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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
( x ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2004
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission File Number 001-12690
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 (Address of Principal Executive 0ffices)
(Zip Code)
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 12b-2 of the Exchange Act). Yes X No ___
The number of shares outstanding of issuer's common stock as of
October 14, 2004 was 8,842,999 shares.
Page 1
UNITED MOBILE HOMES, INC.
for the QUARTER ENDED
SEPTEMBER 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 Condition and Results of 11-15
Operations
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 SEPTEMBER 30, 2004 AND DECEMBER 31, 2003
September December
-ASSETS- 30, 31,
2004 2003
___________ ___________
(Unaudited)
INVESTMENT PROPERTY AND EQUIPMENT
Land $ 8,412,970 $ 6,927,971
Site and Land Improvements 61,883,040 59,202,516
Buildings and Improvements 3,109,992 2,790,612
Rental Homes and Accessories 10,134,044 9,581,123
___________ ___________
Total Investment Property 83,540,046 78,502,222
Equipment and Vehicles 5,478,652 4,664,006
___________ ___________
Total Investment Property and
Equipment 89,018,698 83,166,228
___________ ___________
Accumulated Depreciation (39,843,419) (37,660,693)
___________ ___________
Net Investment Property and 49,175,279 45,505,535
Equipment ___________ ___________
OTHER ASSETS
Cash and Cash Equivalents 1,630,558 3,244,871
Securities Available for Sale 26,578,544 31,096,211
Inventory of Manufactured Homes 4,618,767 3,635,954
Notes and Other Receivables 8,763,261 7,338,580
Unamortized Financing Costs 559,324 407,401
Prepaid Expenses 982,160 559,594
Land Development Costs 4,338,378 2,522,066
___________ ___________
Total Other Assets 47,470,992 48,804,677
_ ___________ ___________
TOTAL ASSETS $96,646,271 $94,310,212
=========== ==========
- LIABILITIES AND SHAREHOLDERS' EQUITY -
LIABILITIES:
MORTGAGES PAYABLE $43,702,290 $44,222,675
__________ ___________
OTHER LIABILITIES
Accounts Payable 546,207 655,648
Loans Payable 3,465,985 7,840,962
Accrued Liabilities and Deposits 1,939,075 1,988,525
Tenant Security Deposits 525,249 502,626
__________ __________
Total Other Liabilities 6,476,516 10,987,761
__________ __________
Total Liabilities 50,178,806 55,210,436
__________ __________
SHAREHOLDERS' EQUITY:
Common Stock - $.10 par value per
share, 20,000,000 shares authorized,
9,140,258 and 8,557,130 shares
issued and 8,842,999 and 8,164,830
shares outstanding as of September
30, 2004 and December 31, 2003,
respectively 914,026 855,713
Excess Stock - $.10 par value per
share, 3,000,000 shares authorized,
no shares issued or outstanding -0- -0-
Additional Paid-In Capital 44,850,179 36,304,626
Accumulated Other
Comprehensive Income 3,035,094 5,308,195
Undistributed Income 479,000 341,164
Treasury Stock, at Cost (297,259 and
392,300 shares at September 30, 2004
and December 31, 2003, respectively) (2,810,834) (3,709,922)
__________ __________
Total Shareholders' Equity 46,467,465 39,099,776
__________ __________
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $96,646,271 $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 NINE MONTHS ENDED
SEPTEMBER 30, 2004 AND 2003
THREE MONTHS NINE MONTHS
2004 2003 2004 2003
_________ _________ _________ _________
REVENUES:
Rental and Related
Income $5,419,585 $5,265,197 $16,150,587 $15,641,010
Sales of Manufactured
Homes 2,136,986 1,876,398 5,368,668 5,107,063
Interest and Dividend
Income 751,276 848,860 2,143,891 2,545,783
(Loss) Gain on
Securities Available
for Sal Transactions
net (203,671) 815,358 1,930,107 1,486,939
Other Income 26,516 28,292 81,326 93,953
_________ _________ _________ _________
Total Revenues 8,130,692 8,834,105 25,674,579 24,874,748
_________ _________ _________ _________
EXPENSES:
Community Operating
Expenses 2,834,637 2,639,788 7,964,416 7,475,312
