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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
( x ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2004
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period ended _________________________
For Quarter Ended Commission File Number
June 30, 2004 0-13130
UNITED MOBILE HOMES, INC.
(Exact name of registrant as specified in its charter)
Maryland 22-1890929
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification number)
Juniper Business Plaza, 3499 Route 9 North, Suite 3-C,
Freehold, NJ 07728
Registrant's telephone number, including area code (732) 577-9997.
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ____
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 125-2 of the Exchange Act). Yes X No ___
The number of shares outstanding of issuer's common stock as of August 4, 2004
was 8,695,238 shares.
Page 1
UNITED MOBILE HOMES, INC.
for the QUARTER ENDED
JUNE 30, 2004
PART I - FINANCIAL INFORMATION Page No.
Item 1 - Financial Statements (Unaudited)
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6-10
Item 2 - Management's Discussion and Analysis of
Financial Conditions and Results of
Operations 11-15
Item 3 - Quantitative and Qualitative Disclosures
About Market Risk
There have been no material changes to
information required regarding quantitative
and qualitative disclosures about market
risk from the end of the preceding year to
the date of this Form 10-Q.
Item 4 - Controls and Procedures 14
PART II OTHER INFORMATION 16
- -
SIGNATURES 17
Page 2
UNITED MOBILE HOMES, INC
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2004 AND DECEMBER 31, 2003
June 30, December 31,
-ASSETS- 2004 2003
(Unaudited)
INVESTMENT PROPERTY AND EQUIPMENT
Land $ 8,412,970 $ 6,927,971
Site and Land Improvements 61,435,295 59,202,516
Buildings and Improvements 3,069,537 2,790,612
Rental Homes and Accessories 9,844,784 9,581,123
__________ __________
Total Investment Property 82,762,586 78,502,222
Equipment and Vehicles 5,226,701 4,664,006
__________ __________
Total Investment Property and 87,989,287 83,166,228
Equipment
Accumulated Depreciation (39,118,772) (37,660,693)
__________ __________
Net Investment Property and Equipment 48,870,515 45,505,535
__________ __________
OTHER ASSETS
Cash and Cash Equivalents 1,562,869 3,244,871
Securities Available for Sale 25,582,531 31,096,211
Inventory of Manufactured Homes 3,881,934 3,635,954
Notes and Other Receivables 8,058,691 7,338,580
Unamortized Financing Costs 500,200 407,401
Prepaid Expenses 516,071 559,594
Land Development Costs 3,430,205 2,522,066
__________ __________
Total Other Assets 43,532,501 48,804,677
__________ __________
TOTAL ASSETS $92,403,016 $94,310,212
=========== ===========
- - LIABILITIES AND SHAREHOLDERS' EQUITY -
LIABILITIES:
MORTGAGES PAYABLE $44,260,061 $44,222,675
__________ __________
OTHER LIABILITIES
Accounts Payable 650,154 655,648
Loans Payable 1,342,599 7,840,962
Accrued Liabilities and Deposits 2,139,397 1,988,525
Tenant Security Deposits 509,454 502,626
__________ __________
Total Other Liabilities 4,641,604 10,987,761
__________ __________
Total Liabilities 48,901,665 55,210,436
__________ __________
SHAREHOLDERS' EQUITY:
Common Stock - $.10 par value per
share, 20,000,000 shares authorized,
9,004,137 and 8,557,130 shares issued
and 8,611,837 and 8,164,830 shares
outstanding as of June 30, 2004 and
December 31, 2003, respectively 900,414 855,713
Excess Stock - $.10 par value per
share, 3,000,000 shares authorized,
no shares issued or outstanding -0- -0-
Additional Paid-In Capital 42,673,009 36,304,626
Accumulated Other
Comprehensive Income 2,273,423 5,308,195
Undistributed Income 1,364,427 341,164
Treasury Stock, at Cost (392,300
shares) (3,709,922) (3,709,922)
__________ __________
Total Shareholders' Equity 43,501,351 39,099,776
__________ __________
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $92,403,016 $94,310,212
========== ==========
-UNAUDITED-
See Accompanying Notes to Consolidated Financial Statements
Page 3
UNITED MOBILE HOMES, INC.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2004 AND 2003
THREE MONTHS SIX MONTHS
2004 2003 2004 2003
REVENUES:
Rental and
Related Income $5,386,252 $5,226,202 $10,731,002 $10,375,813
Sales of
Manufactured
Homes 1,689,340 1,734,572 3,231,682 3,230,665
Interest and
Dividend Income 652,788 811,562 1,392,615 1,696,923
Gain on
Securities
Available for Sale
Transactions, net 313,424 477,065 2,133,778 671,581
