Form 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period _____________ to _____________
Commission File Number 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)
3499 Route 9, Suite 3C, Freehold, New Jersey 07728
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (732) 577-9997
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $.10 par value
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
Indicate by check if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K X .
Based upon the assumption that directors and executive officers
of the registrant are not affiliates of the registrant, the
aggregate market value of the voting stock of the registrant held
by nonaffiliates of the registrant at March 14, 2003 was
$107,771,225. Presuming that such directors and executive
officers are affiliates of the registrant, the aggregate market
value of the voting stock of the registrant held by nonaffiliates
of the registrant at March 14, 2003 was $80,349,564.
The number of shares outstanding of issuer's common stock as of
March 14, 2003 was 7,692,450 shares.
Documents Incorporated by Reference:
- Exhibits incorporated by reference are listed in Part IV,
Item (a)(3).
PART I
ITEM I - BUSINESS
General Development of Business
United Mobile Homes, Inc. (the Company) owns and operates
twenty-five manufactured home communities containing 5,979 sites.
The communities are located in New Jersey, New York, Ohio,
Pennsylvania and Tennessee.
The Company was incorporated in the State of New Jersey in
1968. Its executive offices are located at 3499 Route 9, Suite
3C, Freehold, New Jersey 07728. Its telephone number is (732)
577-9997.
Effective January 1, 1992, the Company elected to be taxed
as a real estate investment trust (REIT) under Sections 856-858
of the Internal Revenue Code. The company received from the
Internal Revenue Service a favorable revenue ruling that it
qualified as a REIT. The Company will not be taxed on the
portion of its income which is distributed to shareholders,
provided it distributes at least 90% of its taxable income, has
at least 75% of its assets in real estate investments and meets
certain other requirements for qualification as a REIT.
Background
Monmouth Capital Corporation, a publicly-owned Small
Business Investment Corporation, that had owned approximately 66%
of the Company's stock, spun off to its shareholders in a
registered distribution three shares of United Mobile Homes, Inc.
for each share of Monmouth Capital Corporation. The Company in
1984 and 1985 issued additional shares through rights offerings.
The Company has been in operation for thirty-four years, the
last seventeen of which have been as a publicly-owned
corporation.
Narrative Description of Business
The Company's primary business is the ownership and
operation of manufactured home communities - leasing manufactured
home spaces on a month-to-month basis to private manufactured
home owners. The Company also leases homes to residents.
A manufactured home community is designed to accommodate
detached, single family manufactured housing units, which are
produced off-site by manufacturers and delivered by truck to the
site. Such dwellings, referred to as manufactured homes (which
should be distinguished from travel trailers), are manufactured
in a variety of styles and sizes. Manufactured homes, once
located, are rarely transported to another site; typically, a
manufactured home remains on site and is sold by its owner to a
subsequent occupant. This transaction is commonly handled
through a broker in the same manner that a more traditional
single-family residence is sold. Each owner of a manufactured
home leases the site on which the home is located from the
Company.
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ITEM I - BUSINESS, (CONT'D.)
Manufactured homes are being accepted by the public as a
viable and economically attractive alternative to common stick-
built single-family housing. During the past five years,
approximately one-fifth of all single-family homes built and sold
in the nation have been manufactured homes.
The size of a modern manufactured home community is limited,
as are other residential communities, by factors such as
geography, topography, and funds available for development.
Generally, modern manufactured home communities contain buildings
for recreation, green areas, and other common area facilities,
which, as distinguished from resident owned manufactured homes,
are the property of the community owner. In addition to such
general improvements, certain manufactured home communities
include recreational improvements such as swimming pools, tennis
courts and playgrounds. Municipal water and sewer services are
available to some manufactured home communities, while other
communities supply these facilities on site. The housing
provided by the manufactured home community, therefore, includes
not only the manufactured dwelling unit (owned by the resident),
but also the physical community framework and services provided
by the manufactured home community.
The community manager interviews prospective residents,
ensures compliance with community regulations, maintains public
areas and community facilities and is responsible for the overall
appearance of the community. The manufactured home community,
once fully occupied, tends to achieve a stable rate of occupancy.
The cost and effort in moving a home once it is located in a
community encourages the owner of the manufactured home to resell
the manufactured home rather than to remove it from the
community. This ability to produce relatively predictable
income, together with the location of the community, its
condition and its appearance, are factors in the long-term
appreciation of the community.
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.
Investment and Other Policies of the Company
The Company may invest in improved and unimproved real
property and may develop unimproved real property. Such
properties may be located throughout the United States. In the
past, it has concentrated on the northeast.
The Company has no restrictions on how it finances new
manufactured home communities. It may finance communities by
purchase money mortgages or other financing, including first
liens, wraparound mortgages or subordinated indebtedness. In
connection with its ongoing activities, the Company may issue
notes, mortgages or other senior securities. The Company intends
to use both secured and unsecured lines of credit.
The Company may issue securities for property, however, this
has not occurred to date, and it may repurchase or reacquire its
shares from time to time if, in the opinion of the Board of
Directors, such acquisition is advantageous to the Company.
During 2002, the Company purchased 46,000 shares of its own stock
at a total cost of $603,024.
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ITEM I - BUSINESS, (CONT'D.)
The Company also invests in both debt and equity securities
of other REITs. The Company from time to time may purchase these
securities on margin when the interest and dividend yields exceed
the cost of funds. At December 31, 2002 and 2001, the Company
had $32,784,968 and $25,917,748, respectively, of securities
available for sale. Included in these securities are Preferred
Stock and Debt securities of $18,012,877 and $2,297,125,
respectively, at December 31, 2002 and $15,219,657 and
$1,452,413, respectively, at December 31, 2001. The unrealized
gain on securities available for sale at December 31, 2002 and
2001 amounted to $3,988,429 and $3,541,001, respectively.
Property Maintenance and Improvement Policies
It is the policy of the Company to properly maintain,
modernize, expand and make improvements to its properties when
required. The Company anticipates that renovation expenditures
with respect to its present properties during 2003 will be
consistent with 2002 expenditures. It is the policy of the
Company to maintain adequate insurance coverage on all of its
properties; and, in the opinion of the Company, all of its
properties are adequately insured.
Risk Factors
Real Estate Industry and Competition Risks
The Company's investments will be subject to the risks
generally associated with the ownership of real property,
including the uncertainty of cash flow to meet fixed obligations,
adverse changes in national economic conditions, changes in the
relative popularity (and thus the relative price) of the
Company's real estate investments when compared to other
investments, adverse local market conditions due to changes in
general or local economic conditions or neighborhood values,
changes in interest rates and in the availability of mortgage
funds, costs and terms of mortgage funds, the financial
conditions of residents and sellers of properties, changes in
real estate tax rates and other operating expenses (including
corrections of potential environmental issues as well as more
stringent governmental regulations regarding the environment),
governmental rules and fiscal policies including possible
proposals for rent controls, as well as expenses resulting from
acts of God, uninsured losses and other factors which are beyond
the control of the Company. The Company's investments are
primarily in rental properties and are subject to the risk or
inability to attract or retain residents with a consequent
decline in rental income as a result of adverse changes in local
real estate markets or other factors.
The Company will be competing for manufactured home
community investments with numerous other real estate entities,
such as individuals, corporations, REITs and other enterprises
engaged in real estate activities, possibly including certain
affiliates of the Company. In many cases, the competing concerns
may be larger and better financed than the Company, making it
difficult for the Company to secure new manufactured home
community investments. Competition among private and
institutional purchasers of manufactured home community
investments has increased substantially in recent years, with
resulting increases in the purchase price paid for manufactured
home communities and consequent higher fixed costs.
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ITEM I - BUSINESS, (CONT'D.)
Governmental Regulations
Local zoning and use laws, environmental statutes and other
governmental requirements may restrict expansion, rehabilitation
and reconstruction activities. These regulations may prevent the
Company from taking advantage of economic opportunities.
Legislation such as the Americans with Disabilities Act may
require the Company to modify its properties. Future legislation
may impose additional requirements. No prediction can be made as
to what requirements may be enacted or what changes may be
implemented to existing legislation.
Rent control affects only two of the Company's manufactured
home communities which are in New Jersey and has resulted in a
slower growth of earnings from these properties.
Environmental Liability Risks
Current and former real estate owners and operators may be
required by law to investigate and clean up hazardous substances
released at the properties they own or operate or have owned or
operated. They may be liable to the government or to third
parties for property damage, investigation costs and cleanup
costs. Contamination may adversely affect the owner's ability to
sell or lease real estate or to borrow using the real estate as
collateral. There is no way of determining at this time the
magnitude of any potential liability to which the Company may be
subject arising out of unknown environmental conditions or
violations with respect to the properties it owns. Environmental
laws today can impose liability on a previous owner or operator
of a property that owned or operated the property at a time when
hazardous or toxic substances were disposed of, or released from,
the property. A conveyance of the property, therefore, does not
relieve the owner or operator from liability. The Company is not
aware of any environmental liabilities relating to its properties
which would have a material adverse effect on its business,
assets, or results of operations. However, no assurance can be
given that environmental liabilities will not arise in the
future.
The Company owns and operates 11 manufactured home
communities which either have their own wastewater treatment
facility, water distribution system, or both. At these
locations, the Company is subject to compliance of monthly,
quarterly and yearly testing for contaminants as outlined by the
individual state's Department of Environmental Protection
Agencies.
Currently, the Company is not subject to radon or asbestos
monitoring requirements.
Insurance Considerations
The Company generally maintains insurance policies related to
its business, including casualty, general liability and other
policies covering business operations, employees and assets. The
Company may be required to bear all losses that are not
adequately covered by insurance. Although management believes
that the Company's insurance programs are adequate, no assurance
can be given that the Company will not incur losses in excess of
its insurance coverage, or that the Company will be able to
obtain insurance in the future at acceptable levels and
reasonable cost.
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ITEM I - BUSINESS, (CONT'D.)
Financing Risks
The Company finances a portion of its investments through
debt. This debt creates risks, including a) rising interest
rates on floating rate debt; b) failure to repay or refinance
existing debt as it matures, which may result in forced
disposition of assets on disadvantageous terms; c) refinancing
terms less favorable than the terms of the existing debt; and d)
failure to meet required payments of principal and/or interest.
Amendment of Business Policies
The Board of Directors determines the growth, investment,
financing, capitalization, borrowing, REIT status, operating and
distribution policies. Although the Board of Directors has no
present intention to amend or revise any of these policies, these
policies may be amended or revised without notice to
shareholders. Accordingly, shareholders may not have control
over changes in Company policies.
Market Perception of Common Stock
The market value of the Company's common stock may be based
primarily upon the market's perception of the Company's growth
potential and current and future cash dividends, and may be
secondarily based upon the real estate market value of the
Company's underlying assets. The market price of the Company's
common stock is influenced by the dividend on the Company's
common stock relative to market interest rates. Rising interest
rates may lead potential buyers of the Company's common stock to
expect a higher dividend rate, which would adversely affect the
market price of the Company's common stock. In addition, rising
interest rates would result in increased expense, thereby
adversely affecting cash flow and the Company's ability to
service the Company's indebtedness and pay dividends.
Qualification as a REIT
The Company intends to qualify as a REIT. If it fails to do
so, it will not be allowed to deduct distributions to
shareholders in computing taxable income and will be subject to
Federal and state income taxes, including any applicable
alternative minimum tax, at regular corporate rates. In
addition, the Company may be barred from qualification as a REIT
for the four years following disqualification. The additional
tax incurred at regular corporate rates would reduce
significantly the cash flow available for distribution to
shareholders and for debt service.
Furthermore, the Company would no longer be required to make
any distributions to shareholders as a condition to REIT
qualification. Any distributions to shareholders that otherwise
would have been subject to tax as a capital gain dividend would
be taxable as ordinary income to the extent of the Company's
current and accumulated earnings and profits. Corporate
distributees, however, may be eligible for the dividends received
deduction on the distributions, subject to limitations under the
Internal Revenue Code.
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ITEM I - BUSINESS, (CONT'D.)
To qualify as a REIT, the Company must comply with certain
highly technical and complex requirements. Management cannot be
certain that the Company has complied with these requirements
since there are few judicial and administrative interpretations
of these provisions. In addition, facts and circumstances that
may be beyond the Company's control may affect the Company's
ability to qualify as a REIT. No assurance can be given that new
legislation, regulations, administrative interpretations or court
decisions will not change the tax laws significantly with respect
to qualification as a REIT or with respect to the Federal Income
tax consequences of qualification. The company intends to
qualify as a REIT. However, no assurance can be given that the
Company qualifies as a REIT or will remain qualified as a REIT.
Notwithstanding the Company's status as a REIT, the Company
is subject to various Federal, state and local taxes on income
and property. The Company will be taxed at regular corporate
rates on any undistributed taxable income, including
undistributed net capital gains, provided, however, that properly
designated undistributed capital gains will effectively avoid
taxation at the stockholder level. The Company may also have to
pay some state income or franchise taxes because not all states
treat REITS in the same manner as they are treated for Federal
income tax purposes.
