<PAGE> 1
FORM 10-Q
UNITED STATES
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 MARCH 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 1-11718
MANUFACTURED HOME COMMUNITIES, INC.
(Exact name of registrant as specified in its Charter)
MARYLAND 36-3857664
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
TWO NORTH RIVERSIDE PLAZA, SUITE 800, CHICAGO, ILLINOIS 60606
(Address of principal executive offices) (Zip Code)
(312) 279-1400
(Registrant's telephone number, including area code)
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 ( )
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
22,103,065 shares of Common Stock as of April 30, 2000.
<PAGE> 2
MANUFACTURED HOME COMMUNITIES, INC.
TABLE OF CONTENTS
PART I - FINANCIAL STATEMENTS
ITEM 1. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
Page
----
Consolidated Balance Sheets as of March 31, 2000
(unaudited) and December 31, 1999.................................. 3
Consolidated Statements of Operations for the quarters ended
March 31, 2000 and 1999 (unaudited)................................ 4
Consolidated Statements of Cash Flows for the quarters ended
March 31, 2000 and 1999 (unaudited)................................ 5
Notes to Consolidated Financial Statements........................... 6
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations......................................... 15
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings................................................ 19
ITEM 6. Exhibits and Reports on Form 8-K................................. 19
2
<PAGE> 3
MANUFACTURED HOME COMMUNITIES, INC.
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2000 AND DECEMBER 31, 1999
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
MARCH 31, DECEMBER 31,
2000 1999
(UNAUDITED)
----------- -----------
ASSETS
Investment in real estate:
Land $ 285,542 $ 285,337
Land improvements........................... 874,336 876,923
Buildings and other depreciable property.... 103,773 102,083
1,263,651 1,264,343
Accumulated depreciation.................... (158,937) (150,757)
Net investment in real estate............. 1,104,714 1,113,586
Cash and cash equivalents...................... 10,626 6,676
Notes receivable............................... 3,224 4,284
Investment in and advances to affiliates....... 14,478 11,689
Investment in joint ventures................... 9,457 9,501
Rents receivable ............................. 1,471 1,338
Deferred financing costs, net.................. 5,255 5,042
Prepaid expenses and other assets.............. 11,169 8,222
----------- -----------
Total assets................................ $ 1,160,394 $ 1,160,338
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage notes payable...................... $ 527,830 $ 513,172
Unsecured term loan......................... 100,000 100,000
Unsecured line of credit.................... 98,400 107,900
Other notes payable......................... 4,192 4,192
Accounts payable and accrued expenses....... 23,554 20,780
Accrued interest payable.................... 5,499 5,612
Rents received in advance and
security deposits......................... 10,421 6,831
Distributions payable....................... 11,607 11,020
Due to affiliates........................... 21 33
----------- -----------
Total liabilities......................... 781,524 769,540
----------- -----------
Commitments and contingencies
Minority interest - Common OP Units
and other................................... 52,906 54,397
Minority interest - Perpetual Preferred
OP Units.................................... 125,000 125,000
Stockholders' equity:
Preferred stock, $.01 par value
10,000,000 shares authorized; none issued --- ---
Common stock, $.01 par value
50,000,000 shares authorized;
22,292,165 and 22,813,357 shares issued
and outstanding for 2000 and
1999, respectively........................ 224 229
Paid-in capital............................. 265,937 275,664
Deferred compensation....................... (5,826) (6,326)
Employee notes (4,502) (4,540)
Distributions in excess of
accumulated earnings...................... (54,869) (53,626)
----------- -----------
Total stockholders' equity................ 200,964 211,401
----------- -----------
Total liabilities and stockholders' equity.. $ 1,160,394 $ 1,160,338
=========== ===========
The accompanying notes are an integral part of the financial statements.
3
<PAGE> 4
MANUFACTURED HOME COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE QUARTERS ENDED MARCH 31, 2000 AND 1999
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
MARCH 31, MARCH 31,
2000 1999
----------- -----------
REVENUES
Base rental income........................ $ 47,309 $ 44,821
RV base rental income..................... 3,699 3,528
Utility and other income.................. 5,698 5,511
Equity in income of affiliates............ 150 143
Interest income........................... 292 387
----------- -----------
Total revenues..................... 57,148 54,390
----------- -----------
EXPENSES
Property operating and maintenance........ 15,407 14,473
Real estate taxes......................... 4,325 4,226
Property management....................... 2,388 2,083
General and administrative................ 1,826 1,692
Interest and related amortization......... 13,332 13,349
Depreciation on corporate assets.......... 271 246
Depreciation on real estate assets
and other costs......................... 8,856 8,243
----------- -----------
Total expenses..................... 46,405 44,312
----------- -----------
Income before allocation to
Minority Interests...................... 10,743 10,078
(Income) allocated to Common OP Units..... (1,599) (1,844)
(Income) allocated to Perpetual
Preferred OP Units...................... (2,813) ---
----------- -----------
NET INCOME......................... $ 6,331 $ 8,234
=========== ===========
Net income per Common Share - basic....... $ .28 $ .31
=========== ===========
Net income per Common Share - diluted..... $ .28 $ .31
=========== ===========
Distributions declared per Common
Share outstanding....................... $ .415 $ .3875
=========== ===========
Weighted average Common Shares
outstanding - basic..................... 22,297 26,157
=========== ===========
Weighted average Common Shares
outstanding - diluted (see Note 2)...... 28,242 32,340
=========== ===========
The accompanying notes are an integral part of the financial statements.
