FORM 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549


FORM 10-Q/A


( x )

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended   March 31, 2006  


(   )

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


UMH PROPERTIES, 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  


United Mobile Homes, Inc.

(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 a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act (Check one):  


Large accelerated filer            

            Accelerated filer      X                 Non-accelerated filer            

  


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).     Yes          

No _X__


The number of shares outstanding of issuer's common stock as of May 1, 2006 was 10,048,908 shares.


EXPLANTORY NOTE

This Amendment No. 1 on Form 10-Q/A to the Quarterly Report of UMH Properties, Inc. for the quarter ended March 31, 2006 is being made to correctly file Exhibits 31.1, 31.2 and 32.  No other changes have been made to this Form 10-Q.


Page 1



UMH PROPERTIES, INC.


for the QUARTER ENDED


MARCH 31, 2006




  

Page No.

PART I -

FINANCIAL INFORMATION

 
   

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

6-9

   

Item 2 -

Management’s Discussion and Analysis of Financial Conditions and Results of Operations


10-13

   

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

    13

   

PART II -

OTHER INFORMATION

    14

   
 

SIGNATURES

    15






Page 2




UMH PROPERTIES, INC.

 CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2006 (UNAUDITED) AND DECEMBER 31, 2005


 

March 31,

  
 

2006

 

December 31,

- ASSETS -

(Unaudited)

 

2005

INVESTMENT PROPERTY AND EQUIPMENT

   

  Land

$ 13,243,525

 

$ 12,054,525

  Site and Land Improvements

73,327,908

 

69,419,378

  Buildings and Improvements

3,579,369

 

3,448,754

  Rental Homes and Accessories

11,446,952

 

11,318,380

    Total Investment Property

101,597,554

 

96,241,037

  Equipment and Vehicles

6,598,835

 

6,331,747

    Total Investment Property and Equipment

108,196,389

 

102,572,784

  Accumulated Depreciation

(44,219,408)

 

         (43,501,401)

    Net Investment Property and Equipment

63,976,981

 

59,071,383

    

OTHER ASSETS

   

  Cash and Cash Equivalents

3,902,378

 

4,555,356

  Securities Available for Sale

22,647,856

 

26,610,338

  Inventory of Manufactured Homes

8,550,766

 

8,153,616

  Notes and Other Receivables, net

12,859,710

 

13,136,356

  Unamortized Financing Costs

505,495

 

550,036

  Prepaid Expenses

594,572

 

607,615

  Land Development Costs

2,688,297

 

2,097,835

    Total Other Assets

51,749,074

 

55,711,152

    

  TOTAL ASSETS

$115,726,055

 

$114,782,535

    

- LIABILITIES AND SHAREHOLDERS’ EQUITY -

   

LIABILITIES:

   

MORTGAGES PAYABLE

$ 48,204,795

 

$ 48,706,241

OTHER LIABILITIES

   

  Accounts Payable

324,937

 

1,231,144

  Loans Payable

7,280,153

 

7,618,478

  Accrued Liabilities and Deposits

2,060,834

 

1,894,962

  Tenant Security Deposits

533,791

 

492,386

    Total Other Liabilities

10,199,715

 

11,236,970

  Total Liabilities

58,404,510

 

59,943,211

    

SHAREHOLDERS’ EQUITY:

   

  Common Stock - $.10 par value per share,  20,000,000 shares

     authorized; 9,989,874 and  9,806,939 shares issued and

     outstanding as of March 31, 2006 and December 31, 2005,

     respectively

998,987

 




980,694

  Excess Stock - $.10 par value per share, 3,000,000 shares

     authorized; no shares issued or outstanding

-0-

 


-0-

  Additional Paid-In Capital

55,914,327

 

53,609,854

  Accumulated Other Comprehensive Income

1,076,024

 

916,569

  Undistributed Income  

(667,793)

 

(667,793)

  Total Shareholders’ Equity

57,321,545

 

54,839,324

    

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$115,726,055

 

$114,782,535


-UNAUDITED-

See Accompanying Notes to Consolidated Financial Statements




Page 3



UMH PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

FOR THE THREE MONTHS ENDED

MARCH 31, 2006 AND 2005

 


 

2006

 

2005

    
        

REVENUES:

       

Rental and Related  Income

$5,692,682

 

        $5,493,754

    

Sales of Manufactured Homes

  2,746,900

 

         1,619,007

    

Interest and Dividend  Income

     718,885

 

            768,076

    

Gain on Securities Available for Sale

  Transactions, net

            313,600

 

            632,608

    

Other Income

      40,134

 

              29,973

    
        

