848 481,961 1,522,048 1,429,598 Interest Expense 677,940 736,860 2,028,564 2,026,066 Depreciation Expense 662,408 613,131 1,988,014 1,845,774 Other Expenses 19,500 23,000 58,500 66,800 __________ __________ __________ __________ Total Expenses 6,006,204 3,805,600 15,624,573 11,286,786 __________ __________ __________ __________ Income before Gain (Loss) on Sales of Investment Property and Equipment 1,766,620 1,348,350 4,776,223 4,036,640 Gain (Loss) on Sales of Investment Property and Equipment (15,872) (648) (14,891) 15,613 __________ __________ __________ __________ Net Income $ 1,750,748 $ 1,347,702 $ 4,761,332 $ 4,052,253 =========== =========== =========== =========== Net Income per Share - Basic $ 0.23 $ 0.18 $ 0.64 $ 0.55 =========== =========== =========== =========== Diluted $ 0.23 $ 0.18 $ 0.64 $ 0.55 =========== =========== =========== =========== Weighted Average Shares - Basic 7,478,621 7,341,811 7,439,016 7,332,392 =========== =========== =========== =========== Diluted 7,525,926 7,348,373 7,476,831 7,332,392 =========== =========== =========== =========== </TABLE> -UNAUDITED- See Notes to Consolidated Financial Statements 4
<TABLE> <CAPTION> UNITED MOBILE HOMES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS for the NINE MONTHS ended September 30, 2001 and 2000 <S> <C> <C> 2001 2000 CASH FLOW FROM OPERATING ACTIVITIES: Net Income $ 4,761,332 $ 4,052,253 Non-Cash Adjustments: Depreciation 1,988,014 1,845,774 Amortization 58,500 66,800 Gain on Securities Available for Sale Transactions (531,253) (177,149) Loss (Gain) on Sales of Investment Property and Equipment 14,891 (15,613) Changes in Operating Assets and Liabilities Inventory of Manufactured Homes (2,025,560) -0- Notes and Other Receivables (613,315) (500,536) Prepaid Expenses (255,665) (335,881) Accounts Payable (67,822) 480,564 Accrued Liabilities and Deposits 238,832 59,103 Tenant Security Deposits 28,372 12,595 __________ __________ Net Cash Provided by Operating Activities 3,596,326 5,487,910 __________ __________ CASH FLOWS FROM INVESTING ACTIVITIES Purchase of Manufactured Home Community (2,503,126) -0- Purchase of Investment Property and Equipment (1,759,260) (1,064,707) Proceeds from Sales of Assets 157,477 79,953 Additions to Land Development (663,252) (1,293,483) Purchase of Securities Available (6,872,336) (3,712,002) for Sale Proceeds from Sales of Securities Available for Sale 3,998,543 2,461,177 __________ __________ Net Cash Used by Investing Activities (7,641,954) (3,529,062) __________ __________ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from Mortgages and Loans 6,842,066 2,500,000 Principal Payments of Mortgages and Loans (682,557) (689,310) Financing Costs on Debt (92,318) (46,431) Proceeds from Exercise of Stock Options 107,500 -0- Dividends Paid (3,093,759) (2,772,859) Purchase of Treasury Stock (307,791) (1,137,260) __________ __________ Net Cash Provided (Used) by Financing Activities 2,773,141 (2,145,860) __________ __________ NET DECREASE IN CASH AND CASH EQUIVALENTS (1,272,487) (187,012) CASH & CASH EQUIVALENTS - BEGINNING 1,399,259 724,650 __________ __________ CASH & CASH EQUIVALENTS - ENDING $ 126,772 $ 537,638 =========== =========== </TABLE> -UNAUDITED- See Notes to Consolidated Financial Statements 5
UNITED MOBILE HOMES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2001 (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, 2001 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, 2000 have been omitted. 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. 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 amounts of 47,305 and 37,815 shares for the three and nine months ended September 30, 2001, respectively and 6,562 shares for the three months ended September 30, 2000 are included in the diluted weighted average shares outstanding. Total comprehensive income, including unrealized gains (losses) on securities available for sale, amounted to $1,240,617 and $7,615,335, for the three and nine months ended September 30, 2001, respectively and $1,863,906 and $5,592,597 for the three and nine months ended September 30, 2000, respectively. NOTE 3 - INVESTMENT PROPERTY AND EQUIPMENT AND MORTGAGES PAYABLE On September 26, 2001, the Company acquired Laurel Woods Manufactured Housing Community, a 220-space manufactured home community located in Cresson, Pennsylvania. This community was purchased from Laurel Woods LLC, an unrelated entity, for a purchase price of approximately $2,500,000. The Company obtained a $1,750,000 mortgage with First Union Bank. This mortgage payable is at an effective interest rate of 6.38% and is due October 10, 2006. 6