Other Income 36,474 40,070 54,810 65,661
__________ __________ __________ __________
Total Revenues 8,078,278 8,289,471 17,543,887 16,040,643
__________ __________ __________ __________
EXPENSES:
Community
Operating
Expenses 2,670,114 2,488,873 5,129,779 4,835,524
Cost of Sales of
Manufactured Homes 1,302,595 1,349,726 2,519,807 2,542,745
Selling Expenses 297,156 297,640 642,451 572,878
General and
Administrative
Expenses 625,354 666,630 1,250,643 1,231,726
Interest Expense 689,785 803,380 1,429,497 1,631,415
Depreciation
Expense 793,368 716,780 1,564,068 1,433,439
Amortization of
Financing Costs 24,810 30,300 49,620 60,600
__________ __________ __________ __________
Total Expenses 6,403,182 6,353,329 12,585,865 12,308,327
__________ __________ __________ __________
Income before
Gain on Sales
of Investment
Property and
Equipment 1,675,096 1,936,142 4,958,022 3,732,316
(Loss) Gain on
Sales of
Investment
Property and
Equipment (6,769) 31,252 (12,028) 37,554
__________ __________ __________ __________
Net Income $1,668,327 $1,967,394 $4,945,994 $3,769,870
========== ========== ========== ==========
Net Income per
Share -
Basic $ 0.20 $ 0.25 $ 0.59 $ .49
========== ========== ========== ==========
Diluted $ 0.20 $ 0.25 $ 0.59 $ .48
========== ========== ========== ==========
Weighted Average
Shares Outstanding -
Basic 8,480,662 7,760,917 8,368,228 7,726,860
========== ========== ========== ==========
Diluted 8,554,366 7,866,355 8,449,347 7,824,096
========== ========== ========== ==========
-UNAUDITED-
See Accompanying Notes to Consolidated Financial Statements
Page 4
UNITED MOBILE HOMES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED
JUNE 30, 2004 AND 2003
2004 2003
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $4,945,994 $3,769,870
Non-Cash Adjustments:
Depreciation 1,564,068 1,433,439
Amortization 49,620 60,600
Stock Compensation Expense 56,855 -0-
Gain on Securities Available for Sale
Transactions (2,133,778) (671,581)
Loss (Gain) on Sales of Investment
Property and Equipment 12,028 (37,554)
Changes in Operating Assets and
Liabilities:
Inventory of Manufactured Homes (245,980) (155,230)
Notes and Other Receivables (720,111) (1,102,623)
Prepaid Expenses 43,523 (149,812)
Accounts Payable (5,494) 186,570
Accrued Liabilities and Deposits 150,872 (271,365)
Tenant Security Deposits 6,828 (13,458)
__________ __________
Net Cash Provided by Operating Activities 3,724,425 3,048,856
__________ __________
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Manufactured Home Community (3,535,400) (918,000)
Purchase of Investment Property
and Equipment (1,538,768) (1,384,118)
Proceeds from Sales of Assets 133,092 201,384
Additions to Land Development (908,139) (417,370)
Purchase of Securities Available for Sale (3,283,385) (1,137,098)
Proceeds from Sales of Securities
Available for Sale 7,896,071 4,267,320
__________ __________
Net Cash (Used) Provided by Investing
Activities (1,236,529) 612,118
__________ __________
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Mortgages and Loans 2,000,000 -0-
Principal Payments of Mortgages and Loans (8,460,977) (2,816,999)
Financing Costs on Debt (142,419) (36,952)
Proceeds from Issuance of Common Stock 5,469,423 675,854
Proceeds from Exercise of Stock Options -0- 458,513
Dividends Paid, net of amount reinvested (3,035,925) (2,553,596)
__________ __________
Net Cash Used in Financing Activities (4,169,898) (4,273,180)
__________ __________
NET DECREASE IN CASH
AND CASH EQUIVALENTS (1,682,002) (612,206)
CASH & CASH EQUIVALENTS-BEGINNING 3,244,871 2,338,979
__________ __________
CASH & CASH EQUIVALENTS-ENDING $1,562,869 $1,726,773
========== ==========
-UNAUDITED-
See Accompanying Notes to Consolidated Financial Statements
Page 5
UNITED MOBILE HOMES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2004 (UNAUDITED)
NOTE 1 - ORGANIZATION AND ACCOUNTING POLICY
The interim consolidated financial statements furnished herein
reflect all adjustments which were, in the opinion of management,
necessary to present fairly the financial position, results of
operations, and cash flows at June 30, 2004 and for all periods
presented. All adjustments made in the interim period were of a
normal recurring nature. Certain footnote disclosures which
would substantially duplicate the disclosures contained in the
audited consolidated financial statements and notes thereto
included in the annual report of the Company for the year ended
December 31, 2003 have been omitted.