Total Revenues

   9,512,201

 

8,543,418

    
        

EXPENSES:

       

Community Operating Expenses

   2,668,601

 

        2,771,444

    

Cost of Sales of  Manufactured Homes

   2,044,716

 

        1,363,069

    

Selling Expenses

     439,937

 

           277,686

    

General and  Administrative  Expenses

     800,644

 

           678,791

    

Interest Expense

     546,530

 

           116,214

    

Depreciation Expense

     825,715

 

           827,289

    

Amortization of  Financing Costs

      62,370

 

             45,120

    
        

   Total Expenses

  7,388,513

 

        6,079,613

    
        

Income before Gain (Loss) on Sales of

   Investment Property and Equipment

         2,123,688

 

       

 2,463,805

    

Gain (Loss) on Sales of Investment

   Property and Equipment

              16,837

 

              

(7,556)

    
        

Net Income

 $2,140,525

 

$2,456,249

    
        

Net Income per Share -  

       

  Basic

              $    0.22

 

              $    0.27

    

  Diluted

              $    0.22

 

              $    0.27

    
        

Weighted Average Shares Outstanding -  

       

   Basic

        9,897,848

 

        9,213,170

    

   Diluted

        9,918,178

 

        9,248,171

    





-UNAUDITED-

See Accompanying Notes to Consolidated Financial Statements



Page 4




UMH PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE THREE MONTHS ENDED

MARCH 31, 2006 AND 2005


 

            2006

 

               2005

    

CASH FLOWS FROM OPERATING ACTIVITIES:

   

Net Income

 $2,140,525

 

$2,456,249

Non-Cash Adjustments:

   

Depreciation

825,715

 

827,289

Amortization of Financing Costs

62,370

 

45,120

Stock Compensation Expense

35,697

 

18,505

Increase in Provision for Uncollectible Notes and Other Receivables

2,098

 

61,175

Gain on Securities Available for Sale Transactions, net

(313,600)

 

(632,608)

(Gain) Loss on Sales of Investment Property and Equipment

(16,837)

 

7,556

Changes in Operating Assets and Liabilities:

   

Inventory of Manufactured Homes

(397,150)

 

100,438

Notes and Other Receivables

274,548

 

(756,923)

Prepaid Expenses

13,043

 

47,462

Accounts Payable

(906,207)

 

(360,166)

Accrued Liabilities and Deposits

165,872

 

(245,720)

Tenant Security Deposits

41,405

 

6,526

Net Cash Provided by Operating Activities

1,927,479

 

1,574,903

    

CASH FLOWS FROM INVESTING ACTIVITIES:

   

Purchase of Manufactured Home Community

(5,218,480)

 

-0-

Purchase of Investment Property and Equipment

(634,567)

 

(1,024,665)

Proceeds from Sales of Assets

138,571

 

93,080

Additions to Land Development

(590,462)

 

(705,826)

Purchase of Securities Available for Sale

(227,708)

 

(5,271,210)

Proceeds from Sales of Securities Available for Sale

4,663,245

 

1,868,997

Net Cash Used by Investing Activities

(1,869,401)

 

(5,039,624)

    

CASH FLOWS FROM FINANCING ACTIVITIES:

   

Proceeds from Mortgages and Loans

-0-

 

238,770

Principal Payments of Mortgages and Loans

(839,771)

 

(452,780)

(Financing Costs) Refund of Financing Costs on Debt

(17,829)

 

12,677

Proceeds from Issuance of Common Stock

1,830,352

 

1,957,592

Proceeds from Exercise of Stock Options

257,813

 

1,181,913

Dividends Paid, net of amount reinvested

(1,941,621)

 

(1,782,139)

Net Cash Provided (Used) Provided by Financing Activities  

(711,056)

 

1,156,033

    

NET DECREASE  IN CASH

  AND CASH EQUIVALENTS

(652,978)

 

(2,308,688)

CASH & CASH EQUIVALENTS – BEGINNING

4,555,356

 

8,774,812

CASH & CASH EQUIVALENTS – ENDING

 $3,902,378

 

$6,466,124





-UNAUDITED-

See Accompanying Notes to Consolidated Financial Statements




Page 5





UMH PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2006 (UNAUDITED)


NOTE 1 – ORGANIZATION AND ACCOUNTING POLICY


United Mobile Homes, Inc. changed its name to UMH Properties, Inc. (the Company). The name change was unanimously approved by the Company’s Board of Directors and effected by the filing of Articles of Amendment to the Company’s charter with the State Department of Assessments and Taxation of Maryland to be effective on April 1, 2006. In accordance with Section 2-605 of the Maryland General Corporation Law and the Company’s organizational documents, no stockholder vote was required or obtained. No other changes were made to the Company’s charter.  The Company’s common stock will continue to be traded on the American Stock Exchange under the ticker symbol “UMH”, but under the new CUSIP number 903002103.