Cost of Sales of
Manufactured Homes 1,783,961 1,504,503 4,303,768 4,047,248
Selling Expenses 249,054 283,278 891,505 856,156
General and
Administrative
Expenses 585,960 566,584 1,836,603 1,798,310
Interest Expense 653,602 785,933 2,083,099 2,417,348
Depreciation Expense 804,920 723,080 2,368,988 2,156,519
Amortization of
Financing Costs 49,810 30,300 99,430 90,900
_________ _________ _________ _________
Total Expenses 6,961,944 6,533,466 19,547,809 18,841,793
_________ _________ __________ _________
Income before Gain on
Sales of Investment
Property and
Equipment 1,168,748 2,300,639 6,126,770 6,032,955
Gain on Sales of
Investment Property
and Equipment 21,090 13,098 9,062 50,652
_________ __________ _________ _________
Net Income $1,189,838 $2,313,737 $6,135,832 $6,083,607
========= ========== ========== =========
Net Income per Share -
Basic $ 0.14 $ 0.29 $ 0.72 $ 0.78
========= ========= ========= =========
Diluted $ 0.14 $ 0.29 $ 0.72 $ 0.77
========= ========= ========= =========
Weighted Average
Shares Outstanding -
Basic 8,723,335 7,905,395 8,485,910 7,788,311
========= ========= ========= =========
Diluted 8,792,531 8,001,633 8,568,035 7,876,576
========= ========= ========= =========
-UNAUDITED-
See Accompanying Notes to Consolidated Financial Statements
Page 4
UNITED MOBILE HOMES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2004 AND 2003
2004 2003
___________ ___________
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Income $ 6,135,832 $ 6,083,607
Non-Cash Adjustments:
Depreciation 2,368,988 2,156,519
Amortization 99,430 90,900
Stock Compensation Expense 91,595 -0-
Gain on Securities Available for
Sale Transactions (1,930,107) (1,486,939)
Gain on Sales of Investment Property
and Equipment (9,062) (50,652)
Changes in Operating Assets and
Liabilities:
Inventory of Manufactured Homes (982,813) 128,152
Notes and Other Receivables (1,424,681) (1,735,292)
Prepaid Expenses (422,566) (431,956)
Accounts Payable (109,441) (347,040)
Accrued Liabilities and Deposits (49,450) (517,577)
Tenant Security Deposits 22,623 55
___________ ___________
Net Cash Provided by Operating Activities 3,790,348 3,889,777
___________ ___________
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Manufactured Home Community (3,535,400) (918,000)
Purchase of Investment Property and
Equipment (2,797,093) (2,196,617)
Proceeds from Sales of Assets 302,823 338,793
Additions to Land Development (1,816,312) (932,803)
Purchase of Securities Available for Sale (5,185,488) (5,741,183)
Proceeds from Sales Of Securities
Available for Sale 9,360,161 9,787,156
Repayment of Notes Receivable from -0- 92,000
Officers
Net Cash (Used) Provided by Investing ___________ ___________
Activities (3,671,309) 429,346
___________ ___________
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Mortgages and Loans 2,000,000 3,500,000
Principal Payments of Mortgages and Loans (6,895,362) (7,916,546)
Financing Costs on Debt (251,353) (75,728)
Proceeds from Issuance of Common Stock 7,915,109 2,350,004
Proceeds from Exercise of Stock Options 100,725 783,513
Dividends Paid, net of amount reinvested (4,602,471) (3,934,487)
___________ ___________
Net Cash Used in Financing Activities (1,733,352) (5,293,244)
___________ ___________
NET DECREASE IN CASH
AND CASH EQUIVALENTS (1,614,313) (974,121)
CASH & CASH EQUIVALENTS-BEGINNING 3,244,871 2,338,979
___________ ___________
CASH & CASH EQUIVALENTS-ENDING $ 1,630,558 $ 1,364,858
=========== ===========
-UNAUDITED-
See Accompanying Notes to Consolidated Financial Statements
Page 5
UNITED MOBILE HOMES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 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 September 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 nine months ended September 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 Nine Months
2004 2003 2004 2003
________ ________ ________ ________
Net Income prior to
compensation
expense $1,224,578 $2,320,650 $6,227,427 $6,090,520