4
<PAGE> 5
MANUFACTURED HOME COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE QUARTERS ENDED MARCH 31, 2000 AND 1999
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
MARCH 31, MARCH 31,
2000 1999
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................ $ 6,331 $ 8,234
Adjustments to reconcile net income to
cash provided by operating activities:
Income allocated to Minority
Interests.......................... 4,412 1,844
Depreciation and amortization
expense............................ 8,500 8,616
Equity in income of affiliates........ (150) (143)
Amortization of deferred
compensation and other............. 500 413
(Increase) in rents receivable........ (133) (180)
(Increase) in prepaid expenses
and other assets................... (1,217) (122)
Increase in accounts payable and
accrued expenses................... 2,649 3,403
Increase in rents received in
advance and security deposits...... 3,590 3,218
----------- -----------
Net cash provided by
operating activities.................... 24,482 25,283
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Contributions to) distributions
from affiliates......................... (2,672) 381
Collection (funding) of notes receivable.. 1,060 (102)
Investment in joint ventures.............. (72) (1,266)
Proceeds from disposition of assets....... 4,133 ---
Acquisition of rental properties.......... (2,524) (1,184)
Improvements:
Improvements - corporate.............. (16) (184)
Improvements - rental properties...... (864) (1,605)
Site development costs................ (70) (208)
----------- -----------
Net cash used in investing activities..... (1,025) (4,168)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from stock options
and employee stock purchase plan........ 769 1,451
Distributions to Common Stockholders,
Common OP Unitholders and
Perpetual Preferred OP Unitholders...... (13,792) (289)
Repurchase of Common Stock and OP Units... (11,296) (11,795)
Collection of principal payments on
employee notes.......................... 38 13
Proceeds from line of credit, term loan,
and mortgage notes payable.............. 28,123 6,000
Repayments on mortgage notes payable
and line of credit...................... (22,965) (23,179)
Debt issuance costs....................... (384) (334)
----------- -----------
Net cash used in financing activities..... (19,507) (28,133)
----------- -----------
Net increase (decrease) in cash and
cash equivalents............................ 3,950 (7,018)
Cash and cash equivalents, beginning
of period................................... 6,676 13,657
----------- -----------
Cash and cash equivalents, end of period....... $ 10,626 $ 6,639
=========== ===========
SUPPLEMENTAL INFORMATION:
Cash paid during the period for interest....... $ 13,245 $ 13,198
=========== ===========
The accompanying notes are an integral part of the financial statements.
5
<PAGE> 6
MANUFACTURED HOME COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DEFINITION OF TERMS:
Capitalized terms used but not defined herein are as defined in the
Company's Annual Report on Form 10-K for the year ended December 31, 1999.
PRESENTATION:
These unaudited Consolidated Financial Statements of Manufactured Home
Communities, Inc., a Maryland corporation, and its subsidiaries (collectively,
the "Company"), have been prepared pursuant to the Securities and Exchange
Commission ("SEC") rules and regulations and should be read in conjunction with
the financial statements and notes thereto included in the Company's 1999 Annual
Report on Form 10-K (the "1999 Form 10-K"). The following Notes to Consolidated
Financial Statements highlight significant changes to the Notes included in the
1999 Form 10-K and present interim disclosures as required by the SEC. The
accompanying Consolidated Financial Statements reflect, in the opinion of
management, all adjustments necessary for a fair presentation of the interim
financial statements. All such adjustments are of a normal and recurring nature.
Certain reclassifications have been made to the prior periods' financial
statements in order to conform with current period presentation.
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures
about Segments of an Enterprise and Related Information" establishes standards
for the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports. SFAS No. 131 also establishes standards for related disclosures about
products and services, geographic areas, and major customers. The adoption of
SFAS No. 131 did not affect the results of operations or financial position of
the Company. The Company has one reportable segment, which is the operation of
manufactured home communities.
NOTE 2 - EARNINGS PER COMMON SHARE
Earnings per common share is based on the weighted average number of common
shares outstanding during each period. In 1997, the Company adopted SFAS No.
128, "Earnings Per Share". SFAS No. 128 replaces the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants and convertible securities. Diluted
earnings per share is very similar to the previously reported fully diluted
earnings per share. The conversion of Operating Partnership Units ("OP Units")
has been excluded from the basic earnings per share calculation. The conversion
of an OP Unit to a share of common stock will have no material effect on
earnings per common share since the allocation of earnings to an OP Unit is
equivalent to the allocation of earnings to a share of common stock.
6
<PAGE> 7
MANUFACTURED HOME COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - EARNINGS PER COMMON SHARE (CONTINUED)
The following table sets forth the computation of basic and diluted
earnings per share for the quarters ended March 31, 2000 and 1999 (amounts in
thousands):
MARCH 31, MARCH 31,
2000 1999
----------- -----------
NUMERATOR:
Numerator for basic earnings per share -
Net income........................ $ 6,331 $ 8,234
Effect of dilutive securities:
Income allocated to Common OP Units.. 1,599 1,844
----------- -----------
Numerator for diluted earnings
per share-income available to
common shareholders after
assumed conversions............... $ 7,930 $ 10,078
=========== ===========
DENOMINATOR:
Denominator for basic earnings
per share - Weighted average
Common Stock outstanding.......... 22,297 26,157
Effect of dilutive securities:
Weighted average Common OP Units.. 5,637 5,881
Employee stock options............ 308 302
----------- -----------
Denominator for diluted earnings
per share-adjusted weighted
average shares and assumed
conversions....................... 28,242 32,340
=========== ===========
NOTE 3 - COMMON STOCK AND RELATED TRANSACTIONS
On April 14, 2000, the Company paid a $.415 per share distribution for the
quarter ended March 31, 2000 to stockholders of record on March 31, 2000.
On March 15, 2000, the Company's Board of Directors approved the repurchase
of an additional 1 million shares of common stock, in increments of 250,000
shares per calendar quarter, in accordance with the common stock repurchase
plan. As of March 31, 2000, the Company had repurchased, 4,998,800 shares of the
6 million shares authorized under the plan.
NOTE 4 - REAL ESTATE
In March 2000, in accordance with SFAS 121 "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed of", MHC
Acquisition One LLC, a consolidated subsidiary of the Company, recorded an
impairment loss on the DeAnza Santa Cruz water and wastewater service company
business. Recent negotiations for the sale of the business as well as
management's estimates indicated that the undiscounted future cash flows from
the business would be less than the carrying value of the business and its
related assets. The Company recorded an asset impairment loss of $701,000 (or
$.02 per fully diluted share) which is included in other income on the
accompanying statements of operations. This loss represents the difference
between the carrying value of the DeAnza Santa Cruz water and wastewater service
company business and its related assets and their estimated fair value.