United Mobile Homes, Inc. (the Company), through its wholly-owned
taxable subsidiary, UMH Sales and Finance, Inc. (S&F), conducts
manufactured home sales in its communities. This company was
established to enhance the occupancy of the communities. The
consolidated financial statements of the Company include S&F and
all of its other wholly-owned subsidiaries. All intercompany
transactions and balances have been eliminated in consolidation.
Certain reclassifications have been made to the consolidated
financial statements for prior periods to conform to the current
period presentation.
Employee Stock Options
Prior to January 1, 2003, the Company accounted for its stock
option plan under the recognition and measurement provision of
APB Opinion No. 25, "Accounting for Stock Issued to Employees",
and the related interpretations. No stock-based compensation was
reflected in net income prior to January 1, 2003. Effective
January 1, 2003, the Company adopted the fair value recognition
provisions of SFAS No. 123, "Accounting for Stock Based
Compensation". The Company has selected the prospective method
of adoption under the provisions of SFAS No. 148, "Accounting for
Stock-Based Compensation Transition and Disclosure". SFAS 123
requires that compensation cost for all stock awards be
calculated and recognized over the service period (generally
equal to the vesting period). This compensation cost is
determined using option pricing models, intended to estimate the
fair value of the awards at the grant date.
Had compensation cost been determined consistent with SFAS No.
123, the Company's net income and earnings per share for the
three and six months ended June 30, 2004 and 2003 would have been
reduced to the pro forma amounts as follows:
Page 6
NOTE 1 - ORGANIZATION AND ACCOUNTING POLICY, (CONT'D.)
Three Months Six Months
2004 2003 2004 2003
Net Income prior to
compensation expense $1,696,755 $1,967,394 $5,002,849 $3,769,870
Compensation expense 28,428 -0- 56,855 -0-
__________ __________ __________ __________
Net Income as
Reported 1,668,327 1,967,394 4,945,994 3,769,870
Compensation
expenses
if the fair value
method had been -0- 4,408 -0- 8,815
applied
__________ __________ __________ __________
Net Income Pro forma $1,668,327 $1,962,986 $4,945,994 $3,761,055
========== ========== ========== ==========
Net Income per
share - as reported
Basic $ .20 $ .25 $ .59 $ .49
Diluted $ .20 $ .25 $ .59 $ .48
Net Income per
share - pro forma
Basic $ .20 $ .25 $ .59 $ .49
Diluted $ .20 $ .25 $ .59 $ .48
The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option pricing model with the
following weighed-average assumptions used for grants in the
following years:
2004 2003 2002
Dividend yield 6.06% 6.14% 6.75%
Expected volatility 19% 19% 13%
Risk-free interest rate 3.54% 3.91% 3.40%
Expected lives 8 8 8
The weighted-average fair value of options granted during the six
months ended June 30, 2004 was $1.23. The weighted average fair
value of options granted during 2003 was $1.30.
