10-K 1 0001.txt 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, 2000 [ ] 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, 2001 was $71,607,738. 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, 2001 was $52,082,734. The number of shares outstanding of issuer's common stock as of March 14, 2001 was 7,382,241 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-four manufactured home communities containing 5,759 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 95% 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-one years, the last fifteen 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. -2- 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. The long-term industry trend may be toward condominium conversions. A change from investor community ownership to resident ownership would enhance the value of existing manufactured home communities. All of the Company's communities are located in areas of the country that have not yet accepted this concept. Condominium conversion is a long-term possibility and has no impact on the Company's current operations. Due to recent REIT legislation, the Company expects to sell manufactured homes into its communities effective April 2001. This sales operation was previously performed by Monmouth Capital Corporation, an affiliated entity. 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. -3- 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 2000, the Company purchased 146,400 shares of its own stock at a total cost of $1,222,797. The Company also invests in both debt and equity securities of other REITs. Based on current market conditions, management believes that the price of those REIT shares are at a discount from the value of the underlying properties. The Company from time to time may purchase these securities on margin when the interest and dividend yields exceed the cost of funds. 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 2001 will be consistent with 2000 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. General Risks of Real Estate Ownership 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. -4- Competition for Manufactured Home Community Investments 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. Environmental, Regulatory and Energy Considerations The availability of suitable investments and the cost of construction and operation of manufactured home communities in which the Company may invest may be adversely affected by legislative, regulatory, administrative and enforcement action at the local, state and national levels in the areas, among others, of housing and environmental controls. In addition to possible increasingly restrictive zoning regulations and related land use controls, such restrictions may relate to air, ground and water quality standards, wetlands regulations, noise pollution and indirect environmental impacts such as increased motor vehicle activity. 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. The Company must also comply with certain Federal Environmental Protection Agency Regulations which may be more stringent than the state and local governmental regulations. The costs of such testing are included in the Company's operating expenses. As of the date of this report, there are no enforcement actions pending by any federal, state or local environmental agencies and management believes that the Company is in compliance with all such regulations. Currently, the Company is not subject to radon or asbestos monitoring requirements. In its normal course of business, the Company does not incur costs related to local or state zoning issues. However, zoning regulations often restrict expansion of the Company's communities, but allow continuing operation of existing communities. 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. Number of Employees On March 14, 2001, 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. -5- 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-four manufactured home communities containing 5,759 sites. The following is a brief description of the properties owned by the Company: Number of 2000 Current Rent Average Per Name of Community Sites Occupancy Month Per Site Allentown 414 89% $247 4912 Raleigh-Millington Road Memphis, TN 38128 Brookview Village 133 85% $310 Route 9N Greenfield Center, NY 12833 Cedarcrest 283 97% $361 1976 North East Avenue Vineland, NJ 08360 Cranberry Village 201 93% $330 201 North Court Cranberry Township, PA 16066 Cross Keys Village 133 92% $217 Old Sixth Avenue Road, RD #1 Duncansville, PA 16635 D & R Village 244 94% $347 Route 146, RD 13 Clifton Park, NY 12065 Fairview Manor 276 70% $351 2110 Mays Landing Road Millville, NJ 08332 Forest Park Village 252 92% $285 724 Slate Avenue Cranberry Township, PA 16066 Heather Highlands 457 68% $215 109 S. Main Street Pittston, PA 18640 Highland Estates 269 81% $347 60 Old Route 22 Kutztown, PA 19530 Kinnebrook 212 87% $349 201 Route 17B Monticello, NY 12701 -6- Number of 2000 Current Rent Average Per Name of Community Sites Occupancy Month Per Site Lake Sherman Village 210 97% $266 7227 Beth Avenue, SW Navarre, OH 44662 Memphis Mobile City 168 88% $224 3894 N. Thomas Street Memphis, TN 38127 Oxford Village 224 100% $381 2 Dolinger Drive West Grove, PA 19390 Pine Ridge Village 137 94% $318 147 Amy Drive Carlisle, PA 17013 Pine Valley Estates 218 84% $220 700 Pine Valley Estates Apollo, PA 15613 Port Royal Village 427 84% $247 400 Patterson Lane Belle Vernon, PA 15012 River Valley Estates 214 91% $197 2066 Victory Road Marion, OH 43302 Sandy Valley Estates 364 95% $242 801 First, Route #2 Magnolia, OH 44643 Southwind Village 250 97% $265 435 E. Veterans Highway Jackson, NJ 08527 Spreading Oaks Village 153 88% $175 7140-29 Selby Road Athens, OH 45701 Waterfalls Village 202 97% $344 3450 Howard Road Hamburg, NY 14075 Woodlawn Village 157 98% $450 Route 35 Eatontown, NJ 07724 Wood Valley 161 94% $200 1493 N. Whetstone River Road Caledonia, OH 43314 -7- 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 14 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. 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 5,759 sites, the Company operates approximately 450 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 700 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 $68,000,000 (at original cost) in manufactured home properties. These consist of 24 separate manufactured home communities and related equipment and improvements. There are 5,759 sites in the 24 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, Allentown with 414 sites and Heather Highlands with 457 sites are the larger properties. The following is a description of these properties: PORT ROYAL VILLAGE The Company acquired Port Royal Village in 1984. This is a 427-space manufactured home community located in Belle Vernon, Pennsylvania. The Company believes this to be a sound acquisition for the following reasons: (a) the community is well-maintained with city water and its own sewer plant, as well as a swimming pool and community building; (b) the community has approximately 84% occupancy; and (c) the community generates substantial revenues and net operating income with an average monthly gross rent of $247 per site. Management believes that this community is a successful and valuable manufactured home community. -8- SANDY VALLEY ESTATES The Company acquired Sandy Valley Estates in 1985. This is a 364- space manufactured home community located in Magnolia, Ohio. The Company believes this to be an excellent community because (a) the community is well-maintained with municipal sewer; (b) the community has its own well system; (c) the community has approximately 95% occupancy; and (d) the community generates revenues with an average monthly rental of $242 per site, which rents are competitive with the other manufactured home communities in the area. The Company