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, 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 June 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 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 August 1, 2002 was 7,626,926 shares.
UNITED MOBILE HOMES, INC. for the QUARTER ENDED JUNE 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 6-7 Item 2 - Management Discussion and Analysis of Financial Conditions and Results of 8-9 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 10 SIGNATURES 11 2
<TABLE> <CAPTION> UNITED MOBILE HOMES, INC CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2002 AND DECEMBER 31, 2001 <S> <C> <C> -ASSETS- June 30, December 31, 2002 2001 INVESTMENT PROPERTY AND EQUIPMENT Land $ 7,212,035 7,212,035 Site and Land Improvements 54,916,370 54,640,298 Buildings and Improvements 2,745,194 2,745,194 Rental Homes and Accessories 8,643,585 8,432,068 __________ __________ Total Investment Property 73,517,184 73,029,595 Equipment and Vehicles 3,840,954 3,611,353 __________ __________ Total Investment Property and Equipment 77,358,138 76,640,948 Accumulated Depreciation (33,666,130) (32,349,006) __________ __________ Net Investment Property and Equipment 43,692,008 44,291,942 __________ __________ OTHER ASSETS Cash and Cash Equivalents 1,222,422 1,567,831 Securities Available for Sale 30,052,232 25,917,748 Inventory of Manufactured Homes 2,736,743 2,782,665 Notes and Other Receivables 4,370,617 3,291,355 Unamortized Financing Costs 451,076 467,107 Prepaid Expenses 439,365 113,680 Land Development Costs 2,246,896 1,902,516 __________ __________ Total Other Assets 41,519,351 36,042,902 __________ __________ TOTAL ASSETS $85,211,359 $80,334,844 ========== ========== - LIABILITIES AND SHAREHOLDERS' EQUITY - LIABILITIES: MORTGAGES PAYABLE $44,943,733 $38,652,025 OTHER LIABILITIES __________ __________ Accounts Payable 430,689 836,588 Loans Payable 7,096,632 10,692,683 Accrued Liabilities and Deposits 2,210,737 1,711,232 Tenant Security Deposits 496,305 477,782 __________ __________ Total Other Liabilities 10,234,363 13,718,285 __________ __________ Total Liabilities 55,178,096 52,370,310 __________ __________ SHAREHOLDERS' EQUITY: Common Stock - $.10 par value per share, 10,000,000 shares authorized, 7,981,326 and 7,888,632 shares issued and 7,624,926 and 7,542,332 shares outstanding as of June 30, 2002 and December 31, 2001, respectively 798,133 788,863 Additional Paid-In Capital 28,491,909 27,409,361 Accumulated Other Comprehensive Income 4,734,827 3,541,001 Accumulated Deficit (603,759) (667,793) Treasury Stock at Cost (356,400 and 346,300 shares at June 30, 2002 and December 31, 2001, respectively) (3,238,347) (3,106,898) Notes Receivable from Officers (149,500) -0- __________ __________ Total Shareholders' Equity 30,033,263 27,964,534 __________ __________ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $85,211,359 $80,334,844 ========== ========== </TABLE> -UNAUDITED- See Accompanying 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, 2002 AND 2001 <S> <C> <C> <C> <C> THREE MONTHS SIX MONTHS 6/30/02 6/30/01 6/30/02 6/30/01 REVENUES: Rental and Related Income $5,007,991 $4,784,766 $9,994,979 $9,550,754 Sales of Manufactured Homes 1,563,144 1,714,722 2,476,662 1,714,722 Interest and Dividend Income 718,962 467,836 1,337,077 991,475 Gain on Securities Available for Sales Transactions, net 169,919 368,948 702,738 330,774 Other Income 30,068 40,247 47,985 40,247 _________ _________ __________ __________ Total Revenues 7,490,084 7,376,519 14,559,441 12,627,972 _________ _________ __________ __________ EXPENSES: Community Operating Expenses 2,335,933 2,239,563 4,530,175 4,228,281 Cost of Sales of Manufactured Homes 1,269,464 1,445,610 2,080,214 1,445,610 Selling Expenses 283,541 197,048 460,483 197,048 General and Administrative Expenses 535,126 493,645 1,071,524 1,032,200 Interest Expense 816,603 698,076 1,590,506 1,350,624 Depreciation Expense 698,020 659,167 1,400,025 1,325,606 Amortization of Financing Costs 26,700 19,500 53,400 39,000 _________ _________ __________ __________ Total Expenses 5,965,387 5,752,609 11,186,327 9,618,369 _________ _________ __________ __________ Income before Gain on Sales of Investment Property and Equipment 1,524,697 1,623,910 3,373,114 3,009,603 (Loss) Gain on Sales of Investment Property and Equipment (4,352) (9,336) (1,025) 981 _________ _________ __________ __________ Net Income $1,520,345 $1,614,574 $3,372,089 $3,010,584 ========= ========= ========= ========= Net Income per Share - Basic $ 0.20 $ 0.22 $ 0.45 $ 0.41 ========= ========= ========= ========= Diluted $ 0.20 $ 0.21 $ 0.44 $ 0.40 ========= ========= ========= ========= Weighted Average Shares Outstanding - Basic 7,590,344 7,440,720 7,569,767 7,420,800 ========= ========= ========= ========= Diluted 7,682,489 7,475,853 7,657,560 7,458,535 ========= ========= ========= ========= </TABLE> -UNAUDITED- See Accompanying Notes to Consolidated Financial Statements 4
