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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
February 16, 2006
Date of Report (Date of earliest event reported)
SUN COMMUNITIES, INC.
(Exact Name of Registrant as Specified in its Charter)
MARYLAND
(State or Other Jurisdiction of Incorporation)
1-12616 38-2730780
(Commission File Number) (IRS Employer Identification No.)
27777 FRANKLIN ROAD
SUITE 200
SOUTHFIELD, MI 48034
(Address of Principal Executive Office) (Zip Code)
248-208-2500
(Registrant's Telephone Number, Including Area Code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a12 under the Exchange
Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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ITEM 2.02 DESCRIPTION.
On February 16, 2006, Sun Communities, Inc. (the "Company") issued a press
release, furnished as Exhibit 99.1 and incorporated herein by reference,
announcing its financial results for the quarter ended December 31, 2005 and
certain other information.
The Company will hold an investor conference call and webcast at 11:00 A.M. EST
on February 16, 2006 to disclose and discuss the financial results for the
quarter ended December 31, 2005.
The information contained in this Current Report on Form 8-K, including the
exhibit attached hereto, is being furnished and shall not be deemed to be
"filed" for purposes of the Securities Exchange Act of 1934, as amended.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(d) Exhibits.
EXHIBIT # DESCRIPTION
- --------- ---------------------------------------------------------------
99.1 Press Release issued February 16, 2006
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 hereunto duly authorized.
Sun Communities, Inc.
Date: February 16, 2006 By: /s/ Jeffrey P. Jorissen
-----------------------------------
Jeffrey P. Jorissen,
Executive Vice President, Treasurer,
Chief Financial Officer, and Secretary
EXHIBIT INDEX
EXHIBIT # DESCRIPTION
- --------- ---------------------------------------------------------------
99.1 Press Release issued February 16, 2006
Exhibit 99.1
Sun Communities, Inc. Reports 2005 Results
SOUTHFIELD, Mich., Feb. 16 /PRNewswire-FirstCall/ -- Sun Communities, Inc.
(NYSE: SUI), a real estate investment trust (REIT) that owns and operates
manufactured housing communities, today reported fourth quarter and year ended
December 31, 2005 results.
Income from rental property increased 7.1 percent to $179.0 million for the
year ended December 31, 2005 from $167.1 million for the year ended December 31,
2004. Net loss for the year ended December 31, 2005 was $(5.5) million or
$(0.31) per common share compared to net loss of $(40.5) million or $(2.21) per
diluted common share during 2004. Funds from operations (FFO)(1) were $51.3
million, or $2.54 per diluted share/OP Unit for the year ended December 31,
2005; an increase from FFO of $(3.3) million, or $(0.16) per diluted share/OP
Unit for the year ended December 31, 2004. The Company incurred costs of $57.2
associated with the repurchase of $345 million of unsecured debt in 2004 and the
associated recapitalization of the Company. Excluding these costs, FFO for 2004
would have been $53.9 million or $2.57 per diluted share/OP unit and net income
would have been $16.7 million or $0.91 cents per diluted common share.
During the fourth quarter ended December 31, 2005, income from rental
property increased 5.3 percent to $45.6 million, compared with $43.3 million in
the fourth quarter of 2004. Loss from continuing operations for the fourth
quarter of 2005 was $(1.7) million or $(0.09) per diluted common share, compared
with income of $1.3 million, or $0.07 per diluted common share for the same
period in 2004. Adjusted to exclude the $5.9 million gain on sale of land,
fourth quarter 2004 results would have reflected a loss of $(4.6) million and
loss per common share of $(0.26). Funds from operations increased from $10.3
million or $0.50 per diluted share/OP Unit in the fourth quarter 2004 to $13.4
million or $0.67 per diluted share/OP Unit in the fourth quarter 2005, an
increase of 30.1 percent.
For 121 communities owned throughout both years, total revenues increased
3.2 percent for the year ended December 31, 2005 and expenses increased 2.1
percent, resulting in an increase in net operating income(2) of 3.6 percent.
Same property occupancy in the manufactured housing sites decreased from 85.0
percent at December 31, 2004 to 84.7 percent at December 31, 2005 due primarily
to an increase in the number of manufactured housing sites in the same property
portfolio.