During the six months ended June 30, 2004, the following stock
option was granted:
Date of Number of Number of Option Expiration
Grant Employees Shares Price Date
1/16/04 1 25,000 $18.62 1/16/12
During the six months ended June 30, 2004, no employees exercised
their stock options and no options expired without being
exercised. As of June 30, 2004, there were options outstanding
to purchase 331,000 shares and 1,411,000 shares were available
for grant under the Company's 2003 Stock Option Plan.
Page 7
NOTE 2 - NET INCOME PER SHARE AND COMPREHENSIVE (LOSS) INCOME
Basic net income per share is calculated by dividing net income
by the weighted average shares outstanding for the period.
Diluted net income per share is calculated by dividing net income
by the weighted average number of common shares outstanding plus
the weighted average number of net shares that would be issued
upon exercise of stock options pursuant to the treasury stock
method. Options in the amount of 73,704 and 81,119 shares for
the three and six months ended June 30, 2004, respectively, and
105,438 and 97,236 shares for the three and six months ended June
30, 2003, respectively are included in the diluted weighted
average shares outstanding.
The following table sets forth the components of the Company's
comprehensive (loss) income for the three and six months ended
June 30, 2004 and 2003:
Three Months Six Months
2004 2003 2004 2003
Net Income $1,668,327 $1,967,394 $4,945,994 $3,769,870
(Decrease)
increase in
unrealized
gain on
securities
available
for sale (1,691,241) (1,255,839) (3,034,772) 869,657
__________ __________ __________ __________
Comprehensive
(Loss) Income $(22,914) $3,223,233 $1,911,222 $4,639,527
========== ========== ========== ==========
NOTE 3 - INVESTMENT PROPERTY AND EQUIPMENT
On March 1, 2004, the Company acquired Bishop's Mobile Home Court
and Whispering Pines Community, in Somerset Township,
Pennsylvania. Bishop's Mobile Home Court is an existing family
community consisting of 124 sites, located next to Whispering
Pines Community, a 55-and-older community consisting of 15
existing home sites and an additional 60 acres for expansion.
The Company will rename Bishop's Mobile Home Court as Somerset
Estates. The total purchase price was approximately $3,500,000.
The Company obtained a $2,000,000 mortgage with Somerset Trust
Company which matures on February 26, 2019. The interest rate is
fixed at 5.25% for three years and is adjusted every three years
based upon the three-year Treasury rate plus 3.25%.
Page 8
NOTE 4 - SECURITIES AVAILABLE FOR SALE AND DERIVATIVE INSTRUMENTS
During the six months ended June 30, 2004, the Company sold or
redeemed $5,762,293 in securities available for sale, recognizing
a gain of $2,133,778. Included in these sales are sales of
630,900 shares of Monmouth Real Estate Investment Corporation (an
affiliated company) common stock for a gain of $1,475,075.
During the six months ended June 30, 2004, the Company invested
in futures contracts on ten-year Treasury notes with a notional
amount of $6,000,000, with the objective of reducing the exposure
of the debt securities portfolio to market rate fluctuations.
Changes in the market value of these derivatives have been
recorded in gain on securities available for sale transactions,
net with corresponding amounts recorded in accrued liabilities
and deposits on the balance sheet. The fair value of the
derivatives at June 30, 2004 was a liability of $119,063. During
the quarter ended June 30, 2004, the Company recorded a realized
gain of $244,924 on settled futures contracts, which is included
in gain on securities available for sale transactions, net.
NOTE 5 - LOANS AND MORTGAGES PAYABLE
Effective March 1, 2004, the Company extended the Sandy Valley
mortgage for an additional five years. This mortgage payable is
due on March 1, 2009 with the interest rate reset at 4.75%.
On June 30, 2004, the Company established a $15,000,000 revolving
line of credit with PNC Bank. This facility is for an initial
three-year period, extendable for an additional year at the end
of each year, and is collateralized by four of the Company's Ohio
manufactured home communities, Lake Sherman Village, River Valley
Estates, Spreading Oaks Village and Wood Valley Estates.
Borrowings are at an interest rate of prime. This credit
facility has been put in place to finance acquisitions and
expansions and for other general corporate purposes.
