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 June 30, 1999 ( ) 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 June 30, 1999 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) 125 Wyckoff Road, Eatontown, New Jersey 07724 Registrant's telephone number, including area code (732) 389-3890 ________________________________________________________________ (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 August 11, 1999 was 7,251,895 shares.
UNITED MOBILE HOMES, INC. for the QUARTER ENDED JUNE 30, 1999 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 6-7 Item 2 - Management Discussion and Analysis of Financial Conditions and Results of Operations 8-9 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 10 SIGNATURES 11 -2-
<TABLE> <CAPTION> UNITED MOBILE HOMES, INC. CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 1999 and DECEMBER 31, 1998 June 30, December 31, 1999 1998 <S> <C> <C> - -ASSETS- INVESTMENT PROPERTY AND EQUIPMENT Land $ 6,797,935 $ 6,797,935 Site and Land Improvements 46,621,802 46,198,257 Buildings and Improvements 2,694,864 2,691,426 Rental Homes and Accessories 7,442,332 5,656,441 ---------- ---------- Total Investment Property 63,556,933 61,344,059 Equipment and Vehicles 2,718,161 2,643,774 ---------- ---------- Total Investment Property and Equipment 66,275,094 63,987,833 Accumulated Depreciation (26,260,853) (25,091,588) ---------- ---------- Net Investment Property and Equipment 40,014,241 38,896,245 ---------- ---------- OTHER ASSETS Cash and Cash Equivalents 970,239 832,408 Securities Available for Sale 9,838,343 7,752,565 Notes and Other Receivables 1,013,775 734,724 Unamortized Financing Costs 207,394 157,928 Prepaid Expenses -0- 168,515 Land Development Costs 2,149,088 1,504,264 ---------- ---------- Total Other Assets 14,178,839 11,150,404 ---------- ---------- TOTAL ASSETS $ 54,193,080 $ 50,046,649 ========== ========== - - LIABILITIES AND SHAREHOLDERS' EQUITY - MORTGAGES PAYABLE $ 24,258,901 $ 21,411,576 ---------- ---------- OTHER LIABILITIES Accounts Payable 188,523 152,011 Loans Payable 4,945,043 3,368,512 Accrued Liabilities and Deposits 1,569,202 1,495,653 Tenant Security Deposits 447,570 406,084 ---------- ---------- Total Other Liabilities 7,150,338 5,422,260 ---------- ---------- TOTAL LIABILITIES 31,409,239 26,833,836 ---------- ---------- SHAREHOLDERS' EQUITY Common Stock - $.10 par value per share 10,000,000 shares authorized, 7,364,895 and 7,246,580 issued and 7,251,895 and 7,246,580 outstanding, respectively 736,490 724,658 Additional Paid-In Capital 24,491,973 23,427,783 Accumulated Other Comprehensive Loss (112,048) (271,835) Accumulated Deficit (1,223,839) (667,793) Treasury Stock, at cost (113,000 shares at June 30,1999) (1,108,735) -0- ---------- ---------- Total Shareholders' Equity 22,783,841 23,212,813 ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 54,193,080 $ 50,046,649 ========== ========== </TABLE> -UNAUDITED- See Notes to Consolidated Financial Statements -3-
<TABLE> <CAPTION> UNITED MOBILE HOMES, INC. CONSOLIDATED STATEMENTS OF INCOME For the THREE AND SIX MONTHS ended JUNE 30, 1999 and 1998 THREE MONTHS SIX MONTHS 6/30/99 6/30/98 6/30/99 6/30/98 <S> <C> <C> <C> <C> Rental and Related Income $ 4,451,646 $ 4,179,675 $ 8,773,629 $ 8,298,510 Community Operating Expense 2,060,524 1,830,858 4,024,213 3,647,194 --------- --------- --------- --------- Income from Community Operations 2,391,122 2,348,817 4,749,416 4,651,316 General and Administrative 441,386 363,504 824,099 719,678 Interest Expense 435,317 382,008 839,473 754,129 Interest Income (164,488) (82,213) (331,098) (174,108) Depreciation 600,323 601,063 1,225,938 1,201,735 Other Expenses 23,460 28,770 40,650 41,970 --------- --------- --------- --------- Income before Gains On Sales of Assets 1,055,124 1,055,685 2,150,354 2,107,912 Gains on Sales of Assets 16,529 11,052 4,452 9,928 --------- --------- --------- --------- Net Income $1,071,653 $1,066,737 $2,154,806 $2,117,840 ========= ========= ========= ========= Net Income Per Share - Basic $ .15 $ .16 $ .30 $ .31 ========= ========= ========= ========= Diluted $ .15 $ .15 $ .30 $ .30 ========= ========= ========= ========= Weighted Average Shares - Basic 7,210,196 7,029,651 7,225,789 6,918,006 ========= ========= ========= ========= Diluted 7,223,525 7,058,715 7,244,232 6,955,017 ========= ========= ========= ========= </TABLE> -UNAUDITED- See Notes to Consolidated Financial Statements -4-