Number of Employees
On March 14, 2003, the Company had approximately 100
employees, including Officers. During the year, the Company
hires approximately 20 part-time and full-time temporary
employees as lifeguards, grounds keepers and for emergency
repairs.
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ITEM 2 - PROPERTIES
United Mobile Homes, Inc. is engaged in the ownership and
operation of manufactured home communities located in New Jersey,
New York, Ohio, Pennsylvania and Tennessee. The Company owns
twenty-five manufactured home communities containing 5,979 sites.
The following is a brief description of the properties owned by
the Company:
2002 Current
Number of Average Rent Per
Name of Community Sites Occupancy Month Per Site
_____ _________ ______________
Allentown 414 84% $257
4912 Raleigh-Millington Road
Memphis, TN 38128
Brookview Village 133 81% $310
Route 9N
Greenfield Center, NY 12833
Cedarcrest 283 99% $385
1976 North East Avenue
Vineland, NJ 08360
Cranberry Village 201 90% $361
201 North Court
Cranberry Township, PA
16066
Cross Keys Village 133 91% $243
Old Sixth Avenue Road, RD #1
Duncansville, PA 16635
D & R Village 244 95% $346
Route 146, RD 13
Clifton Park, NY 12065
Fairview Manor 276 87% $375
2110 Mays Landing Road
Millville, NJ 08332
Forest Park Village 252 90% $312
724 Slate Avenue
Cranberry Township, PA 16066
Heather Highlands 457 65% $235
109 S. Main Street
Pittston, PA 18640
Highland Estates 269 92% $371
60 Old Route 22
Kutztown, PA 19530
Kinnebrook 212 90% $370
201 Route 17B
Monticello, NY 12701
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2002 Current
Number of Average Rent Per
Name of Community Sites Occupancy Month Per Site
_________ _________ ______________
Lake Sherman Village 210 96% $288
7227 Beth Avenue, SW
Navarre, OH 44662
Laurel Woods 220 73% $200
1943 St. Joseph Street
Cresson, PA 16630
Memphis Mobile City 168 83% $234
3894 N. Thomas Street
Memphis, TN 38127
Oxford Village 224 99% $406
2 Dolinger Drive
West Grove, PA 19390
Pine Ridge Village 137 92% $344
147 Amy Drive
Carlisle, PA 17013
Pine Valley Estates 218 80% $240
700 Pine Valley Estates
Apollo, PA 15613
Port Royal Village 427 78% $267
400 Patterson Lane
Belle Vernon, PA 15012
River Valley Estates 214 94% $217
2066 Victory Road
Marion, OH 43302
Sandy Valley Estates 364 95% $263
801 First, Route #2
Magnolia, OH 44643
Southwind Village 250 97% $275
435 E. Veterans Highway
Jackson, NJ 08527
Spreading Oaks Village 153 93% $192
7140-29 Selby Road
Athens, OH 45701
Waterfalls Village 202 98% $344
3450 Howard Road
Hamburg, NY 14075
Woodlawn Village 157 98% $475
Route 35
Eatontown, NJ 07724
Wood Valley 161 96% $218
1493 N. Whetstone River Road
Caledonia, OH 43314
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ITEM 2 - PROPERTIES, (CONT'D.)
Occupancy rates are very stable with little year-to-year
changes once the community is filled (generally 90% or greater
occupancy). It is the Company's experience that, once a home is
set up in the community, it is seldom moved. The home if sold,
is sold on-site to a new owner.
Residents generally rent on a month-to-month basis. Some
residents have one-year leases. Southwind Village and Woodlawn
Village (both in New Jersey) are the only communities subject to
local rent control laws.
There are 17 sites at Sandy Valley which are under a consent
order with the Federal Government. This order provides that, as
these sites become vacant, they cannot be reused. As of December
31, 2002, all of these sites were vacant. The restrictions on
use were known at the time of purchase, and the item is not
material to the operation of Sandy Valley Estates.
In connection with the operation of its 5,979 sites, the
Company operates approximately 490 rental units. These are homes
owned by the Company and rented to residents. The Company
engages in the rental of manufactured homes primarily in areas
where the communities have existing vacancies. The rental homes
produce income on both the home and for the site which might
otherwise be non-income producing. The Company sells the older
rental homes when the opportunity arises.
The Company has approximately 800 sites in various stages of
engineering/construction. Due to the difficulties involved in
the approval and construction process, it is difficult to predict
the number of sites which will be completed in a given year.
Significant Properties
The Company operates approximately $75,000,000 (at original
cost) in manufactured home properties. These consist of 25
separate manufactured home communities and related equipment and
improvements. There are 5,979 sites in the 25 communities. No
one community constitutes more than 10% of the total assets of
the Company. Port Royal Village with 427 sites, Sandy Valley
Estates with 364 sites, Cedarcrest with 283 sites, Fairview Manor
with 276 sites, Highland Estates with 269 sites, Allentown with
414 sites and Heather Highlands with 457 sites are the larger
properties. Heather Highlands historically has an average of 65%
to 70% occupancy. The property continues to produce positive
cash flow.
Mortgages on Properties
The Company has mortgages on various properties. The
maturity dates of these mortgages range from the year 2003 to
2012. Interest varies from fixed rates of 4.625% to 7.86%. The
aggregate balances of these mortgages total $43,321,884 at
December 31, 2002. (For additional information, see Part IV,
Item 14(a)(1)(vi), Note 5 of the Notes to Consolidated Financial
Statements - Notes and Mortgages Payable).
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ITEM 3 - LEGAL PROCEEDINGS
Legal proceedings are incorporated herein by reference and
filed as Part IV, Item 14(a)(1)(vi), Note 13 of the Notes to
Consolidated Financial Statements - Legal Matters.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of 2002
to a vote of security holders through the solicitation of proxies
or otherwise.
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PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's shares are traded on the American Stock
Exchange (symbol UMH). The per share range of high and low
quotes for the Company's stock for each quarterly period is as
follows:
2002 2001 2000
HIGH LOW HIGH LOW HIGH LOW
First Quarter 12.50 11.77 12.75 9.63 8-7/8 7
Second Quarter 13.85 12.15 12.35 10.65 8-1/2 7-3/8
Third Quarter 13.50 12.25 11.95 10.50 9-1/2 8-1/8
Fourth Quarter 13.54 12.22 12.50 10.25 9-3/4 8-3/8
On March 14, 2003, the closing price of the Company's stock
was $14.01.
As of December 31, 2002, there were approximately 1,000
shareholders of the Company's common stock based on the number of
record owners.
For the years ended December 31, 2002, 2001 and 2000, total
dividends paid by the Company amounted to $6,568,295 or $.8650
per share ($.6738 taxed as ordinary income and $.1912 taxed as a
long-term capital gain), $5,980,540 or $.8025 per share (all
taxed as ordinary income) and , $5,555,941 or $.7575 per share
($.7102 taxed as ordinary income, $.0384 taxed as a long-term
capital gain and $.0089 was a return of capital), respectively.
Future dividend policy will depend on the Company's
earnings, capital requirements, financial condition, availability
and cost of bank financing and other factors considered relevant
by the Board of Directors. The Company elected REIT status
beginning in 1992. As a REIT, the Company must pay out at least
90% of its taxable income in the form of a cash distribution to
shareholders.
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ITEM 6 - SELECTED FINANCIAL DATA
December 31,
2002 2001 2000 1999 1998
___________ ___________ ___________ ___________ ___________
Operating Data:
Total Revenues $29,423,893 $26,882,399 $20,644,731 $18,807,085 $17,193,278
Total Expenses 23,576,227 21,303,647 15,418,042 14,248,985 13,004,682
Gain (Loss) on
Sales Of
Investment
Property and
Equipment 664,546 (28,264) (37,318) (1,964) 13,095
Net Income 6,512,212 5,550,488 5,189,371 4,556,136 4,201,691
Average Number
of Shares
Outstanding 7,600,266 7,457,636 7,339,684 7,252,774 7,042,701
Net Income Per
Share -
Basic .86 .74 .71 .63 .60
Diluted .85 .74 .71 .63 .60
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash Flow Data:
Net Cash
Provided by
Operating
Activities $6,747,943 $4,277,851 $7,171,086 $6,770,625 $6,556,937
Net Cash Used by
Investing
Activities (7,076,423) (11,027,374) (4,068,797) (12,032,660) (8,606,679)
Net Cash
Provided (Used)
by Financing
Activities 1,099,628 6,918,095 (2,427,680) 5,154,277 2,690,831
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance Sheet
Data:
Total Assets $89,026,506 $80,334,844 $62,945,597 $58,575,312 $50,046,649
Mortgages
Payable 43,321,884 38,652,025 32,055,839 30,419,153 21,411,576
Shareholders'
Equity 29,736,417 27,964,534 22,839,426 21,391,307 23,212,813
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Data:
Funds from
Operations * $9,319,106 $8,263,308 $7,845,528 $7,010,633 $6,591,995
Cash Dividends
Per Share .8650 .8025 .7575 .75 .7375
*Funds from Operations (FFO) is defined as net income excluding
gains (or losses) from sales of depreciable assets, plus
depreciation. FFO should be considered as a supplemental measure
of operating performance used by real estate investment trust
(REITs). FFO excludes historical cost depreciation as an expense
and may facilitate the comparison of REITs which have different
cost bases. The items excluded from FFO are significant
components in understanding and assessing the Company's financial
performance. FFO (1) does not represent cash flow from
operations as defined by generally accepted accounting
principles; (2) should not be considered as an alternative to net
income as a measure of operating performance or to cash flows
from operating, investing and financing activities; and (3) is
not an alternative to cash flow as a measure of liquidity. FFO,
as calculated by the Company, may not be comparable to similarly
entitled measures reported by other REITs.
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ITEM 6 - SELECTED FINANCIAL DATA
The Company's FFO is calculated as follows:
2002 2001 2000 1999 1998
__________ __________ __________ __________ _________
Net Income $6,512,212 $5,550,488 $5,189,371 $4,556,136 $4,201,691
(Gain) Loss on
Sales of
Depreciable
Assets (3,546) 28,264 37,318 1,946 (13,095)
Depreciation
Expense 2,810,440 2,684,556 2,618,839 2,452,533 2,403,399
__________ __________ __________ __________ _________
FFO (1) $9,319,106 $8,263,308 $7,845,528 $7,010,633 $6,591,995
========== ========== ========== ========== =========
(1) Includes gain on sale of land of $661,000 in 2002.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Revenue and Expense
2002 vs. 2001
Rental and related income increased from $19,291,611 for the
year ended December 31, 2001 to $20,140,691 for the year ended
December 31, 2002 primarily due to the acquisition of a new
community in 2001 and rental increases to residents. During
2002, the Company was able to obtain an average rent increase of
approximately 3%.
Overall occupancy rates are satisfactory with eight
manufactured home communities experiencing vacancies over ten
percent. Some of these vacancies are the result of expansions.
The Company is also evaluating further expansion at selected
communities in order to increase the number of available sites.
Some of these communities are in various stages of expansion.
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. Sales of manufactured homes, other income, cost of
sales of manufactured homes and selling expenses are directly
related to this operation.
Interest and dividend income increased from $2,188,430 in
2001 to $2,867,142 in 2002 due to purchases of securities
available for sale during 2001 and 2002.
Gains on sales of securities available for sale increased
from $257,142 in 2000 to $530,324 in 2001 to $794,950 in 2002.
Community operating expenses increased from $9,004,164 for
the year ended December 31, 2001 to $9,457,214 for the year ended
December 31, 2002 primarily as a result of the acquisition of a
new community in 2001 and increased insurance expense and
personnel costs. Management anticipates that the increase in
insurance costs will continue into 2003.
-14-
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, (CONT'D.)
General and administrative expenses increased from
$2,015,685 in 2001 to $2,184,045 in 2002 primarily as a result of
an increase in personnel costs.
Interest expense increased from $2,825,894 in 2001 to
$3,314,335 in 2002. This was primarily as a result of a higher
average principal balance outstanding. Interest capitalized on
construction in progress amounted to $162,600 and $146,000 for
2002 and 2001, respectively.
Depreciation expense increased from $2,684,556 for the year
ended December 31, 2001 to $2,810,440 for the year ended December
31, 2002 primarily as a result of the acquisition of a new
community in 2001 and the completion of certain projects.
Amortization of financing costs increased from $87,748 in
2001 to $112,200 in 2002 due to recent refinancing.
Gain (loss) on sales of investment property and equipment
increased from a loss of $28,264 in 2001 to a gain of $664,546 in
2002 primarily due to the sale of vacant land at a gain of
$661,000.