believes that it is an excellent investment. CEDARCREST On July 15, 1986, the Company paid $760,000 to acquire 94.05% of the partnership interest in a limited partnership that owned a 283-space manufactured home community located in Vineland, New Jersey. On June 30, 1988 the Company paid $40,000 to acquire an additional 4.95% of the partnership interest, brining the Company's total ownership to 99%. During 1989 the Company acquired the remaining 1% interest. The Company believes this to be an excellent community for the following reasons: (a) the community is well maintained; (b) the community has municipal sewer and water service; and (c) the community is 97% occupied. Rents average $361 per month per site and they are competitive with other communities in the area. ALLENTOWN On September 15, 1986 the Company paid $850,000 to all of the limited partners to acquire 97% of the partnership interests in a limited partnership that owned a 414-space manufactured home community located in Memphis, Tennessee. Royal Green, Inc., the General Partner of this partnership, retained its 3% interest in the partnership until January 1990 at which time the Company purchased the 3% interest for $25,500. The Company believes this to be a sound investment for the following reasons: (a) the property is well-maintained; (b) the community has municipal sewer and water service; and (c) rents are $247 per month per site and are competitive with other manufactured home communities in the area. Current occupancy is approximately 89%. The Company is continuing its effort to bring occupancy to 90% or higher. In the future, the Company anticipates that it will be able to increase occupancy. -9- HEATHER HIGHLANDS On January 30, 1992, the Company acquired an 88.36% interested in a limited partnership operating a 457-space manufactured home community located in Pittston, Pennsylvania. This partnership has partners who are also officers, directors and/or shareholders of the Company. Mr. Eugene Landy, Chairman of the Board, retained the remaining 11.64% limited partnership interest. The purchase price was approximately $2,500,000. This purchase was based on an independent appraisal of fair market value. In January 1996, the Company purchased the remaining 11.64% partnership interest for $132,600. This price per unit was the same price previously paid to non-affiliated sellers. The Company anticipates that the community will ultimately have 415 sites since the use of double-wide units reduces the total number of available sites. The Company believes this to be a sound investment for the following reasons: (a) the property is well-maintained; (b) the community has municipal sewer and water service; and (c) rents are $215 per month per site and are competitive with other manufactured home communities in the area. Current occupancy is approximately 68%. The Company is continuing its efforts to bring occupancy to 90% or higher. Mortgages on Properties The Company has mortgages on various properties. The maturity dates of these mortgages range from the year 2002 to 2005. Interest varies from fixed rates of 7% to 7.86% with one mortgage at a variable rate of LIBOR plus 155 basis points. The aggregate balances of these mortgages total $32,055,839 at December 31, 2000. (For additional information, see Part IV, Item 14(a)(1)(vi), Note 5 of the Notes to Consolidated Financial Statements - Notes and Mortgages Payable). 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 2000 to a vote of security holders through the solicitation of proxies or otherwise. -10- 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: 2000 1999 1998 HIGH LOW HIGH LOW HIGH LOW First Quarter 8-7/8 7 10-15/16 9-3/16 12-1/2 11-1/4 Second Quarter 8-1/2 7-3/8 10 8-1/4 11-13/16 10-1/2 Third Quarter 9-1/2 8-1/8 9-1/2 8-5/8 11 9-7/8 Fourth Quarter 9-3/4 8-3/8 9 8 10-7/8 9-3/8 On March 14, 2001, the closing price of the Company's stock was $9.70. As of December 31, 2000, there were approximately 1,100 shareholders of the Company's common stock based on the number of record owners. For the years ended December 31, 2000, 1999 and 1998, total dividends paid by the Company amounted to $5,555,941 or $.7575, $5,441,904 or $.75 per share and $5,204,623 or $.7375 per share, respectively. On January 25, 2001, the Company declared a dividend of $.195 per share to be paid on March 15, 2001 to shareholders of record February 15, 2001. 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 95% of its taxable income in the form of a cash distribution to shareholders. -11-
ITEM 6 - SELECTED FINANCIAL DATA December 31, 2000 1999 1998 1997 1996 Income Statement Data: Rental and Related Income $18,640,335 $17,752,823 $16,783,821 $15,330,300 $14,533,218 Income from Community Operations 10,406,979 9,760,550 9,180,332 8,513,206 8,311,469 (Loss) Gain on Sales Of Investment Property and Equipment (37,318) (1,964) 13,095 (10,546) 333,647 Net Income 5,189,372 4,556,136 4,201,691 4,197,258 3,729,526 Net Income Per Share - Basic and Diluted .71 .63 .60 .63 .61 ......................................................................... Balance Sheet Data: Total Assets $62,945,597 $58,575,312 $50,046,649 $43,599,259 $35,875,206 Mortgages Payable 32,055,839 30,419,153 21,411,576 20,111,023 17,351,030 Shareholders' Equity 22,839,426 21,391,307 23,212,813 20,830,541 16,426,145 ......................................................................... Average Number of Shares Outstanding 7,339,684 7,252,774 7,042,701 6,617,479 6,072,637 Funds from Operations * $7,845,529 $7,010,633 $6,591,995 $6,324,536 $5,693,631 Cash Dividends Per Share .7575 .75 .7375 .70 .60 * Defined as net income, excluding gains (or losses) from sales of depreciable assets, plus depreciation. Includes gain on sale of land of $290,303 in 1996. Funds from Operations do not replace net income determined in accordance with generally accepted accounting principles (GAAP) as a measure of performance or net cash flows as a measure of liquidity. Funds from Operations is not a GAAP measure of operating performance and should be considered as a supplemental measure of operating performance used by real estate investment trusts. -12-
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Revenue and Expense 2000 vs. 1999 Rental and related income increased from $17,752,823 for the year ended December 31, 1999 to $18,640,335 for the year ended December 31, 2000 primarily due to rental increases to residents and increased occupancy. During 2000, the Company was able to obtain an average rent increase of approximately 3.3%. Overall occupancy rates are satisfactory with ten manufactured home communities experiencing vacancies over ten percent. Some of these vacancies are the result of expansions completed toward the end of 1999. The Company has completed a 79 site expansion at Fairview Manor, a 40 site expansion at Highland Estates, and a 25 site expansion at Port Royal Village. 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. Community operating expenses increased from $7,992,273 for the year ended December 31, 1999 to $8,233,356 for the year ended December 31, 2000 primarily as a result of increased insurance expense and real estate taxes. The Company's income from community operations continues to show steady growth rising from $9,760,550 in 1999 to $10,406,979 in 2000. General and administrative expenses increased from $1,621,479 in 1999 to $1,852,308 in 2000 primarily as a result of an increase in personnel and occupancy costs. Interest expense increased from $2,105,546 in 1999 to $2,624,801 in 2000. This was primarily as a result of a higher average principal balance outstanding. Interest capitalized on construction in progress amounted to $180,600 and $179,000 for 2000 and 1999, respectively. Interest and dividend income increased from $1,000,789 in 1999 to $1,747,254 in 2000 due to purchases of securities available for sale during 1999 and 2000. Gains on sales of securities available for sale increased from $53,473 in 1999 to $257,142 in 2000. Depreciation expense increased from $2,452,533 for the year ended December 31, 1999 to $2,618,839 for the year ended December 31, 2000 primarily as a result of the completion of the expansions. Other expenses remained relatively stable in 2000 and 1999. -13- Loss on sales of investment property and equipment increased from a loss of $1,964 for the year ended December 31, 1999 to a loss of $37,318 for the year ended December 31, 2000 primarily as a result of the sale of certain older rental units. For the year ended December 31, 2000, the Company reported net income of $5,189,372 as compared to net income of $4,556,136 for the year ended December 31, 1999. 