<TABLE> <CAPTION> UNITED MOBILE HOMES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS for the SIX MONTHS ended June 30, 1999 and 1998 1999 1998 <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 2,154,806 $ 2,117,840 Non-Cash Adjustments: Depreciation 1,225,938 1,201,735 Amortization 40,650 41,970 Gain on Sales of Securities Available for Sale (53,473) (9,928) Gain of Sales of Investment Property and Equipment (4,452) -0- Changes in Operating Assets And Liabilities - Notes and Other Receivables (279,051) (88,431) Prepaid Expenses 168,515 109,415 Accounts Payable 36,512 (119,282) Accrued Liabilities and Deposits 73,549 3,668 Tenant Security Deposits 41,486 26,908 --------- --------- Net Cash Provided by Operating Activities 3,404,480 3,283,895 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of Investment Property and Equipment (2,533,022) (811,083) Proceeds from Sales of Assets 193,540 144,769 Additions to Land Development (644,824) (967,050) Purchase of Securities Available for Sale (2,290,441) (1,908,443) Proceeds from Sales of Securities Available for Sale 417,923 -0- --------- --------- Net Cash Used by Investing Activities (4,856,824) (3,541,807) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from Mortgages and Loans 5,576,531 3,600,000 Principal Payments of Mortgages and Loans (1,152,675) (2,486,332) Financing Costs on Debt (90,116) (83,774) Proceeds from Dividend Reinvestment And Stock Purchase Plan -0- 1,870,075 Proceeds from Exercise of Stock Options 263,750 75,688 Dividends Paid (1,898,580) (1,566,656) Purchase of Treasury Stock (1,108,735) -0- --------- --------- Net Cash Provided by Financing Activities 1,590,175 1,409,001 --------- --------- NET INCREASE IN CASH AND CASH EQUIVALENTS 137,831 1,151,089 CASH & CASH EQUIVALENTS - BEGINNING 832,408 191,319 --------- --------- CASH & CASH EQUIVALENTS - ENDING $ 970,239 $ 1,342,408 ========= ========= </TABLE> -UNAUDITED- See Notes to Consolidated Financial Statements -5-
UNITED MOBILE HOMES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1999 (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 June 30, 1999 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, 1998 have been omitted. NOTE 2 - NET INCOME PER SHARE AND COMPREHENSIVE INCOME 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 13,329 and 18,443 for the three and six months ended June 30, 1999, respectively, and 29,064 and 37,011 for the three and six months ended June 30, 1998, are included in the diluted weighted average shares outstanding. Total comprehensive income, including unrealized gains (losses) on securities available for sale, amounted to $1,606,467 and $2,314,593, for the three and six months ended June 30, 1999 and 1998, respectively, and $726,514 and $2,085,280 for the three and six months ended June 30, 1998, respectively. NOTE 3 - MORTGAGES PAYABLE On February 10, 1999, the Company entered into a $4,000,000 mortgage payable to Summit Bank. The interest rate on this mortgage is fixed at 7.0%. This mortgage loan is due on March 1, 2004. Proceeds of this mortgage were used primarily to retire existing debt, purchase securities available for sale and purchase Treasury Stock. NOTE 4 - DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN On June 15, 1999, the Company paid $1,352,117 as a dividend of $.1875 per share to shareholders of record as of May 15, 1999. The total dividends paid for the six months ended June 30, 1999 amounted to $2,710,852. On June 15, 1999, the Company received $370,503 from the Dividend Reinvestment and Stock Purchase Plan. There were 40,599 new shares issued resulting in 7,251,895 shares outstanding. The total amount received from the Dividend Reinvestment Plan for the six months ended June 30, 1999 amounted to $812,272. -6-
NOTE 5 - TREASURY STOCK During the six months ended June 30, 1999, the Company purchased 113,000 shares of its own stock for a total cost of $1,108,735. 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 six months ended June 30, 1999, the following stock option was granted: Date of Number of Number of Option Expiration Grant Employees Shares Price Date 1/5/99 1 25,000 $11.5625 1/5/2004 During the six months ended June 30, 1999, two employees exercised their stock options and purchased 30,000 shares for total proceeds of $263,750. As of June 30, 1999, there were options outstanding to purchase 379,500 shares and 308,500 shares available for grant under the Company's Stock Option Plans. NOTE 7 - SUPPLEMENTAL CASH FLOW INFORMATION Cash paid during the six months ended June 30, 1999 and 1998 for interest was $839,473 and $814,729, respectively. During the six months ended June 30, 1999 and 1998, land development costs of $-0- and $250,000, respectively, were transferred to investment property and equipment and placed in service. During the six months ended June 30, 1999 and 1998, the Company had dividend reinvestments of $812,272 and $947,631, respectively, which required no cash transfers. NOTE 8 - SUBSEQUENT EVENTS On July 28, 1999, the Company entered into a $4,000,000 mortgage and a $2,500,000 mortgage with First Union Bank. These mortgages bear interest at an effective rate of 7.86%. These mortgages mature on August 2, 2004. -7-