<TABLE> <CAPTION> UNITED MOBILE HOMES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001 <S> <C> <C> 2002 2001 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $3,372,089 $3,010,584 Non-Cash Adjustments: Depreciation 1,400,025 1,325,606 Amortization 53,400 39,000 Gain on Securities Available for Sale Transactions (702,738) (330,774) Loss (Gain) on Sales of Investment Property and Equipment 1,025 (981) Changes in Operating Assets and Liabilities: Inventory of Manufactured Homes 45,922 (2,164,994) Notes and Other Receivables (1,079,262) (432,348) Prepaid Expenses (325,685) 13,965 Accounts Payable (405,899) (50,943) Accrued Liabilities and Deposits 499,505 231,311 Tenant Security Deposits 18,523 6,901 _________ _________ Net Cash Provided by Operating Activities 2,876,905 1,647,327 _________ _________ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of Investment Property And Equipment (952,830) (1,166,281) Proceeds from Sales of Assets 151,714 35,953 Additions to Land Development (344,380) (351,638) Purchase of Securities Available for Sale (5,044,831) (5,331,992) Proceeds from Sales of Securities Available for Sale 2,806,911 3,125,688 _________ _________ Net Cash Used by Investing Activities (3,383,416) (3,688,270) _________ _________ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from Mortgages and Loans 6,862,500 3,502,050 Principal Payments of Mortgages and Loans (4,166,843) (456,058) Financing Costs on Debt (37,369) -0- Proceeds from Exercise of Stock Options 117,050 107,500 Dividends Paid (2,482,787) (1,972,898) Purchase of Treasury Stock (131,449) (296,731) _________ _________ Net Cash Provided by Financing Activities 161,102 883,863 _________ _________ NET DECREASE IN CASH AND CASH EQUIVALENTS (345,409) (1,157,080) CASH & CASH EQUIVALENTS - BEGINNING 1,567,831 1,399,259 _________ _________ CASH & CASH EQUIVALENTS - ENDING $1,222,422 $242,179 ========= ========= </TABLE> -UNAUDITED- See Accompanying Notes to Consolidated Financial Statements 5
UNITED MOBILE HOMES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 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 June 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. 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 amount of 92,145 and 87,793 shares for the three and six months ended June 30, 2002, respectively, and 35,133 and 37,735 for the three and six months ended June 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 $2,232,710 and $4,565,915 for the three and six months ended June 30, 2002, respectively, and $2,844,917 and $6,374,718 for the three and six months ended June 30, 2001, respectively. NOTE 3 - MORTGAGES PAYABLE 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. 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. 6
NOTE 4 - DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN On June 17, 2002, the Company paid $1,705,309 as a dividend of $.215 per share to shareholders of record as of May 15, 2002. The total dividends paid for the six months ended June 30, 2002 amounted to $3,308,055. On June 17, 2002, the Company received $414,716 from the Dividend Reinvestment and Stock Purchase Plan. There were 33,676 new shares issued under the Plan. The total amount received from the Dividend Reinvestment and Stock Purchase Plan for the six months ended June 30, 2002 amounted to $825,268. NOTE 5 - TREASURY STOCK During the six months ended June 30, 2002, the Company purchased 10,100 shares of its own stock for a total cost of $131,449. 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, 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 six months ended June 30, 2002, seven employees exercised their stock options and purchased 23,700 shares for a total of $266,550. 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. NOTE 7 - SUPPLEMENTAL CASH FLOW INFORMATION Cash paid during the six months ended June 30, 2002 and 2001 for interest was $1,656,106 and $1,430,924, respectively. Interest cost capitalized to Land Development was $65,600 and $80,300 for the six months ended June 30, 2002 and 2001, respectively. During the six months ended June 30, 2002 and 2001, the Company had dividend reinvestments of $825,268 and $936,276, respectively, which required no cash transfers. During the six months ended June 30, 2002, two officers exercised their stock options for 13,000 shares through the issuance of $149,500 of notes receivable. 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- 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 $2,876,905 net cash provided by operating activities. The Company received new capital of $825,268 through its Dividend Reinvestment and Stock Purchase Plan (DRIP). The Company purchased $5,044,831 of securities of other real estate investment trusts. The Company had a decrease in inventory of manufactured homes of $45,922. 