SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark
One)
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
|_| FOR THE SIX MONTHS PERIOD ENDED JUNE 30, 2000
TRANSITION REPORT UNDER SECTION 13 OR 15 (D)
OF THE EXCHANGE ACT
For the period of transition from __________ to __________
Commission File No. 0-1322
KNICKERBOCKER VILLAGE, INC.
---------------------------
(Exact name of registrant as specified in its Charter)
NEW YORK 13-0924285
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer identification No.)
incorporation or organization)
10 Monroe Street, New York, N.Y. 10002
-------------------------------------------- -------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 227-0955
Indicate by checkmark 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 |_|
The number of shares outstanding of each of the issuer's classes of common
stock, as of the close of the period covered by this report is 147,464, $2.15
par value.
Total number of sequentially numbered pages - 14
No exhibits filed.
<PAGE>
FORM 10-QSB
KNICKERBOCKER VILLAGE, INC.
BALANCE SHEET
AS OF JUNE 30, 2000
(UNAUDITED)
Assets
Current Assets:
Cash and cash equivalents $ 767,231
Accounts receivable (less allowance for
doubtful accounts of $308,000) 101,993
Other receivables 23,849
Prepaid expenses and other current assets 903,802
Deferred tax asset, net 78,000
-----------
Total Current Assets 1,874,875
-----------
Special Funds And Deposits:
Funds for replacements, painting
and decorating 366,999
Tenants' security deposits - contra 674,846
-----------
Total Special Funds and Deposits 1,041,845
-----------
Fixed Assets:
Land 3,273,281
Buildings and Building Equipment 17,329,631
-----------
20,602,912
Less: Accumulated depreciation 12,714,689
-----------
Net Fixed Assets 7,888,223
-----------
Other Assets:
Deferred tax asset, net 299,000
Other assets 92,821
-----------
391,821
-----------
Total Assets $11,196,764
===========
In the opinion of management, the accompanying financial statements of
Knickerbocker Village, Inc. as at June 30, 2000 and for the related periods then
ended include all adjustments necessary in order to make the financial
statements not misleading.
2
<PAGE>
FORM 10-QSB
KNICKERBOCKER VILLAGE, INC.
BALANCE SHEET
AS OF JUNE 30, 2000
(UNAUDITED)
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued expenses $ 2,584,954
Unearned rental income 57,686
Dividends payable 19,023
Current portion of long-term debt 101,024
Current portion of capital lease obligation 809
-----------
Total Current Liabilities 2,763,496
Tenants' Security Deposits - Contra 674,846
Long-Term Debt, less current portion 5,917,842
-----------
Total Liabilities 9,356,184
-----------
Stockholders' Equity:
Limited dividend capital stock,
par value $2.15 per share,
Authorized - 348,837 shares;
issued and outstanding - 147,464 317,048
Retained earnings 1,523,532
-----------
Total Stockholders' Equity 1,840,580
-----------
Total Liabilities and Stockholders' Equity $11,196,764
===========
In the opinion of management, the accompanying financial statements of
Knickerbocker Village, Inc. as at June 30, 2000 and for the related periods then
ended include all adjustments necessary in order to make the financial
statements not misleading.
3
<PAGE>
FORM 10-QSB
KNICKERBOCKER VILLAGE, INC.
STATEMENTS OF NET INCOME, COMPREHENSIVE INCOME AND RETAINED EARNINGS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
2000 1999
---------- ----------
Revenues:
Rentals $5,384,575 $5,242,797
Other income 20,810 13,315
---------- ----------
5,405,385 5,256,112
---------- ----------
Expenses:
Wages and related costs 1,296,237 1,223,435
Real estate taxes 348,897 384,130
Utilities 1,124,743 786,861
Maintenance, repairs and decorating 752,956 532,320
Depreciation and amortization 225,989 269,411
Mortgage and other interest 268,590 272,491
Management and administrative fee 482,450 475,932
Provision for doubtful accounts 1,965 3,078
Miscellaneous operating and general expenses 822,505 782,878
---------- ----------
5,324,332 4,730,536
---------- ----------
Income before income taxes 81,053 525,576
Provision for income taxes 47,000 236,000
---------- ----------
Net income and comprehensive income 34,053 289,576
Retained earnings at beginning of the period 1,489,479 1,278,589
---------- ----------
Retained earnings at end of the period $1,523,532 $1,568,165
========== ==========
Earnings per share $ 0.23 $ 1.96
========== ==========
In the opinion of management, the accompanying financial statements of
Knickerbocker Village, Inc. as at June 30, 2000 and for the related periods then
ended include all adjustments necessary in order to make the financial
statements not misleading.