Increases in revenue producing sites reported during the first and second
quarters of 2005 were diminished by the slow down in site rentals during the
third and fourth quarters of the year. Revenue producing sites increased by 103
during the year. The Company sold 179 new and 246 pre-owned homes during 2005 as
compared to 180 new and 357 pre-owned sales in 2004. The Company also brokered
593 sales during the year.
"While the positive gain in revenue producing sites fell short of budget for
the year, the 103 sites represents the first positive portfolio year over year
gain since 2001," said Gary Shiffman, Chief Executive Officer.
"We continue to utilize the home rental program as a tool to attempt to
overcome the industry challenges. Management has both improved lease renewals
and increased rental rates throughout the year," he added.
The Company rented an additional 273 homes in the fourth quarter of 2005
bringing the total number of rentals to 3,711 at December 31, 2005, as reflected
in the accompanying table. Rental rates for the homes, including site rent, have
increased by over 11% over the past twelve months. The Company continues to
purchase value priced repossessed homes from finance companies and focus on cost
containment measures related to the repair and refurbishment of these homes.
During 2005, the Company acquired a recreational vehicle community comprised
of approximately 700 recreational vehicle sites and 30 manufactured housing
sites in Dover, Florida for $7.3 million. Subsequent to year end, the Company
purchased a manufactured housing community containing 227 sites in Oakland
County, Michigan for $7.8 million and assumed $4.5 million of debt. The
occupancy of this community is approximately 95.0 percent.
During 2005, the Company repurchased 600,000 shares of its common stock at
various prices ranging from a high of $35.59 to a low of $30.15. The average
cost of the repurchases was $33.40. Also during 2005, the Company repurchased
$50.0 million of its Series A Perpetual Preferred Operating Partnership Units
which carried a coupon rate of 8.875 percent.
A conference call to discuss fourth quarter operating results will be held
on February 16, 2006, at 11:00 A.M. EST. To participate, call toll-free
877-407-9039. Callers outside the U.S. or Canada can access the call at
201-689-8470. A replay will be available following the call through March 2,
2006, and can be accessed by dialing 877-660-6853 from the U.S. or
201-612-7415 outside the U.S. or Canada. The account number for the replay is
3055 and the ID number is 188752. The conference call will be available live
on Sun Communities website http://www.suncommunities.com. Replay will also be
available on the website.
Sun Communities, Inc. is a real estate investment trust (REIT) that
currently owns and operates a portfolio of 136 communities comprising
approximately 47,360 developed sites and nearly 7,000 sites suitable for
development mainly in the Midwest and Southeast United States.
(1) Funds from operations ("FFO") is defined by the National Association of
Real Estate Investment Trusts ("NAREIT") as net income (computed in
accordance with generally accepted accounting principles), excluding
gains (or losses) from sales of depreciable operating property, plus
real estate-related depreciation and amortization, and after adjustments
for unconsolidated partnerships and joint ventures. FFO is a non-GAAP
financial measure that management believes is a useful supplemental
measure of the Company's operating performance. Management generally
considers FFO to be a useful measure for reviewing comparative operating
and financial performance because, by excluding gains and losses related
to sales of previously depreciated operating real estate assets and
excluding real estate asset depreciation and amortization (which can
vary among owners of identical assets in similar condition based on
historical cost accounting and useful life estimates), FFO provides a
performance measure that, when compared year over year, reflects the
impact to operations from trends in occupancy rates, rental rates and
operating costs, providing perspective not readily apparent from net
income. Management believes that the use of FFO has been beneficial in
improving the understanding of operating results of REITs among the
investing public and making comparisons of REIT operating results more
meaningful.
Because FFO excludes significant economic components of net income
including depreciation and amortization, FFO should be used as an
adjunct to net income and not as an alternative to net income. The
principal limitation of FFO is that it does not represent cash flow from
operations as defined by GAAP and is a supplemental measure of
performance that does not replace net income as a measure of performance
or net cash provided by operating activities as a measure of liquidity.