On February 29, 2000, MHC Systems, Inc., a consolidated subsidiary of the
Company, disposed of in a cash sale the water and wastewater service company and
facilities known as FFEC-Six. Net proceeds from the sale of approximately $4.2
million were used to pay down the Company's line of credit and a gain on the
sale of $719,000 (or $.02 per fully diluted share) was recorded in other income
on the accompanying statements of operations.
7
<PAGE> 8
MANUFACTURED HOME COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - REAL ESTATE (CONTINUED)
The Company is actively seeking to acquire additional manufactured home
communities and currently is engaged in negotiations relating to the possible
acquisition of a number of manufactured home communities. At any time these
negotiations are at varying stages which may include contracts outstanding to
acquire certain manufactured home communities which are subject to satisfactory
completion of the Company's due diligence review.
NOTE 5 - NOTES RECEIVABLE
At March 31, 2000 and December 31, 1999, the Company had approximately $3.2
million and $4.3 million in notes receivable, respectively. On January 10, 2000,
$1.1 million in purchase money notes receivable were repaid to the Company. The
Company has a $3.2 million loan outstanding, which bears interest at the rate of
approximately 8.5%, is collateralized by the property known as Trails West and
matures on June 1, 2003.
NOTE 6 - LONG-TERM BORROWINGS
As of March 31, 2000 and December 31, 1999, the Company had outstanding
mortgage indebtedness of approximately $527.8 million and $513.2 million,
respectively, encumbering 74 and 72 of the Company's properties, respectively.
As of March 31, 2000 and December 31, 1999, the carrying value of such
properties was approximately $665 million and $638 million, respectively.
The outstanding mortgage indebtedness consists in part of a $265.0 million
mortgage note (the "Mortgage Debt") collateralized by 29 properties beneficially
owned by MHC Financing Limited Partnership. The Mortgage Debt has a maturity
date of January 2, 2028 and pays interest at 7.015%. There is no principal
amortization until February 1, 2008, after which principal and interest are to
be paid from available cash flow and the interest rate will be reset at a rate
equal to the then 10-year U.S. Treasury obligations plus 2.0%.
In 1998, a joint venture formed by the Company and Wolverine Investors
L.L.C. borrowed approximately $68 million (the "College Heights Debt") at an
interest rate of 7.19%, maturing July 1, 2008. The College Heights Debt is
collateralized by 18 properties owned by the joint venture.
The Company also has outstanding debt on 26 properties in the aggregate
amount of approximately $195.5 million, which was recorded at fair market value
with the related discount or premium being amortized over the life of the loan
using the effective interest rate. Included in this debt are two mortgages which
were entered into on February 24, 2000, with combined principal of $14.6 million
at an interest rate of approximately 8.3%, maturing on March 24, 2010. In
addition, the Company has a $2.4 million loan recorded to account for a direct
financing lease entered into in May 1997. Scheduled maturities for the
outstanding indebtedness, excluding the Mortgage Debt and the College Heights
Debt, are at various dates through November 30, 2020, and fixed interest rates
ranging from 7.25% to 9.05%.
The Company has a $175 million unsecured line of credit with a bank (the
"Credit Agreement") bearing interest at the London Interbank Offered Rate
("LIBOR") plus 1.125%. The Credit Agreement matures on August 17, 2000, at which
time the Company may extend the maturity date to August 17, 2002 and the Credit
Agreement would be converted to a term loan. The Company pays a fee on the
average unused amount of such credit equal to 0.15% of such amount. As of March
31, 2000, $98.4 million was outstanding under the Credit Agreement.
The Company has a $100 million unsecured term loan (the "Term Loan") with a
group of banks with interest only payable monthly at a rate of LIBOR plus 1.0%.
The Term Loan maturity has been extended to April 3, 2002.
8
<PAGE> 9
MANUFACTURED HOME COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - LONG-TERM BORROWINGS (CONTINUED)
The Company has approximately $4.2 million of installment notes payable,
secured by a letter of credit, each with an interest rate of 6.5%, maturing
September 1, 2002. Approximately $4 million of the notes pay principal annually
and interest quarterly and the remaining $1.3 million of the notes pay interest
only quarterly.
In July 1995, the Company entered into an interest rate swap agreement (the
"1998 Swap") fixing LIBOR on $100 million of the Company's floating rate debt at
6.4% for the period 1998 through 2003. The value of the 1998 Swap was impacted
by changes in the market rate of interest. The Company accounted for the 1998
Swap as a hedge. Payments and receipts under the 1998 Swap were accounted for as
an adjustment to interest expense. On January 10, 2000, the Company terminated
the 1998 Swap and received $1.0 million of proceeds which will be amortized as
an adjustment to interest expense through March 2003.
NOTE 7 - STOCK OPTIONS
Pursuant to the Amended and Restated 1992 Stock Option and Stock Award Plan
as discussed in Note 14 to the 1999 Form 10-K, certain officers, directors,
employees and consultants have been offered the opportunity to acquire shares of
common stock of the Company through stock options ("Options"). During the
quarter ended March 31, 2000, Options for 19,318 shares of common stock were
exercised.
NOTE 8 - COMMITMENTS AND CONTINGENCIES
DEANZA SANTA CRUZ MOBILE ESTATES
The residents of DeAnza Santa Cruz Mobile Estates, a property located in
Santa Cruz, California (the "City") previously brought several actions opposing
certain fees and charges in connection with water service at the Property. The
trial of the ongoing utility charge dispute with the residents of this Property
concluded on January 22, 1999. This summary provides the history and reasoning
underlying the Company's defense of the residents' claims and explains the
Company's decision to continue to defend its position, which the Company
believes is fair and accurate.