For the year ended December 31, 2002, the Company reported
net income of $6,512,212 as compared to net income of $5,550,488
for the year ended December 31, 2001. The Company is currently
experiencing modest inflation. Modest inflation is believed to
have a favorable impact on the Company's financial performance.
With modest inflation, the Company believes that it can increase
rents sufficiently to match increases in operating expenses.
High rates of inflation (more than 10%) could result in an
inability to raise rents to meet rising costs and could create
political problems such as the imposition of rent controls. The
Company anticipates continuing profits in 2003.
2001 vs. 2000
Rental and related income increased from $18,640,335 for the
year ended December 31, 2000 to $19,291,611 for the year ended
December 31, 2001 primarily due to the acquisition of a new
community and rental increases to residents. During 2001, the
Company was able to obtain an average rent increase of
approximately 3.5%.
Overall occupancy rates are satisfactory with ten
manufactured home communities experiencing vacancies over ten
percent. Some of these vacancies are the result of expansions.
The Company is also evaluating further expansion at selected
communities in order to increase the number of available sites.
Some of these communities are in various stages of expansion.
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. Sales of manufactured homes, other income, cost of
sales of manufactured homes and selling expenses are directly
related to this operation.
Interest and dividend income increased from $1,747,254 in
2000 to $2,188,430 in 2001 due to purchases of securities
available for sale during 2000 and 2001.
-15-
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, (CONT'D.)
Gains on sales of securities available for sale increased
from $257,142 in 2000 to $530,324 in 2001.
Community operating expenses increased from $8,233,356 for
the year ended December 31, 2000 to $9,004,164 for the year ended
December 31, 2001 primarily as a result of the acquisition of a
new community and increased insurance expense and personnel
costs.
General and administrative expenses increased from
$1,852,309 in 2000 to $2,015,685 in 2001 primarily as a result of
an increase in personnel and occupancy costs.
Interest expense increased from $2,624,801 in 2000 to
$2,825,894 in 2001. This was primarily as a result of a higher
average principal balance outstanding. Interest capitalized on
construction in progress amounted to $146,000 and $180,600 for
2001 and 2000, respectively.
Depreciation expense increased from $2,618,839 for the year
ended December 31, 2000 to $2,684,556 for the year ended December
31, 2001 primarily as a result of the acquisition of a new
community and the completion of certain projects.
Amortization of financing costs remained relatively stable
in 2001 and 2000.
For the year ended December 31, 2001, the Company reported
net income of $5,550,488 as compared to net income of $5,189,371
for the year ended December 31, 2000.
Liquidity and Capital Resources
The Company uses funds for real estate acquisitions, real
property improvements, amortization of debt incurred in
connection with such acquisitions and improvements, purchase of
inventory of manufactured homes and investment in debt and equity
securities of other REITs. The Company generates funds through
cash flow from properties, sales of manufactured homes and its
securities portfolio, mortgages on properties and increases in
shareholder investments. The Company has liquidity available
from a combination of short and long-term sources. The Company
currently has mortgages payable totaling $43,321,884 secured by
thirteen communities and loans payable totaling $12,358,965
primarily secured by investment securities and inventory of
manufactured homes. The Company has a $2,000,000 line of credit
with Fleet Bank, all of which was utilized at December 31,
2002. The Company believes that its 25 communities have market
values in excess of historical cost. Management believes that
this provides significant additional borrowing capacity.
Net cash provided by operating activities decreased from
$7,171,086 in 2000 to $4,277,851 in 2001, and increased to
$6,747,943 in 2002. The decrease in 2001 was primarily due to
the initial purchase of inventory for the sales operation. Cash
flow was primarily used for capital improvements, payment of
dividends, purchases of securities available for sale, purchase
of inventory of manufactured homes, purchase of a manufactured
home community in 2001 and expansion of existing communities.
The Company meets maturing mortgage obligations by using a
combination of cash flow and refinancing. The dividend payments
were primarily made from cash flow from operations.
-16-
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, (CONT'D.)
In addition to normal operating expenses, the Company
requires cash for additional investments in manufactured home
communities, capital improvements, purchase of manufactured homes
for rent, scheduled mortgage amortization and dividend
distributions.
The Company also invests in debt and equity securities of
other REITs. During 2002, the Company purchased approximately
$9,400,000 in these securities. The securities portfolio at
December 31, 2002 has experienced an approximate 14% increase in
value from cost.
The Company estimates that in 2003 it will purchase
approximately 25 manufactured homes to be used as rentals for a
total cost of $500,000. Management believes that these
manufactured homes will each generate approximately $300 per
month in rental income in addition to lot rent. Once rental
homes reach 10 years old, the Company generally sells them.
Capital improvements include amounts needed to meet
environmental and regulatory requirements in connection with the
manufactured home communities that provide water or sewer
service. Excluding expansions, the Company is budgeting
approximately $1,000,000 in capital improvements for 2003.
The Company's only significant commitment and contractual
obligation relates to the lease on its corporate offices as
described in Note 9 to the Consolidated Financial Statements.
The Company has a Dividend Reinvestment and Stock Purchase
Plan (Plan). Dividends reinvested are a significant additional
source of liquidity and capital resources. During 2002, the
Company paid $4,913,346 in dividends, which is net of
$1,654,949 of dividends reinvested under the Plan. The success
of the Plan resulted in a substantial improvement in the
Company's liquidity and capital resources in 2002.
The Company has undeveloped land which it could develop over
the next several years. The Company is also exploring the
utilization of vacant land for town houses. The Company
continues to analyze the highest and best use of its vacant land,
and uses it accordingly.
The Company believes that funds generated from operations,
together with the financing and refinancing of its properties,
will be adequate to meet its needs over the next several years.
Critical Accounting Policies and Estimates
The Company's most critical accounting policies relate to
the evaluation of impairment of real estate and investment
securities. The Company evaluates the need for an impairment
loss on its real estate assets when indicators of impairment are
present and the undiscounted cash flows are not sufficient to
recover the asset's carrying amount. The impairment loss is
measured by comparing the fair value of the asset to its carrying
amount. In addition, estimates are used when accounting for the
allowance for doubtful accounts, potentially excess and obsolete
inventory and contingent liabilities, among others. These
estimates are susceptible to change and actual results could
differ from these estimates. The effects of changes in these
estimates are recognized in the period they are determined.
-17-
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, (CONT'D.)
The Company evaluates other than temporary impairment on
individual securities in its investment portfolio when a security
has experienced a sustained decline in fair value below amortized
cost. Management considers several factors, including the length
of time such security has experienced a decline, the relationship
to peer group stock performance and the financial condition and
near-term prospects of the issuer. These evaluations are
subjective in nature. Other than temporary declines in value
result in a charge to net income reducing the carrying value of
the security.
Recent Accounting Pronouncements
In December, 2002, the Financial Accounting Standards Boards
(FASB) issued Statement of Financial Accounting Standards (SFAS)
No. 148, "Accounting for Stock-Based Compensation, Transition and
Disclosure." SFAS No. 148 provides alternative methods of
transition for a voluntary change to the fair value based method
of accounting for stock-based employee compensation. SFAS No.
148 also requires that disclosures of the pro forma effect of
using the fair value method of accounting for stock-based
employee compensation be displayed more prominently and in a
tabular format. Additionally, SFAS No. 148 requires disclosure
of the pro forma effect in interim financial statement. The
additional disclosure requirements of SFAS No. 148 are effective
for fiscal years ended after December 15, 2002. The Company has
adopted the expanded disclosure requirements as of December 31,
2002.
Controls and Procedures
Within the 90 days prior to the date of this report, the
Company carried out an evaluation, under the supervision of the
Company's Chief Executive Officer and Chief Financial Officer and
with the participation of the Company's management, including the
effectiveness of the design and operation of the Company's
disclosure controls and procedures pursuant to the Securities
Exchange Act Rule 13A-14. Based upon the evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that the
Company's disclosure controls and procedures are effective in
timely alerting them to material information relating to the
Company required to be included in the Company's periodic
Securities and Exchange Commission filings. No significant
changes were made in the Company's internal controls or in other
factors that could significantly affect these controls subsequent
to the date of their evaluation.
Safe Harbor Statement
This Form 10-K contains various "forward-looking statements"
within the meaning of the Securities Act of 1933 and the
Securities Exchange Act of 1934, and the Company intends that
such forward-looking statements be subject to the safe harbors
created thereby. The words "may", "will", "expect", "believe",
"anticipate", "should", "estimate", and similar expressions
identify forward-looking statements. These forward-looking
statements reflect the Company's current views with respect to
future events and finance performance, but are based upon current
assumptions regarding the Company's operations, future results
and prospects, and are subject to many uncertainties and factors
relating to the Company's operations and business environment
which may cause the actual results of the Company to be
materially different from any future results expressed or implied
by such forward-looking statements.
-18-
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, (CONT'D.)
Such factors include, but are not limited to, the following:
(i) changes in the general economic climate; (ii) increased
competition in the geographic areas in which the Company owns and
operates manufactured housing communities; (iii) changes in
government laws and regulations affecting manufactured housing
communities; and (iv) the ability of the Company to continue to
identify, negotiate and acquire manufactured housing communities
and/or vacant land which may be developed into manufactured
housing communities on terms favorable to the Company. The
Company undertakes no obligation to publicly update or revise any
forward-looking statements whether as a result of new
information, future events, or otherwise.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
The Company is exposed to interest rate changes primarily as
a result of its line of credit and long-term debt used to
maintain liquidity and fund capital expenditures and expansion of
the Company's real estate investment portfolio and operations.
The Company's interest rate risk management objectives are to
limit the impact of interest rate changes on earnings and cash
flows and to lower its overall borrowing costs. To achieve its
objectives, the Company borrows primarily at fixed rates.
The following table sets forth information as of December
31, 2002, concerning the Company's debt obligations, including
principal cash flow by scheduled maturity, weighted average
interest rates and estimated fair value.
Long-term
Fixed Average
rate Carrying Value Interest Rate Fair Value
______________ _____________ __________
2003 $ 3,188,122 7.50%
2004 9,618,647 7.54%
2005 11,090,532 7.50%
2006 1,695,862 6.38%
2007 3,960,632 6.39%
Thereafter 13,768,089 6.40%
____________
Total $43,321,884 $43,543,545
=========== ===========
The Company also has approximately $12.4 million in variable
rate debt due on demand. This debt primarily consists of a $9.2
million margin loan secured by marketable securities, a $2
million unsecured line of credit, and a $900 thousand inventory
financing loan. The interest rates on these loans range from 3%
to 7% at December 31, 2002. The carrying value of the Company's
variable rate debt approximates fair value at December 31, 2002.
The Company also invests in both debt and equity securities
of other REITs and is primarily exposed to equity price risk from
adverse changes in market rates and conditions. All securities
are classified as available for sale and are carried at fair
value. The Company has no significant interest rate risk
relating to debt securities as they are short-term in nature.
-19-
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data listed in
Part IV, Item 14(a)(1) are incorporated herein by reference.
The following is the Unaudited Selected Quarterly Financial
Data:
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
THREE MONTHS ENDED
2002 March 31 June 30 September 30 December 31
____ _________ _________ _________ _________
Total Revenue $7,069,357 $7,490,084 $7,883,991 $6,980,461
Total Expenses 5,220,940 5,965,387 6,382,832 6,007,068
Net Income 1,851,744 1,520,345 1,493,901 1,646,222
Net Income per Share-
Basic .25 .20 .19 .22
Diluted .24 .20 .19 .22
2001 March 31 June 30 September 30 December 31
____ _________ _________ _________ _________
Total Revenues $5,251,453 $7,376,519 $7,772,824 $6,481,603
Total Expenses 3,865,760 5,752,609 6,006,204 5,679,074
Net Income 1,396,010 1,614,574 1,750,748 789,156 (1)
Net Income per Share-
Basic and Diluted .19 .22 .23 .10
2000 March 31 June 30 September 30 December 31
____ _________ _________ _________ _________
Total Revenues $5,158,326 $5,011,150 $5,153,950 $5,321,305
Total Expenses 3,698,650 3,782,536 3,805,600 4,131,256
Net Income 1,484,094 1,220,457 1,347,702 1,137,119
Net Income per Share -
Basic and Diluted .20 .17 .18 .16
(1) Decrease due primarily to a decrease in sales activity and
security transactions and an increase in insurance costs and
property taxes.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
-20-
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Percent
Name, Age & Principal Occupation Director Shares Owned Of
Office Held During the Past Five Years Since Beneficially Stock
____________ ____________________________ ________ ____________ _______
Ernest V. Financial Consultant; (1976 1969 44,274 (1) 0.58%
Bencivenga to present); Treasurer and
Age: 85 Director (1961 to present)
Secretary/ and Secretary (1967 to
Treasurer present) of Monmouth Capital
and Director Corporation; Treasurer and
Director (1968 to present)
of Monmouth Real Estate
Investment Corporation.