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 March 31, 2006 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, 2005 have been omitted.  


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.


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 employee 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.  


Compensation cost which has been determined consistent with SFAS No. 123, amounted to $35,697 and $18,505 for the three months ended March 31, 2006 and 2005, respectively.


The fair value of each option grant is estimated on the date of grant using the Black-Scholes




Page 6





option pricing model with the following weighed-average assumptions used for grants in the following years:


   

2006

 

        2005

  
        
 

Dividend yield

 

6.29%

 

6.30%

  
 

Expected volatility

 

18.57%

 

19.50%

  
 

Risk-free interest rate

 

4.34%

 

3.93%

  
 

Expected lives

 

8

 

8

  


The weighted-average fair value of options granted during the three months ended March 31, 2006 and 2005 was $1.39 and $1.38, respectively.  


During the three months ended March 31, 2006, the following stock options were granted:


 

Date of Grant

 

Number of Employees

 

Number of Shares

 

Option Price

 

Expiration Date

          
 

1/9/06

 

  1

 

44,200

 

$15.62

 

1/9/14

 

1/9/06

 

  1

 

  5,800

 

  17.21

 

1/9/14


During the three months ended March 31, 2006, one employee exercised his stock option and purchased 25,000 shares for a total of $257,813.  As of March 31, 2006, there were options outstanding to purchase 321,000 shares and 1,237,000 shares were available for grant under the Company’s 2003 Stock Option Plan.


NOTE 2 – NET INCOME PER SHARE AND COMPREHENSIVE 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 20,330 and 35,001 shares for the three months ended March 31, 2006 and 2005, respectively, are included in the diluted weighted average shares outstanding.





Page 7





The following table sets forth the components of the Company’s comprehensive income for the three months ended March 31, 2006 and 2005:


 

         2006

 

2005

    
    

Net Income

$2,140,525

 

$2,456,249

Increase (decrease) in unrealized gain

  on securities available for sale


159,455

 


(1,755,702)

Comprehensive Income

$2,299,980

 

$  700,547

 

NOTE 3 – INVESTMENT PROPERTY AND EQUIPMENT


On March 10, 2006, the Company acquired (at auction) Weatherly Estates I, a 270-space manufactured home community in Lebanon, Tennessee, from Affordable Residential Communities Inc., an unrelated entity.  The total purchase price was approximately $5,200,000.  The Company paid approximately $600,000 in cash and used approximately $4,600,000 of its line of credit from PNC Bank.

NOTE 4 – SECURITIES AVAILABLE FOR SALE

During the three months ended March 31, 2006, the Company sold or redeemed $4,349,645 in securities available for sale, recognizing a gain of $56,408.  

NOTE 5 – DERIVATIVE INSTRUMENTS


The Company invested in futures contracts on ten-year Treasury notes with the objective of reducing the exposure of the debt securities portfolio to market rate fluctuations.  The notional amount of these contracts amounted to $9,000,000 at March 31, 2006 and 2005.  Changes in the market value of these derivatives have been recorded in gain on securities available for sale transactions, net with corresponding amounts recorded in accrued liabilities and deposits on the balance sheet.  The fair value of the derivatives at March 31, 2006 and December 31, 2005 was a gain (loss) of $49,921 and $(50,625), respectively.  During the quarter ended March 31, 2006, the Company recorded a realized gain of $207,271 on settled futures contracts, which is included in gain on securities available for sale transactions, net.


The Company had entered into five interest rate swap agreements to effectively convert a portion of its variable rate debt to fixed rate debt.  Changes in the fair value of these agreements have been recorded as an increase or deduction from interest expense with corresponding amounts in other assets or other liabilities.  The change in the fair value of these agreements for the quarter ended March 31, 2006 amounted to $218,617 and has been recorded as a deduction from interest expense.  The fair value of these agreements at March 31, 2006 amounted to an asset of $689,701.





Page 8





NOTE 6 - DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN


On March 15, 2006, the Company paid $2,428,397 of which $486,776 was reinvested, as a dividend of $.245 per share to shareholders of record as of February 15, 2006.  On April 3, 2006, the Company declared a dividend of $.245 per share to be paid on June 15, 2006 to shareholders of record May 16, 2006.


During the three months ended March 31, 2006, the Company received, including dividends reinvested, a total of $2,317,128 from the Dividend Reinvestment and Stock Purchase Plan.  There were 157,935 new shares issued under the Plan.