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 2001. 1999 vs. 1998 Rental and related income increased from $16,783,821 for the year ended December 31, 1998 to $17,752,823 for the year ended December 31, 1999 primarily due to rental increases to residents, increased occupancy and expansions to existing communities. During 1999, the Company was able to obtain an average rent increase of approximately 4.5%. Overall occupancy rates are satisfactory with only eleven manufactured home communities experiencing vacancies over ten percent. Some of these vacancies are the result of expansions completed toward the end of the year. Community operating expenses increased from $7,603,489 for the year ended December 31, 1998 to $7,992,273 for the year ended December 31, 1999 primarily as a result of increased expenses, such as advertising, associated with the expansions. The Company's income from community operations continues to show steady growth rising from $9,180,332 in 1998 to $9,760,550 in 1999. General and administrative expenses increased from $1,386,757 in 1998 to $1,621,479 in 1999 primarily as a result of an increase in personnel. Interest expense increased from $1,505,577 in 1998 to $2,105,546 in 1999. This was primarily as a result of a higher average principal balance outstanding. Interest capitalized on construction in progress amounted to $179,000 and $154,000 for 1999 and 1998, respectively. Interest and dividend income increased from $409,457 in 1998 to $1,000,789 in 1999 due to purchases of securities available for sale during 1998 and 1999. Gains on sales of securities available for sale amounted to $53,473 in 1999. Depreciation expense remained relatively stable in 1999 and 1998. -14- Other expenses decreased from $105,460 in 1998 to $77,154 in 1999 due primarily to the write-off in 1998 of unamortized financing costs on the D & R mortgage upon refinancing. Loss/gain on sales of investment property and equipment remained relatively stable in 1999 and 1998. 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 and investment in debt and equity securities of other REITs. The Company generates funds through cash flow from properties 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 $32,055,839 secured by eleven communities and loans payable totaling $5,639,470 primarily secured by investment securities. The Company has a $2,000,000 line of credit with Summit Bank, of which all was available at December 31, 2000. The Company believes that its 24 manufactured home communities have market values in excess of historical cost. Management believes that this provides significant additional borrowing capacity. Net cash provided by operating activities increased from $6,556,937 in 1998 to $6,770,625 in 1999 to $7,171,086 in 2000. Cash flow was primarily used for capital improvements, payment of dividends, purchases of securities available for sale 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. 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. As a REIT, the Company must distribute at least 95% of its taxable income. The Company also invests in debt and equity securities of other REITs. During 2000, the Company purchased approximately $4,300,000 in these securities. The securities portfolio at December 31, 2000 has experienced an approximate 3% decline in value from cost. Management believes that this is temporary in nature. The Company estimates that in 2001 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 2001. -15- The Company has a Dividend Reinvestment and Stock Purchase Plan (Plan). Cash received from the Plan is a significant additional source of liquidity and capital resources. During 2000, the Company paid $5,555,941 in dividends. Amounts received under the Plan amounted to $1,866,103. The success of the Plan resulted in a substantial improvement in the Company's liquidity and capital resources in 2000. 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. 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. 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. -16- 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. At December 31, 2000, the Company had $29,555,839 of fixed rate debt, of which $6,319,159 with an average interest rate of 7.56% matures in 2003, $10,142,053 with an average interest rate of 7.54% matures in 2004 and $13,094,627 with an interest rate of 7.5% matures in 2005. At December 31, 2000, the fair and carrying value of fixed rate mortgage debts amounted to $28,611,420 and $29,555,839, respectively. The Company also has $2,500,000 of variable rate mortgage debt due in 2002. The interest rate on this debt at December 31, 2000 was 8.2362%. In addition, the Company has approximately $5.6 million in variable rate debt due on demand. This debt is primarily a margin loan secured by marketable securities. The interest rate on this margin loan was 8% at December 31, 2000. The carrying value of the Company's variable rate debt approximates fair value at December 31, 2000. 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. -17-
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 __________________________________________________________________________ 2000 March 31 June 30 September 30 December 31 __________________________________________________________________________ Rental & Related Income $ 4,611,582 $ 4,630,873 $ 4,672,427 $ 4,725,453 Income from Community Operations 2,639,064 2,635,491 2,721,779 2,410,645 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 __________________________________________________________________________ 1999 March 31 June 30 September 30 December 31 __________________________________________________________________________ Rental & Related Income $ 4,321,983 $ 4,451,646 $ 4,446,644 $ 4,532,550 Income from Community Operations 2,358,294 2,391,122 2,363,374 2,647,760 Net Income 1,083,153 1,071,653 1,119,211 1,282,119 Net Income per Share- Basic and Diluted .15 .15 .15 .18 __________________________________________________________________________ 1998 March 31 June 30 September 30 December 31 __________________________________________________________________________ Rental & Related Income $ 4,118,835 $ 4,179,675 $ 4,225,218 $ 4,260,093 Income from Community Operations 2,302,499 2,348,817 2,224,582 2,304,434 Net Income 1,051,103 1,066,737 955,431 1,128,420 Net Income per Share- Basic and Diluted .15 .16 .13 .16 ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. -18-