NOTE 6 - DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
On June 15, 2004, the Company paid $1,999,225 of which $462,098
was reinvested, as a dividend of $.235 per share to shareholders
of record as of May 17, 2004. Total dividends paid for the six
months ended June 30, 2004 amounted to $3,922,731, of which
$886,806 was reinvested. On July 1, 2004, the Company declared a
dividend of $.2375 per share to be paid on September 15, 2004 to
shareholders of record August 16, 2004.
During the six months ended June 30, 2004, the Company received,
including dividends reinvested, a total of $6,356,229 from the
Dividend Reinvestment and Stock Purchase Plan. There were
447,007 new shares issued under the Plan.
Page 9
NOTE 7 - EMPLOYMENT AGREEMENTS
The Company has an employment agreement with Mr. Eugene W. Landy,
Chairman of the Board. Under this agreement his base
compensation was $150,000 per year. This contract expired in
1998 and had been renewed for one-year periods. Effective
January 1, 2004, this agreement was amended to increase Mr.
Landy's annual base compensation to $175,000. Additionally, Mr.
Landy's pension benefit of $50,000 per year has been extended for
an additional three years. This amendment did not have a
material impact on the Company's financial statements.
NOTE 8 - CONTINGENCIES
The Company is subject to claims and litigation in the ordinary
course of business. Management does not believe that any such
claim or litigation will have a material adverse effect on the
consolidated balance sheet or results of operations.
NOTE 9 - SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the six months ended June 30, 2004 and 2003 for
interest was $1,518,497 and $1,699,915, respectively. Interest
cost capitalized to Land Development was $89,000 and $68,500 for
the six months ended June 30, 2004 and 2003, respectively.
During the six months ended June 30, 2004 and 2003, the Company
had dividend reinvestments of $886,806 and $899,258,
respectively, which required no cash transfers.
Page 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
OVERVIEW
The following discussion and analysis of the consolidated
financial condition and results of operations should be read in
conjunction with the Consolidated Financial Statements and notes
thereto included elsewhere herein and in our annual report on
Form 10-K for the year ended December 31, 2003.
The Company is a real estate investment trust (REIT). 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 owns and operates 27 communities with over 6,200
sites. These communities are located in New Jersey, New York,
Ohio, Pennsylvania and Tennessee. The Company also leases homes
to residents and, through its taxable REIT subsidiary, UMH Sales
and Finance, Inc. (S&F), sells homes to residents and prospective
residents of our communities.
The Company also holds a portfolio of securities of other REITs
of $25,582,531 at June 30, 2004. The Company from time to time
may purchase these securities on margin when an adequate yield
spread can be achieved. At June 30, 2004, the Company's
portfolio consists of 60% preferred stocks, 27% common stocks and
13% debentures. The securities portfolio provides the Company
with liquidity and additional income.
The Company's revenue primarily consists of rental and related
income from the operation of the manufactured home communities.
Revenues also include sales of manufactured homes, interest and
dividend income and gain on securities available for sale
transactions, net. Total revenues decreased 2.5% for the three
months ended June 30, 2004 as compared to the three months ended
June 30, 2003 primarily due to a decrease in dividend and
interest income as a result of sales of securities. Total
revenues increased 9.4% for the six months ended June 30, 2004 as
compared to the six months ended June 30, 2003 primarily due to
an increase in gain on securities available for sale
transactions, net and the acquisition of a new community during
the first quarter of 2004. On March 1, 2004, the Company
acquired a manufactured home community in Somerset Township,
Pennsylvania.
Page 11
CHANGES IN RESULTS OF OPERATIONS
Rental and related income increased from $5,226,202 for the
quarter ended June 30, 2003 to $5,386,252 for the quarter ended
June 30, 2004. Rental and related income increased from
$10,375,813 for the six months ended June 30, 2003 to $10,731,002
for the six months ended June 30, 2004. This was primarily due
to the acquisitions of the new communities during 2003 and 2004
and rental increases to residents. The Company has been raising
rental rates by approximately 3% to 4% annually. Interest and
dividend income decreased from $811,562 for the quarter ended
June 30, 2003 to $652,788 for the quarter ended June 30, 2004.