In addition, FFO is not intended as a measure of a REIT's ability to
meet debt principal repayments and other cash requirements, nor as a
measure of working capital. FFO only provides investors with an
additional performance measure. Other REITs may use different methods
for calculating FFO and, accordingly, the Company's FFO may not be
comparable to other REITs.
(2) Investors in and analysts following the real estate industry utilize net
operating income ("NOI") as a supplemental performance measure. NOI is
derived from revenues (determined in accordance with GAAP) minus
property operating expenses and real estate taxes (determined in
accordance with GAAP). NOI does not represent cash generated from
operating activities in accordance with GAAP and should not be
considered to be an alternative to net income (determined in accordance
with GAAP) as an indication of the Company's financial performance or to
be an alternative to cash flow from operating activities (determined in
accordance with GAAP) as a measure of the Company's liquidity; nor is it
indicative of funds available for the Company's cash needs, including
its ability to make cash distributions. The Company believes that net
income is the most directly comparable GAAP measurement to net operating
income. Net income includes interest and depreciation and amortization
which often have no effect on the market value of a property and
therefore limit its use as a performance measure. In addition, such
expenses are often incurred at a parent company level and therefore are
not necessarily linked to the performance of a real estate asset. The
Company believes that net operating income is helpful to investors as a
measure of operating performance because it is an indicator of the
return on property investment, and provides a method of comparing
property performance over time. The Company uses NOI as a key management
tool when evaluating performance and growth of particular properties
and/or groups of properties. The principal limitation of NOI is that it
excludes depreciation, amortization and non-property specific expenses
such as general and administrative expenses, all of which are
significant costs, and therefore, NOI is a measure of the operating
performance of the properties of the Company rather than of the Company
overall.
For more information about Sun Communities, Inc., visit our website at
http://www.suncommunities.com.
-- FINANCIAL TABLES FOLLOW --
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 will be subject to
the safe harbors created thereby. The words "will," "may," "could," "expect,"
"anticipate," "believes," "intends," "should," "plans," "estimates,"
"approximate" and similar expressions identify these forward- looking
statements. These forward-looking statements reflect the Company's current views
with respect to future events and financial performance, but involve known and
unknown risks and uncertainties, both general and specific to the matters
discussed in this press release. These risks and uncertainties 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 risks and
uncertainties include the ability of manufactured home buyers to obtain
financing, the level of repossessions by manufactured home lenders and those
referenced under the headings entitled "Factors That May Affect Future Results"
or "Risk Factors" contained in the Company's filings with the Securities and
Exchange Commission. The forward-looking statements contained in this press
release speak only as of the date hereof and the Company expressly disclaims any
obligation to provide public updates, revisions or amendments to any
forward-looking statements made herein to reflect changes in the Company's
expectations of future events.
SUN COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIODS ENDED DECEMBER 31, 2005 AND 2004
(Amounts in thousands except for per share data)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
---------------------------- ----------------------------
2005 2004 2005 2004
------------ ------------ ------------ ------------
REVENUES
Income from rental property $ 45,569 $ 43,340 $ 178,985 $ 167,145
Revenue from home sales 4,249 2,944 18,385 17,667
Rental revenues, net 385 52 1,712 1,190
Ancillary revenues, net 135 168 741 532
Gain on sale of land - 5,879 - 5,879
Interest and other income 640 703 2,762 7,416
------------ ------------ ------------ ------------
Total revenues 50,978 53,086 202,585 199,829
COSTS AND EXPENSES
Property operating and maintenance 10,925 10,715 45,091 41,544
Cost of home sales 3,089 2,314 13,861 14,242
Real estate taxes 3,800 3,762 15,173 13,753
General and administrative -- rental
property 3,758 4,020 14,493 12,559
General and administrative -- home