NOTE 4 - SECURITIES AVAILABLE FOR SALE During the nine months ended September 30, 2001, the Company realized a loss of $132,949 due to a writedown to fair value of Securities Available for Sale which was considered other than temporarily impaired. This loss is included in the Gain on Securities for Sale Transactions, net. NOTE 5 - DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN On September 17, 2001, the Company paid $1,494,309 as a dividend of $.20 per share to shareholders of record as of August 15, 2001. The total dividends paid for the nine months ended September 30, 2001 amounted to $4,403,483. On September 17, 2001, the Company received $373,448 from the Dividend Reinvestment and Stock Purchase Plan. There were 34,763 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, 2001 amounted to $1,309,724. NOTE 6 - TREASURY STOCK During the nine months ended September 30, 2001, the Company purchased 29,400 shares of its own stock for a total cost of $307,791. These shares are accounted for under the cost method and are included as Treasury Stock in the Consolidated Financial Statements. NOTE 7 - EMPLOYEE STOCK OPTIONS During the nine months ended September 30, 2001, the following stock options were granted: Date of Number of Number of Option Expiration Grant Employees Shares Price Date 1/2/01 1 25,000 $10.3125 12/2006 During the nine months ended September 30, 2001, one employee exercised a stock option and purchased 10,000 shares for total proceeds of $107,500. Options to purchase 42,000 shares expired and were added back to the "pool" of shares available for grant. As of September 30, 2001, there were options outstanding to purchase 423,500 shares and 252,500 shares available for grant under the Company's Stock Option Plans. NOTE 8 - SUPPLEMENTAL CASH FLOW INFORMATION Cash paid during the nine months ended September 30, 2001 and 2000 for interest was $2,162,864 and $2,153,066 respectively. Interest cost capitalized to Land Development was $134,300 and $127,000 for the nine months ended September 30, 2001 and 2000, respectively. During the nine months ended September 30, 2001 and 2000, the Company had dividend reinvestments of $1,309,724 and $1,371,210, respectively, which required no cash transfers. 7
NOTE 9 - RECENT ACCOUNTING PRONOUNCEMENTS On July 20, 2001, the Financial Accounting Standards Board (FASB) issued Statement No. 141, Business Combinations, and Statement No. 142, Goodwill and Other Intangible Assets. Statement 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001 as well as all purchase method business combinations completed after June 30, 2001. Statement 141 also specifies the criteria acquired intangible assets must meet to be recognized and reported apart from goodwill. Statement 142 will require that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually in accordance with the provisions of Statement 142. Statement 142 will also require that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. Statement 142 requires that goodwill and any intangible asset determined to have an indefinite useful life acquired after June 30, 2001 will not be amortized, but will continue to be evaluated for impairment in accordance with the appropriate pre-Statement 142 accounting literature. Goodwill and intangible assets acquired in business combinations completed before July 1, 2001 will continue to be amortized prior to the adoption of Statement 142. The Company is required to adopt the provisions of Statement 141 immediately. The initial adoption of Statement 141 had no impact on the Company's consolidated financial statements. The Company is required to adopt Statement 142 effective January 1, 2002. The Company currently has no recorded goodwill or intangible assets and does not anticipate that the initial adoption of Statement 142 will have a significant impact on the Company's consolidated financial statements. In August, 2001, FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations," which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. SFAS No. 143 requires an enterprise to record the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets. The Company is required to adopt the provisions of SFAS No. 143 for fiscal years beginning after June 15, 2002. The Company does not anticipate that SFAS No. 143 will significantly impact the Company's consolidated financial statements. 8
On October 3, 2001, FASB issued Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which addresses financial accounting and reporting for the impairment or disposal of long- lived assets. While SFAS No. 144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long- Lived Assets to Be Disposed Of", it retains many of the fundamental provisions of that Statement. The Statement is effective for fiscal years beginning after December 15, 2001. The Company does not anticipate that the initial adoption of SFAS No. 144 will have a significant impact on the Company's financial statements. NOTE 10 - SUBSEQUENT EVENTS On November 6, 2001 the Company obtained a $5,775,000 Fannie Mae mortgage at an interest rate of 6.3% for a ten-year term with a twenty-five year amortization schedule. This loan is secured by Allentown Mobile Home Community in Memphis, Tennessee. 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 generated $3,596,326 net cash provided by operating activities. The Company received new capital of $1,417,224 through its Dividend Reinvestment and Stock Purchase Plan (DRIP) and exercise of stock options. The Company repurchased 29,400 shares of its own stock at a cost of $307,791. The Company purchased a manufactured home community for a total cost of approximately $2,500,000. The Company purchased $6,872,336 of securities of other real estate investment trusts. The Company had an increase in inventory of manufactured homes of $2,025,560. 