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, 1998 ( ) 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, 1998 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 November 6, 1998 was 7,198,073 shares.
UNITED MOBILE HOMES, INC. for the QUARTER ENDED SEPTEMBER 30, 1998 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 for 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
<TABLE> <CAPTION> UNITED MOBILE HOMES, INC. CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 1998 and DECEMBER 31, 1997 September 30, December 31, 1998 1997 - -ASSETS- INVESTMENT PROPERTY AND EQUIPMENT <S> <C> <C> Land $ 6,351,506 $ 6,351,506 Site and Land Improvements 44,559,174 43,927,856 Buildings and Improvements 2,667,816 2,592,125 Rental Homes and Accessories 5,653,622 5,339,857 __________ __________ Total Investment Property 59,232,118 58,211,344 Equipment and Vehicles 2,585,160 2,416,402 __________ __________ Total Investment Property and Equipment 61,817,278 60,627,746 Accumulated Depreciation (24,582,797) (22,918,677) __________ __________ Net Investment Property and Equipment 37,234,481 37,709,069 __________ __________ OTHER ASSETS Cash and Cash Equivalents 110,058 191,319 Securities Available for Sale 5,584,332 3,547,236 Notes and Other Receivables 904,538 678,280 Unamortized Financing Costs 184,603 172,694 Prepaid Expenses -0- 109,415 Land Development Costs 2,936,064 1,191,246 __________ __________ Total Other Assets 9,719,595 5,890,190 __________ __________ TOTAL ASSETS $ 46,954,076 $ 43,599,259 ========== ========== - LIABILITIES AND SHAREHOLDERS' EQUITY - MORTGAGES PAYABLE $ 21,548,840 $ 20,111,023 __________ __________ OTHER LIABILITIES Accounts Payable 119,010 222,474 Loans Payable 117,433 578,973 Accrued Liabilities and Deposits 1,600,542 1,477,855 Tenant Security Deposits 396,959 378,393 __________ __________ Total Other Liabilities 2,233,944 2,657,695 __________ __________ TOTAL LIABILITIES 23,782,784 22,768,718 __________ __________ SHAREHOLDERS' EQUITY Common Stock - $.10 par value per share 10,000,000 shares authorized, 7,198,073 and 6,865,312 issued and Outstanding, respectively 719,807 686,531 Additional Paid-In Capital 23,981,235 20,572,786 Accumulated Other Comprehensive Income ( 80,244) 239,017 Accumulated Deficit ( 1,449,506) ( 667,793) __________ __________ Total Shareholders' Equity 23,171,292 20,830,541 __________ __________ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 46,954,076 $ 43,599,259 ========== ========== -UNAUDITED- See Notes to Consolidated Financial Statements 3 </TABLE>
<TABLE> <CAPTION> UNITED MOBILE HOMES, INC. CONSOLIDATED STATEMENTS OF INCOME For the THREE AND NINE MONTHS ended SEPTEMBER 30, 1998 and 1997 THREE MONTHS NINE MONTHS 9/30/98 9/30/97 9/30/98 9/30/97 <S> <C> <C> <C> <C> Rental and Related Income $4,225,218 $3,862,240 $12,523,728 $11,432,333 Community Operating Expense 2,000,636 1,800,308 5,647,830 5,023,954 _________ _________ __________ __________ Income from Community Operations 2,224,582 2,061,932 6,875,898 6,408,379 General and Administrative 423,958 359,150 1,143,636 1,032,075 Interest Expense 377,608 343,925 1,131,737 1,016,955 Interest Income ( 153,425) ( 90,087) ( 327,533) ( 182,897) Depreciation 591,802 517,171 1,793,537 1,563,256 Other Expenses 29,895 10,500 71,865 31,500 _________ _________ __________ __________ Income before Gains On Sales of Assets 954,744 921,273 3,062,656 2,947,490 Gains (Losses) on Sales Of Assets 687 ( 32,141) 10,615 ( 10,110) _________ _________ __________ __________ Net Income $ 955,431 $ 889,132 $3,073,271 $2,937,380 ========= ========= ========== ========== Net Income Per Share - Basic and Diluted $ .13 .13 .44 .44 ========= ========= ========== ========== Weighted Average Shares - Basic 7,156,058 6,675,037 6,991,239 6,564,615 ========= ========= ========= ========= Diluted 7,158,227 6,741,506 7,016,236 6,631,084 ========= ========= ========= ========= -UNAUDITED- See Notes to Consolidated Financial Statements 4 </TABLE>