4
<PAGE>
FORM 10-QSB
KNICKERBOCKER VILLAGE, INC.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 34,053 $ 289,576
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 225,989 269,411
Provision for bad debts 1,965 3,078
Deferred income taxes (17,000) (32,000)
Changes in assets (increase) decrease:
Accounts receivable 15,216 (1,011)
Other receivables 161,327 155,538
Prepaid expenses 404,949 585,723
Other assets 1,134 0
Changes in liabilities increase (decrease):
Accounts payable and accrued expenses (54,494) 53,200
Unearned rental income 33,519 57,898
Other liabilities 0 (165,652)
----------- -----------
Net cash provided by operating activities 806,658 1,215,761
----------- -----------
Cash Flows From Investing Activities:
Interest earned on reserve fund investments (2,613) (3,441)
Capital expenditures (499,056) (75,129)
Contributions of cash from operations to replacement fund (457,740) (519,450)
Reimbursement of expenditures paid by housing company
from replacement fund 453,234 58,993
----------- -----------
Net cash used in investing activities (506,175) (539,027)
----------- -----------
Cash flows from financing activities:
Payments on long-term debt (47,393) (43,544)
Payments on capital lease obligation (3,610) (4,202)
----------- -----------
Net cash used in financing activities (51,003) (47,746)
----------- -----------
Net increase in cash 249,480 628,988
Cash at beginning of period 517,751 92,956
----------- -----------
Cash at end of period $ 767,231 $ 721,944
=========== ===========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ 269,000 $ 260,000
=========== ===========
Income taxes $ 128,000 $ 124,000
=========== ===========
</TABLE>
In the opinion of management, the accompanying financial statements of
Knickerbocker Village, Inc. as at June 30, 2000 and for the related periods then
ended include all adjustments necessary in order to make the financial
statements not misleading.
5
<PAGE>
KNICKERBOCKER VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
NOTE 1 - CORPORATE ORGANIZATION
Knickerbocker Village, Inc. (the "Company"), is a public, limited
dividend housing company formed pursuant to the Housing Laws of the
State of New York, on September 5, 1933. The Company is regulated by
the Division of Housing and Community Renewal ("DHCR"), a New York
State regulatory agency. The Company is located in lower Manhattan
and operates approximately 1,600 rental units ranging in size from
studios through three bedroom apartments. The Company requires one
(1) month's rent as a security deposit on all apartments.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
The Company recognizes revenue in the accounting period that
corresponds to the month for which rental income is billed. Rents
received but not recognized as revenue as of June 30, are recorded
as unearned rental income.
CASH AND CASH EQUIVALENTS
For the purposes of the statements of cash flows, the Company
considers all highly liquid debt instruments purchases with a
maturity of three months or less to be cash equivalents.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Bad debts are provided for on the allowance method based on
historical experience and management's evaluation of outstanding
rents receivable.
FIXED ASSETS
Fixed assets consist primarily of building improvements and
equipment and are recorded at cost. Depreciation is provided for
financial statement purposes on the straight-line method, over the
estimated useful lives of the fixed asset, which range from 5 to 30
years. For federal income tax purposes, depreciation is provided for
on the straight-line and accelerated methods.
Expenditures for maintenance and repairs are charged to operations
as incurred. Upon sale or retirement of property, the cost and
accumulated depreciation are removed from the respective accounts
and any gain or loss is reflected in operations for the year.
Depreciation expense was approximately $219,000 and $263,000 for the
six months ended June 30, 2000 and 1999, respectively.
INCOME TAXES
Deferred tax assets and liabilities reflect the tax consequences on
future years of differences between the tax bases of assets and
liabilities, and their financial reporting amounts, using enacted
tax rates in effect for the year in which the differences are
expected to reverse.
6
<PAGE>
KNICKERBOCKER VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(continued)
CONCENTRATION OF CREDIT RISK
The Company places its cash and investments for its Replacement Fund
(See Note 3) with a high quality credit institution. At times such
investments may be in excess of FDIC insured limits.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles 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.
RECLASSIFICATIONS
Certain prior year balances have been reclassified to conform with
current year classifications.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments:
1. Cash and cash equivalents - The carrying amounts approximate
fair value because of the short maturity of these instruments.
2. Receivables - The carrying amount approximates fair value
because of the short maturity of these instruments.
3. Debt - The carrying amounts approximate fair value based on
borrowing rates currently available to the Company for bank
loans with similar terms.
IMPAIRMENT OF LONG-LIVED ASSETS
In accordance with SFAS No. 121, "Accounting For the Impairment of
Long-Lived Assets and For Long-Lived Assets To Be Disposed Of", the
Company reviews it long-lived assets, including property and
equipment, and intangible assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of the
assets may not be fully recoverable. To determine recoverability of
its long-lived assets, the Company evaluates the probability that
future undiscounted net cash flows will be less than the carrying
amount of the assets. Impairment costs, if any, are measured by
comparing the carrying amount of the related assets to their fair
value.