PART III ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Name, Age & Principal Occupation Director Shares Owned Percent Office Held During the Past Five Since Beneficially of Years Stock Ernest V. Financial Consultant; 1969 32,062(1) 0.43% Bencivenga Treasurer and Director Age: 83 (1961 to present) and Secretary/ Secretary (1967 to Treasurer and present) of Monmouth Director Capital Corporation; Treasurer and Director (1968 to present) of Monmouth Real Estate Investment Corporation Anna T. Chew Certified Public 1995 40,859(2) 0.55% Age: 42 Accountant; Controller Vice President (1991 to present) and and Chief Director (1993 to Financial present) of Director Officer and (1993 to present) of Director Monmouth Real Estate Investment Corporation; Controller (1991 to to present) and Director (1995 to present) of Monmouth Capital Corporation. Charles P. Investor; Director (1970 1969 62,317(3) 0.84% Kaempffer to present) of Monmouth Age: 63 Capital Corporation; Director Director (1974 to present) of Monmouth Real Estate Investment Corporation; Vice Chairman and Director (1997 to present) of Community Bank of New Jersey; Director (1989 to 1997) of Sovereign Community Bank (formerly Colonial Bank) Eugene W. Landy Attorney at Law for the 1969 938,023(4) 12.69% Age: 67 firm of Landy & Landy; Chairman of the President and Director Board and (1961 to present) of Director Monmouth Capital Corporation; President and Director (1968 to present) of Monmouth Real Estate Investment Corporation. -19- Name, Age & Principal Occupation Director Shares Owned Percent Office Held During the Past Five Since Beneficially of Years Stock Samuel A. Landy Attorney at Law for the 1992 309,560(5) 4.19% Age: 40 firm of Landy & Landy; President and Director (1989 to Director present) of Monmouth Real Estate Investment Corporation; Director Investment Corporation; Director (1995 to present) of Monmouth Capital Corporation. Richard H. Vice President of Remsco 1986 417,435(6) 5.64% Molke Associates, Inc., a Age: 74 construction firm. Director Eugene Obstetrician and 1977 81,163(7) 1.10% Rothenberg Gynecologist; Investor Age: 68 Director Robert G. Investor; Director (1968 1969 131,468(8) 1.78% Sampson to present) of Monmouth Age: 75 Real Estate Investment Director Corporation; Director (1963 to present) of Monmouth Capital Corporation; General Partner (1983 to present of Sampco, Ltd., an investment group. TOTALS............ 2,012,887 27.22% 1) Includes 8,991 shares held by Mr. Bencivenga's wife and 6,135 shares held in the United Mobile Homes, Inc. 401(k) Plan. 2) Includes 36,800 shares held jointly with Ms. Chew's husband and 4,058 shares held in the United Mobile Homes, Inc. 401(k) Plan. 3) Includes (a) 60,317 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) 69,767 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) 67,285 shares held in the Landy & Landy, Employee's Pension Plan, of which Mr. Landy is a Trustee with power to vote, and (d) 123,640 shares held in the Landy & Landy, Employees' Profit Sharing Plan, of which Mr. Landy is a Trustee with power to vote. Excludes 215,238 shares held by Mr. Landy's adult children in which he disclaims any beneficial interest. 5) Includes (a) 26,996 shares held jointly with Mr. Samuel A. Landy's wife, (b) 22,993 in a custodial account for his sons, (c) 5,500 shares in the Samuel Landy Limited Partnership and (d) 7,151 shares held in the United Mobile Homes, Inc. 401(k) Plan. 6) Includes (a) 41,687 shares owned by Mr. Molke's wife, (b) 163,514 shares in the Richard H. Molke Grantor Retained Annuity Trust dated December 21, 1992, and (c) 163,514 shares in the Louise G. Molke Grantor Retained Annuity Trust dated December 21, 1992. 7) Includes (a) 56,878 shares held by Rothenberg Investment, Ltd. in which Dr. Rothenberg has a beneficial interest. 8) Includes 48,492 shares held by Sampco, Ltd. in which he has a beneficial interest. -20- ITEM 11 - EXECUTIVE COMPENSATION Summary Compensation Table. The following Summary Compensation Table shows compensation paid by the Company for services rendered during 2000, 1999 and 1998 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 Position Year Salary Bonus All Other Options Eugene W. Landy 2000 $150,000 $ - $ 53,876 (1) - Chairman of the 1999 $150,000 $ - $ 52,876 (1) - Board 1998 $ 75,000 $ - $ 173,376 (1) 25,000 Samuel A. Landy 2000 $214,615 $ 8,269 $ 18,432 (2) 25,000 President 1999 $205,000 $ 7,885 $ 15,410 (2) 25,000 1998 $199,650 $ 43,979 $ 18,559 (2) 25,000 Anna T. Chew 2000 $132,635 $ 14,119 $ 16,003 (3) 10,000 Vice President 1999 $120,577 $ 13,654 $ 13,650 (3) 10,000 1998 $110,000 $ 16,231 $ 14,752 (3) 10,000 (1) Represents base compensation of $75,000 in 1998, as well as Directors' fees, fringe benefits and legal fees. Also includes an accrual of $40,000, $40,000 and $80,000 for 2000, 1999 and 1998, respectively 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. -21- 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, 2000: Potential Realized % of Total Price Value at Assumed Annual Options Granted to Per Expiration Rates for Option Term Name Granted Employees Share Date 5% 10% Samuel A. Landy 25,000 41% $ 9.0625 1/06/05 $34,503 $102,915 Anna T. Chew 10,000 16% $ 8.50 7/17/05 $23,500 $ 51,900 The following table sets forth for the executive officers named in the Summary Compensation Table, information regarding stock options outstanding at December 31, 2000: Value of Unexercised Options Number of Unexercised at Year-End Shares Value Options at Year-End Exercisable/ Name Exercised Realized Exercisable/Unexercisable Unexercisable Eugene W. Landy -0- N/A 125,000 / -0- $ 62,500 / $ -0- Samuel A. Landy -0- N/A 125,000 / 25,000 $ 31,250 / $ 10,938 Anna T. Chew -0- N/A 38,000 / 10,000 $ 6,875 / $ 10,000 Compensation of Directors. The Directors receive a fee of $1,000 for each Board meeting attended. Directors also receive a fixed annual fee of $7,600, payable $1,900 quarterly. 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 -22- 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, 1999, the Company and Samuel A. Landy entered into a three-year Employment Agreement under which Mr. Samuel Landy receives an annual base salary of $205,000 for 1999, $215,000 for 2000 and $225,000 for 2001 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. The Company also agrees to loan to Mr. Samuel Landy $100,000 at the Company's corporate borrowing rate with a 5-year maturity and a 15-year principal amortization. Additional amounts, secured by Company stock, may be borrowed at the same terms for the exercise of stock options. 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 Board of Directors. 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. -23- 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, $13,876 in director's fees, fringe benefits and legal fees plus $40,000 accrual for pension and other benefits in 2000). The Committee also reviewed the progress made by Mr. Samuel A. Landy, President. Funds from operations increased by approximately 12%. Mr. Samuel Landy is under an employment agreement with the Company. His base compensation under this contract is $205,000 for 2000. 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. 1995 1996 1997 1998 1999 2000 United Mobile Homes, Inc. 100 123 135 131 110 139 NAREIT All REIT 100 136 161 131 123 154 S & P 500 100 123 164 211 255 232 -24- ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT On March 14, 2001, 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: Percent Name and Address Shares Owned of Title of Class of Beneficial Owner Beneficially Class Common Stock Eugene W. Landy 938,023 12.69% 20 Tuxedo Road Rumson, NJ 07760 Common Stock Richard H. Molke 417,435 5.64% 8 Ivins Place Rumson, NJ 07760 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. -25- PART IV ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K (a) (1) The following Financial Statements are filed as part of this report. Page(s) (i) Independent Auditors' Report 28 (ii) Consolidated Balance Sheets as of December 31, 2000 29 and 1999 (iii) Consolidated Statements of Income for the years 30 ended December 31, 2000, 1999 and 1998. (iv) Consolidated Statements of Shareholders' Equity for 31-32 the years ended December 31, 2000, 1999 and 1998 (v) Consolidated Statements of Cash Flows for the years 33 ended December 31, 2000, 1999 and 1998 (vi) Notes to Consolidated Financial Statements 34-45 (a) (2) The following Financial Statement Schedule for the years ended December 31, 2000, 1999 and 1998 is filed as part of this report. (i) Schedule III - Real Estate and Accumulated Depreciation 46 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. -26- (a) (3) The Exhibits set forth in the following index of Exhibits are filed as part of this Report. Exhibit No. Description (3) Articles of Incorporation and By-Laws: Articles of Incorporation and By-Laws, 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. 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, 1997 is incorporated by reference to that filed with the Company's 1996 Form 10-K filed with the SEC on March 28, 1996. (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. (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 (a)(3)(b) Reports on Form 8-K None. -27- 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. 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 financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these 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. as of December 31, 2000 and 1999, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2000 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. Shorts Hills, New Jersey /s/ KPMG LLP March 2, 2001 -28-