Anna T. Chew Certified Public Accountant; 1995 103,872 (2) 1.35%
Age: 45 Controller (1991 to present)
Vice and Director (1993 to
President and present) of Monmouth Real
Chief Estate Investment
Financial Corporation; Controller
Office and (1991 to present), Vice
Director President (2001 to present)
and Director (1994 to
present) of Monmouth
Capital Corporation.
Charles P. Investor; Director (1970 to 1969 60,318 (3) 0.79%
Kaempffer present) of Monmouth Capital
Age: 66 Corporation; Director (1974
Director to present) of Monmouth Real
Estate Investment
Corporation; Vice Chairman
and Director (1996 to
present) of Community Bank
of New Jersey.
Eugene W. Attorney at Law; Chairman of 1969 1,076,182 (4) 13.89%
Landy the Board (2001 to present),
Age: 69 President and Director
Chairman of (1961 to present) of
the Board and Monmouth Capital
Director Corporation; President and
Director (1968 to present)
of Monmouth Real Estate
Investment Corporation.
Samuel A. Attorney at Law; Director 1992 459,820 (5) 5.88%
Landy (1989 to present) of
Age: 43 Monmouth Real Estate
President Investment Corporation;
amd Director Director (1994 to present)
of Monmouth Capital
Corporation.
-21-
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT,
(CONT'D.)
Percent
Name, Age & Principal Occupation Director Shares Owned Of
Office Held During the Past Five Years Since Beneficially Stock
James Attorney at Law; General 2001 170,442 (6) 2.22%
Mitchell Partner, Mitchell Partners,
Age: 63 L.P.; President, Mitchell
Director Capital Mgmt., Inc.
Richard H. Vice President(1984 to 1986 104,664 (7) 1.36%
Molke present) of Remsco
Age: 77 Associates, Inc., a
Director construction firm.
Eugene Investor; Director (2001 to 1977 81,235 (8) 1.03%
Rothenberg present) of Monmouth
Age: 71 Capital Corporation.
Director
Robert G. Investor; Director (1963 to 1969 131,486 (9) 1.71%
Sampson present) of Monmouth
Age: 78 Capital Corporation;
Director Director (1968 to 2001) of
Monmouth Real Estate
Investment Corporation;
General Partner (1983 to
present) of Sampco, Ltd.,
an investment group.
TOTALS............ 2,232,292 28.09%
1) Includes 9,065 shares held by Mr. Bencivenga's wife and 8,200
shares held in the United Mobile Homes, Inc. 401(k) Plan.
Includes 10,000 shares issuable upon exercise of stock options.
Excludes 5,000 shares issuable upon exercise of a stock option,
which stock option is not exercisable until June 20, 2003.
2) Includes 58,446 shares held jointly with Ms. Chew's husband and
5,426 shares held in the United Mobile Homes, Inc. 401(k) Plan.
Includes 40,000 shares issuable upon exercise of stock options.
Excludes 10,000 shares issuable upon exercise of a stock option,
which stock option is not exercisable until June 20, 2003.
3) Includes (a) 58,318 shares held as Trustee for Defined Benefit
Pension Plan for which Mr. Kaempffer has power to vote and (b)
2,000 shares held by Mr. Kaempffer's wife.
4) Includes (a) 79,854 shares held by Mr. Landy's wife, (b) 172,608
shares held by Landy Investments, Ltd. In which Mr. Landy has a
beneficial interest, (c) 69,961 shares held in the Landy &
Landy, Employees' Pension Plan, of which Mr. Landy is a Trustee
with power to vote, and (d) 128,212 shares held in the Landy &
Landy, Employees' Profit Sharing Plan, of which Mr. Landy is a
Trustee with power to vote. Excludes 236,912 shares held by Mr.
Landy's adult children, Michael Landy and Richard Landy, in
which he disclaims any beneficial interest. Includes 75,000
shares issuable upon exercise of stock options.
5) Includes (a) 29,028 shares held jointly with Mr. Samuel A.
Landy's wife, (b) 26,573 in a custodial account for his sons,
(c) 6,221 shares in the Samuel Landy Limited Partnership and (d)
9,169 shares held in the United Mobile Homes, Inc. 401 (k) Plan.
Includes 150,000 shares issuable upon exercise of stock options.
6) Includes 135,425 shares held by Mitchell Partners in which Mr.
Mitchell has a beneficial interest.
7) Includes (a) 48,261 shares owned by Mr. Molke's wife.
8) Includes (a) 56,878 shares held by Rothenberg Investment, Ltd.
in which Dr. Rothenberg has a beneficial interest.
9) Includes 48,492 shares held by Sampco, Ltd. In which he has a
beneficial interest.
-22-
ITEM 11 - EXECUTIVE COMPENSATION
Summary Compensation Table.
The following Summary Compensation Table shows compensation
paid by the Company for services rendered during 2002, 2001 and
2000 to the Chairman of the Board, President and Vice President.
There were no other executive officers whose aggregate cash
compensation exceeded $100,000:
Name and Annual Compensation
Principal Year Salary Bonus All Other Options
Position
Eugene W. 2002 $150,000 $ - $17,276 (1)
Landy 2001 150,000 - 15,076 (1) -
Chairman of 2000 150,000 - 53,876 (1) -
the Board
Samuel A. 2002 $285,000 $14,961 $21,585 (2) 25,000
Landy 2001 224,615 25,704 21,028 (2) 25,000
President 2000 214,615 8,269 18,432 (2) 25,000
Anna T. Chew 2002 $160,488 $16,194 $19,000 (3) 10,000
Vice 2001 145,898 15,631 17,646 (3) 10,000
President 2000 132,635 14,119 16,003 (3) 10,000
(1) Represents Directors' fees and fringe benefits. Also
includes an accrual of $40,000 in 2000 for pension and other
benefits in accordance with Eugene W. Landy's employment
contract.
(2) Represents Directors' fees, fringe benefits and
discretionary contributions by the Company to the Company's
401(k) Plan allocated to an account of the named executive
officer.
(3) Represents Directors' fees and discretionary contributions
by the Company to the Company's 401(k) Plan allocated to an
account of the named executive officer.
-23-
ITEM 11 - EXECUTIVE COMPENSATION, (CONT'D.)
Stock Option Plan.
The following table sets forth, for the executive officers
named in the Summary Compensation Table, information regarding
individual grants of stock options made during the year ended
December 31, 2002:
Potential Realized
Value at Assume
Annual
Granted Price Rates for Option
Options to Per Expiration Terms
Name Granted Employees Share Date 5% 10%
____ _______ _________ ______ __________ ___________ ________
Samuel A.
Landy 25,000 37% $12.95 01/04/10 $110,991 $307,001
Anna T.
Chew 10,000 15% $12.60 06/20/10 $ 60,159 $144,092
The following table sets forth for the executive officers
named in the Summary Compensation Table, information regarding
stock options outstanding at December 31, 2002:
<S<
Number of
Unexercised Value of
Options at Year- Unexercised Options
End At Year-End
Name Shares Value Exercisable/ Exercisable/
Exercised Realized Unexercisable Unexercisable
____ _________ ________ _____________ __________________
Eugene W.
Landy -0- N/A 75,000 / -0- $328,000 $ -0-
Samuel A.
Landy -0- N/A 125,000 / 25,000 $394,062 $14,750
Anna T.
Chew 8,000 $10,000 40,000 / 10,000 $162,475 $ 9,400
Compensation of Directors.
The Directors receive a fee of $1,000 for each Board meeting
attended, and an additional fixed annual fee of $10,000, payable
$2,500 quarterly. Effective April 1, 2002, the per meeting fee
was increased to $1,500. Directors appointed to house committees
receive $150 for each meeting attended. Those specific
committees are Compensation Committee, Audit Committee and Stock
Option Committee.
Employment Contracts.
On December 14, 1993, the Company and Eugene W. Landy
entered into an Employment Agreement under which Mr. Eugene Landy
receives an annual base compensation of $150,000 plus bonuses and
customary fringe benefits, including health insurance,
participation in the Company's 401(k) Plan, stock options, five
weeks vacation and use of an automobile. In lieu of annual
increases in compensation, there will be additional bonuses voted
by the Board of Directors. On severance of employment for any
reason, Mr. Eugene Landy will receive severance pay of $450,000
payable $150,000 on severance and $150,000 on the first and
second anniversaries of severance. If employment is terminated
following a change in control of the Company, Mr. Eugene Landy
will be entitled to severance pay only if actually severed
either at
-24-
ITEM 11 - EXECUTIVE COMPENSATION, (CONT'D.)
the time of merger or subsequently. In the event of disability,
Mr. Eugene Landy's compensation shall continue for a period of
three years, payable monthly. On retirement, Mr. Eugene Landy
shall receive a pension of $50,000 a year for ten years, payable
in monthly installments. In the event of death, Mr. Eugene
Landy's designated beneficiary shall receive $450,000, $100,000
thirty days after death and the balance one year after death.
The Employment Agreement terminated December 31, 1999 but was
automatically renewed and extended for successive one-year
periods.
Effective January 1, 2002, the Company and Samuel A. Landy
entered into a three-year Employment Agreement under which Mr.
Samuel Landy receives an annual base salary of $285,000 for 2002,
$299,250 for 2003 and $314,212 for 2004 plus bonuses and
customary fringe benefits. Bonuses shall be at the discretion of
the Board of Directors and shall be based on certain guidelines.
Mr. Samuel Landy will also receive four weeks vacation, use of an
automobile, and stock options for 25,000 shares in each year of
the contract. On severance or disability, Mr. Samuel Landy is
entitled to one year's pay.
Effective January 1, 2000, the Company extended Anna T.
Chew's Employment Agreement for an additional three years. Ms.
Chew receives an annual base salary of $133,100 for 2000,
$146,400 for 2001 and $161,000 for 2002 plus bonuses and
customary fringe benefits. On severance for any reason, Ms. Chew
is entitled to an additional one year's pay. In the event of
disability, her salary shall continue for a period of two years.
Report of Compensation Committee.
Overview and Philosophy
The Company has a Compensation Committee consisting of two
independent outside Directors. This Committee is responsible for
making recommendations to the Board of Directors concerning
executive compensation. The Compensation Committee takes into
consideration three major factors in setting compensation.
The first consideration is the overall performance of the
Company. The Board believes that the financial interests of the
executive officers should be aligned with the success of the
Company and the financial interests of its shareholders.
Increases in funds from operations, the enhancement of the
Company's equity portfolio, and the success of the Dividend
Reinvestment and Stock Purchase Plan all contribute to increases
in stock prices thereby maximizing shareholders' return.
The second consideration is the individual achievements made
by each officer. The Company is a small real estate investment
trust (REIT). The Board of Directors is aware of the
contributions made by each officer and makes an evaluation of
individual performance based on their own familiarity with the
officer.
-25-
ITEM 11 - EXECUTIVE COMPENSATION, (CONT'D.)
The final criteria in setting compensation is comparable
wages in the industry. In this regard, the REIT industry
maintains excellent statistics.
Evaluation
Mr. Eugene Landy is under an employment agreement with the
Company. His base compensation under this contract is $150,000
per year. (The Summary Compensation Table for Mr. Eugene Landy
shows a salary of $150,000 and $17,276 in director's fees, fringe
benefits and legal fees).
The Committee also reviewed the progress made by Mr. Samuel
A. Landy, President. Funds from operations increased by
approximately 13%. Mr. Samuel Landy is under an employment
agreement with the Company. His base compensation under this
contract is $285,000 for 2002.
COMPARATIVE STOCK PERFORMANCE.
The line graph compares the total return of the Company's
common stock for the last five years to the NAREIT ALL REIT Total
Return Index published by the National Association of Real Estate
Investment Trust (NAREIT) and to the S&P 500 Index for the same
period. The total return reflects stock price appreciation and
dividend reinvestment for all three comparative indices. The
information herein has been obtained from sources believed to be
reliable, but neither its accuracy nor its completeness is
guaranteed.
1997 1998 1999 2000 2001 2002
United Mobile
Homes, Inc. 100 97 82 103 142 168
NAREIT All REIT 100 81 76 96 110 116
S & P 500 100 129 156 141 125 97
-26-
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
On December 21, 2002, no person owned of record, or was
known by the Company to own beneficially more than five percent
(5%) of the shares of the Company, except the following:
Name and Address
Of Shares Percent
Title of Class Beneficial Owner Owned Of Class
______________ _____________ ___________ ___________
Common Stock Eugene W. Landy
20 Tuxedo Road
Rumson, NJ
07760 1,076,182 13.82%
Common Stock Samuel A. Landy
124 Federal Road
Monroe Twp., NJ
08831 459,820 5.88%
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Certain relationships and related party transactions are
incorporated herein by reference to Part IV, Item 14(a)(1)(vi),
Note 9 of the Notes to Consolidated Financial Statements -
Related Party Transactions.
