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.
<PAGE>
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
<PAGE>
<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>
<PAGE>
<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>
<PAGE>
<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>
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF UNITED MOBILE HOMES, INC. AS OF AND FOR THE PERIOD
ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 110,058
<SECURITIES> 5,584,332
<RECEIVABLES> 1,002,315
<ALLOWANCES> 97,777
<INVENTORY> 0
<CURRENT-ASSETS> 6,598,928
<PP&E> 61,817,278
<DEPRECIATION> 24,582,797
<TOTAL-ASSETS> 46,954,076
<CURRENT-LIABILITIES> 2,233,944
<BONDS> 21,548,840
<COMMON> 719,807
0
0
<OTHER-SE> 22,451,485
<TOTAL-LIABILITY-AND-EQUITY> 46,954,076
<SALES> 0
<TOTAL-REVENUES> 12,861,876
<CGS> 0
<TOTAL-COSTS> 5,647,830
<OTHER-EXPENSES> 3,009,038
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,131,737
<INCOME-PRETAX> 3,073,271
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,073,271
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,073,271
<EPS-PRIMARY> .44
<EPS-DILUTED> .44
</TABLE>