sales and rentals 1,332 3,605 6,207 8,070
Depreciation and amortization 14,319 12,271 54,330 45,217
Extinguishment of debt - - - 51,643
Deferred financing costs related to
extinguished debt - - - 5,557
Interest 15,473 13,817 59,972 48,193
Florida storm damage (recovery) 165 - (390) 600
------------ ------------ ------------ ------------
Total expenses 52,861 50,504 208,737 241,378
------------ ------------ ------------ ------------
Income (loss) from operations (1,883) 2,582 (6,152) (41,549)
Less income (loss) allocated to minority interest:
Preferred OP Units - 1,110 961 4,438
Common OP Units (219) 180 (837) (5,382)
------------ ------------ ------------ ------------
Income (loss) from continuing
operations (1,664) 1,292 (6,276) (40,605)
Income from discontinued operations - 17 824 137
------------ ------------ ------------ ------------
Net income (loss) $ (1,664) $ 1,309 $ (5,452) $ (40,468)
============ ============ ============ ============
Weighted average common shares outstanding:
Basic 17,540 17,832 17,716 18,318
============ ============ ============ ============
Diluted 17,540 17,990 17,716 18,318
============ ============ ============ ============
Basic earnings (loss) per share:
Continuing operations $ (0.09) $ 0.07 $ (0.35) $ (2.22)
Discontinued operations - 0.00 0.05 0.01
------------ ------------ ------------ ------------
Net income (loss) $ (0.09) $ 0.07 $ (0.31) $ (2.21)
============ ============ ============ ============
Diluted earnings (loss) per share:
Continuing operations $ (0.09) $ 0.07 $ (0.35) $ (2.22)
Discontinued operations - 0.00 0.05 0.01
------------ ------------ ------------ ------------
Net income (loss) $ (0.09) $ 0.07 $ (0.31) $ (2.21)
============ ============ ============ ============
RECONCILIATION OF NET INCOME (LOSS) TO FUNDS FROM OPERATIONS
FOR THE PERIODS ENDED DECEMBER 31, 2005 AND 2004
(Amounts in thousands except for per share data)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
---------------------------- ----------------------------
2005 2004 2005 2004
------------ ------------ ------------ ------------
Net income (loss) $ (1,664) $ 1,309 $ (5,452) $ (40,468)
Adjustments:
Depreciation and amortization 14,972 12,480 56,902 45,589
Valuation adjustment(3) 30 226 430 528
Allocation of SunChamp losses(4) - - - 300
(Gain) loss on disposition
of assets, net 257 (3,880) 156 (3,880)
Income (loss) allocated to
minority interest (219) 182 (723) (5,364)
------------ ------------ ------------ ------------
Funds from operations (FFO) $ 13,376 $ 10,317 $ 51,313 $ (3,295)
============ ============ ============ ============
FFO -- Continuing Operations $ 13,376 $ 10,250 $ 51,141 $ (3,628)
============ ============ ============ ============
FFO -- Discontinued Operations $ - $ 67 $ 172 $ 333
============ ============ ============ ============
Weighted average common shares/OP Units outstanding:
Basic 19,868 20,306 20,121 20,792
============ ============ ============ ============
Diluted 19,971 20,464 20,253 20,792
============ ============ ============ ============
Continuing Operations:
FFO per weighted average Common
Share/OP Unit -- Basic $ 0.67 $ 0.51 $ 2.53 $ (0.17)
============ ============ ============ ============
FFO per weighted average Common
Share/OP Unit -- Diluted $ 0.67 $ 0.50 $ 2.53 $ (0.17)
============ ============ ============ ============
Discontinued Operations:
FFO per weighted average Common
Share/OP Unit -- Basic $ - $ 0.00 $ 0.01 $ 0.01
============ ============ ============ ============
FFO per weighted average Common
Share/OP Unit -- Diluted $ - $ 0.00 $ 0.01 $ 0.01
============ ============ ============ ============
Total Operations:
FFO per weighted average Common
Share/OP Unit -- Basic $ 0.67 $ 0.51 $ 2.54 $ (0.16)
============ ============ ============ ============
FFO per weighted average Common
Share/OP Unit -- Diluted $ 0.67 $ 0.50 $ 2.54 $ (0.16)
============ ============ ============ ============
(3) The Company entered into three interest rate swaps and an interest rate cap
agreement. The valuation adjustment reflects the theoretical noncash profit
and loss were those hedging transactions terminated at the balance sheet
date. As the Company has no expectation of terminating the transactions
prior to maturity, the net of these noncash valuation adjustments will be
zero at the various maturities. As any imperfection related to hedging
correlation in these swaps is reflected currently in cash as interest, the
valuation adjustments reflect volatility that would distort the comparative
measurement of FFO and on a net basis approximate zero. Accordingly, the
valuation adjustments are excluded from FFO. The valuation adjustment is
included in interest expense.