-27-
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON
FORM 8-K
The following Financial Statements are
(a) (1) filed as part of this report.
Page(s)
_______
(i) Independent Auditors' Report 31
Consolidated Balance Sheets as of December
(ii) 31, 2002 and 2001 32
Consolidated Statements of Income for the
years ended December 31, 2002, 2001, and
(iii) 2000 33
Consolidated Statements of Shareholders'
Equity for the years ended December 31,
(iv) 2002, 2001 and 2000 34-35
Consolidated Statements of Cash Flows for
the years ended December 31, 2002, 2001
(v) and 2000 36
(vi) Notes to Consolidated Financial Statements 37-49
The following Financial Statement Schedule
for the years ended December 31, 2002,
2001 and 2000 is filed as part of this
(a) (2) report
Schedule III - Real Estate and Accumulated
(i) Depreciation 50
All other schedules are omitted for the reason that they are
not required, are not applicable, or the required information is
set forth in the financial statements or notes thereto.
-28-
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON
FORM 8-K, (CONT'D.)
(a) (3) The Exhibits set forth in the following index of
Exhibits are filed as part of this Report.
Exhibit Description
No.
_______ ______________________________________________________
(3) Articles of Incorporation and By-Laws:
(a) Certificate of Incorporation and Amendments
thereto are incorporated by reference to the Company's
Registration Statement No. 2-92896-NY, and Amendments
thereto, filed with the SEC on August 22, 1984.
(b) Certificate of Amendment to the Certificate of
Incorporation dated May 24, 1988.
(c) Certificate of Amendment to the Certificate of
Incorporation dated May 28, 1998.
(d) By-laws.
(10) Material Contracts:
(a) Stock Option Plan is incorporated by reference to
the Company's Proxy Statement dated April 25, 1994
filed with the SEC April 27, 1994.
(b) 401(k) Plan Document and Adoption Agreement
effective April 1, 1992 is incorporated by reference
to that filed with the Company's 1992 Form 10-K filed
with the SEC on March 9, 1993.
(c) Employment contract with Mr. Eugene W. Landy
dated December 14, 1993 is incorporated by reference
to that filed with the Company's 1993 Form 10-K filed
with the SEC on March 28, 1994.
(d) Employment contract with Mr. Ernest V. Bencivenga
dated November 9, 1993 is incorporated by reference to
that filed with the Company's 1993 Form 10-K filed
with the SEC on March 28, 1994.
(e) Employment contract with Mr. Samuel A. Landy
effective January 1, 2002.
(f) Employment contract with Ms. Anna T. Chew
effective January 1, 1998 is incorporated by reference
to that filed with the Company's 1997 Form 10-K filed
with the SEC on March 27, 1997.
-29-
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON
FORM 8-K, (CONT'D.)
Exhibit Description
No.
_______ _____________________________________________________
(21) Subsidiaries of the Registrant:
The Company operates through nine wholly-owned
multiple Subsidiaries carrying on the same line of
business. The parent company of these subsidiaries
is the Registrant. The line of business is the
operation of manufactured home communities.
(23) Consent of KPMG LLP.
(99.1) Certification pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
(99.2) Certification pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
(99.3) Certification pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
(99.4) Certification pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
(a)(3)(b) Reports of Form 8-K - None
-30-
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
United Mobile Homes, Inc.:
We have audited the consolidated financial statements of United
Mobile Homes, Inc. and subsidiaries as listed in the accompanying
index. In connection with our audits of the consolidated
financial statements, we also have audited the financial
statement schedule as listed in the accompanying index. These
consolidated financial statements and financial statement
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated
financial statements and financial statement schedule based on
our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of United Mobile Homes, Inc. and subsidiaries as of
December 31, 2002 and 2001, and the results of their operations
and their cash flows for each of the years in the three-year
period ended December 31, 2002 in conformity with accounting
principles generally accepted in the United States of America.
Also in our opinion, the related financial statement schedule,
when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
/s/ KPMG LLP
Short Hills, New Jersey
March 7, 2003
-31-
UNITED MOBILE HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2002 AND 2001
ASSETS 2002 2001
____________ ___________
INVESTMENT PROPERTY AND EQUIPMENT
Land $6,850,970 $7,212,035
Site and Land Improvements 56,437,044 54,640,298
Buildings and Improvements 2,748,600 2,745,194
Rental Homes and Accessories 8,798,433 8,432,068
Total Investment Property 74,835,047 73,029,595
Equipment and Vehicles 3,919,983 3,611,353
____________ ___________
Total Investment Property and
Equipment 78,755,030 76,640,948
Accumulated Depreciation (34,969,453) 32,349,006)
____________ ___________
Net Investment Property and
Equipment 43,785,577 44,291,942
____________ ___________
OTHER ASSETS
Cash and Cash Equivalents 2,338,979 1,567,831
Securities Available for Sale 32,784,968 25,917,748
Inventory of Manufactured Homes 2,775,459 2,782,665
Notes and Other Receivables 4,800,969 3,291,355
Unamortized Financing Costs 403,663 467,107
Prepaid Expenses 422,323 113,680
Land Development Costs 1,714,568 1,902,516
____________ ___________
Total Other Assets 45,240,929 36,042,902
____________ ___________
TOTAL ASSETS $89,026,506 $80,334,844
============ ===========
- LIABILITIES AND SHAREHOLDERS' EQUITY -
LIABILITIES:
MORTGAGES PAYABLE $43,321,884 $38,652,025
____________ ___________
OTHER LIABILITIES
Accounts Payable 956,663 836,588
Loans Payable 12,358,965 10,692,683
Accrued Liabilities and Deposits 2,141,636 1,711,232
Tenant Security Deposits 510,941 477,782
____________ ___________
Total Other Liabilities 15,968,205 13,718,285
____________ ___________
Total Liabilities 59,290,089 52,370,310
____________ ___________
SHAREHOLDERS' EQUITY:
Common Stock - $.10 par value per
share, 10,000,000 shares
authorized, 8,063,750 and
7,888,632 shares issued and
7,671,450 and 7,542,332 shares
outstanding as of December 31,
2002 and 2001, respectively 806,375 788,863
Additional Paid-In Capital 29,411,328 27,409,361
Accumulated Other
Comprehensive Income 3,988,429 3,541,001
Accumulated Deficit (667,793) (667,793)
Treasury Stock at Cost (392,300
and 346,300 shares at
December 31, 2002 and 2001,
respectively) (3,709,922) (3,106,898)
Notes Receivable from Officers
(13,000 shares) (92,000) -0-
____________ ___________
Total Shareholders' Equity 29,736,417 27,964,534
____________ ___________
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $89,026,506 $80,334,844
============ ===========
See Accompanying Notes to Consolidated Financial Statements
-32-
UNITED MOBILE HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
2002 2001 2000
____ ____ ____
REVENUES:
Rental and Related Income $20,140,691 $19,291,611 $18,640,335
Sales of Manufactured Homes 5,538,202 4,766,189 -0-
Interest and Dividend
Income 2,867,142 2,188,430 1,747,254
Gain on Sale of Securities
Available for Sale 794,950 530,324 257,142
Other Income 82,908 105,845 -0-
__________ ___________ ____________
Total Revenues 29,423,893 26,882,399 20,644,731
__________ ___________ ____________
EXPENSES:
Community Operating Expenses 9,457,214 9,004,164 8,233,356
Cost of Sales of
Manufactured Homes 4,657,988 3,930,666 -0-
Selling Expenses 1,040,005 754,934 -0-
General and Administrative 2,184,045 2,015,685 1,852,309
Interest Expense 3,314,335 2,825,984 2,624,801
Depreciation Expense 2,810,440 2,684,556 2,618,839
Amortization of Financing
Costs 112,200 87,748 88,737
__________ ___________ ____________
Total Expenses 23,576,227 21,303,647 15,418,042
__________ ___________ ____________
Income Before Gain (Loss) on
Sales of Investment
Property and Equipment 5,847,666 5,578,752 5,226,689
Gain (Loss) on Sales of
Investment Property and
Equipment 664,546 (28,264) (37,318)
__________ ___________ ____________
Net Income $6,512,212 $5,550,488 $ 5,189,371
========== ========== ==========
Net Income Per Share -
Basic $ .86 $ .74 $ .71
========== ========== ==========
Diluted $ .85 $ .74 $ .71
========== ========== ==========
Weighted Average Shares
Outstanding:
Basic
7,600,266 7,457,636 7,339,684
========== ========== ==========
Diluted 7,677,200 7,496,371 7,341,078
========== ========== ==========
See Accompanying Notes to Consolidated Financial Statements
-33-
UNITED MOBILE HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
Other
Additional Accumulated
Common Stock Issued Paid-In Comprehensive
Number Amount Capital Income/(Loss)
________ ________ ____________ ___________
Balance December 31,
1999 7,483,196 $748,320 $24,549,267 $(1,662,178)
Common Stock Issued
with the DRIP* 227,945 22,794 1,843,309 -0-
Distributions -0- -0- (366,570) -0-
Net Income -0- -0- -0- -0-
Unrealized Net Holding
Gains on Securities
Available for Sale
Net of Reclassification
Adjustment -0- -0- -0- 1,171,383
Purchase of Treasury
Stock -0- -0- -0- -0-
________ ________ ________ ________
Balance December 31,
2000 7,711,141 771,114 26,026,006 (490,795)
Common Stock Issued
with the DRIP* 163,491 16,349 1,669,682 -0-
Common Stock Issued
through the Exercise
of Stock Options 14,000 1,400 143,725 -0-
Distributions -0- -0- (430,052) -0-
Net Income -0- -0- -0- -0-
Unrealized Net Holding
Gains on Securities
Available for Sale
Net of Reclassification
Adjustment -0- -0- -0- 4,031,796
Purchase of Treasury
Stock -0- -0- -0- -0-
________ ________ ________ ________
Balance December 31,
2001 7,888,632 788,863 27,409,361 3,541,001
Common Stock Issued
with the DRIP* 135,418 13,542 1,641,407 -0-
Common Stock Issued
through the Exercise
of Stock Options 39,700 3,970 416,643 -0-
Distributions -0- -0- (56,083) -0-
Net Income -0- -0- -0- -0-
Unrealized Net Holding
Gains on Securities
Available for Sale
Net of Reclassification
Adjustment -0- -0- -0- 447,428
Purchase of Treasury
Stock -0- -0- -0- -0-
________ ________ ________ ________
Balance December 31,
2002 8,063,750 $806,375 $29,411,328 $3,988,429
========= ======== ========== =========
*Dividend Reinvestment and Stock Purchase Plan
See Accompanying Notes to Consolidated Financial Statements
-34-
UNITED MOBILE HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY, CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
Notes
Accumulated Treasury Receivable Comprehensive
Deficit Stock From Officers Income
________ ___________ _____________ ____________
Balance December 31,
1999
$(667,793) $(1,576,309) $ -0-
Common Stock Issued with
the DRIP* -0- -0- -0-
Distributions (5,189,371) -0- -0-
Net Income 5,189,371 -0- -0- $ 5,189,371
Unrealized Net Holding
Gains on Securities
Available for Sale
Net of Reclassification
Adjustment -0- -0- -0- 1,171,383
Purchase of Treasury
Stock -0- (1,222,797) -0-
__________ __________ ________ ___________
Balance December 31,
2000 (667,793) (2,799,106) -0- $ 6,360,754
===========
Common Stock Issued with
the DRIP* -0- -0- -0-
Common Stock Issued
through the Exercise
of Stock Options -0- -0- -0-
Distributions (5,550,488) -0- -0-
Net Income 5,550,488 -0- -0- $ 5,550,488
Unrealized Net Holding
Gains on Securities
Available for Sale
Net of Reclassification
Adjustment -0- -0- -0- 4,031,796
Purchase of Treasury
Stock -0- (307,792) -0-
__________ __________ ________ ___________
Balance December 31,
2001 (667,793) (3,106,898) -0- $ 9,582,284
===========
Common Stock Issued with
the DRIP* -0- -0- -0-
Common Stock Issued
through the Exercise
of Stock Options -0- -0- (92,000)
Distributions (6,512,212) -0- -0-
Net Income 6,512,212 -0- -0- $ 6,512,212
Unrealized Net Holding
Gains on Securities
Available for Sale
Net of Reclassification
Adjustment -0- -0- -0- 447,428
Purchase of Treasury
Stock -0- (603,024) -0-
__________ __________ ________ ___________
Balance December 31,
2002 $(667,793) $(3,709,922) $(92,000) $ 6,959,640
========== ========== ======== ===========
*Dividend Reinvestment and Stock Purchase Plan.