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 $1,067,443 as a result of a new mortgage loan of $1,750,000 partially offset by principal repayments of $682,557. Loans payable increased by $5,092,066 primarily as a result of additional borrowings to purchase Securities Available for Sale and Inventory. MATERIAL CHANGES IN RESULTS OF OPERATIONS Rental and related income increased from $4,672,427 for the quarter ended September 30, 2000 to $4,809,011 for the quarter ended September 30, 2001. Rental and related income increased from $13,914,882 for the nine months ended September 30, 2000 to $14,359,765 for the nine months ended September 30, 2001. This was the result of higher rents. The Company has been raising rental rates by approximately 3% to 4% annually. Sales of manufactured homes amounted to $2,112,264 and $3,826,986 for the quarter and nine months ended September 30, 2001, respectively. Effective April 1, 2001, the Company began to conduct manufactured home sales in its communities. Interest and dividend income rose from $448,788 for the quarter ended September 30, 2000 to $620,137 for the quarter ended September 30, 2001. Interest and dividend income rose from $1,231,395 for the nine months ended September 30, 2000 to $1,611,612 for the nine months ended September 30, 2001. This was due primarily to purchases of Securities available for sale during 2000 and 2001. Gain on securities available for sale transactions amounted to $200,480 and $531,253 for the three and nine months ended September 30, 2001, respectively as compared to $32,735 and $177,149 for the three and nine months ended September 30, 2000, 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 was considered other than temporarily impaired. Other income amounted 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. 9
Community operating expenses increased from $1,950,648 for the quarter ended September 30, 2000 to $2,215,391 for the quarter ended September 30, 2001. Community operating expenses increased from $5,918,548 for the nine months ended September 30, 2000 to $6,443,672 for the nine months ended September 30, 2001. This was primarily due to an increase in personnel costs and advertising costs. The Company is increasing its efforts to gain occupancy, especially in its recently expanded communities. Cost of sales of manufactured homes amounted to $1,706,892 and $3,152,502 for the quarter and nine months ended September 30, 2001, respectively. Selling expenses amounted to $234,225 and $431,273 for the quarter and nine months ended September 30, 2001, respectively. General and administrative expenses remained relatively stable for the quarter ended September 30, 2001 as compared to the quarter ended September 30, 2000. General and administrative expenses increased from $1,429,598 for the nine months ended September 30, 2000 to $1,522,048 for the nine months ended September 30, 2001. This was primarily due to an increase in occupancy and personnel costs. Interest expense remained relatively stable for the quarter and nine months ended September 30, 2001 as compared to the quarter and nine months ended September 30, 2000. Although there has been an increase in the average principal balance of loans payable, there has been a decrease in interest rates. Depreciation expense increased from $613,131 for the quarter ended September 30, 2000 to $662,408 for the quarter ended September 30, 2001. Depreciation expense increased from $1,845,774 for the nine months ended September 30, 2000 to $1,988,014 for the nine months ended September 30, 2001. This was primarily due to land development costs which were transferred to investment property and equipment and placed in service at the end of 2000. Other expenses remained relatively stable for the quarter and nine months ended September 30, 2001 as compared to the quarter and nine months ended September 30, 2000. Funds from operations (FFO), defined as net income, excluding gains (or losses) from sales of depreciable assets, plus depreciation increased from $1,961,481 for the quarter ended September 30, 2000 to $2,429,028 for the quarter ended September 30, 2001. FFO increased from $5,882,414 for the nine months ended September 30, 2000 to $6,764,237 for the nine months ended September 30, 2001. 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. LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operating activities decreased from $5,487,910 for the nine months ended September 30, 2000 to $3,596,326 for the nine months ended September 30, 2001 primarily due to the new inventory for S&F. 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. 10
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 - none (b) Reports on Form 8-K - none 11
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 12, 2001 By: /s/ Samuel A. Landy Samuel A. Landy, President DATE: November 12, 2001 By: /s/ Anna T. Chew Anna T. Chew, Vice President and Chief Financial Officer 12