UNITED MOBILE HOMES, INC. CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2000 AND 1999 - ASSETS- 2000 1999 INVESTMENT PROPERTY AND EQUIPMENT Land $ 6,779,335 $ 6,779,335 Site and Land Improvements 50,707,021 49,256,596 Buildings and Improvements 2,705,636 2,697,313 Rental Homes and Accessories 8,088,015 7,888,924 __________ __________ Total Investment Property 68,280,007 66,622,168 Equipment and Vehicles 3,282,681 2,969,556 __________ __________ Total Investment Property and 71,562,688 69,591,724 Equipment Accumulated Depreciation (29,862,276) (27,429,461) __________ __________ Net Investment Property and Equipment 41,700,412 42,162,263 __________ __________ OTHER ASSETS Cash and Cash Equivalents 1,399,259 724,650 Securities Available for Sale 15,494,918 12,794,514 Notes and Other Receivables 1,914,446 1,082,126 Unamortized Financing Costs 280,727 252,648 Prepaid Expenses 115,633 121,521 Land Development Costs 2,040,202 1,437,590 __________ __________ Total Other Assets 21,245,185 16,413,049 __________ __________ TOTAL ASSETS $62,945,597 $58,575,312 =========== =========== - LIABILITIES AND SHAREHOLDERS' EQUITY - LIABILITIES: MORTGAGES PAYABLE $32,055,839 $30,419,153 __________ __________ OTHER LIABILITIES Accounts Payable 339,174 105,215 Loans Payable 5,639,470 4,674,385 Accrued Liabilities and Deposits 1,622,272 1,493,897 Tenant Security Deposits 449,416 491,355 __________ __________ Total Other Liabilities 8,050,332 6,764,852 __________ __________ Total Liabilities 40,106,171 37,184,005 __________ __________ SHAREHOLDERS' EQUITY: Common Stock - $.10 par value per share, 10,000,000 shares authorized, 7,711,141 and 7,483,196 shares issued and 7,394,241 and 7,312,696 shares outstanding as of December 31, 2000 and 1999, respectively 771,114 748,320 Additional Paid-In Capital 26,026,006 24,549,267 Accumulated Other Comprehensive Loss (490,795) (1,662,178) Accumulated Deficit (667,793) (667,793) Treasury Stock at Cost (316,900 and 170,500 shares at December 31, 2000 and 1999, respectively) (2,799,106) (1,576,309) __________ __________ Total Shareholders' Equity 22,839,426 21,391,307 __________ __________ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $62,945,597 $58,575,312 =========== =========== See Accompanying Notes to Consolidated Financial Statements -29-
UNITED MOBILE HOMES, INC. CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 2000 1999 1998 Rental and Related Income $18,640,335 $17,752,823 $16,783,821 Community Operating Expenses 8,233,356 7,992,273 7,603,489 __________ __________ __________ Income from Community Operations 10,406,979 9,760,550 9,180,332 Other Expenses (Income): General and Administrative 1,852,309 1,621,479 1,386,757 Interest Expense 2,624,801 2,105,546 1,505,577 Interest and Dividend Income (1,747,254) (1,000,789) (409,457) Gain on Sale of Securities Available for Sale (257,142) (53,473) -0- Depreciation Expense 2,618,839 2,452,533 2,403,399 Amortization of Financing Costs 88,737 77,154 105,460 __________ __________ __________ Income Before (Loss) Gain On Sales of Assets 5,226,689 4,558,100 4,188,596 (Loss) Gain on Sales of Assets (37,318) (1,964) 13,095 __________ __________ __________ Net Income $ 5,189,371 $4,556,136 $ 4,201,691 =========== =========== =========== Net Income Per Share - Basic and Diluted $ .71 $ .63 $ .60 =========== =========== =========== Weighted Average Shares Outstanding: Basic 7,339,684 7,252,774 7,042,701 =========== =========== =========== Diluted 7,341,078 7,267,695 7,060,542 =========== =========== =========== See Accompanying Notes to Consolidated Financial Statements -30-
UNITED MOBILE HOMES, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 Additional Common Stock Issued Paid-In Number Amount Capital Balance December 31, 1997 6,865,312 $686,531 $20,572,786 Common Stock Issued with the DRIP 357,268 35,727 3,695,329 Common Stock Issued through the Exercise of Stock Options 24,000 2,400 162,600 Distributions -0- -0- ( 1,002,932) Net Income -0- -0- -0- Unrealized Net Holding Gains on Securities Available for Sale -0- -0- -0- __________ __________ __________ Balance December 31, 1998 7,246,580 $724,658 $23,427,783 Common Stock Issued with the DRIP 187,616 18,762 1,613,027 Common Stock Issued through the Exercise of Stock Options 49,000 4,900 394,225 Distributions -0- -0- (885,768) Net Income -0- -0- -0- Unrealized Net Holding Losses on Securities Available for Sale Net of Reclassification Adjustment -0- -0- -0- Purchase of Treasury Stock -0- -0- -0- __________ __________ __________ Balance December 31, 1999 7,483,196 $748,320 $24,549,267 Common Stock Issued with the DRIP 227,945 22,794 1,843,309 Distributions -0- -0- (366,570) Net Income -0- -0- -0- Unrealized Net Holding Losses on Securities Available for Sale Net of Reclassification Adjustment -0- -0- -0- Purchase of Treasury Stock -0- -0- -0- __________ __________ __________ Balance December 31, 2000 7,711,141 $771,114 $26,026,006 ========== ========== =========== *Dividend Reinvestment and Stock Purchase Plan See Accompanying Notes to Consolidated Financial Statements -31-
UNITED MOBILE HOMES, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY, CONTINUED FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 Accumulated Other Compre- Comprehensive Accumulated Treasury hensive (Loss)/Income Deficit Stock Income Balance December 31, 1997 239,017 (667,793) -0- Common Stock Issued with the DRIP -0- -0- -0- Common Stock Issued through the Exercise of Stock Options -0- -0- -0- Distributions -0- (4,201,691) -0- Net Income -0- 4,201,691 -0- $4,201,691 Unrealized Net Holding Gains on Securities Available for Sale (510,852) -0- -0- (510,852) __________ __________ __________ __________ Balance December 31, 1998 (271,835) (667,793) -0- $3,690,839 ========== Common Stock Issued with the DRIP -0- -0- -0- Common Stock Issued through the Exercise of Stock Options -0- -0- -0- Distributions -0- (4,556,136) -0- Net Income -0- 4,556,136 -0- $4,556,136 Unrealized Net Holding Losses on Securities Available for Sale Net of Reclassification Adjustment (1,390,343) -0- -0- (1,390,343) Purchase of Treasury Stock -0- -0- (1,576,309) __________ __________ __________ __________ Balance December 31, 1999 $(1,662,178) $(667,793) $(1,576,309) $3,165,793 ========== Common Stock Issued with the DRIP -0- -0- -0- Distributions -0- (5,189,371) -0- Net Income -0- 5,189,371 -0- $5,189,371 Unrealized Net Holding -0- Losses on Securities Available for Sale Net of Reclassification Adjustment 1,171,383 -0- 1,171,383 Purchase of Treasury Stock -0- -0- (1,222,797) __________ __________ __________ __________ Balance December 31, 2000 $(490,795) $(667,793) $(2,799,106) $6,360,754 ========== ========== ========== ========== See Accompanying Notes to Consolidated Financial Statements -32-