COMPREHENSIVE INCOME
The company adopted SFAS No. 130, "Reporting Comprehensive Income"
in 1998 for the years ended December 31, 1998 and 1997. There are no
items of other comprehensive income as defined in the pronouncement.
7
<PAGE>
KNICKERBOCKER VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
NOTE 3 - REPLACEMENT, PAINTING AND DECORATING FUNDS
Maintenance of these funds is requested by the Commissioner of
Housing and Community Renewal of the State of New York. These funds
were comprised of the following at June 30, 2000:
Cash $366,999
========
NOTE 4 - LONG-TERM DEBT
On January 31, 1997, the Company entered into an extension and
modification agreement with The Greater New York Savings Bank, now
known as Astoria Federal Savings Bank (the "Bank") for the principal
amount of $6,300,000. The mortgage is payable in monthly
installments of $50,729, inclusive of interest at the rate of 8 1/2%
per annum, and is due on February 1, 2007. On the maturity date, the
Company may pay the remaining principal balance, or extend the term
of the mortgage for an additional five (5) years. The mortgage is
collateralized by land, buildings and boilers. The aggregate
maturities for long-term debt for the five years after June 30, 2000
are approximately $101,000, (2001); $110,000, (2002); $120,000,
(2003); $130,000 (2004); and $142,000,(2005); $5,416,000,
(thereafter).
NOTE 5 - CAPITAL LEASE OBLIGATIONS
The Company leases certain equipment under long term leases and has
the option to purchase the equipment at a nominal cost at the
termination of the leases. Included in building equipment are the
following assets held under capital leases:
Building Equipment $ 34,961
Less accumulated depreciation 14,196
--------
$ 20,765
========
Future minimum payments for assets under capital leases are as
follows at June 30, 2000:
Total minimum lease payments $ 993
Less amounts representing interest 184
--------
Present value of net minimum lease payments $ 809
========
NOTE 6 - DIVIDENDS PAYABLE AND CAPITAL STOCK
The holders of the Company's capital stock cannot at any time
receive, in repayment of their investment, any sums in excess of the
par value of the stock together with cumulative dividends at the
rate of 6% of par value per annum (without interest). Any surplus in
excess of such amounts upon dissolution reverts to the public
authorities.
8
<PAGE>
KNICKERBOCKER VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
NOTE 6 - DIVIDENDS PAYABLE AND CAPITAL STOCK--(continued)
Cumulative dividends unpaid to June 30, 2000 amounted to $608,735 or
approximately $4.13 per share and unpaid to June 30, 1999 amounted
to $589,712 or approximately $4.00 per share. Dividends amounting to
$19,023 were declared during 1979, but were not paid as of June 30,
2000. Such dividends were approved by the DHCR. No dividends were
declared or paid in 2000 or 1999.
NOTE 7 - INCOME TAXES
The provision for income taxes for the six months ended June 30,
2000 and 1999 consist of the following:
2000 1999
--------- ---------
Current Taxes
Federal $ 49,000 $ 208,000
New York City 15,000 60,000
--------- ---------
Total 64,000 268,000
--------- ---------
Deferred Taxes
Federal (13,000) (26,000)
New York City (4,000) (6,000)
--------- ---------
Total (17,000) (32,000)
--------- ---------
Provision For Income Taxes $ 47,000 $ 236,000
========= =========
The provision for income taxes differs from amounts computed at
statutory rates as follows:
2000 1999
-------- --------
Federal income taxes at statutory rate $ 28,000 $178,000
New York City corporation tax -
net of federal benefit 12,000 46,000
Other, net 7,000 12,000
-------- --------
Total $ 47,000 $236,000
======== ========
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax
purposes. At June 30, 2000, the net deferred tax assets of $377,000,
were included in the Company's balance sheet as follows.
Deferred tax asset, net - current $ 78,000
Deferred tax asset, net - Long term 299,000
--------
Deferred tax asset, net $377,000
========
9
<PAGE>
KNICKERBOCKER VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
NOTE 7 - INCOME TAXES--(continued)
Significant components of the Company's net deferred tax asset at
June 30, 2000 are as follows:
Tax effects of:
Accounts receivable $ 132,000
Unearned rental income 26,000
Buildings and building equipment 597,000
---------
Gross deferred tax asset 755,000
Valuation allowance (378,000)
---------
Net deferred tax asset $ 377,000
=========
Management believes that a valuation allowance is appropriate given
the current estimates of future taxable income, as well as
consideration of available tax planning strategies. If the Company
is unable to generate sufficient taxable income in the future
through operating results, increases in the valuation allowance will
be required through a charge to expense. However, if the Company
achieves profitability to utilize a greater portion of the deferred
tax asset, the valuation allowance will be reduced through a credit
to income. The net change in the valuation allowance for the six
months ended June 30, 2000 was an increase of $18,000.