DeAnza Santa Cruz Mobile Estates is a 198 site community overlooking the
Pacific Ocean. It is subject to the City's rent control ordinance which limits
annual rent increases to 75% of CPI. The Company purchased this Property in
August 1994 from certain unaffiliated DeAnza entities ("DeAnza"). Prior to the
Company's purchase in 1994, DeAnza made the decision to submeter the Property
for both water and sewer in 1993 in the face of the City's rapidly rising
utility costs.
Under California Civil Code Section 798.41, DeAnza was required to reduce
rent by an amount equal to the average cost of usage over the preceding 12
months. This was done. With respect to water, not looking to submit to
jurisdiction of the California Public Utility Commission ("CPUC"), DeAnza relied
on California Public Utilities Code Section 2705.5 ("CPUC Section 2705.5") to
determine what rates would be charged for water on an ongoing basis without
becoming a public utility. This statute provides that in a submetered mobilehome
park, the property owner is not subject to regulation and control of the CPUC so
long as the users are charged what they would be charged by the utility company
if users received their water directly from the utility company. In Santa Cruz,
customers receiving their water directly from the city's water utility were
charged a certain lifeline rate for the first 400 ccfs of water and a greater
rate for usage over 400 ccfs of water, a readiness to serve charge of $7.80 per
month and tax on the total. In reliance on CPUC Section 2705.5, DeAnza
implemented its billings on this schedule notwithstanding that it did not
receive the discount for the first 400 ccfs of water because it was a commercial
and not a residential customer.
9
<PAGE> 10
MANUFACTURED HOME COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
A dispute with the residents ensued over the readiness to serve charge and
tax thereon. The residents argued that California Civil Code Section 798.41
required that the park owner could only pass through its actual costs of water
(and that the excess charges over the amount of the rent rollback were an
improper rent increase) and that CPUC Section 2705.5 was not applicable. DeAnza
unbundled the utility charges from rent consistent with California Civil Code
Section 798.41 and it has generally been undisputed that the rent rollback was
accurately calculated.
In August 1994, when the Company acquired the Property, the Company
reviewed the respective legal positions of the Santa Cruz Homeowners Association
("HOA") and DeAnza and concurred with DeAnza. Their reliance on CPUC Section
2705.5 made both legal and practical sense in that residents paid only what they
would pay if they lived in a residential neighborhood within the city of Santa
Cruz and permitted DeAnza to recoup part of the expenses of operating a
submetered system through the readiness to serve charge.
Over a period of 18 months from 1993 into May of 1995, a series of
complaints were filed by the HOA and Herbert Rossman, a resident, against
DeAnza, and later, the Company. DeAnza and the Company demurred to each of these
complaints on the grounds that the CPUC had exclusive jurisdiction over the
setting of water rates and that residents under rent control had to first
exhaust their administrative remedies before proceeding in a civil action. At
one point, the case was dismissed (with leave to amend) on the basis that
jurisdiction was with the CPUC and, at another point, Mr. Rossman was dismissed
from the case because he had not exhausted his administrative remedies.
On June 29, 1995, a hearing was held before a Santa Cruz rent control
officer on the submetering of both water and sewer. The Company and DeAnza
prevailed on all issues related to sewer and the rent rollback related to water,
but the hearing officer determined that the Company could only pass through its
actual cost of water, i.e., a prorated readiness to serve charge and tax
thereon. The hearing officer did not deal with the subsidy being given to
residents through the quantity charge and ordered a rebate in a fixed amount per
resident. The Company and DeAnza requested reconsideration on this issue, among
others, which reconsideration was denied by the hearing officer.
The Company then took a writ of mandate (an appeal from an administrative
order) to the Superior Court and, pending this appeal, the residents, the
Company and the City agreed to stay the effect of the hearing officer's decision
until the Court rendered judgment.
In July 1996, the Superior Court affirmed the hearing officer's decision
without addressing concerns about the failure to take the subsidy on the
quantity charge into account.
The Company requested that the City and the HOA agree to a further stay
pending appeal to the court of appeals, but they refused and the appeals court
denied the Company's request for a stay in late November 1996. Therefore, on
January 1, 1997, the Company reduced its water charges at this Property to
reflect a pass-through of only the readiness to serve charge and tax at the
master meter (approximately $0.73) and to eliminate the subsidy on the water
charges. On their March 1, 1997 rent billings, residents were credited for
amounts previously "overcharged" for readiness to serve charge and tax. The
amount of the rebate given by the Company was $36,400. In calculating the
rebate, the Company and DeAnza took into account the previous subsidy on water
usage although this issue had not yet been decided by the court of appeals. The
Company and DeAnza felt legally safe in so doing based on language in the
hearing officer's decision that actual costs could be passed through.
10
<PAGE> 11
MANUFACTURED HOME COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
On March 12, 1997, the Company also filed an application with the CPUC to
dedicate the water system at this Property to public use and have the CPUC set
cost based rates for water usage. The Company believed it was obligated to take
this action because of its consistent reliance on CPUC Section 2705.5 as a safe
harbor from CPUC jurisdiction. That is, when the Company could no longer charge
for water as the local serving utility would charge, it was no longer exempt
from the CPUC's jurisdiction and control under CPUC Section 2705.5.
On March 20, 1997, the court of appeals issued the writ of mandate
requested by the Company on the grounds that the hearing officer had improperly
calculated the amount of the rebate (meaning the Company had correctly
calculated the rent credits), but also ruling that the hearing officer was
correct when he found that the readiness to serve charge and tax thereon as
charged by DeAnza and the Company were an inappropriate rent increase. The court
of appeals further agreed with the Company that the city's hearing officer did
not have the authority under California Civil Code Section 798.41 to establish
rates that could be charged in the future.
Following this decision, the CPUC granted the Company its certificate of
convenience and necessity on December 17, 1998 and approved cost based rates and
charges for water that exceed what residents were paying under the Company's
reliance on CPUC Section 2705.5. Concurrently, the CPUC also issued an Order
Instituting Investigation ("OII") confirming its exclusive jurisdiction over the
issue of water rates in a submetered system and commencing an investigation into
the confusion and turmoil over billings in submetered properties. Specifically,
the OII states: "The Commission has exclusive and primary jurisdiction over the
establishment of rates for water and sewer services provided by private
entities."