Interest and dividend income decreased from $1,696,923 for the
six months ended June 30, 2003 to $1,392,615 for the six months
ended June 30, 2004. This was due primarily to a lower average
balance of securities in 2004 as a result of sales during 2003
and 2004. Gain on securities available for sale transactions
amounted to $313,424 and $477,065 for the quarters ended June 30,
2004 and 2003, respectively. Gain on securities available for
sale transactions amounted to $2,133,778 and $671,581 for the six
months ended June 30, 2004 and 2003, respectively. This increase
was primarily the result of the Company's decision to take
advantage of the rise in price of the securities portfolio in the
fourth quarter of 2003 and the first quarter of 2004. Management
does not expect to recognize the same level of realized gains on
sale of securities in future quarters due to a decline in market
values of REIT securities occurring after the first quarter of
2004. See Safe Harbor Statement on page 14
Community operating expenses increased from $2,488,873 for the
quarter ended June 30, 2003 to $2,670,114 for the quarter ended
June 30, 2004. Community operating expenses increased from
$4,835,524 for the six months ended June 30, 2003 to $5,129,779
for the six months ended June 30, 2004. This was primarily due
to the acquisitions of the new communities in the latter half of
2003 and 2004 and increased real estate taxes, health insurance
and sewer expenses. General and administrative expenses remained
relatively stable for the quarter and six months ended June 30,
2004 as compared to the quarter and six months ended June 30,
2003. Interest expense decreased from $803,380 for the quarter
ended June 30, 2003 to $689,785 for the quarter ended June 30,
2004. Interest expense decreased from $1,631,415 for the six
months ended June 30, 2003 to $1,429,497 for the six months ended
June 30, 2004. This was primarily due to a decrease in loans
payable and the refinancing of existing mortgages at lower
interest rates. Depreciation expense increased from $716,780
for the quarter ended June 30, 2003 to $793,368 for the quarter
ended June 30, 2004. Depreciation expense increased from
$1,433,439 for the six months ended June 30, 2003 to $1,564,068
for the six months ended June 30, 2004. This was primarily due
to the acquisitions of the new communities. Amortization of
financing costs remained relatively stable for the quarter and
six months ended June 30, 2004 as compared to the quarter and six
months ended June 30, 2003.
Page 12
CHANGES IN RESULTS OF OPERATIONS, (CONT'D.)
Sales of manufactured homes amounted to $1,689,340 and $1,734,572
for the quarters ended June 30, 2004 and 2003, respectively.
Sales of manufactured homes amounted to $3,231,682 and $3,230,665
for the six months ended June 30, 2004 and 2003, respectively.
Cost of sales of manufactured homes amounted to $1,302,595 and
$1,349,726 for the quarters ended June 30, 2004 and 2003,
respectively. Cost of sales of manufactured homes amounted to
$2,519,807 and $2,542,745 for the six months ended June 30, 2004
and 2003, respectively. Selling expenses amounted to $297,156
and $297,640 for the quarters ended June 30, 2004 and 2003,
respectively.
Selling expenses amounted to $642,451 and $572,878 for the six
months ended June 30, 2004 and 2003, respectively. These
fluctuations are directly attributable to the fluctuations in
sales. Income from sales operations (defined as sales of
manufactured homes less cost of sales of manufactured homes less
selling expenses) amounted to $89,589 for the quarter ended June
30, 2004 as compared to $87,206 for the quarter ended June 30,
2003. Income from sales operations amounted to $69,424 for the
six months ended June 30, 2004 as compared to $115,042 for the
six months ended June 30, 2003. This decrease was primarily due
to an increase in personnel costs. The Company believes that
sales of new homes, into the Company's parks produces new rental
revenue and upgrades the communities.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities increased from
$3,048,856 for the six months ended June 30, 2003 to $3,724,425
for the six months ended June 30, 2004 primarily due to a smaller
increase in notes and other receivables for the six months ended
June 30, 2004 as compared to the six months ended June 30, 2003.