NOTE 7 - 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 8 - SUPPLEMENTAL CASH FLOW INFORMATION


Cash paid during the three months ended March 31, 2006 and 2005 for interest was $800,747and $737,828, respectively.  Interest cost capitalized to Land Development was $35,600 and $75,800 for the three months ended March 31, 2006 and 2005, respectively.  The change in fair value of the interest rate swap agreements amounted to $218,617 and $545,814 for the three months ended March 31, 2006 and 2005, respectively.


During the three months ended March 31, 2006 and 2005, the Company had dividend reinvestments of $486,776 and $465,498, respectively, which required no cash transfers.







Page 9





MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS


OVERVIEW


The following discussion and analysis of the consolidated financial condition and results of operations should be read in conjunction with the Consolidated Financial Statements and notes thereto included elsewhere herein and in our annual report on Form 10-K for the year ended December 31, 2005.


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 also leases homes to residents and, through, its taxable REIT subsidiary, UMH Sales and Finance, Inc. (S&F), sells and finances homes to residents and prospective residents of our communities.  The Company owns twenty-eight communities containing approximately 6,600 sites.  These communities are located in New Jersey, New York, Ohio, Pennsylvania and Tennessee.  


The Company also holds a portfolio of securities of other REITs with a balance of $22,647,856 at March 31, 2006.  The Company invests in REIT securities on margin from time to time when the Company can achieve an adequate yield spread and when suitable acquisitions of real property cannot be found.  At March 31, 2006, the Company’s portfolio consisted of 49% preferred stocks, 24% common stocks and 27% debentures.  The REIT securities portfolio provides the Company with liquidity and additional income until suitable acquisitions of real property are found.


Total revenues increased by approximately 11% from $8,543,418 for the quarter ended March 31, 2005 to $9,512,201 for the quarter ended March 31, 2006.  This was primarily due to an increase in sales of manufactured homes of $1,127,893.  Total expenses increased by approximately 22% from $6,079,613 for the quarter ended March 31, 2005 to $7,388,513 for the quarter ended March 31, 2006.  This was primarily due to an increase in cost of sales of manufactured homes of $681,647 and an increase in interest expense of $430,316 primarily due to the change in fair value of the Company’s interest rate swaps.  Net income decreased by approximately 13% from $2,456,249 for the quarter ended March 31, 2005 to $2,140,525 for the quarter ended March 31, 2006.  This decrease is due primarily to the decrease in gain on securities available for sale transactions, net.


See PART I, Item 1 – Business in the Company’s 2005 annual report on Form 10-K for a more complete discussion of the economic and industry-wide factors relevant to the Company and the opportunities and challenges, and risks on which the Company is focused.  





Page 10





CHANGES IN RESULTS OF OPERATIONS


Rental and related income increased from $5,493,754 for the quarter ended March 31, 2005 to $5,692,682 for the quarter ended March 31, 2006.   This was primarily due to the expansion of existing communities and rental increases to residents. The Company has been raising rental rates by approximately 3% to 4% annually.   Interest and dividend income remained relatively stable for the quarter ended March 31, 2006 as compared to the quarter ended March 31, 2005.  


Gain on securities available for sale transactions, net for the three months ended March 31, 2006 and 2005 consisted of the following:


 

2006

 

2005

    

Gain on sale of securities, net

$ 56,408

 

$480,182

Gain on settled futures contracts

207,271

 

69,458

Gain on open futures contracts

49,921

 

82,968

Gain on securities available for sales

     transactions, net


$313,600

 


$632,608


Gain on securities available for sale transactions, net decreased by $319,008 for the quarter ended March 31, 2006 as compared to the quarter ended March 31, 2005.  This decrease is due primarily to the Company’s decision to realize a substantial portion of the unrealized gain in the securities portfolio existing during the first quarter of 2005.  This decrease was partially offset by the increase in the gain on settled futures contracts.  The Company invests in futures contracts of ten-year treasury notes to mitigate the exposure of interest rate fluctuations on the Company’s preferred equity and debt securities portfolio.


Community operating expenses decreased from $2,771,444 for the quarter ended March 31, 2005 to $2,668,601 for the quarter ended March 31, 2006.   This was primarily due the completion of certain community expansions in 2005.  General and administrative expenses increased from $678,791 for the quarter ended March 31, 2005 to $800,644 for the quarter ended March 31, 2006.   This was primarily due to an increase in franchise taxes, personnel costs and professional fees.   Interest expense increased from $116,214 for the quarter ended March 31, 2005 to $546,530 for the quarter ended March 31, 2006.    This was primarily due to the change in fair value of the Company’s interest rate swaps.  Cash paid for interest during the three months ended March 31, 2006 and 2005 amounted to $800,747 and $737,828, respectively.  Depreciation expense remained relatively stable for the quarter ended March 31, 2006 as compared to the quarter ended March 31, 2005.  Amortization of financing costs increased from $45,120 for the quarter ended March 31, 2005 to $ 62,370 for the quarter ended March 31, 2006 primarily due to fees incurred for our line of credit with PNC Bank.