Specifically, the CPUC ruling regarding the Company's application stated:
"The ultimate question of what fees and charges may or may not be assessed,
beyond external supplier pass-through charges, for in-park facilities when a
mobile home park does not adhere to the provisions of CPUC Section 2705.5, must
be decided by the Commission."
After the court of appeals decision, the HOA brought all of its members
back into the underlying civil action for the purpose of determining damages,
including punitive damages, against the Company. The trial was continued from
July 1998 to January 1999 to give the CPUC time to act on the Company's
application. Notwithstanding the action taken by the CPUC in issuing the OII in
December 1998, the trial court denied the Company's motion to dismiss on
jurisdictional grounds and trial commenced before a jury on January 11, 1999.
Not only did the trial court not consider the Company's motion to dismiss,
the trial court refused to allow evidence of the OII or the Company's CPUC
approval to go before the jury. Notwithstanding the Company's strenuous
objections, the judge also allowed evidence of the Company's and DeAnza's
litigation tactics to be used as evidence of bad faith and oppressive actions
(including evidence of the application to the CPUC requesting a $22.00 readiness
to serve charge). The Company's motion for a mistrial based upon these
evidentiary rulings was denied. On January 22, 1999, the jury returned a verdict
awarding $6.0 million of punitive damages against the Company and DeAnza. The
Company had previously agreed to indemnify DeAnza on the matter.
The Company has bonded the judgment pending appeal in accordance with
California procedural rules, which require a bond equal to 150% of the amount of
the judgment. Post-judgment interest will accrue at the statutory rate of 10.0%
per annum.
11
<PAGE> 12
MANUFACTURED HOME COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
On April 19, 1999, the trial court denied all of the Company's and DeAnza's
post-trial motions for judgement notwithstanding the verdict, new trial and
remittitur. The trial court also awarded $700,000 of attorneys' fees to
plaintiffs. The Company has appealed the jury verdict and attorneys' fees award
and the Company has filed its opening brief in the jury verdict case. The
Company also has filed two related appeals challenging the result of related
litigation and a resulting attorneys' fee award. The two related appeals are
based on a preemption argument. The Company asserts the superior courts' ability
to enter an attorneys' fee award in an earlier case and take certain other
actions which were preempted by the exercise of exclusive jurisdiction by the
CPUC over the issue of how to set rates for water in a submetered mobilehome
park. The Company is awaiting notice from the court of appeal setting oral
argument in these two appeals. The jury verdict appeal also raises the
jurisdictional argument as well as several other arguments for reversal of the
punitive damage award or for a new trial. One of the arguments raised by the
Company in the jury verdict appeal is that punitive damages are not available in
a case brought under Section 798.41 of the California Mobilehome Residency Law
("MRL") since the MRL contains its own penalty provisions. The court of appeal
granted the Company's request for judicial notice of the legislative history of
the applicable MRL sections, which indicates to the Company that the court of
appeal is receptive to this argument. Although no assurances can be given, the
Company believes the appeals will be successful.
Subsequently, in June 1999 the DeAnza Santa Cruz Homeowners Association
filed a complaint in the Superior Court of California, County of Santa Cruz (No.
135991) against the Company, MHC Acquisition One, L.L.C. and Starland Vistas,
Inc. The new lawsuit seeks damages, including punitive damages, for alleged
violations of California Civil Code Sections 798.31 and 798.41 arising from
implementation of utility rates previously approved by the CPUC. The Company
demurred to (filed a motion to dismiss) the complaint on the grounds that the
Court lacks jurisdiction to hear the subject matter of the complaint given that
the CPUC has exclusive jurisdiction over utility rates and charges at the
Property. The California Superior Court denied the motion to dismiss and the
court of appeal denied the Company's request to review the denial of the
demurrer. The Company and the plaintiffs in this matter entered a settlement
into the record before a judge in the California Superior Court in March 2000
the terms of which are being incorporated into a definitive settlement
agreement. The Company does not expect the outcome of the settlement to be
material.
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
On September 29, 1995, the United States Environmental Protection Agency
("USEPA") issued its Findings of Violations and Order for Compliance with
respect to the National Pollution Discharge Elimination System ("NPDES") Permit
governing the operation of the onsite waste water treatment plant at one of the
Properties. On October 6, 1995, the USEPA issued its Findings of Violation and
Order for Compliance with respect to NPDES Permit governing the operation of the
onsite wastewater treatment plant at another of the Properties. The Company and
the USEPA have reached a tentative agreement to resolve the matter in which the
operation of the remaining waste water treatment plant would be subject to a
consent decree that would provide for fines and penalties in the event of future
violations and the Company would pay a fine. The tentative agreement has not yet
been reduced to writing and therefore remains subject to change. The Company
does not believe the impact of the settlement will be material and the Company
believes it has established adequate reserves for any amounts that may be paid.
12
<PAGE> 13
MANUFACTURED HOME COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
ELLENBURG COMMUNITIES
In connection with the acquisition of the Ellenburg Communities (as
hereinafter defined) and pursuant to orders of the California Superior Court
("Court"), approximately $30 million of the amounts paid by the Company have
been deposited with the court appointed winding up agents (the "Winding Up
Agents"). The deposited amounts relate to claims (the "Karno Claims") of Norton
S. Karno (and related entities) who at various times has been a creditor,
advisor, lawyer and shareholder of certain of the entities related to the
Ellenburg Communities. The Winding Up Agents have disputed the claims and have
filed a complaint against Mr. Karno (and related entities) requesting that the
court determine that the claims be reduced or eliminated.
On October 30, 1998, the Company received notice of a lawsuit filed against
the Company and certain executive officers of the Company in the Los Angeles
County Superior Court alleging, among other causes of action, that the Company
breached certain agreements in connection with the Ellenburg acquisition and
claiming damages in excess of $50 million plus punitive damages. The Company
believes most of the claim relates to the disputed Karno Claims discussed above.
