FOR IMMEDIATE RELEASE March 15, 2005
CONTACT: Rosemarie Faccone
Susan Jordan
732-577-9997
UNITED MOBILE HOMES, INC. ANNOUNCES RESTATEMENT OF FINANCIAL
STATEMENTS TO CORRECT ACCOUNTING FOR INTEREST RATE SWAP
AGREEMENTS
FREEHOLD, NJ, March 15, 2005...... United Mobile Homes, Inc. (AMEX:UMH)
announced today that following a review of its accounting treatment of various
interest rate swaps, the Company, in consultation with its external auditors,
KPMG LLP, has determined that it is necessary to restate its previously issued
financial statements for periods ending on or prior to September 30, 2004. In an
ongoing review of its accounting policies, the Company determined that the
accounting for certain of its interest rate swaps did not comply with generally
accepted accounting principles in the U.S. (GAAP). Although management believes
the substance of the interest rate swaps achieved the original objectives of
converting certain variable rate debt to effectively fixed rate obligations,
certain technical documentation requirements for hedge accounting under
Financial Accounting Standards Board (FAS) Statement No. 133 "Accounting for
Derivative Instruments and Hedging Activities" and related interpretations were
not met.
Historically, the Company treated these interest rate swaps as embedded
derivatives and did not separately recognize the fair value of these derivatives
as an asset/liability in the Company's consolidated financial statements. The
Company disclosed these borrowings as fixed rate obligations. Since these
transactions do not qualify for hedge accounting under FAS Statement No. 133,
the Company must record the fair value of the derivatives as an asset/liability
and the changes in fair value as an income/expense in the period that such
changes occurred. KPMG LLP is in the process of completing their 2004 audit of
the Company's consolidated financial statements. Management estimates that these
non-cash adjustments have the effect of decreasing net income by approximately
$531,000 for the year ended December 31, 2002 and increasing net income by
approximately $390,000 for the year ended December 31, 2003. The impact of this
accounting change for the nine months ended September 30, 2004 is to increase
net income by approximately $249,000. There is no effect on historical or future
net cash flows provided by operating activities.
The restated financial statements for the two year period ended December
31, 2003, the four quarters of 2003 and the first three quarters of 2004 will be
reflected in the Company's 2004 Annual Report on Form 10-K. Accordingly, the
financial statements and the related independent auditors' reports contained in
the Company's prior filings with the Securities and Exchange Commission should
no longer be relied upon.
Due to this restatement, the Company does not expect to file its 2004
Annual Report on Form 10-K by March 16, 2005. The Company will file a
Notification of Late Filing on Form 12b-25 with the Securities and Exchange
Commission today in connection with this delay.
United Mobile Homes, Inc., a publicly-owned real estate investment trust,
owns and operates twenty-seven manufactured home communities located in New
Jersey, New York, Pennsylvania, Ohio and Tennessee. In addition, the Company
owns a portfolio of REIT securities.
This press release 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.