See Accompanying Notes to Consolidated Financial Statements
-35-
UNITED MOBILE HOMES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000
2002 2001 2000
_______ _______ _______
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $6,512,212 $5,550,488 $5,189,371
Depreciation 2,810,440 2,684,556 2,618,839
Amortization of Financing Costs 112,200 87,748 88,737
Gain on Sales of Securities
Available for Sale Transactions (794,950) (530,324) (257,142)
(Gain) Loss on Sales of
Investment Property & Equipment (664,546) 28,264 37,318
Changes in Operating Assets and
Liabilities -
Inventory of Manufactured Homes 7,206 (2,782,665) -0-
Notes and Other Receivables (1,509,614) (1,376,909) (832,320)
Prepaid Expenses (308,643) 1,953 5,888
Accounts Payable 120,075 497,414 233,959
Accrued Liabilities and Deposits 430,404 88,960 128,375
Tenant Security Deposits 33,159 28,366 (41,939)
__________ __________ __________
Net Cash Provided by Operating
Activities 6,747,943 4,277,851 7,171,086
__________ __________ __________
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Manufactured Home
Community -0- (2,503,126) -0-
Purchase of Investment Property
and Equipment (2,640,164) (2,199,133) (1,382,130)
Proceeds from Sales of Investment
Property and Equipment 1,698,262 352,494 250,923
Additions to Land Development Costs (509,679) (816,899) (1,665,711)
Purchase of Securities Available
for Sale (9,360,375) (9,858,324) (4,282,988)
Proceeds from Sales of
Securities Available for Sale 3,735,533 3,997,614 3,011,109
__________ __________ __________
Net Cash Used by Investing
Activities (7,076,423) (11,027,374) (4,068,797)
__________ __________ __________
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from Mortgages and Loans 6,862,500 7,525,000 2,500,000
Net Proceeds from Short-Term
Borrowings 1,666,282 5,053,213 965,085
Principal Payments of Mortgages
and Loans (2,192,641) (928,814) (863,314)
Financing Costs on Debt (48,756) (274,128) (116,816)
Proceeds from Exercise of Stock
Options 271,113 145,125 -0-
Collection on Notes Receivable
from Officers 57,500 -0- -0-
Dividends Paid (4,913,346) (4,294,509) (3,689,838)
Purchase of Treasury Stock (603,024) (307,792) (1,222,797)
__________ __________ __________
Net Cash Provided (Used) by
Financing Activities 1,099,628 6,918,095 (2,427,680)
__________ __________ __________
NET INCREASE (DECREASE) IN CASH 771,148 168,572 674,609
CASH & CASH EQUIVALENTS -
BEGINNING 1,567,831 1,399,259 724,650
__________ __________ __________
CASH & CASH EQUIVALENTS - END $ 2,338,979 $1,567,831 $1,399,259
========== ========== ==========
See Accompanying Notes to Consolidated Financial Statements
-36-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ELECTION TO BE TAXED AS A REAL ESTATE INVESTMENT TRUST
United Mobile Homes, Inc. (the Company) has elected to be
taxed as a Real Estate Investment Trust (REIT) under Sections
856-858 of the Internal Revenue Code. The Company will not be
taxed on the portion of its income which is distributed to
shareholders, provided it distributes at least 90% of its taxable
income, has at least 75% of its assets in real estate investments
and meets certain other requirements for qualification as a REIT.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF THE BUSINESS - The Company owns and operates
twenty-five manufactured home communities containing 5,979 sites.
The communities are located in New Jersey, New York, Ohio,
Pennsylvania and Tennessee.
These manufactured home communities are listed by trade names as
follows:
MANUFACTURED HOME
COMMUNITY LOCATION
_________________ ___________
Allentown Memphis, Tennessee
Brookview Village Greenfield Center, New York
Cedarcrest Vineland, New Jersey
Cranberry Village Cranberry Township,Pennsylvania
Cross Keys Village Duncansville, Pennsylvania
D& R Village Clifton Park, New York
Fairview Manor Millville, New Jersey
Forest Park Village Cranberry Township, Pennsylvania
Heather Highlands Inkerman, Pennsylvania
Highland Estates Kutztown, Pennsylvania
Kinnebrook Monticello, New York
Lake Sherman Village Navarre, Ohio
Laurel Woods Cresson, Pennsylvania
Memphis Mobile City Memphis, Tennessee
Oxford Village West Grove, Pennsylvania
Pine Ridge Village Carlisle, Pennsylvania
Pine Valley Estates Apollo, Pennsylvania
Port Royal Village Belle Vernon, Pennsylvania
River Valley Estates Marion, Ohio
Sandy Valley Estates Magnolia, Ohio
Southwind Village Jackson, New Jersey
Spreading Oaks Village Athens, Ohio
Waterfalls Village Hamburg, New York
Woodlawn Village Eatontown, New Jersey
Wood Valley Caledonia, Ohio
-37-
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (CONT'D.)
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.
Inherent in the operation of manufactured home communities is
site vacancies. S&F was established to fill these vacancies and
enhance the value of the communities.
BASIS OF PRESENTATION - The Company's subsidiaries are all 100%
wholly-owned. The consolidated financial statements of the
Company include all of these subsidiaries. All intercompany
transactions and balances have been eliminated in consolidation.
The Company does not have a majority or minority interest in any
other Company, either consolidated or unconsolidated.
USE OF ESTIMATES - In preparing the consolidated financial
statements, management is required to make estimates and
assumptions that affect the reported amounts of assets and
liabilities, as well as contingent assets and liabilities as of
the dates of the consolidated balance sheets and revenue and
expenses for the years then ended. Actual results could differ
significantly from these estimates and assumptions.
INVESTMENT PROPERTY AND EQUIPMENT AND DEPRECIATION - Property and
equipment are carried at cost. Depreciation for Sites and
Building (15 to 27.5 years) is computed principally on the
straight-line method over the estimated useful lives of the
assets. Depreciation of Improvements to Sites and Buildings,
Rental Homes and Equipment and Vehicles (3 to 27.5 years) is
computed principally on the straight-line method. Land
Development Costs are not depreciated until they are put in use,
at which time they are capitalized as Sites or Site Improvements.
Interest Expense pertaining to Land Development Costs are
capitalized. Maintenance and Repairs are charged to income as
incurred and improvements are capitalized. The costs and related
accumulated depreciation of property sold or otherwise disposed
of are removed from the accounts and any gain or loss is
reflected in the current year's results of operations. If there
is an event or change in circumstances that indicates that the
basis of an investment property may not be recoverable,
management assesses the possible impairment of value through
evaluation of the estimated future cash flows of the property, on
an undiscounted basis, as compared to the property's current
carrying value. If a property is determined to be impaired, it
will be recorded at fair value.
UNAMORTIZED FINANCING COSTS - Legal fees and loan processing fees
for mortgages are being amortized over the life of the related
debt.
CASH AND CASH EQUIVALENTS - Cash and cash equivalents include
certificates of deposit and bank repurchase agreements with
maturities of 90 days or less.
SECURITIES AVAILABLE FOR SALE - The Company's securities consist
primarily of debt securities and common and preferred stock of
other REITs. These securities are all publicly-traded and
purchased on the open market or through dividend reinvestment
plans. These securities are classified as available-for-sale and
are carried at fair value. Gains or losses on the sale of
securities are based on identifiable cost and are accounted for
on a trade date basis. Unrealized holding gains and losses are
excluded from earnings and reported as a separate component of
Shareholders' Equity until realized. A decline in the market
value of any security
below cost that is deemed to be other than temporary results in a
reduction in the carrying amount to fair value. Any impairment
is charged to earnings and a new cost basis for the security
established.
-38-
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (CONT'D.)
INVENTORY OF MANUFACTURED HOMES - Inventory of manufactured
homes is valued at the lower of cost or market value and is
determined by the specific identification method. All inventory
is considered finished goods.
REVENUE RECOGNITION - The Company derives its income primarily
from the rental of manufactured home sites. The Company also
owns approximately 490 rental units which are rented to
residents. Rental and related income is recognized on the
accrual basis.
Sale of manufactured homes is recognized on the full accrual
basis when certain criteria are met. These criteria include the
following: (a) initial and continuing payment by the buyer must
be adequate: (b) the receivable, if any, is not subject to
future subordination; (c) the benefits and risks of ownership are
substantially transferred to the buyer; and (d) the Company does
not have a substantial continued involvement with the home after
the sale. Alternatively, when the foregoing criteria are not
met, the Company recognizes gains by the installment method.
Interest income on loans receivable is not accrued when, in the
opinion of management, the collection of such interest appears
doubtful.
NET INCOME PER SHARE - Basic net income per share is calculated
by dividing net income by the weighted-average number of common
shares outstanding during the period (7,600,266, 7,457,636 and
7,339,684 in 2002, 2001 and 2000, respectively). 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
(7,677,200, 7,496,371 and 7,341,078 in 2002, 2001 and 2000,
respectively) (See Note 6). Options in the amount of 76,934,
38,735, and 1,394 for 2002, 2001, and 2000, respectively, are
included in the diluted weighted average shares outstanding.
STOCK OPTION PLANS - Stock option plans are accounted for under
the intrinsic value based method as prescribed by Accounting
Principles Board (APB) Opinion No. 25, "Accounting for Stock
Issued to Employees". As such, compensation expense would be
recorded on the date of grant only if the current market price on
the underlying stock exceeds the exercise price. The following
are the pro forma disclosures required by SFAS No. 123,
"Accounting for Stock-Based Compensation," which assumes the fair
value based method of accounting had been adopted:
2002 2001 2000
Net Income(Loss)as Reported $6,512,212 $5,550,488 $5,189,371
Compensation expense if the
fair value method had been
applied 8,815 63,861 71,590
Net Income (Loss) Pro forma 6,503,397 5,486,627 5,117,781
Net Income (Loss) per Share:
Basic - As reported .86 .74 .71
- Pro forma .86 .74 .70
Diluted - As reported .85 .74 .71
- Pro forma .85 .73 .70
-39-
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (CONT'D.)
The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions used for grants in 2002,
2001 and 2000 dividend yield of 6.75% in 2002 and 8% for 2001
and 2000; expected volatility of 12.77% in 2002 and 25% in 2001
and 2000; risk-free interest rates of 3.40%, 4.29% and 6.50% in
2002, 2001 and 2000, respectively; and expected lives of 8 years
in 2002 and 5 years in 2001 and 2000.
TREASURY STOCK - Treasury stock is accounted for under the cost
method.
OTHER COMPREHENSIVE INCOME - Comprehensive income consists of net
income and net unrealized gains or losses on securities available
for sale and is presented in the consolidated statements of
shareholders' equity.
RECLASSIFICATION - Certain amounts in the financial statements
for the prior years have been reclassified to conform to the
statement presentation for the current year.
NOTE 3 - INVESTMENT PROPERTY AND EQUIPMENT
On October 1, 2002, the Company sold its vacant land
consisting of 65 acres in Chester County, Pennsylvania. Net
proceeds from the sale amounted to approximately $1,385,000,
resulting in a realized gain of $661,000.
The following is a summary of accumulated depreciation by
major classes of assets:
December 31, December 31,
2002 2001
___________ ___________
Site and Land
Improvements $28,022,091 $26,083,752
Buildings and
Improvements 1,599,404 1,511,066
Rental Homes and
Accessories 2,466,630 2,182,822
Equipment and Vehicles 2,881,328 2,571,366
___________ ___________
Total Accumulated
Depreciation $34,969,453 $32,349,006
=========== ===========
NOTE 4 - SECURITIES AVAILABLE FOR SALE
The Company's securities available for sale consist
primarily of debt securities and common and preferred stock of
other REITs. The Company does not own more than 10% of the
outstanding shares of any of these securities, nor does it have
controlling financial interest.
-40-
NOTE 4 - SECURITIES AVAILABLE FOR SALE, (CONT'D.)
The following is a summary of securities available for sale
at December 31, 2002 and 2001:
2002 2001
Market Market
Cost Value Cost Value
______ ______ ______ ______
Equity Securities:
Monmouth Real Estate
Investment Corporation*
(738,942 and 548,501
Shares at December 31,
2002 and 2001,
respectively $4,404,622 $5,113,476 $3,134,889 $3,537,834
Monmouth Capital
Corporation*
(73,575 and 24,206
shares at December 31,
2002 and 2001,
respectively) 230,864 255,304 62,076 65,839
Preferred Stock 15,599,262 18,012,877 12,623,026 15,219,657
Other Equity Securities 6,320,593 7,106,186 5,155,709 5,642,005
Debt Securities (maturing
in 2009) 2,241,198 2,297,125 1,401,047 1,452,413
_________ _________ __________ __________
$28,796,539 $32,784,968 $22,376,747 $25,917,748
========== ========== ========== ===========
* Related entity - See Note 9.
Gross unrealized gains on debt securities amounted to
$55,927 and $51,366 as of December 31, 2002 and 2001,
respectively. Gross unrealized gains on equity securities
amounted to $4,033,203 and $3,578,486 as of December 31, 2002 and
2001, respectively. Gross unrealized losses on equity securities
amounted to $100,701 and $88,851 as of December 31, 2002 and
2001, respectively.