Compensation expense 34,740 6,913 91,595 6,913
_________ _________ _________ _________
Net Income as 1,189,838 2,313,737 6,135,832 6,083,607
Reported
Compensation expenses
if the fair value
method had been
applied -0- -0- -0- 8,815
_________ __________ __________ _________
Net Income Pro forma $1,189,838 $2,313,737 $6,135,832 $6,074,792
========= ========= ========= =========
Net Income per share
- as reported
Basic $ .14 $ .29 $ .72 $ .78
Diluted $ .14 $ .29 $ .72 $ .77
Net Income per share
- pro forma
Basic $ .14 $ .29 $ .72 $ .78
Diluted $ .14 $ .29 $ .72 $ .77
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 3.89% 3.91% 3.40%
Expected lives 8 8 8
The weighted-average fair value of options granted during the
nine months ended September 30, 2004 was $1.27. The weighted
average fair value of options granted during 2003 was $1.30.
During the nine months ended September 30, 2004, the following
stock options were granted:
Date Number Number Option Expiration
of of of Price Date
Grant Employees Shares
______ ________ _______ _____ ________
1/16/04 1 25,000 $18.62 1/16/12
7/6/04 9 41,000 13.05 7/6/12
During the nine months ended September 30, 2004, three employees
exercised their stock options and purchased 11,000 shares for a
total of $100,725. Additionally, a stock option for 2,000 shares
expired without being exercised. As of September 30, 2004, there
were options outstanding to purchase 359,000 shares and 1,372,000
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 69,196 and 82,125 shares for
the three and nine months ended September 30, 2004, respectively,
and 96,238 and 88,265 shares for the three and nine months ended
September 30, 2003, respectively are included in the diluted
weighted average shares outstanding.
The following table sets forth the components of the Company's
comprehensive income for the three and nine months ended
September 30, 2004 and 2003:
Three Months Nine Months
____________ ___________
2004 2003 2004 2003
_____ _____ _____ _____
Net Income $1,189,838 $2,313,737 $6,135,832 $6,083,607
Increase
(decrease) in
unrealized
gain on
securities
available
for sale 761,671 450,313 (2,273,101) 1,319,970
__________ __________ __________ __________
Comprehensive
Income $1,951,509 $2,764,050 $3,862,731 $7,403,577
========== ========== ========== ===========
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 nine months ended September 30, 2004, the Company sold
or redeemed $7,430,054 in securities available for sale,
recognizing a net gain of $1,930,107. Included in these sales
are sales of 745,250 shares of Monmouth Real Estate Investment
Corporation (an affiliated company) common stock for a gain of
$1,499,332.
During the nine months ended September 30, 2004, the Company
invested in futures contracts on ten-year Treasury notes with a
notional amount of $9,000,000, 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 (loss) 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 September 30, 2004 was a liability of
$30,235. During the quarter and nine months ended September 30,
2004, the Company recorded a realized loss of $454,137 and
$209,213, respectively on settled futures contracts, which is
included in (loss) 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 September 15, 2004, the Company paid $2,075,265 of which
$508,719 was reinvested, as a dividend of $.2375 per share to
shareholders of record as of August 16, 2004. Total dividends
paid for the nine months ended September 30, 2004 amounted to
$5,997,996, of which $1,395,525 was reinvested. On October 1,
2004, the Company declared a dividend of $.24 per share to be
paid on December 15, 2004 to shareholders of record November 15,
2004.
During the nine months ended September 30, 2004, the Company
received, including dividends reinvested, a total of $9,310,634
from the Dividend Reinvestment and Stock Purchase Plan. There
were 667,169 shares issued under the Plan, of which 95,041 shares
were issued from Treasury stock.