NOTE 8 - MANAGEMENT FEE
The management fee, set by DHCR, was paid to Cherry Green Property
Corp., (Cherry Green), the owner of approximately 95% of the
outstanding shares of the Company. Such fee is reviewed and may be
adjusted annually, effective July 1 of each year, by the DHCR.
On September 2, 1999, the DHCR approved an increase in the
management fee of approximately 1.4% effective July 1, 1999.
NOTE 9 - PENSION PLAN
Certain employees of the Company are covered under a union
sponsored, multi-employer defined benefit pension plan. This plan is
not administered by the Company and contributions are determined by
the union. The Company's contributions for this plan were
approximately $47,000 and $39,000 for the six months ended June 30,
2000 and 1999 respectively.
NOTE 10 - COMMITMENTS AND CONTINGENCIES
The Company in accordance with the Modification Agreement with its
Bank dated January 30, 1997 (Note 4), has made a commitment to
complete asbestos abatement work and lead paint remediation work of
approximately $425,000. As of June 30, 2000, the commitment has been
fulfilled. The costs of any additional asbestos abatement or lead
paint remediation, if necessary, cannot be determined at this time.
10
<PAGE>
KNICKERBOCKER VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2000 AND 1999
NOTE 11 - RENTAL INCOME
During December 1998, the Company received a two step rent increase,
which was approved by the DHCR. The first increase of approximately
3.3% was effective February 1, 1999. The second increase of
approximately 3.2% was effective April 1, 2000.
NOTE 12 - PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets in the accompanying
balance sheet at June 30, 2000 are as follows:
Escrow Account $ 65,927
Prepaid:
Insurance 284,352
Real Estate Taxes 394,127
Supplies 93,397
Federal Corporation Income Taxes 51,000
NYC Corporation Taxes 13,000
Expenses - Other 1,999
--------
TOTAL $903,802
========
11
<PAGE>
FORM 10-QSB
KNICKERBOCKER VILLAGE, INC
MANAGEMENTS DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION
JUNE 30, 2000
(UNAUDITED)
Liquidity - As of June 30, 2000, the Registrant has a working capital deficit of
approximately $ 889,000. During December 1998, the Company received a two step
rent increase, which was approved by the DHCR. The first increase of
approximately 3.3% was effective February 1, 1999. The second increase of
approximately 3.2%, was effective April 1, 2000.
Capital resources - The Registrant has set aside funds for capital improvements
and repairs amounting to approximately $367,000 as of June 30, 2000.
Results of operations - During the six months ended June 30, 2000, as compared
to the six months ended June 30, 1999, total revenues increased by approximately
$149,000 or approximately 2.8%, due primarily to the two step rent increase
which was effective February 1, 1999 and April 1, 2000.
Operating expenses increased by approximately $594,000 or approximately 12.6%
during the six months ended June 30, 2000, as compared to the six months ended
June 30, 1999. This is primarily attributable to increases in wages and related
costs, utilities, maintenance, repairs and decorating expense and miscellaneous
operating and general expenses offset by reductions in real estate taxes and
depreciation and amortization. Wages and related costs increased by
approximately $73,000 or approximately 6.0%, primarily due to increases in union
wage rates, union pension rates and related payroll taxes. Utilities increased
by approximately $338,000 or approximately 42.9%, primarily due to significant
increases in the price of fuel oil in 2000 as compared to 1999. Maintenance,
repairs and decorating expense increased by approximately $221,000 or
approximately 41.5% primarily due to increases in electrical repairs, plumbing,
structural expenses, painting and decorating, supplies and grounds expenses,
offset by a decrease in heating and plumbing repairs. Miscellaneous operating
and general expenses increased by approximately $40,000 or approximately 5.1%
primarily due to increases in legal and consulting fees. The increase in legal
fees was attributable to a corresponding reduction in the assessed valuation of
the properties for the tax year ended June 30, 2000. Real estate taxes decreased
by approximately $35,000 or approximately 9.2% due to a decrease in the
property's assessed value for the tax year ended June 30, 2000. Depreciation and
amortization decreased by approximately $43,000 or approximately 16.1% due to
the fact that the majority of the fixed assets are in the latter part of their
useful lives. The provision for taxes decreased by approximately $189,000 or
approximately 80.0%, primarily due to a decrease in income before taxes (see
Note 7 to the financial statements pages 9 and 10.)
12
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
None.
(b) Reports on Form 8-K.
None.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
KNICKERBOCKER VILLAGE, INC.:
Dated: August 9, 2000 By: S/ROBERT GERSHON
--------------------
ROBERT GERSHON,
Vice President and Treasurer
Dated: August 9, 2000 By: S/MELVIN GERSHON
-------------------
MELVIN GERSHON,
Secretary