Sales of manufactured homes amounted to $2,746,900 and $1,619,007 for the quarters ended March 31, 2006 and 2005, respectively.   Cost of sales of manufactured homes amounted to $2,044,716 and $1,363,069 for the quarters ended March 31, 2006 and 2005, respectively.  Selling expenses amounted to $439,937 and $277,686 for the quarters ended March 31, 2006 and 2005,




Page 11



respectively. These fluctuations are directly attributable to the fluctuations in sales.  The increase in sales is primarily due to the new expansions completed in 2005.  Sales in these expansion communities also command a higher profit margin.  Income from the sales operations (defined as sales of manufactured homes less cost of sales of manufactured homes less selling expenses) amounted to $262,247 and $21,748 for the quarters ended March 31, 2006 and 2005, respectively.  The Company believes that sales of new homes produces new rental revenue and is an investment in the upgrading of the communities.


LIQUIDITY AND CAPITAL RESOURCES


Net cash provided by operating activities increased from $1,574,903 for the quarter ended March 31, 2005 to $1,927,479 for the quarter ended March 31, 2006 primarily due to a decrease in notes and other receivables.  The Company received, including dividends reinvested of $486,776, new capital of $2,317,128 through its Dividend Reinvestment and Stock Purchase Plan (DRIP).  The Company purchased a manufactured home community in Lebanon, Tennessee for a total purchase price of approximately $5,200,000.  The Company sold $4,349,645, at cost, and purchased $227,708 of securities of other real estate investment trusts. Mortgages payable decreased by $501,446 and loans payable decreased by $338,325 as a result of principal repayments.  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.


The Company’s FFO for the quarter ended March 31, 2006 and 2005 is calculated as follows:


  

2006

 

2005

     
 

Net Income

$2,140,525

 

$2,456,249

 

(Gain) Loss on Sales of

   Depreciable Assets


(16,837)

 


7,556

 

Depreciation Expense

825,715

 

827,289

     
 

FFO

$2,949,403

 

$3,291,094



Page 12


The following are the cash flows provided (used) by operating, investing and financing activities for the three months ended March 31, 2006 and 2005:


  

           2006

 

       2005

     
 

Operating Activities

$1,927,479

 

$1,574,903

 

Investing Activities

(1,869,401)

 

(5,039,624)

 

Financing Activities

(711,056)

 

1,156,033


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.


Changes In Internal Control Over Financial Reporting


 There were no changes in the Company’s internal control over financial reporting during the first quarter of 2006 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.


SAFE HARBOR STATEMENT


This Form 10-Q contains various “forward-looking statements” within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, and the Company intends that such forward-looking statements be subject to the safe harbors created thereby.  The words “may”, “will”, “expect”, “believe”, “anticipate”, “should”, “estimate”, and similar expressions identify forward-looking statements.  These forward-looking statements reflect the Company’s current views with respect to future events and finance performance, but are based upon current assumptions regarding the Company’s operations, future results and prospects, and are subject to many uncertainties and factors relating to the Company’s operations and business environment which may cause the actual results of the Company to be materially different from any future results expressed or implied by such forward-looking statements.


Such factors include, but are not limited to, the following:  (i)  changes in the general economic climate; (ii)  increased competition in the geographic areas in which the Company owns and operates manufactured housing communities; (iii)  changes in government laws and regulations affecting manufactured housing communities; and (iv)  the ability of the Company to continue to identify, negotiate and acquire manufactured housing communities and/or vacant land which may be developed into manufactured housing communities on terms favorable to the Company.  The Company undertakes no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events, or otherwise.



Page 13





PART II


OTHER INFORMATION




Item 1 -

Legal Proceedings - none

  

Item 2 -

Unregistered Sale 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 2002

  
 

31.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

 AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT 2002

  
 

32

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT 2002





Page 14






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.


UMH PROPERTIES, INC.



DATE:

  May 5, 2006

By /s/ Samuel A. Landy

Samuel A. Landy

President





DATE:

   May 5, 2006

 

By /s/ Anna T. Chew

Anna T. Chew

Vice President and

Chief Financial Officer














Page 15