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 $6,291,708 as a result of new mortgages of $6,862,500 partially offset by principal repayments of $570,792. MATERIAL CHANGES IN RESULTS OF OPERATIONS Rental and related income increased from $4,784,766 for the quarter ended June 30, 2001 to $5,007,991 for the quarter ended June 30, 2002. Rental and related income increased from $9,550,754 for the six months ended June 30, 2001 to $9,994,979 for the six months ended June 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. Sales of manufactured homes amounted to $1,563,144 and $2,476,662 for the quarter and six months, ended June 30, 2002, respectively, as compared to $1,714,722 for the quarter and six months ended June 30, 2001. Effective April 1, 2001, the Company began to conduct manufactured home sales in its communities. Interest and dividend income rose from $467,836 for the quarter ended June 30, 2001 to $718,962 for the quarter ended June 30, 2002. Interest and dividend income rose from $991,475 for the six months ended June 30, 2001 to $1,377,077 for the six months ended June 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 $169,919 and $702,738 for the quarter and six months ended June 30, 2002, respectively, as compared to $368,948 and $330,774 for the quarter and six months ended June 30, 2001, respectively. Included in the Gain on securities available for sale transactions for the quarter and six months ended June 30, 2001 was a writedown of $31,130 and $132,949, respectively, of Securities available for sale which were considered other than temporarily impaired. Other income amounted to $30,068 and $47,985 for the quarter and six months ended June 30, 2002, respectively, as compared to $40,247 for the quarter and six months ended June 30, 2001. This represents miscellaneous income generated by S&F. Community operating expenses increased from $2,239,563 for the quarter ended June 30, 2001 to $2,335,933 for the quarter ended June 30, 2002. Community operating expenses increased from $4,228,281 for the six months ended June 30, 2001 to $4,530,175 for the six months ended June 30, 2002. This was primarily due to the acquisition of a new community and increased insurance expense and personnel costs. Cost of sales of manufactured homes amounted to $1,269,464 and $2,080,214 for the quarter and six months ended June 30, 2002, respectively, as compared to $1,445,610 for the quarter and six months ended June 30, 2001. 8
This change is directly attributable to the change in sales. Selling expenses amounted to $283,541 and $460,483 for the quarter and six months ended June 30, 2002, respectively, as compared to $197,048 for the quarter and six months ended June 30, 2001. This increase is due to additional personnel costs and advertising. General and administrative expenses remained relatively stable for the quarter and six months ended June 30, 2002 as compared to the quarter and six months ended June 30, 2001. Interest expense increased from $698,076 for the quarter ended June 30, 2001 to $816,603 for the quarter ended June 30, 2002. Interest expense increased from $1,350,624 for the six months ended June 30, 2001 to $1,590,506 for the six months ended June 30, 2002. This was primarily due to increased borrowings. Depreciation expense increased from $659,167 for the quarter ended June 30, 2001 to $698,020 for the quarter ended June 30, 2002. Depreciation expense increased from $1,325,606 for the six months ended June 30, 2001 to $1,400,025 for the six months ended June 30, 2002. This was primarily due to the acquisition of a new community. Amortization of financing costs remained relatively stable for the quarter and six months ended June 30, 2002 as compared to the quarter and six months ended June 30, 2001. Funds from operations (FFO), defined as net income, excluding gains (or losses) from sales of depreciable assets, plus depreciation remained relatively stable for the quarter ended June 30, 2002 as compared to the quarter ended June 30, 2001. FFO increased from $4,335,209 for the six months ended June 30, 2001 to $4,773,139 for the six months ended June 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. LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operating activities increased from $1,647,327 for the six months ended June 30, 2001 to $2,876,905 for the six months ended June 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. 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 June 6, 2002 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 - 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 99.2 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 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 2, 2002 By /s/ Samuel A. Landy, President DATE: August 2, 2002 By /s/ Anna T. Chew, Vice President and Chief Financial Officer 11