The Company received, including dividends reinvested of $886,806,
new capital of $6,356,229 through its Dividend Reinvestment and
Stock Purchase Plan (DRIP). The Company sold $5,762,293, at
cost, and purchased $3,283,385 of securities of other real estate
investment trusts. Mortgages Payable increased by $37,386 as a
result of a new mortgage of $2,000,000 partially offset by
principal repayments of $1,962,614. Loans payable decreased by
$6,498,363 due primarily to principal repayments. The Company
also established a $15,000,000 revolving line of credit to
finance acquisitions and expansions and for other general
corporate purposes. The Company believes that funds generated
from operations together with the financing and refinancing of
its properties will be sufficient to meet its needs over the next
several years.
Page 13
FUNDS FROM OPERATIONS
Funds from Operations (FFO) is defined as net income excluding
gains (or losses) from sales of depreciable assets, plus
depreciation. FFO should be considered as a supplemental measure
of operating performance used by real estate investment trust
(REITs). FFO excludes historical cost depreciation as an expense
and may facilitate the comparison of REITs which have different
cost bases. The items excluded from FFO are significant
components in understanding and assessing the Company's financial
performance. FFO (1) does not represent cash flow from
operations as defined by generally accepted accounting
principles; (2) should not be considered as an alternative to net
income as a measure of operating performance or to cash flows
from operating, investing and financing activities; and (3) is
not an alternative to cash flow as a measure of liquidity. FFO,
as calculated by the Company, may not be comparable to similarly
entitled measures reported by other REITs.
FUNDS FROM OPERATIONS, (CONT'D.)
The Company's FFO for the three and six months ended June 30,
2004 and 2003 is calculated as follows:
Three Months Six Months
2004 2003 2004 2003
Net Income $1,668,327 $1,967,394 $4,945,994 $3,769,870
Loss (Gain) on Sale
of Depreciable Assets 6,769 (31,252) 12,028 (37,554)
Depreciation
Expense 793,368 716,780 1,564,068 1,433,439
__________ _________ __________ _________
FFO $2,468,464 $2,652,922 $6,522,090 $5,165,755
========== ========== ========== ==========
The following are the cash flows provided (used) by operating,
investing and financing activities for the six months ended June
30, 2004 and 2003:
2004 2003
Operating Activities $3,724,425 $3,048,856
Investing Activities (1,236,529) 612,118
Financing Activities (4,169,898) (4,273,180)
Page 14
CONTROLS AND PROCEDURES
The Company's Chief Executive Officer and Chief Financial
Officer, with the assistance of other members of the Company's
management, have evaluated the effectiveness of the Company's
disclosure controls and procedures as of the end of the period
covered by this Quarterly Report on Form 10-Q. Based on such
evaluation, the Company's Chief Executive Officer and Chief
Financial Officer have concluded that the Company's disclosure
controls and procedures are effective.
The Company's Chief Executive Officer and Chief Financial Officer
have also concluded that there have not been any changes in the
Company's internal control over financial reporting during the
quarter ended June 30, 2004 that has materially affected, or is
reasonably likely to materially affect, the Company's internal
control over financial reporting.
SAFE HARBOR STATEMENT
This Form 10-Q 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.
Page 15
PART II
OTHER INFORMATION
Item 1 - Legal Proceedings - none
Item 2 - Changes in Securities, Use of Proceeds and
Issuer Purchases of Equity Securities- none
Item 3 - Defaults Upon Senior Securities - none
Item 4 - Submission of Matters to a Vote of Security Holders
The annual meeting of shareholders was held on June 10,
2004 to elect members of the Board of Directors and to
approve the selection of independent auditors. Proxies for
the meeting were solicited pursuant to Regulation 14 under
the Securities and Exchange Act of 1934.
Item 5 - Other Information - none
Item 6 - Exhibits and Reports on Form 8-K -
(a) Exhibits -
31.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
31.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
32
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(b) Reports on Form 8-K - none
Page 16
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
UNITED MOBILE HOMES, INC.
DATE: August 4, 2004 By /s/ Samuel A. Landy
Samuel A. Landy
President
DATE: August 4, 2004 By /s/ Anna T. Chew
Anna T. Chew
Vice President and
Chief Financial Officer
Page 17