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- four manufactured home communities. These manufactured home communities have been generating increased gross revenues and increased operating income. The Company generated $3,404,480 net cash provided by operating activities. The Company received new capital of $812,272 through its Dividend Reinvestment and Stock Purchase Plan (DRIP). The Company repurchased 113,000 shares of its own stock at a cost of $1,108,735. The Company purchased $2,290,441 of Securities Available for Sale. Mortgages Payable increased by $2,847,325 as a result of a new mortgage of $4,000,000 offset by principal repayments. Loans payable increased by $1,576,531 primarily as a result of new loans for the purchase of securities available for sale. MATERIAL CHANGES IN RESULTS OF OPERATIONS Income from community operations increased by $42,305 to $2,391,122 for the quarter ended June 30, 1999 as compared to $2,348,817 for the quarter ended June 30, 1998. Income from community operations increased by $98,100 to $4,749,416 for the six months ended June 30, 1999 as compared to $4,651,316 for the six months ended June 30, 1998. This represents a continuing trend of rising income from community operations. The Company has been raising rental rates by approximately 4 to 5% annually. Rental and related income rose from $4,179,675 for the quarter ended June 30, 1998 to $4,451,646 for the quarter ended June 30, 1999. Rental and related income rose from $8,298,510 for the six months ended June 30, 1998 to $8,773,629 for the six months ended June 30, 1999. This was the result of higher rents. Community operating expenses increased from $1,830,858 for the quarter ended June 30, 1998 to $2,060,524 for the quarter ended June 30, 1999. Community operating expenses increased from $3,647,194 for the six months ended June 30, 1998 to $4,024,213 for the six months ended June 30, 1999. Community operating expenses increased due to an increase in certain expenses associated with filling vacant expansion sites (i.e. advertising, personnel, etc.). General and administrative expenses increased from $363,504 for the quarter ended June 30, 1998 to $441,386 for the quarter ended June 30, 1999. General and Administrative expenses increased from $719,678 for the six months ended June 30, 1998 to $824,099 for the six months ended June 30, 1999. This was primarily due to an increase in personnel. Interest expense increased by $53,309 for the quarter ended June 30, 1999 compared to the quarter ended June 30, 1998 and by $85,344 for the six months ended June 30, 1999 compared to the six months ended June 30, 1998. This was primarily a result of an increase in the average principal balance on borrowings outstanding. The balance outstanding of mortgages payable at June 30, 1999 was $24,258,901 as compared to $21,677,592 at June 30, 1998. -8-
Funds from operations (FFO), defined as net income, excluding gains (or losses) from sales of depreciable assets, plus depreciation amounted to $1,655,447 for the quarter ended June 30, 1999 and $1,656,748 for the quarter ended June 30, 1998. FFO amounted to $3,376,292 for the six months ended June 30, 1999 and $3,309,647 for the six months ended June 30, 1998. 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 increased from $3,283,895 for the six months ended June 30, 1998 to $3,404,480 for the six months ended June 30, 1999. 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. YEAR 2000 The Company is currently in the process of implementing its Year 2000 compliance plan. The Company has assessed all hardware and software for Year 2000 readiness. The Company has developed and is currently implementing renovation plans, including hardware replacement and software upgrades, to ensure all hardware and software is year 2000 compliant. The Company has no significant suppliers and vendors. Renovation and testing are scheduled to be completed by the third quarter of 1999. The Company has developed contingency plans for each of its critical systems, which includes moving many of the Company's operations to a manual system. There can be no assurances given that the Year 2000 compliance plan will be completed successfully by the Year 2000, in which event the Company could incur additional costs to implement its contingency plans. Management does not anticipate that such costs would be significant to the Company. The total costs associated with the Company's Year 2000 plan are anticipated to be less than $20,000. Successful and timely completion of the Year 2000 plan is based on management's best estimates derived from various assumptions of future events, which are inherently uncertain, including the effectiveness of remediation and validation plans, and all vendors and suppliers readiness. -9-
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 May 27, 1999 to elect a Board of Directors for the ensuing year and to approve the selection of independent auditors. 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 - none (b) Reports on Form 8-K - none -10-
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: August 12, 1999 By:/s/Samuel A. Landy Samuel A. Landy, President DATE: August 12, 1999 By:/s/Anna T. Chew Anna T. Chew, Vice President and Chief Financial Officer