<TABLE> <CAPTION> UNITED MOBILE HOMES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS for the NINE MONTHS ended SEPTEMBER 30, 1998 and 1997 1998 1997 CASH FLOWS FROM OPERATING ACTIVITIES: <S> <C> <C> Net Income $ 3,073,271 $ 2,937,380 Non-Cash Adjustments Depreciation 1,793,537 1,563,256 Amortization 71,865 31,500 (Gain) Loss on Sales of Assets ( 10,615) 10,110 Changes in Operating Assets And Liabilities - Notes and Other Receivables ( 226,258) ( 80,309) Prepaid Expenses 109,415 134,387 Accounts Payable ( 103,464) ( 119,063) Accrued Liabilities & Deposits 122,687 ( 139,522) Tenant Security Deposits 18,566 12,213 _________ _________ Net Cash Provided by Operating Activities 4,849,004 4,349,952 _________ _________ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of Investment Property And Equipment (1,211,312) (1,520,077) Proceeds from Sales of Assets 152,978 307,327 Additions to Land Development (1,994,818) (2,266,891) Purchase of Securities Available for Sale (2,356,357) (1,908,574) _________ _________ Net Cash Used by Investing Activities (5,409,509) (5,388,215) _________ _________ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from Mortgages and Loans 3,600,000 500,000 Principal Payments of Mortgages and Loans (2,623,723) ( 291,926) Financing Costs on Debt ( 83,774) -0- Proceeds from Dividend Reinvestment And Stock Purchase Plan 1,870,075 1,773,418 Proceeds from Exercise of Stock Options 165,000 317,250 Dividends Paid (2,448,334) (2,085,421) _________ _________ Net Cash Provided by Financing Activities 479,244 213,321 _________ _________ NET DECREASE IN CASH ( 81,261) ( 824,942) AND CASH EQUIVALENTS CASH & CASH EQUIVALENTS - BEGINNING 191,319 1,195,095 _________ _________ CASH & CASH EQUIVALENTS - ENDING $ 110,058 $ 370,153 ========= ========= -UNAUDITED- See Notes to Consolidated Financial Statements 5 </TABLE>
UNITED MOBILE HOMES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1998 (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, 1998 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, 1997 have been omitted. Effective January 1, 1998, the Company adopted the provisions of Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130). SFAS 130 establishes standards for reporting and display of comprehensive income and its components in a full set of general purpose financial statements. Under SFAS 130, comprehensive income is divided into net income and other comprehensive income. Other comprehensive income includes items previously recorded directly in equity, such as unrealized gains or losses on securities available for sale. Comparative financial statements provided for earlier periods have been reclassified to reflect application of the provisions of SFAS 130. SFAS 130 requires total comprehensive income and its components to be displayed on the face of a financial statement for annual financial statements. For interim financial statements, SFAS 130 requires only total comprehensive income to be reported and allows such disclosure to be presented in the notes to the interim financial statements. Total comprehensive income, including unrealized gains (losses) on securities available for sale, amounted to $668,730 and $2,754,010, for the three and nine months ended September 30, 1998, respectively, and $775,206 and $2,772,529, for the three and nine months ended September 30, 1997, respectively. NOTE 2 - NET INCOME PER SHARE 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 2,169 and 24,997 for the three and nine months ended September 30, 1998, respectively, and 66,469 for both the three and nine months ended September 30, 1997, are included in the diluted weighted average shares outstanding. NOTE 3 - MORTGAGES PAYABLE On April 28, 1998, the Company entered into a $3,600,000 mortgage payable to Summit Bank. The interest rate on this mortgage is fixed at 7.5%. This mortgage loan is due on May 1, 2003. Proceeds of this mortgage were used to retire existing debt and to purchase securities available for sale. 6
NOTE 4 - DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN On September 15, 1998, the Company paid $1,340,697 as a dividend of $.1875 per share to shareholders of record as of August 17, 1998. The total dividends paid for the nine months ended September 30, 1998 amounted to $3,854,984. On September 15, 1998, the Company received $459,019 from the Dividend Reinvestment and Stock Purchase Plan. There were 47,686 new shares issued resulting in 7,198,073 shares outstanding. The total amount received from the Dividend Reinvestment Plan for the nine months ended September 30, 1998 amounted to $3,276,725. Effective June 24, 1998, the Company amended the Dividend Reinvestment and Stock Purchase Plan. Shareholders may no longer purchase additional shares by making optional cash payments. The dividend reinvestment feature of the Plan remains unchanged. NOTE 5 - EMPLOYEE STOCK OPTIONS During the nine months ended September 30, 1998, the following stock options were granted: Date of Number of Number of Option Expiration Grant Employees Shares Price Date 1/8/98 1 25,000 $12.75 1/8/2003 8/5/98 8 33,000 $10.00 8/5/2003 During the nine months ended September 30, 1998, four employees exercised their stock options and