The Company believes the claims are without merit, intends to vigorously defend
the defendants in this matter and does not believe the impact of this matter
will be material.
In connection with the acquisition of the Ellenburg Communities, Mr. Karno
and others have appealed various court orders on which the Company has relied.
Mr. Karno has also sought before both the California Superior Court and Court of
Appeals to take control of ECC (as hereinafter defined), but to date none of his
attempts have been successful.
On September 8, 1999, Ellenburg Fund 20 ("Fund 20") filed a cross complaint
in the dissolution proceeding against the Company and certain of its affiliates
alleging causes of action for fraud and other claims in connection with the
Ellenburg acquisition. By stipulation, the Company has not yet had to respond to
the complaint, which the Company believes to be completely without merit. The
Company's defense to the claims include documents and letters signed by the
court-appointed Winding Up Agents supporting the Company's position.
Mr. Karno, the Company and certain other parties have entered into a global
settlement agreement which was filed with the Court in February 2000. In April
2000, the Court approved the settlement agreement and therefore it is
anticipated that substantially all of the litigation and appeals involving the
Ellenburg acquisition will be settled and dismissed pursuant to the global
settlement agreement. However, the Company can provide no assurances that the
settlement will close. The global settlement agreement does not dispose of the
Fund 20 lawsuit against the Company. However, the Company believes that there is
a substantial likelihood that settlement with Fund 20 will be reached or, if
not, that the Company will ultimately successfully defend itself against the
lawsuit.
CANDLELIGHT PROPERTIES, L.L.C
In 1996, 1997 and 1998, the Lending Partnership made a loan to Candlelight
Properties, L.L.C. ("Borrower") in the principal amount of $8,050,000. The loan
is secured by a mortgage on Candlelight Village ("Candlelight"), a property in
Columbus, Indiana. The Company accounts for the loan as an investment in real
estate and, accordingly, Candlelight's results of operations are consolidated
with the Company's for financial reporting purposes. Concurrently with the
funding of the loan, Borrower granted the Operating Partnership the option to
acquire Candlelight upon the maturity of the loan. The Operating Partnership
notified Borrower that it was exercising its option to acquire Candlelight in
March 1999, and the loan subsequently matured on May 3, 1999. However, Borrower
failed to repay the loan and refused to convey Candlelight to the Operating
Partnership.
13
<PAGE> 14
MANUFACTURED HOME COMMUNITIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
Borrower filed suit in the Circuit Court of Bartholomew County, Indiana
("Court") on May 5, 1999, seeking declaratory judgment on the validity of the
exercise of the option. The Lending Partnership filed suit in the Court the next
day, seeking to foreclose its mortgage, and the suits were consolidated
(collectively, the "State Court Litigation") by the Court. The Court issued an
Order on December 1, 1999, finding, among other things, that the Operating
Partnership had validly exercised the option. Both parties have filed motions to
correct errors in the Order, which motions are currently pending before the
Court. The Court has not yet ruled on the foreclosure complaint; however, given
the Court's finding in the Order, the Lending Partnership believes that Borrower
has no valid defense in the foreclosure action. The Operating Partnership and
the Lending Partnership intend to continue vigorously pursuing this matter and
believe that, while no assurance can be given, such efforts will be successful.
On May 3, 2000, Hanover Group, Inc. and Ronald E. Farren filed suit against
the Company and certain executive and senior officers of the Company in the
United States District Court for the Southern District of Indiana, Indianapolis
Division. The complaint alleges violations of securities laws and fraud arising
from the loan transaction being litigated in the State Court Litigation and
seeks damages, including treble damages. The Company believes that the complaint
is related to rulings made by the Court and is without merit. The Company will
vigorously defend itself and the officers of the Company.
The Company is involved in various other legal proceedings arising in the
ordinary course of business. All proceedings herein described or referred to,
taken together, are not expected to have a material adverse impact on the
Company.
14
<PAGE> 15
MANUFACTURED HOME COMMUNITIES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The following is a discussion of the interim results of operations,
financial condition and liquidity and capital resources of the Company for the
three months ended March 31, 2000 compared to the corresponding period in 1999.
It should be read in conjunction with the Consolidated Financial Statements and
Notes thereto included herein and the 1999 Form 10-K. The following discussion
may contain certain forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995, which reflect management's current
views with respect to future events and financial performance. Such
forward-looking statements are subject to certain risks and uncertainties,
including, but not limited to, the effects of future events on the Company's
financial performance, the adverse impact of external factors such as inflation
and consumer confidence, and the risks associated with real estate ownership.
RESULTS OF OPERATIONS
COMPARISON OF THE QUARTER ENDED MARCH 31, 2000 TO THE QUARTER ENDED MARCH 31,
1999
Since December 31, 1998, the gross investment in real estate has increased
from $1,237 million to $1,264 million. The total number of sites owned or
controlled has increased from 53,391 as of December 31, 1998 to 54,022 as of
March 31, 2000. These changes reflect the following property acquisitions and
dispositions (the sale of FFEC-Six had no effect on the number of sites owned):
(i) The Meadows - Acquired on April 1, 1999
(ii) Coquina Crossing - Acquired on July 23, 1999
(iii) FFEC-six (water and wastewater service company) - Sold on
February 29, 2000
The Company defines its core manufactured home community portfolio ("Core
Portfolio") as manufactured home properties owned as of the beginning of both
periods of comparison. Excluded from the Core Portfolio are the aforementioned
acquisitions and dispositions and also the Recreational Vehicle ("RV")
properties which, together, are referred to as the "Non-Core" Properties.
The following table summarizes certain weighted average statistics for the
quarters ended March 31, 2000 and 1999.
CORE PORTFOLIO TOTAL PORTFOLIO
--------------------- ---------------------
MARCH 31, MARCH 31, MARCH 31, MARCH 31,
2000 1999 2000 1999
--------- --------- --------- ---------
Total sites 46,459 46,463 47,289 46,463
Occupied sites 43,958 43,720 44,595 43,720
Occupancy % 94.6% 94.1% 94.3% 94.1%
Monthly base rent per site $ 354 $ 342 $ 354 $ 342
Base rental income ($47.3 million) increased $2.5 million or 5.6%. For the
Core Portfolio, base rental income increased approximately $1.9 million or 4.3%,
due to increased base rental rates. The remaining $572,000 increase in base
rental income was attributed to the Properties acquired in 1999.