During the years ended December 31, 2002, 2001 and 2000,
gross gains on sales of securities amounted to $823,573,
$737,417, and $257,142, respectively. During the year ended
December 31, 2002, 2001 and 2000, gross losses on sales of
securities amounted to $28,623, $74,144 and $-0-. During the
year ended December 31, 2001, the Company also 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.
Dividend income for the years ended December 31, 2002, 2001 and
2000 amounted to $2,376,286, $1,910,909, and $1,397,849,
respectively. Interest income for the years ended December 31,
2002, 2001 and 2000 amounted to $490,856, $277,521, and
$349,405, respectively.
-41-
NOTE 5 - LOANS AND MORTGAGES PAYABLE
LOANS PAYABLE
During 2002 and 2001, the Company purchased securities on
margin. The margin loan interest rate at December 31, 2002 and
2001 was 3% and 3.875%, respectively and is due on demand. At
December 31, 2002 and 2001, the margin loan amounted to
$9,165,645 and $8,411,421, respectively, and is secured by
investment securities with a market value of $32,784,968 and
$25,917,748, respectively.
The Company has a $2,000,000 agreement with Transamerica
Commercial Finance Corporation (Transamerica) to finance
inventory purchases. The interest rates range from prime (with a
minimum of 6%) for each advance to prime plus 2% after one year.
Advances under this line of credit were secured by the
manufactured homes for which the advances were made. As of
December 31, 2002, the amount outstanding with Transamerica was
$908,340.
The Company also has miscellaneous loans payable for
equipment and vehicles and inventory totaling $284,980.
UNSECURED LINE OF CREDIT
The Company has a $2,000,000 unsecured line of credit with
Fleet Bank, all of which was utilized at December 31, 2002. The
interest rate on this line of credit is prime. This line of
credit expires on June 15, 2004.
MORTGAGES PAYABLE
The following is a summary of mortgages payable at December
31, 2002 and 2001:
Interest
Property Due Date Rate 2002 2001
________ ________ ________ ________
Allentown 12-01-11 6.36% $5,675,439 $5,767,117
Cranberry Village 08-02-04 7.86% 2,309,000 2,370,693
D & R Village 05-01-03 7.5% 3,188,122 3,289,479
Fairview Manor 07-27-07 6.39% 3,960,632 2,500,000
Forest Park Village 08-02-04 7.86% 3,694,400 3,793,109
Laurel Woods 10-10-06 6.38% 1,695,862 1,739,711
Port Royal Village 04-01-12 7.36% 5,330,337 -0-
Sandy Valley 03-01-04 7% 3,615,247 3,726,479
Waterfalls Village 01-01-08 4.625% 2,762,313 2,852,354
Various
(4 properties) 12-01-05 7.5% 11,090,532 12,613,083
__________ __________
TOTAL MORTGAGES PAYABLE $43,321,884 $38,652,025
========== ==========
At December 31, 2002 and 2001, mortgages are collateralized
by real property with a carrying value of $40,409,176 and
$34,704,950, respectively, before accumulated depreciation and
amortization. Interest costs amounting to $162,600, $146,000,
and $180,600 were capitalized during 2002, 2001 and 2000,
respectively, in connection with the Company's expansion program.
-42-
NOTE 5 - LOANS AND MORTGAGES PAYABLE, (CONT'D.)
RECENT FINANCING
On September 24, 2001, the Company obtained a $1,750,000
mortgage with First Union Bank for the acquisition of Laurel
Woods. This mortgage payable is at an effective interest rate of
6.38% and is due October 10, 2006.
On November 6, 2001 the Company obtained a $5,775,000 Fannie
Mae mortgage at an interest rate of 6.36% for a ten-year term
with a twenty-five year amortization schedule. This loan is
secured by Allentown Mobile Home Community in Memphis, Tennessee.
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.
Effective January 1, 2003, the Company extended the
Waterfalls Village mortgage for an additional five years. The
interest rate was reset to 4.625%.
The aggregate principal payments of all mortgages payable
are scheduled as follows:
2003 $ 4,538,273
2004 10,431,309
2005 10,217,013
2006 1,976,131
2007 3,841,524
Thereafter 12,317,634
___________
Total $43,321,884
===========
NOTE 6 - EMPLOYEE STOCK OPTIONS
The Company maintains Stock Option Plans for officers and
key employees to purchase up to 750,000 shares of common stock.
Options may be granted any time up to December 31, 2003. No
option shall be available for exercise beyond ten years. All
options are exercisable after one year from the date of grant.
The option price shall not be below the fair market value at date
of grant. Cancelled or expired options are added back to the
"pool" of shares available under the plan.
-43-
NOTE 6 - EMPLOYEE STOCK OPTIONS, (CONT'D.)
A summary of the status of the Company's stock option plans
as of December 31, 2002, 2001 and 2000 and changes during the
years then ended are as follows:
2002 2001 2000
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
_______ _______ _______ _______ _______ _______
Outstanding at
beginning of
year 440,200 $10.44 433,500 $10.45 396,500 $ 10.59
Granted 68,000 12.73 62,700 10.49 61,000 8.73
Exercised (39,700) 10.59 (14,000) 10.37 -0- -0-
Expired (80,500) 13.06 (42,000) 10.68 (24,000) 8.38
_______ _______ _______
Outstanding
at end of
year 388,000 10.28 440,200 10.44 433,500 10.45
======= ======= =======
Options
Exercisable
at end of
year 320,000 377,500 372,500
======= ======= =======
Weighted-
Average
Fair value
of options
granted
during the
year .35 1.18 1.00
======= ======= =======
The following is a summary of stock options outstanding as
of December 31, 2002:
Date of Number of Number of Option Expiration
Grant Employees Shares Price Date
_________ _________ _________ _______ _________
01/05/95 2 75,000 8.25 01/05/05
01/08/98 1 25,000 12.75 01/08/03
08/05/98 3 20,000 10.00 08/05/03
08/05/98 1 25,000 11.00 08/05/03
01/05/99 1 25,000 11.5625 01/05/04
09/28/99 6 29,000 8.8125 09/28/04
01/06/00 1 25,000 9.0625 01/06/05
07/17/00 6 34,000 8.50 07/17/05
01/02/01 1 25,000 10.3125 01/02/06
10/04/01 10 37,000 10.60 10/04/09
01/04/02 1 25,000* 12.95 01/04/10
06/20/02 12 43,000* 12.60 06/20/10
_________
388,000
=========
* Unexercisable
-44-
NOTE 6 - EMPLOYEE STOCK OPTIONS, (CONT'D.)
During the year ended December 31, 2002, eight employees
exercised their stock options and purchased 39,700 shares for a
total of $420,613. 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. The balance of these notes receivable
at December 31, 2002 amounted to $92,000, collateralized by 8,000
shares.
As of December 31, 2002, there were 227,300 shares available
for grant under these plans.
NOTE 7 - TREASURY STOCK
During the years ended December 31, 2002 and 2001, the
Company purchased 46,000 and 29,400 shares, respectively, of its
own stock for a total cost of $603,024 and $307,792,
respectively.
NOTE 8 - 401(K) PLAN
Any full-time employees who are over 21 years old and have
completed one year of service (as defined) are eligible for the
Company's 401(k) Plan (Plan). Under this Plan, an employee may
elect to defer his/her compensation (up to a maximum of 15%) and
have it contributed to the Plan. Employer contributions to the
Plan are at the discretion of the Company. During 2002, 2001 and
2000, the Company made matching contributions to the Plan of up
to 50% of the first 6% of employee salary. This amounted to
$42,411, $48,243 and $41,194 for 2002, 2001 and 2000,
respectively.
NOTE 9 - RELATED PARTY TRANSACTIONS AND OTHER MATTERS
TRANSACTIONS WITH MONMOUTH REAL ESTATE INVESTMENT CORPORATION
During 2002, 2001 and 2000, the Company purchased shares of
Monmouth Real Estate Investment Corporation (MREIC) common stock
primarily through its Dividend Reinvestment and Stock Purchase
Plan (See Note 4). There are five Directors of the Company who
are also Directors and shareholders of MREIC.
TRANSACTIONS WITH MONMOUTH CAPITAL CORPORATION AND THE MOBILE
HOME STORE, INC.
During 2002, 2001 and 2000, the Company purchased shares of
Monmouth Capital Corporation (MCC) common stock primarily through
its Dividend Reinvestment and Stock Purchase Plan (See Note 4).
Seven directors of the Company are also directors and
shareholders of MCC.
Prior to April 1, 2001, The Mobile Home Store, Inc. (MHS), a
wholly-owned subsidiary of MCC, sold and financed the sales of
manufactured homes. MHS paid the Company market rent on sites
where MHS had a home for sale. Total site rental income from MHS
amounted to $33,370, and $109,550, respectively, for the years
ended December 31, 2001 and 2000.
-45-
NOTE 9 - RELATED PARTY TRANSACTIONS AND OTHER MATTERS, (CONT'D.)
Effective April 1, 1996 through April 1, 2001, MHS leased
space from the Company to be used as sales lots, at market rates,
at most of the Company's communities. Total rental income
relating to these leases amounted to $38,370 and $153,480 for
the years ended December 31, 2001 and 2000, respectively.
During 2001 and 2000, the Company had approximately $49,000,
and $52,000 respectively, of rental homes that were sold to MHS
at book value.
During 2002, 2001 and 2000, the Company purchased from MHS
at its cost, 2, 3, and 11 homes, respectively totaling $43,181
$47,953, and $201,399, respectively to be used as rental homes.
On March 30, 2001, the Company also purchased at carrying value
all of the remaining inventory of MHS. This amounted to
$2,261,624. The Company also assumed the inventory financing of
$1,833,871.
SALARY, DIRECTORS', MANAGEMENT AND LEGAL FEES
During the years ended December 31, 2002, 2001 and 2000,
salary, Directors', management and legal fees to Mr. Eugene W.
Landy and the law firm of Landy & Landy amounted to $162,800,
$161,600 and $160,600, respectively.
OTHER MATTERS
The Company has a three-year employment agreement and a five-
year employment agreement with two of its executive officers.
The agreements provide for base compensation, bonuses and fringe
benefits, in addition to specified severance and retirement
benefits. The Company is accruing these benefits over the terms
of the agreements. Included in general and administrative
expense for the year ended December 31, 2000 was $40,000 in
expense relating to severance and retirement benefits.
In August, 1999, the Company entered into a lease for its
corporate offices. The lease is for a five-year term at market
rates with monthly lease payments of $12,000, plus its
proportionate share of real estate taxes and common area
maintenance. The lessor of the property is owned by certain
officers and directors of the Company. The lease payments and
the resultant lease term commenced on May 1, 2000. Approximately
50% of the monthly lease payment of $12,000, plus its
proportionate share of real estate taxes and common area
maintenance is reimbursed by other related entities utilizing the
leased space (MCC and MREIC).
NOTE 10 - DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
The Company has a Dividend Reinvestment and Stock Purchase
Plan (DRIP). Under the terms of the DRIP, shareholders who
participate may reinvest all or part of their dividends in
additional shares of the Company at approximately 95% of the
market price. Shareholders may also purchase additional shares
at approximately 95% of their market price by making optional
cash payments. Generally, dividend reinvestments and purchases
of shares are made quarterly on March 15, June 15, September 15
and December 15.
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.
-46-
NOTE 10 - DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN,
(CONT'D.)
Amounts received and shares issued in connection with the
DRIP for the years ended December 31, 2002, 2001 and 2000 were as
follows:
2002 2001 2000
______ ______ ______
Amounts
Received/Dividends
Reinvested $1,654,949 $1,686,031 $1,866,103
Number of Share
Issued 135,418 163,491 227,945
NOTE 11 - DISTRIBUTIONS
The following dividends were paid to shareholders during the
three years ended December 31, 2002, 2001 and 2000:
2002 2001 2000
Quarter ____________________ _____________________ ___________________
Ended Amount Per Share Amount Per Share Amount Per Share
_______ ________ ________ ________ ________ ________ ________
March 31 $1,602,746 $.2125 $1,442,387 $ .1950 $1,371,130 $ .1875
June 30 1,705,309 .2150 1,466,787 .1975 1,376,095 .1875
September 30 1,581,064 .2175 1,494,309 .2000 1,396,844 .1900
December 31 1,679,176 .2200 1,577,057 .2100 1,411,872 .1925
__________ ________ __________ ________ __________ _______
$6,568,295 $.8650 $5,980,540 $ .8025 $5,555,941 $ .7575
========== ======== ========== ======== ========== =======
Total distributions to shareholders for 2002 amounted to
$6,568,295, or $.8650 per share, of which $.6738 was taxed as
ordinary income and $.1912 was taxed as a long-term capital gain.