UNITED MOBILE HOMES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 2000 1999 1998 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 5,189,371 $ 4,556,136 $ 4,201,691 Depreciation 2,618,839 2,452,533 2,403,399 Amortization of Financing Costs 88,737 77,154 105,460 Gain on Sales of Securities Available for Sale (257,142) (53,473) -0- Loss (Gain) on Sales of Assets 37,318 1,964 (13,095) Changes in Operating Assets and Liabilities - Notes and Other Receivables (832,320) (347,402) (56,444) Prepaid Expenses 5,888 46,994 (59,100) Accounts Payable 233,959 (46,796) (70,463) Accrued Liabilities and Deposits 128,375 (1,756) 17,798 Tenant Security Deposits (41,939) 85,271 27,691 __________ __________ __________ Net Cash Provided by Operating Activities 7,171,086 6,770,625 6,556,937 __________ __________ __________ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of Investment Property and Equipment (1,382,130) (3,792,004) (2,169,674) Proceeds from Sales of Investment Property and Equipment 250,923 344,173 303,972 Additions to Land Development Costs (1,665,711) (2,206,010) (2,024,796) Purchase of Securities Available for Sale (4,282,988) (6,796,742) (4,716,181) Proceeds from Sales of Securities Available for Sale 3,011,109 417,923 -0- __________ __________ __________ Net Cash Used by Investing Activities (4,068,797) (12,032,660) (8,606,679) __________ __________ __________ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from Mortgages and Loans 2,500,000 10,500,000 3,600,000 Net Proceeds from Short-Term Borrowings 965,085 1,305,873 2,789,539 Principal Payments of Mortgages and Loans (863,314) (1,492,423) (2,299,447) Financing Costs on Debt (116,816) (171,874) (90,694) Proceeds from Dividend Reinvestment and Stock Purchase Plan -0- -0- 1,870,075 Proceeds from Exercise of Stock Options -0- 399,125 165,000 Dividends Paid (3,689,838) (3,810,115) (3,343,642) Purchase of Treasury Stock (1,222,797) (1,576,309) -0- __________ __________ __________ Net Cash Provided by Financing Activities (2,427,680) 5,154,277 2,690,831 __________ __________ __________ NET INCREASE (DECREASE) IN CASH 674,609 (107,758) 641,089 CASH & CASH EQUIVALENTS - BEGINNING 724,650 832,408 191,319 __________ __________ __________ CASH & CASH EQUIVALENTS - END $ 1,399,259 $ 724,650 $ 832,408 ========== ========== ========== See Accompanying Notes to Consolidated Financial Statements -33-
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 95% 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-four manufactured home communities containing 5,759 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 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 -34- BASIS OF PRESENTATION - The consolidated financial statements of the Company include all of its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. 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 new and restructured 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 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. REVENUE RECOGNITION - The Company derives its income primarily from the rental of manufactured home sites. The Company also owns approximately 450 rental units which are rented to residents. Revenue is recognized on the accrual basis. -35- 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 (7,339,684, 7,252,774 and 7,042,701 in 2000, 1999 and 1998, 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 (7,341,078, 7,267,695 and 7,060,542 in 2000, 1999 and 1998, respectively) (See Note 6). Options in the amount of 1,394, 14,921 and 17,841 for 2000, 1999, and 1998, 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. Included in these Notes to Consolidated Financial Statements 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. 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. -36- NOTE 3 - INVESTMENT PROPERTY AND EQUIPMENT The following is a summary of accumulated depreciation by major classes of assets: December 31, 2000 December 31, 1999 Site and Land Improvements $ 24,241,316 $ 22,453,059 Buildings and Improvements 1,418,939 1,330,046 Rental Homes and Accessories 1,880,685 1,588,790 Equipment and Vehicles 2,321,336 2,057,566 __________ __________ Total Accumulated Depreciation $ 29,862,276 $ 27,429,461 ========== ========== NOTE 4 - SECURITIES AVAILABLE FOR SALE The following is a summary of securities available for sale at December 31, 2000 and 1999: 2000 1999 Market Market Cost Value Cost Value Equity Securities: Monmouth Real Estate Investment Corporation * (378,369 shares and 338,111 shares at December 31, 2000 and 1999, respectively) $2,165,069 1,844,550 1,972,238 1,627,330 Monmouth Capital Corporation * (22,267 shares and 21,903 shares at December 31, 2000 and 1999, respectively) 56,986 55,666 55,986 55,435 Preferred Stock 6,653,648 6,946,426 5,094,590 4,685,168 Other Equity Securities 5,637,713 5,254,876 5,556,581 4,695,206 Debt Securities (maturing in 2001 to 2003) 1,472,297 1,393,400 1,777,297 1,731,375 __________ __________ __________ __________ Total $15,985,713 $15,494,918 $14,456,692 $12,794,514 ========== ========== ========== ========== * Related entity - See Note 9. -37- Gross unrealized gains on debt securities amounted to $3,375 and $-0- as of December 31, 2000 and 1999, respectively. Gross unrealized losses on debt securities amounted to $82,272 and $45,922 at December 31, 2000 and 1999, respectively. Gross unrealized gains on equity securities amounted to $734,652 and $88,117 as of December 31, 2000 and 1999, respectively. Gross unrealized losses on equity securities amounted to $1,146,550 and $1,704,373 as of December 31, 2000 and 1999, respectively. During the years ended December 31, 2000, 1999 and 1998, gross gains on sales of securities amounted to $257,142, $53,473 and $-0-, respectively. Dividend income for the years ended December 31, 2000, 1999 and 1998 amounted to $1,397,849, $734,623 and $260,352, respectively. Interest income for the years ended December 31, 2000, 1999 and 1998 amounted to $349,405, $266,166 and $149,105, respectively. NOTE 5 - LOANS AND MORTGAGES PAYABLE LOANS PAYABLE During 2000 and 1999, the Company purchased securities on margin. The margin loan interest rate at December 31, 2000 and 1999 was 8% and 7%, respectively and is due on demand. At December 31, 2000 and 1999, the margin loan amounted to $5,619,980 and $4,097,172, respectively and is secured by investment securities with a market value of $15,494,918 and $12,794,514, respectively. UNSECURED LINE OF CREDIT The Company has a $2,000,000 unsecured line of credit with Summit Bank, of which all was available at December 31, 2000. The interest rate on this line of credit is prime. This line of credit expires on March 16, 2001 and is currently being renewed. MORTGAGES PAYABLE The following is a summary of mortgages payable at December 31, 2000 and 1999: Interest Property Due Date Rate 2000 1999 Cranberry Village 08-02-04 7.86% $ 2,427,667 $ 2,480,841 D & R Village 05-01-03 7.5% 3,383,438 3,469,814 Fairview Manor 07-27-02 LIBOR +155 2,500,000 -0- Forest Park Village 08-02-04 7.86% 3,884,268 3,969,346 Sandy Valley 03-01-04 7% 3,830,118 3,925,925 Water Falls Village 01-01-03 7.625% 2,935,721 3,012,276 Various(5 properties) 12-01-05 7.5% 13,094,627 13,560,951 __________ __________ TOTAL MORTGAGES PAYABLE $32,055,839 $30,419,153 ========== ========== -38- At December 31, 2000 and 1999, mortgages are collateralized by real property with a carrying value of $32,743,695 and $26,997,426, respectively, before accumulated depreciation and amortization. Interest costs amounting to $180,600, $179,000 and $154,000 were capitalized during 2000, 1999 and 1998, respectively, in connection with the Company's expansion program. RECENT FINANCING On February 10, 1999, the Company entered into a $4,000,000 mortgage payable to Summit Bank. The interest rate