Monthly base rent per site for the total portfolio increased 3.5%,
reflecting a 3.8% increase in monthly base rent per site for the Core Portfolio,
partially offset by lower monthly base rents for the Properties acquired in
1999.
15
<PAGE> 16
MANUFACTURED HOME COMMUNITIES, INC.
RESULTS OF OPERATIONS (CONTINUED)
Weighted average occupied sites for the total portfolio increased by 875
sites creating a .20% increase in occupancy. Core Portfolio occupancy increased
.50% reflecting an increase in weighted average occupied sites of 238 sites.
RV base rental income ($3.7 million), which is higher in the first quarter
due to seasonality, increased $171,000 primarily due to increased rental rates.
Utility and other income ($5.7 million) increased $187,000 or 3.4%,
primarily due to an increase in utility income and real estate tax pass-ons.
Additionally, other income includes a gain on the sale of FFEC-Six of $719,000
partially offset by an impairment loss on the DeAnza Santa Cruz water and
wastewater service company of $701,000 as discussed in Note 4.
Interest income ($292,000) decreased $95,000 or 24.5%, primarily due to the
repayment of certain notes receivable and a decrease in interest earned on
short-term investments. Short-term investments had average balances for the
quarters ended March 31, 2000 and 1999 of approximately $2.5 million and $3.7
million, respectively, which earned interest income at an effective rate of 5.6%
and 4.8% per annum, respectively. As of March 31, 2000, the Company had cash and
cash equivalents and short-term investments of $10.6 million.
Property operating and maintenance expenses ($15.4 million) increased
$934,000 or 6.5%. Expenses at the Core Portfolio increased $753,000 primarily
due to increases in payroll and utility expenses and legal costs associated with
the DeAnza Santa Cruz litigation. Property operating and maintenance expenses
represented 27.0% of total revenues in 2000 and 26.6% in 1999.
Real estate taxes ($4.3 million) increased $99,000 or 2.3%, which was
primarily attributed to the Properties acquired in 1999. Real estate taxes
represented 7.6% of total revenues in 2000 and 7.8% in 1999.
Property management expenses ($2.4 million) increased $305,000 or 14.6%.
The increase was primarily due to management staffing changes and incremental
management costs related to the addition of the Properties acquired in 1999 and
1998. Property management expenses represented 4.2% of total revenues in 2000
and 3.8% in 1999.
General and administrative expense ("G&A") ($1.8 million) increased
$134,000 or 7.9%. The increase was primarily due to increased payroll and public
company costs. G&A represented 3.2% of total revenues in 2000 and 3.1% in 1999.
Interest and related amortization ($13.3 million) decreased $17,000. The
decrease was due to lower weighted average outstanding debt balances during the
period, partially offset by a slightly increased effective interest rate. The
weighted average outstanding debt balances for the quarters ended March 31, 2000
and 1999 were $727.0 million and $738.0. million, respectively. The effective
interest rates were 7.4% and 7.2%, respectively. Interest and related
amortization represented 23.3% of total revenues in 2000 and 24.5% in 1999.
Depreciation on corporate assets ($271,000) increased $25,000 or 10.2%. The
increase was due to fixed asset purchases related to computer software upgrades.
Depreciation on corporate assets represented 0.5% of total revenues in both 2000
and 1999.
Depreciation on real estate assets and other costs ($8.9 million) increased
$613,000 or 7.4% as a result of the addition of the Properties purchased in
1999. Depreciation on real estate assets and other costs represented 15.5% of
total revenues in 2000 and 15.2% in 1999.
16
<PAGE> 17
MANUFACTURED HOME COMMUNITIES, INC.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased by $4.0 million when compared to
December 31, 1999. The major components of this increase were the timing of
distributions to Common Stockholders and Common OP Unitholders and the timing of
borrowings on the line of credit for the distributions and stock repurchases.
Net cash provided by operating activities decreased $801,000 from $25.3
million for the quarter ended March 31, 1999 to $24.5 million for the quarter
ended March 31, 2000. This increase reflected a $1.5 million decrease in funds
from operations ("FFO"), as discussed below, partially offset by increased
prepaid expenses.
FFO was redefined by the National Association of Real Estate Investment
Trusts ("NAREIT") in October 1999, effective January 1, 2000, as net income
(computed in accordance with generally accepted accounting principles ["GAAP"]),
before allocation to minority interests, excluding gains (or losses) from sales
of property, plus real estate depreciation and after adjustments for
unconsolidated partnerships and joint ventures. The Company computes FFO in
accordance with the NAREIT definition, which may differ from the methodology for
calculating FFO utilized by other equity REITs and, accordingly, may not be
comparable to such other REITs. Funds available for distribution ("FAD") is
defined as FFO less non-revenue producing capital expenditures and amortization
payments on mortgage loan principal. The Company believes that FFO and FAD are
useful to investors as a measure of the performance of an equity REIT because,
along with cash flows from operating activities, financing activities and
investing activities, they provide investors an understanding of the ability of
the Company to incur and service debt and to make capital expenditures. FFO and
FAD in and of themselves do not represent cash generated from operating
activities in accordance with GAAP and therefore should not be considered an
alternative to net income as an indication of the Company's performance or to
net cash flows from operating activities as determined by GAAP as a measure of
liquidity and are not necessarily indicative of cash available to fund cash
needs.