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 nine months ended September 30, 2004 and
2003 for interest was $2,233,799 and $2,529,048, respectively.
Interest cost capitalized to Land Development was $150,700 and
$111,700 for the nine months ended September 30, 2004 and 2003,
respectively.
During the nine months ended September 30, 2004 and 2003, the
Company had dividend reinvestments of $1,395,525 and $1,316,223,
respectively, which required no cash transfers.
Page 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 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 $26,578,544 at September 30, 2004. The Company from time to
time may purchase these securities on margin when an adequate
yield spread can be achieved. At September 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 its 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 8% for the three
months ended September 30, 2004 as compared to the three months
ended September 30, 2003 primarily due to a loss on securities
available for sale transactions due to settlement of futures
contracts at a loss of $454,137. The net loss on settlement of
futures contracts amounted to $209,213 for the nine months ended
September 30, 2004. The Company also experienced a decrease in
dividend and interest income as a result of sales of securities.
Total revenues increased 3% for the nine months ended September
30, 2004 as compared to the nine months ended September 30, 2003
primarily due to rent increases 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. Net income for the three months ended
September 30, 2004 decreased by $1,123,899 due primarily to the
loss on securities available for sales transactions of $203,671
for the three months ended September 30, 2004 as compared to a
gain of $815,358 for the three months ended September 30, 2003.
Community operations have remained relatively stable. Management
is continuing to seek communities for acquisition, but the
current acquisition environment is very competitive.
See PART I, Item 1- Business, of the Company's December 31,
2003 annual report on Form 10-K for a more complete discussion
of the economic and industry-wide factors relevant to the
Company, the Company's lines of business and principal products
and services, and the opportunities, challenges and risks on
which the Company is focused.
Page 11
CHANGES IN RESULTS OF OPERATIONS
Rental and related income increased from $5,265,197 for the
quarter ended September 30, 2003 to $5,419,585 for the quarter
ended September 30, 2004. Rental and related income increased
from $15,641,010 for the nine months ended September 30, 2003 to
$16,150,587 for the nine months ended September 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 $848,860
for the quarter ended September 30, 2003 to $751,276 for the
quarter ended September 30, 2004. Interest and dividend income
decreased from $2,545,783 for the nine months ended September 30,
2003 to $2,143,891 for the nine months ended September 30, 2004.
This was due primarily to a lower average balance of securities
in 2004 as a result of sales during 2003 and 2004. (Loss) gain
on securities available for sale transactions, net amounted to a
loss of $203,671 for the quarter ended September 30, 2004 as
compared to a gain of $815,358 for the quarter ended September
30, 2003. This decrease was primarily due to a loss on
settlement of futures contracts of $454,137 partially offset by
gains on sales of securities. The net loss on settlement of
futures contracts amounted to $209,213 for the nine months ended
September 30, 2004. (Loss) gain on securities available for sale
transactions, net amounted to $1,930,107 and $1,486,939 for the
nine months ended September 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. See
Safe Harbor Statement on page 14.
Community operating expenses increased from $2,639,788 for the
quarter ended September 30, 2003 to $2,834,637 for the quarter
ended September 30, 2004. Community operating expenses increased
from $7,475,312 for the nine months ended September 30, 2003 to
$7,964,416 for the nine months ended September 30, 2004. This
was primarily due to the acquisitions of the new communities
during 2003 and 2004 and increased real estate taxes, health
insurance and sewer expenses. General and administrative
expenses remained relatively stable for the quarter and nine
months ended September 30, 2004 as compared to the quarter and
nine months ended September 30, 2003. Interest expense decreased
from $785,933 for the quarter ended September 30, 2003 to
$653,602 for the quarter ended September 30, 2004. Interest
expense decreased from $2,417,348 for the nine months ended
September 30, 2003 to $2,083,099 for the nine months ended
September 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 $723,080
for the quarter ended September 30, 2003 to $804,920 for the
quarter ended September 30, 2004. Depreciation expense increased
from $2,156,519 for the nine months ended September 30, 2003 to
$2,368,988 for the nine months ended September 30, 2004. This
was primarily due to the acquisitions of the new communities.