on this mortgage is fixed at 7.0%. This mortgage loan is due on March 1, 2004. Proceeds of this mortgage were used primarily to retire existing debt, purchase securities available for sale and purchase Treasury Stock. On July 28, 1999, the Company entered into a $4,000,000 mortgage and a $2,500,000 mortgage with First Union Bank. These mortgages bear interest at an effective rate of 7.86%. These mortgages mature on August 2, 2004. Proceeds from these mortgages were used primarily to retire existing debt, purchase securities available for sale and fund land development. On July 27, 2000, the Company entered into a $4,000,000 mortgage commitment with First Union Bank, of which $2,500,000 was taken down. This mortgage is secured by Fairview Manor and bears interest at LIBOR plus 155 points. This mortgage matures on August 1, 2002 but may be converted to a fixed rate mortgage loan for an additional five years. On December 1, 2000, the Company extended the Summit Bank mortgage on five properties for an additional five years. The interest rate remains fixed at 7.5% The aggregate principal payments of all mortgages payable are scheduled as follows: 2001 - $ 911,200 2002 - 3,483,190 2003 - 6,800,553 2004 - 9,928,282 2005 - 10,932,614 __________ Total - $32,055,839 ========== 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. -39- A summary of the status of the Company's stock option plans as of December 31, 2000, 1999 and 1998 and changes during the years then ended are as follows: 2000 1999 1998 Weighted- Weighted- Weighted- Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price Outstanding at beginning of year 396,500 $10.59 384,500 $10.38 336,500 $ 9.97 Granted 61,000 8.73 61,000 9.94 83,000 11.13 Exercised -0- -0- (49,000) 8.15 (24,000) 6.88 Expired (24,000) 8.38 -0- -0- (11,000) 11.16 ________ ________ ________ Outstanding at end of year 433,500 10.45 396,500 10.59 384,500 10.38 ======== ======== ======== Options exercisable at end of year 372,500 335,500 301,500 ======== ======== ======== Weighted-average fair value of options granted during the year 1.00 1.10 1.36 The Company has elected to continue to follow APB Opinion No. 25 in accounting for its stock option plans and, accordingly, no compensation cost has been recognized. Had compensation cost been determined consistent with SFAS No. 123, the Company's net income and earnings per share would have been reduced to the pro forma amounts as follows: 2000 1999 1998 Net Income As reported $ 5,189,371 $4,556,136 $4,201,691 Pro forma 5,117,781 4,475,560 4,022,731 Net Income Per Share - Basic As reported .71 .63 .60 and Diluted Pro forma .70 .62 .57 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 2000, 1999 and 1998: dividend yield of 8 percent for 2000 and 1999 and 7 percent for 1998; expected volatility of 25 percent; risk-free interest rates of 6.50 percent, 6.25 percent and 5.74 percent in 2000, 1999 and 1998, respectively; and expected lives of five years. -40- The following is a summary of stock options outstanding as of December 31, 2000: Date of Number of Number of Option Expiration Grant Employees Shares Price Date 01/05/95 2 75,000 8.25 01/05/05 01/10/96 1 25,000 10.625 01/10/01 06/27/96 5 27,000 10.75 06/27/01 01/03/97 1 25,000 13.125 01/03/02 03/17/97 1 25,000 13.375 03/17/02 06/25/97 6 26,500 11.50 06/25/02 12/15/97 1 25,000 13.0625 12/15/02 01/08/98 1 25,000 12.75 01/08/03 08/05/98 8 33,000 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 8 36,000 8.8125 09/28/04 01/06/00 1 25,000 * 9.0625 01/06/05 07/17/00 8 36,000 * 8.50 07/17/05 _______ 433,500 ======= * Unexercisable As of December 31, 2000, there were 235,500 shares available for grant under these plans. NOTE 7 - TREASURY STOCK During the years ended December 31, 2000 and 1999, the Company purchased 146,400 and 170,5000 shares, respectively, of its own stock for a total cost of $1,222,797 and $1,576,309, 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 2000, 1999 and 1998, the Company made matching contributions to the Plan of up to 50% of the first 6% of employee salary. This amounted to $41,194, $31,967 and $38,271 for 2000, 1999 and 1998, respectively. -41- NOTE 9 - RELATED PARTY TRANSACTIONS AND OTHER MATTERS TRANSACTIONS WITH MONMOUTH REAL ESTATE INVESTMENT CORPORATION During 2000, 1999 and 1998, 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 six Directors of the Company who are also Directors and shareholders of MREIC. TRANSACTIONS WITH MONMOUTH CAPITAL CORPORATION AND THE MOBILE HOME STORE, INC. During 2000, 1999 and 1998, the Company purchased shares of Monmouth Capital Corporation (MCC) common stock primarily through its Dividend Reinvestment and Stock Purchase Plan (See Note 4). Six directors of the Company are also directors and shareholders of MCC. The Company receives rental income from The Mobile Home Store, Inc. (MHS), a wholly-owned subsidiary of MCC. MHS sells and finances the sales of manufactured homes. MHS pays the Company market rent on sites where MHS has a home for sale. Total site rental income from MHS amounted to $109,550, $159,065 and $152,935, respectively for the years ended December 31, 2000, 1999 and 1998. Effective April 1, 1996, the Company and MHS entered into an agreement whereby MHS leases 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 $153,480, $142,680 and $139,200 for the years ended December 31, 2000, 1999 and 1998, respectively. As a REIT, the Company cannot be in the business of selling manufactured homes for profit. During 2000, 1999 and 1998, the Company had approximately $52,000, $62,000 and $139,000 respectively, of rental homes that were sold to MHS at book value. During 2000, 1999 and 1998, the Company purchased from MHS at its cost, 11, 24 and 10 new homes, respectively totaling $201,399, $530,520 and $269,192, respectively to be used as rental homes. SALARY, DIRECTORS', MANAGEMENT AND LEGAL FEES During the years ended December 31, 2000, 1999 and 1998, salary, Directors', management and legal fees to Mr. Eugene W. Landy and the law firm of Landy & Landy amounted to $161,600, $160,600 and $166,100, respectively. -42- OTHER MATTERS During 1995, the Company entered into 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 years ended December 31, 2000, 1999 and 1998 were $40,000, $41,875 and $83,750, respectively, relating to these agreements. 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. 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 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. Amounts received and shares issued in connection with the DRIP for the years ended December 31, 2000, 1999 and 1998 were as follows: 2000 1999 1998 Amounts Received/Dividends Reinvested $ 1,866,103 $ 1,631,789 $ 3,731,056 Number of Shares Issued 227,945 187,616 357,268 -43- NOTE 11 - DISTRIBUTIONS The following dividends were paid to shareholders during the three years ended December 31, 2000, 1999 and 1998: 2000 1999 1998 Quarter Per Per Per Ended Amount Share Amount Share Amount Share March 31 $1,371,130 $.1875 $1,358,734 $.1875 $1,202,990 $.175 June 30 1,376,095 .1875 1,352,118 .1875 1,311,297 .1875 September 30 1,396,844 .1900 1,359,730 .1875 1,340,697 .1875 December 31 1,411,872 .1925 1,371,322 .1875 1,349,639 .1875 _________ _____ _________ _____ _________ _____ $5,555,941 .7575 $5,441,904 $.75 $5,204,623 $.7375 ========= ===== ========= ===== ========= ====== Total distributions to shareholders for 2000 amounted to $5,555,941, or $.7575 per share, of which 93.76% was taxed as ordinary income, 5.07% was taxed as capital gains and 1.17% was a return of capital. This amount does not include the dividend resulting from the discount on shares purchased through the Company's Dividend Reinvestment and Stock Purchase Plan. On January 25, 2001, the Company declared a dividend of $.195 per share to be paid on March 15, 2001 to shareholders of record February 15, 2001. 