purchased 24,000 shares for total proceeds of $165,000. Three options for 11,000 shares expired and were added back to the "pool"of shares available for grant. As of September 30, 1998, there were options outstanding to purchase 359,500 shares and 358,000 shares available for grant under the Company's Stock Option Plans. NOTE 6 - SUPPLEMENTAL CASH FLOW INFORMATION Cash paid during the nine months ended September 30, 1998 and 1997 for interest was $1,239,937 and $1,016,955, respectively. During the nine months ended September 30, 1998 and 1997, land development costs of $250,000 and $572,648, respectively, were transferred to investment property and equipment and placed in service. During the nine months ended September 30, 1998 and 1997, the Company had dividend reinvestments of $1,406,650 and $1,352,245, respectively, which required no cash transfers. 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 $4,849,004 net cash provided by operating activities. The Company received new capital of $3,276,725 through its Dividend Reinvestment and Stock Purchase Plan (DRIP). The Company purchased $2,356,357 of Securities Available for Sale. Mortgages Payable increased by $1,437,817 as a result of a new mortgage of $3,600,000 offset by principal repayments. Loans payable decreased by $461,540 as a result of principal repayments. MATERIAL CHANGES IN RESULTS OF OPERATIONS Income from community operations increased by $162,650 to $2,224,582 for the quarter ended September 30, 1998 as compared to $2,061,932 for the quarter ended September 30, 1997. Income from community operations increased by $467,519 to $6,875,898 for the nine months ended September 30, 1998 as compared to $6,408,379 for the nine months ended September 30, 1997. This represents a continuing trend of rising income from community operations. The Company has been raising rental rates by approximately 5% annually. Rental and related income rose from $3,862,240 for the quarter ended September 30, 1997 to $4,225,218 for the quarter ended September 30, 1998. Rental and related income rose from $11,432,333 for the nine months ended September 30, 1997 to $12,523,728 for the nine months ended September 30, 1998. This was the result of higher rents, an increase in occupancy, and the purchase of Waterfalls Village during the fourth quarter of 1997. Community operating expenses increased from $1,800,308 for the quarter ended September 30, 1997 to $2,000,636 for the quarter ended September 30, 1998. Community operating expenses increased from $5,023,954 for the nine months ended September 30, 1997 to $5,647,830 for the nine months ended September 30, 1998. Community operating expenses increased due to the purchase of Waterfalls Village and an increase in certain expenses associated with filling vacant expansion sites (i.e. advertising, personnel, etc.). Interest expense increased by $33,683 for the quarter ended September 30, 1998 compared to the quarter ended September 30, 1997 and by $114,782 for the nine months ended September 30, 1998 compared to the nine months ended September 30, 1997. This was primarily a result of an increase in the average principal balance on borrowings outstanding. The balance outstanding of mortgages payable at September 30, 1998 was $21,548,840 as compared to $17,059,104 at September 30, 1997. 8
Material Changes in Results of Operations (Continued) Funds from operations (FFO), defined as net income, excluding gains (or losses) from sales of depreciable assets, plus depreciation increased from $1,438,444 for the quarter ended September 30, 1997 to $1,546,546 for the quarter ended September 30, 1998 and from $4,510,746 for the nine months ended September 30, 1997 to $4,856,193 for the nine months ended September 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 $4,349,952 for the nine months ended September 30, 1997 to $4,849,004 for the nine months ended September 30, 1998. The Company believes that funds generated from operations together with the financing and refinancing of its properties will be sufficient to meet its need 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 during the first half 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 immaterial. 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 inherenty 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 - 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 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: November 11, 1998 By:/s/ Samuel A. Landy Samuel A. Landy, President DATE: November 11, 1998 By:/s/ Anna T. Chew Anna T. Chew, Vice President and Chief Financial Officer 11