Amortization of financing costs remained relatively stable for
the quarter and nine months ended September 30, 2004 as compared
to the quarter and nine months ended September 30, 2003.
Sales of manufactured homes amounted to $2,136,986 and $1,876,398
for the quarters ended September 30, 2004 and 2003, respectively.
Sales of manufactured homes amounted to $5,368,668 and $5,107,063
for the nine months ended September 30, 2004 and 2003,
Page 12
CHANGES IN RESULTS OF OPERATIONS, (CONT'D.)
respectively. Cost of sales of manufactured homes amounted to
$1,783,961 and $1,504,503 for the quarters ended September 30,
2004 and 2003, respectively. Cost of sales of manufactured homes
amounted to $4,303,768 and $4,047,248 for the nine months ended
September 30, 2004 and 2003, respectively. Selling expenses
amounted to $249,054 and $283,278 for the quarters ended
September 30, 2004 and 2003, respectively. Selling expenses
amounted to $891,505 and $856,156 for the nine months ended
September 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 $103,971 for the quarter ended September 30, 2004 as
compared to $88,617 for the quarter ended September 30, 2003.
Income from sales operations amounted to $173,395 for the nine
months ended September 30, 2004 as compared to $203,659 for the
nine months ended September 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 decreased from
$3,889,777 for the nine months ended September 30, 2003 to
$3,790,348 for the nine months ended September 30, 2004 primarily
due to an increase in inventory of manufactured homes for the
nine months ended September 30, 2004 as compared to a decrease
for the nine months ended September 30, 2003. The Company
received, including dividends reinvested of $1,395,525, new
capital of $9,310,634 through its Dividend Reinvestment and Stock
Purchase Plan (DRIP). The Company sold $7,430,054, at cost, and
purchased $5,185,488 of securities of other real estate
investment trusts. Mortgages Payable decreased by $520,385 as a
result of principal repayments of $2,520,385 partially offset by
a new mortgage of $2,000,000. Loans payable decreased by
$4,374,977 due primarily to principal repayments from the sales
of securities subject to margin loans. 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.
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.
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FUNDS FROM OPERATIONS, (CONT'D.)
The Company's FFO for the three and nine months ended September
30, 2004 and 2003 is calculated as follows:
Three Months Nine Months
____________ ___________
2004 2003 2004 2003
Net Income $1,189,838 $2,313,737 $6,135,832 $6,083,607
Gain on Sales of
Depreciable Assets (21,090) (13,098) (9,062) (50,652)
Depreciation Expense 804,920 723,080 2,368,988 2,156,519
_________ ________ _________ ________
FFO $1,973,668 $3,023,719 $8,495,758 $8,189,474
========= ======== ========= =========
The following are the cash flows provided (used) by operating,
investing and financing activities for the nine months ended
September 30, 2004 and 2003:
2004 2003
_________ __________
Operating Activities $3,790,348 $ 3,889,777
Investing Activities (3,671,309) 429,346
Financing Activities (1,733,352) (5,293,244)
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 September 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
Page 14
SAFE HARBOR STATEMENT, (CONT'D.)
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 - Unregistered Sales of Equity Securities and Use of
Proceeds- none
Item 3 - Defaults Upon Senior Securities - none
Item 4 - Submission of Matters to a Vote of Security Holders -
none
Item 5 - Other Information
(a) Information Required to be Disclosed in a Report on Form 8-
K, but not Reported - none
(b) Material Changes to the Procedures by which Security Holders
May Recommend Nominees to the Board of Directors - none
Item 6 - 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
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: November 5, 2004 By /s/ Samuel A. Landy
Samuel A. Landy
President
DATE: November 5, 2004 By /s/ Anna T. Chew
Anna T. Chew
Vice President and
Chief Financial Officer
Page 17