This amount does not include the dividend resulting from the
discount on shares purchased through the Company's Dividend
Reinvestment and Stock Purchase Plan.
NOTE 12 - FEDERAL INCOME TAXES
The Company elected to be taxed as a REIT. As the Company
has distributed all of its income currently, no provision has
been made for Federal income or excise taxes for the years ended
December 31, 2002, 2001 and 2000.
NOTE 13 - LEGAL MATTERS
There are no lawsuits pending against the Company
that management believes will have a material effect on the
financial condition or results of operations of the Company.
In the normal course of business, the Company is a
Defendant in various legal cases, all of which are being defended
by the Company's insurance carrier.
-47-
NOTE 14 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company is required to disclose certain information
about fair values of financial instruments, as defined in SFAS
No. 107, "Disclosures About Fair Value of Financial Instruments".
Limitations
Estimates of fair value are made at a specific point in
time, based upon, where available, relevant market prices and
information about the financial instrument. Such estimates do
not include any premium or discount that could result from
offering for sale at one time the Company's entire holdings of a
particular financial instrument. All of the Company's securities
available for sale have quoted market prices. However, for a
portion of the Company's other financial instruments, no quoted
market value exists. Therefore, estimates of fair value are
necessarily based on a number of significant assumptions (many of
which involve events outside the control of management). Such
assumptions include assessments of current economic conditions,
perceived risks associated with these financial instruments and
their counterparties, future expected loss experience and other
factors. Given the uncertainties surrounding these assumptions,
the reported fair values represent estimates only and, therefore,
cannot be compared to the historical accounting model. Use of
different assumptions or methodologies is likely to result in
significantly different fair value estimates.
The fair value of cash and cash equivalents and notes
receivables approximates their current carrying amounts since all
such items are short-term in nature. The fair value of
securities available for sale is based upon quoted market values.
For 2002, the fair and carrying value of mortgages payable
amounted to $43,543,545 and $43,321,884. For 2001, the fair and
carrying values of mortgages payable amounted to $38,719,558 and
$38,652,025, respectively. The fair value of mortgages payable
is based upon discounted cash flows at current market rates for
instruments with similar remaining terms.
NOTE 15 - SUPPLEMENTAL CASH FLOW AND COMPREHENSIVE INCOME
INFORMATION
Cash paid during the years ended December 31, 2002, 2001 and
2000 for interest was $3,476,935, $2,971,894 and $2,805,401,
respectively.
During the years ended December 31, 2002, 2001 and 2000,
land development costs of $697,627, $954,585 and $1,063,099,
respectively were transferred to investment property and
equipment and placed in service.
During the years ended December 31, 2002, 2001 and 2000, the
Company had dividend reinvestments of $1,654,949, $1,686,031 and
$1,866,103, respectively which required no cash transfers.
-48-
NOTE 15 - SUPPLEMENTAL CASH FLOW AND COMPREHENSIVE INCOME
INFORMATION, (CONT'D.)
The following are the reclassification adjustments related to
securities available for sale included in Other Comprehensive
Income:
2002 2001 2000
_____ _____ _____
Unrealized holding gains
(losses) arising during
the year $1,242,378 $4,562,120 $1,428,525
Less: reclassification
adjustment for gains
realized in income (794,950) (530,324) (257,142)
_________ _________ _________
Net unrealized
gains(losses) $447,428 $4,031,796 $1,171,383
========= ========= =========
NOTE 16 - RECENT ACCOUNTING PRONOUNCEMENTS
In December, 2002, the Financial Accounting Standards Boards
(FASB) issued Statement of Financial Accounting Standards (SFAS)
No. 148, "Accounting for Stock-Based Compensation, Transition and
Disclosure." SFAS No. 148 provides alternative methods of
transition for a voluntary change to the fair value based method
of accounting for stock-based employee compensation. SFAS No.
148 also requires that disclosures of the pro forma effect of
using the fair value method of accounting for stock-based
employee compensation be displayed more prominently and in a
tabular format. Additionally, SFAS No. 148 requires disclosure
of the pro forma effect in interim financial statement. The
additional disclosure requirements of SFAS No. 148 are effective
for fiscal years ended after December 15, 2002. The Company has
adopted the expanded disclosure requirements as of December 31,
2002.
-49-
UNITED MOBILE HOMES, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2002
Column A Column B Column C Column D
Initial Cost
Site, Land Capitalization
& Building Subsequent to
Description Encumbrances Land Improvements Acquisition
_______________________________________________________________________________
Memphis, TN $5,675,439 $250,000 $ 2,569,101 $ 1,351,939
Greenfield Center, NY -0- 37,500 232,547 2,128,168
Vineland, NJ (3) 320,000 1,866,323 816,859
Duncansville, PA -0- 60,774 378,093 459,511
Cranberry Township,PA 2,309,000 181,930 1,922,932 229,409
Clifton Park, NY 3,188,122 391,724 704,021 1,180,474
Apollo, PA -0- 670,000 1,336,600 782,820
Cranberry Township, PA 3,694,400 75,000 977,225 1,113,256
Millville, NJ 3,960,632 216,000 1,166,517 4,275,636
Kutztown, PA -0- 145,000 1,695,041 4,229,199
Inkerman, PA -0- 572,500 2,151,569 2,485,717
Monticello, NY -0- 235,600 1,402,572 1,852,750
Navarre, OH -0- 290,000 1,457,673 712,771
Cresson, PA 1,695,862 432,700 2,070,426 135,222
Memphis, TN -0- 78,435 810,477 1,465,924
West Grove, PA (3) 175,000 990,515 912,295
Carlisle, PA -0- 37,540 198,321 917,876
Belle Vernon, PA 5,330,337 150,000 2,491,796 2,678,785
Marion, OH -0- 236,000 785,293 2,308,521
Athens, OH -0- 67,000 1,326,800 221,595
Magnolia, OH 3,615,247 270,000 1,941,430 1,734,314
Jackson, NJ (3) 100,095 602,820 1,295,743
Hamburg, NY 2,762,313 424,000 3,812,000 123,467
Eatontown, NJ (3) 157,421 280,749 201,949
Caledonia, OH -0- 260,000 1,753,206 448,434
__________ __________ __________ __________
32,231,352 $5,834,219 $34,924,046 $34,062,634
========== ========== ==========
Various 11,090,532 (3)
__________
$43,321,884
==========
-50A-
UNITED MOBILE HOMES, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2002
Column A Column E (1) (2) Column F (1)
Gross Amount at Which Carried at 12/31/02
Site, Land &
Building Accumulated
Description Land Improvements Total Depreciation
Memphis, TN $250,000 $3,921,040 $4,171,040 $2,735,686
Greenfield Center, NY 122,865 2,275,350 2,398,215 1,093,550
Vineland, NJ 408,206 ,594,976 3,003,182 1,843,046
Duncansville, PA 60,774 837,604 898,378 579,613
Cranberry Township, PA 181,930 2,152,340 2,334,270 1,706,095
Clifton Park, NY 391,724 1,884,495 2,276,219 1,011,363
Apollo, PA 670,000 2,119,420 2,789,420 553,679
Cranberry Township, PA 75,000 2,090,481 2,165,481 1,683,798
Millville, NJ 631,137 5,027,016 5,658,153 1,728,984
Kutztown, PA 404,239 5,665,001 6,069,240 1,501,360
Inkerman, PA 572,500 4,637,286 5,209,786 1,410,727
Monticello, NY 318,472 3,172,450 3,490,922 1,342,161
Navarre, OH 290,000 2,170,444 2,460,444 1,145,880
Cresson, PA 432,700 2,205,648 2,638,348 98,006
Memphis, TN 78,435 2,276,401 2,354,836 1,304,164
West Grove, PA 175,000 1,902,81 2,077,810 1,462,614
Carlisle, PA 145,473 1,008,264 1,153,737 713,999
Belle Vernon, PA 150,000 5,170,581 5,320,581 3,218,483
Marion, OH 236,000 3,093,814 3,329,814 1,210,555
Athens, OH 67,000 1,548,395 1,615,395 351,942
Magnolia, OH 270,000 3,675,744 3,945,744 2,249,508
Jackson, NJ 100,095 1,898,563 1,998,658 1,511,973
Hamburg, NY 424,000 3,935,467 4,359,467 723,879
Eatontown, NJ 135,420 504,699 640,119 371,566
Caledonia, OH 260,000 2,201,640 2,461,640 521,347
__________ __________ __________ __________
$6,850,970 $67,969,929 $74,820,898 $32,073,978
========== ========== ========== ==========
-50B-
UNITED MOBILE HOMES, INC.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2002
Column A Column G Column H Column I
______________________________________________________________
Date of Date Depreciable
Description Construction Acquired Life
______________________________________________________________
Memphis, TN prior to 1980 1986 3 to 27.5
Greenfield Center, NY prior to 1970 1977 3 to 27.5
Vineland, NJ 1973 1986 3 to 27.5
Duncansville, PA 1961 1979 3 to 27.5
Cranberry Township, PA 1974 1986 5 to 27.5
Clifton Park, NY prior to 1972 1978 3 to 27.5
Apollo, PA 1980 1995 5 to 27.5
Cranberry Township, PA prior to 1980 1982 3 to 27.5
Millville, NJ prior to 1980 1985 3 to 27.5
Kutztown, PA 1971 1979 5 to 27.5
Inkerman, PA 1970 1992 5 to 27.5
Monticello, NY 1972 1988 5 to 27.5
Navarre, OH prior to 1980 1987 5 to 27.5
Cresson, PA prior to 1980 2001 27.5
Memphis, TN 1955 1985 3 to 27.5
West Grove, PA 1971 1974 5 to 27.5
Carlisle, PA 1961 1969 3 to 27.5
Belle Vernon, PA 1973 1983 3 to 27.5
Marion, OH prior to 1950 1986 3 to 27.5
Athens, OH 1980 1996 5 to 27.5
Magnolia, OH prior to 1980 1985 5 to 27.5
Jackson, NJ 1969 1969 3 to 27.5
Hamburg, NY prior to 1980 1997 27.5
Eatontown, NJ prior to 1964 1978 3 to 27.5
Caledonia, OH 1980 1996 5 to 27.5
-50C-
/----------FIXED ASSETS-----------/
(1) Reconciliation: 12/31/02 12/31/01 12/31/00
________ ________ ________
Balance - Beginning
of Year $73,015,447 $68,265,859 $66,608,020
__________ __________ __________
Additions:
Acquisitions -0- 2,503,126 -0-
Improvements 2,952,693 2,710,384 2,017,051
Depreciation -0- -0- -0-
__________ __________ __________
Total Additions 2,952,693 5,213,510 2,017,051
__________ __________ __________
Deletions 1,147,241 463,922 359,212
__________ __________ __________
$74,820,899 $73,015,447 $68,265,859
Balance - End of Year ========== ========== ==========
/-----ACCUMULATED DEPRECIATION-----/
Reconciliation: 2002 12/31/01 12/31/00
______ ______ ______
Balance - Beginning
of Year $29,763,492 $27,526,792 $25,357,748
__________ __________ __________
Additions:
Acquisitions -0- -0- -0-
Improvements -0- -0- -0-
Depreciation 2,433,867 2,360,623 2,260,130
__________ __________ __________
Total Additions 2,433,867 2,360,623 2,260,130
__________ __________ __________
Deletions 123,381 123,923 91,086
__________ __________ __________
Balance - End of Year $32,073,978 $29,763,492 $27,526,792
========== ========== ==========
(2) The aggregate cost for Federal tax purposes approximates
historical cost.
(3) Represents one mortgage note payable secured by five
properties.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
UNITED MOBILE HOMES, INC.
BY: /s/Eugene W. Landy
EUGENE W. LANDY
Chief Executive Officer
Dated: March 15, 2003
Pursuant to the requirements of the Securities and Exchange Act
of 1934, this report has been duly signed below by the following
persons on behalf of the registrant and in the capacities and on
the date indicated.
Title Date
/s/Eugene W. Landy Chief Executive
EUGENE W. LANDY Officer and
Director March 15, 2003
/s/Samuel A. Landy President and
SAMUEL A. LANDY Director March 15, 2003
/s/Anna T. Chew Vice President and
ANNA T. CHEW Chief Financial
Officer
and Director March 15, 2003
/s/Ernest V. Secretary/Treasurer
Bencivenga and
ERNEST V. BENCIVENGA Director March 15, 2003
/s/Charles P. Director
Kaempffer
CHARLES P. KAEMPFFER March 15, 2003
/s/James Mitchell Director
JAMES MITCHELL March 15, 2003
/s/Richard H. Molke Director
RICHARD H. MOLKE March 15, 2003
/s/Eugene Rothenberg Director
EUGENE ROTHENBERG March 15, 2003
/s/Robert G. Sampson Director
ROBERT G. SAMPSON March 15, 2003
-51-