The following table presents a calculation of FFO and FAD for the quarters
ended March 31, 2000 and 1999 (amounts in thousands):
MARCH 31, MARCH 31,
2000 1999
----------- -----------
COMPUTATION OF FUNDS FROM OPERATIONS:
Net Income................................ $ 6,331 $ 8,234
Income allocated to Common OP Units....... 1,599 1,844
Depreciation on real estate assets
and other costs......................... 8,856 8,243
----------- -----------
Funds from operations..................... $ 16,786 $ 18,321
=========== ===========
Weighted average Common Shares
outstanding - diluted................... 28,242 32,340
=========== ===========
COMPUTATION OF FUNDS AVAILABLE FOR DISTRIBUTION:
Funds from operations..................... $ 16,786 $ 18,321
Non-revenue producing improvements -
rental properties.................... (864) (1,605)
----------- -----------
Funds available for distribution.......... $ 15,922 $ 16,716
=========== ===========
Weighted average Common Shares
outstanding - diluted................... 28,242 32,340
=========== ===========
17
<PAGE> 18
MANUFACTURED HOME COMMUNITIES, INC.
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Net cash used in investing activities decreased $3.1 million from $4.2
million for the quarter ended March 31, 1999 to $1.0 million for the quarter
ended March 31, 2000 primarily due to the sale of the FFEC-Six water and
wastewater service company and the repayment of the purchase money note
receivable, partially offset by increased contributions to affiliates.
Capital expenditures for improvements were approximately $950,000 for the
quarter ended March 31, 2000 compared to $2.0 million for the quarter ended
March 31, 1999. Of the $950,000, approximately $864,000 represented improvements
to existing sites. The Company anticipates spending approximately $7.0 million
on improvements to existing sites during the remainder of 2000. The Company
believes these improvements are necessary in order to increase and/or maintain
occupancy levels and maintain competitive market rents for new and renewing
residents. The remaining $86,000 represented costs to develop expansion sites at
certain of the Company's Properties and other corporate headquarters costs. The
Company is currently developing an additional 100 sites which should be
available for occupancy in 2000.
Net cash used in financing activities decreased $8.6 million from $28.1
million for the quarter ended March 31, 1999 to $19.5 million for the quarter
ended March 31, 2000, primarily due to the timing of distributions to Common
Stockholders and Common OP Unitholders and the timing of borrowings on the line
of credit for the distributions and for Common Stock repurchases.
Distributions to Common Stockholders and Common OP Unitholders increased
approximately $22.1 million due to the timing of the 4th quarter 1999 dividend
payment. On April 14, 2000, the Company paid a $.415 per share distribution for
the quarter ended March 31, 2000 to stockholders of record on March 31, 2000.
Return of capital on a GAAP basis was $.135 per share for the first quarter of
2000.
The Company expects to meet its short-term liquidity requirements,
including its distributions, generally through its working capital, net cash
provided by operating activities and availability under the existing line of
credit. The Company expects to meet certain long-term liquidity requirements
such as scheduled debt maturities, property acquisitions and capital
improvements by long-term collateralized and uncollateralized borrowings
including borrowings under its existing line of credit and the issuance of debt
securities or additional equity securities in the Company, in addition to
working capital.
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement No. 133 ("SFAS No. 133"), "Accounting for Derivative Instruments and
Hedging Activities", which is required to be adopted in years beginning after
June 15, 1999. SFAS No. 133 permits early adoption as of the beginning of any
fiscal quarter after its issuance. In June 1999, the FASB issued Statement No.
137 which deferred the effective date of SFAS No. 133 to all fiscal quarters for
fiscal years beginning after June 15, 2000. The Company has not yet determined
the date at which it will adopt SFAS No. 133. SFAS No. 133 will require the
Company to recognize all derivatives on the balance sheet at fair value.
Derivatives that are not hedges must be adjusted to fair value through income.
If the derivative is a hedge, depending on the nature of the hedge, changes in
the fair value of derivatives will either be offset against the change in fair
value of the hedged assets, liabilities or firm commitments through earnings or
recognized in other comprehensive income until the hedged item is recognized in
earnings. The Company has not yet determined what the effect of SFAS No. 133
will be on the earnings and financial position of the Company, when implemented.
18
<PAGE> 19
MANUFACTURED HOME COMMUNITIES, INC.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
(see Note 8 of the Consolidated Financial Statements contained herein)
ITEM 5. OTHER INFORMATION
On May 9, the Board of Directors of the Company appointed Thomas P.
Heneghan as MHC's President and Chief Operating Officer. Mr. Heneghan, 36,
has served for the last five years as MHC's Chief Financial Officer. Gary
Powell, MHC's Executive Vice President of Property Operations will become
President and CEO of MHC's sales and marketing affiliate, RSI. In addition,
the Board of Directors of the Company appointed John M. Zoeller as Vice
President and Chief Financial Officer. Mr. Zoeller, 39, has over 18 years
of accounting experience including twelve years with the various
affiliates of Equity Group Investments. Mr. Zoeller, a CPA, holds a BS
in Accounting from the University of Illinois, Champaign - Urbana.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K:
None.
19
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
MANUFACTURED HOME COMMUNITIES, INC.
BY: /s/ John M. Zoeller
---------------------------------------
John M. Zoeller
Vice President, Treasurer and
Chief Financial Officer
BY: /s/ Mark Howell
---------------------------------------
Mark Howell
Principal Accounting Officer and
Assistant Treasurer
DATE: May 11, 2000
20
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000895417
<NAME> MANUFACTURED HOME COMMUNITIES, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 10,626
<SECURITIES> 0
<RECEIVABLES> 1,471
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 52,456
<PP&E> 1,263,651
<DEPRECIATION> (158,937)
<TOTAL-ASSETS> 1,160,394
<CURRENT-LIABILITIES> 51,102
<BONDS> 0
0
0
<COMMON> 224
<OTHER-SE> 200,740
<TOTAL-LIABILITY-AND-EQUITY> 1,160,394
<SALES> 56,706
<TOTAL-REVENUES> 57,148
<CGS> 0
<TOTAL-COSTS> 22,120
<OTHER-EXPENSES> 1,826
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,332
<INCOME-PRETAX> 10,743
<INCOME-TAX> 0
<INCOME-CONTINUING> 6,331
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,331
<EPS-BASIC> 0.28
<EPS-DILUTED> 0.28
</TABLE>