(4) The Company acquired the equity interest of another investor in SunChamp in
December 2002. Consideration consisted of a long-term note payable at net
book value. Although the adjustment for the allocation of the SunChamp
losses (based on SunChamp as a stand-alone entity) is not reflected in the
accompanying financial statements, management believes that it is
appropriate to provide for this adjustment because the Company's payment
obligations with respect to the note are subordinate in all respects to the
return of the members' equity (including the gross book value of the
acquired equity) plus a preferred return. As a result, the losses that are
allocated to the Company from SunChamp as a stand-alone entity under
generally accepted accounting principles are effectively reallocated to the
note for purposes of calculating FFO. A situation such as this is not
contemplated in the NAREIT definition of FFO due to the unique
circumstances of the transaction. Although not comparable to the precise
NAREIT definition, the Company believes the inclusion of this item in its
calculation of FFO to be appropriate as noted above.
SUN COMMUNITIES, INC.
SELECTED BALANCE SHEET DATA
(Amounts in thousands)
(Unaudited)
December 31, December 31,
2005 2004
------------ ------------
Investment in rental property before
accumulated depreciation $ 1,458,122 $ 1,380,553
Total assets $ 1,320,536 $ 1,403,167
Total debt $ 1,123,468 $ 1,078,442
Total minority interests and
stockholders' equity $ 164,801 $ 292,789
SUN COMMUNITIES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
FOR THE PERIODS ENDED DECEMBER 31, 2005 AND 2004
(Amounts in thousands)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
---------------------------- ----------------------------
2005 2004 2005 2004
------------ ------------ ------------ ------------
Net income (loss) $ (1,664) $ 1,309 $ (5,452) $ (40,468)
Unrealized income on interest rate
swaps 417 577 1,491 335
------------ ------------ ------------ ------------
Comprehensive income (loss) $ (1,247) $ 1,886 $ (3,961) $ (40,133)
============ ============ ============ ============
SUN COMMUNITIES, INC.
ADDITIONAL INFORMATION
SAME PROPERTY RESULTS
---------------------
For 121 communities owned throughout both years (amounts in thousands):
Three Months Ended Twelve Months Ended
December 31, December 31,
------------------------------------- -------------------------------------
2005 2004 % change 2005 2004 % change
---------- ---------- ---------- ---------- ---------- ----------
Total revenue $ 40,438 $ 38,938 3.9% $ 158,882 $ 153,999 3.2%
Total expense 10,852 10,995 -1.3% 45,016 44,085 2.1%
---------- ---------- ---------- ----------
Net operating income(2) $ 29,586 $ 27,943 5.9% $ 113,866 $ 109,914 3.6%
========== ========== ========== ==========
Same property occupancy and average monthly rent information at December
31, 2005 and 2004:
2005 2004
------------ ------------
Total manufactured housing sites 38,185 38,060
Occupied manufactured housing sites 32,336 32,339
Manufactured housing occupancy % 84.7% 85.0%
Average monthly rent per site $ 355 $ 342
RENTAL PROGRAM SUMMARY
----------------------
Twelve Months Ended
December 31,
----------------------------
2005 2004
------------ ------------
(thousands)
Revenue $ 21,371 $ 10,887
------------ ------------
Expenses
Payroll and commissions 1,825 1,054
Repairs and refurbishment 3,190 1,375
Taxes and insurance 1,022 459
Other 1,336 487
------------ ------------
Total expenses 7,373 3,375
------------ ------------
Net operating income $ 13,998(5) $ 7,512(5)
============ ============
Number of occupied rentals, end of period 3,711 1,933
Cost of occupied rental homes $ 109,214 $ 51,540
Weighted average monthly rental rate $ 643 $ 579
(5) Includes site rent included in Income from rental property.
SOURCE Sun Communities, Inc.
-0- 02/16/2006
/CONTACT: Jeffrey P. Jorissen, Chief Financial Officer of Sun
Communities, Inc., +1-248-208-2500/
/Web site: http://www.suncommunities.com /