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, 2000, 1999 and 1998. 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. 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". -44- 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. For a portion of the Company's 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. The fair value of mortgages payable in 1999 approximated their carrying amounts since such amounts payable were at approximately a weighted-average current market rate of interest. For 2000, the fair and carrying values of mortgages payable amounted to $31,111,420 and $32,055,839, 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, 2000, 1999 and 1998 for interest was $2,805,401, $2,120,268 and $1,351,577, respectively. During the years ended December 31, 2000, 1999 and 1998, land development costs of $1,063,099, $2,284,546 and $1,711,778, respectively were transferred to investment property and equipment and placed in service. During the years ended December 31, 2000, 1999 and 1998, the Company had dividend reinvestments of $1,866,103, $1,631,789 and $1,860,981, respectively which required no cash transfers. The following are the reclassification adjustments related to securities available for sale included in Other Comprehensive Income: 2000 1999 1998 Unrealized holding gains (losses) arising during the year $ 1,428,525 $(1,336,870) $(510,852) Less: reclassification adjustment for gains realized in income (257,142) (53,473) -0- __________ __________ __________ Net unrealized gains (losses) $ 1,171,383 $(1,390,343) $(510,852) ========== ========== ========== -45-
UNITED MOBILE HOMES, INC. SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2000 Column A Column B Column C Column D Initial Cost Site, Land & Capitalization Building Subsequent to Description Encumbrances Land Improvements Acquisition Memphis, TN $ -0- $ 250,000 $ 2,569,101 $ 1,295,551 Greenfield Center, NY -0- 37,500 232,547 1,771,099 Vineland, NJ (3) 320,000 1,866,323 683,727 Duncansville, PA -0- 60,774 378,093 288,917 Cranberry Township, PA 2,427,667 181,930 1,922,931 242,781 Clifton Park, NY 3,383,438 391,724 704,021 951,391 Apollo, PA -0- 670,000 1,336,600 719,786 Cranberry Township, PA 3,884,268 75,000 977,225 1,028,885 Millville, NJ 2,500,000 216,000 1,166,517 3,789,766 Kutztown, PA -0- 145,000 1,695,041 3,316,041 Inkerman, PA -0- 572,500 2,151,569 1,917,343 Monticello, NY -0- 235,600 1,402,572 1,717,671 Navarre, OH -0- 290,000 1,457,673 653,305 Memphis, TN -0- 78,435 810,477 1,419,990 West Grove, PA (3) 175,000 990,515 1,168,705 Carlisle, PA -0- 37,540 198,321 815,334 Belle Vernon, PA (3) 150,000 2,491,796 2,464,682 Marion, OH -0- 236,000 785,293 2,046,764 Athens, OH -0- 67,000 1,326,800 191,531 Magnolia, OH 3,830,118 270,000 1,941,430 1,618,548 Jackson, NJ (3) 100,095 602,820 1,274,619 Hamburg, NY 2,935,721 424,000 3,812,000 -0- Eatontown, NJ (3) 157,421 280,749 167,058 Caledonia, OH -0- 260,000 1,753,206 331,190 __________ _________ __________ __________ 18,961,212 $5,401,519 $32,853,620 $29,874,684 ========= ========== ========== Various 13,094,627 (3) __________ $32,055,839 ========== -46a-
UNITED MOBILE HOMES, INC. SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2000 Column A Column E(1) (2) Column F(1) Gross Amount at Which Carried at 12/31/00 Site, Land & Building Accumulated Description Land Improvements Total Depreciation Memphis, TN $ 250,000 $ 3,864,652 $ 4,114,652 $ 2,350,070 Greenfield Center, NY 122,865 1,918,281 2,041,146 993,155 Vineland, NJ 408,206 2,461,844 2,870,050 1,608,524 Duncansville, PA 60,774 667,010 727,784 552,151 Cranberry Township, PA 181,930 2,165,712 2,347,642 1,486,551 Clifton Park, NY 391,724 1,655,412 2,047,136 935,334 Apollo, PA 670,000 2,056,386 2,726,386 396,614 Cranberry Township, PA 75,000 2,006,110 2,081,110 1,580,719 Millville, NJ 631,137 4,541,146 5,172,283 1,320,589 Kutztown, PA 404,239 4,751,843 5,156,082 1,128,073 Inkerman, PA 572,500 4,068,912 4,641,412 1,074,722 Monticello, NY 318,472 3,037,371 3,355,843 1,106,828 Navarre, OH 290,000 2,110,978 2,400,978 994,181 Memphis, TN 78,435 2,230,467 2,308,902 1,101.692 West Grove, PA 536,064 1,798,156 2,334,220 1,403,004 Carlisle, PA 145,473 905,722 1,051,195 661,278 Belle Vernon, PA 150,000 4,956,478 5,106,478 3,076,862 Marion, OH 236,000 2,832,057 3,068,057 945,201 Athens, OH 67,000 1,518,331 1,585,331 231,489 Magnolia, OH 270,000 3,559,978 3,829,978 1,969,444 Jackson, NJ 100,095 1,877,439 1,977,534 1,460,713 Hamburg, NY 424,000 3,948,036 4,372,036 439,986 Eatontown, NJ 135,421 469,807 605,228 360,870 Caledonia, OH 260,000 2,084,396 2,344,396 348,742 __________ __________ __________ __________ $ 6,779,335 $ 61,486,524 $ 68,265,859 $ 27,526,792 ========== ========== ========== ========== -46b-
UNITED MOBILE HOMES, INC. SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2000 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 1972 1978 3 to 27.5 Apollo, PA Prior to 1980 1996 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 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 1950 1986 3 to 27.5 Athens, OH Prior to 1980 1997 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 1998 27.5 Eatontown, NJ 1964 1978 3 to 27.5 Caledonia, OH Prior to 1980 1997 5 to 27.5 -46c-
/-------------FIXED ASSETS------------/ (1) Reconciliation: 12/31/00 12/31/99 12/31/98 Balance - Beginning of Year $ 66,608,020 $ 61,329,910 $ 58,197,197 __________ __________ __________ Additions: Acquisitions -0- -0- -0- Improvements 2,017,051 5,739,997 3,512,719 Depreciation -0- -0- -0- __________ __________ __________ Total Additions 2,017,051 5,739,997 3,512,719 __________ __________ __________ Deletions 359,212 461,887 380,006 __________ __________ __________ Balance - End of Year $ 68,265,859 $ 66,608,020 $ 61,329,910 =========== =========== =========== /---ACCUMULATED DEPRECIATION---/ Reconciliation: 12/31/00 12/31/99 12/31/98 Balance - Beginning of Year $ 25,357,748 $ 23,335,294 $ 21,388,924 __________ __________ __________ Additions: Acquisitions -0- -0- -0- Improvements -0- -0- -0- Depreciation 2,260,130 2,128,474 2,079,649 __________ __________ __________ Total Additions 2,260,130 2,128,474 2,079,649 __________ __________ __________ Deletions 91,086 106,020 133,279 __________ __________ __________ Balance - End of Year $ 27,526,792 $ 25,357,748 $ 23,335,294 =========== =========== =========== (2) The aggregate cost for Federal tax purposes approximates historical cost. (3) Represents one mortgage note payable secured by five properties. -46d- INDEPENDENT ACCOUNTANTS' CONSENT The Board of Directors United Mobile Homes, Inc. We consent to incorporation by reference in the Registration Statement (No. 333-13053) on Form S-8 of our report dated March 2, 2001, relating to the consolidated balance sheets of United Mobile Homes, Inc., as of December 31, 2000 and 1999 and the related consolidated statements of income, shareholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2000, and the related schedule, which report appears in the December 31, 2000 annual report on Form 10-K of United Mobile Homes, Inc. /s/ KPMG LLP Short Hills, New Jersey March 27, 2001 -47- 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 Chairman of the Board Dated: March 16, 2001 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 Chairman of the Board March 16, 2001 EUGENE W. LANDY and Director /s/Samuel A. Landy President and Director March 16, 2001 SAMUEL A. LANDY /s/Anna T. Chew Vice President and March 16, 2001 ANNA T. CHEW Chief Financial Officer and Director /s/Ernest V. Bencivenga Secretary/Treasurer and March 16, 2001 ERNEST V. BENCIVENGA Director /s/Charles P. Kaempffer Director March 16, 2001 CHARLES P. KAEMPFFER /s/Richard H. Molke Director March 16, 2001 RICHARD H. MOLKE /s/Eugene Rothenberg Director March 16, 2001 EUGENE ROTHENBERG /s/Robert G. Sampson Director March 16, 2001 ROBERT G. SAMPSON -48-