SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark FORM 10-QSB
One)
|X|
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 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 - 13
No exhibits filed.
<PAGE>
FORM 10-QSB
KNICKERBOCKER VILLAGE, INC.
BALANCE SHEET
AS OF SEPTEMBER 30, 2000
(UNAUDITED)
Assets
Current Assets:
Cash and cash equivalents $ 538,586
Accounts receivable (less allowance for
doubtful accounts of $308,000) 115,967
Other receivables 48,675
Prepaid expenses and other current assets 827,987
Deferred tax asset, net 74,000
-----------
Total Current Assets 1,605,215
-----------
Special Funds And Deposits:
Funds for replacements, painting
and decorating 271,922
Tenants' security deposits - contra 677,618
-----------
Total Special Funds and Deposits 949,540
-----------
Fixed Assets:
Land 3,273,281
Buildings and Building Equipment 17,542,877
-----------
20,816,158
Less: Accumulated depreciation 12,834,799
-----------
Net Fixed Assets 7,981,359
-----------
Other Assets:
Deferred tax asset, net 306,000
Other assets 89,336
-----------
395,336
-----------
Total Assets $10,931,450
===========
In the opinion of management, the accompanying financial statements of
Knickerbocker Village, Inc. as at September 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 SEPTEMBER 30, 2000
(UNAUDITED)
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued expenses $ 2,374,667
Unearned rental income 36,879
Dividends payable 19,023
Current portion of long-term debt 103,186
-----------
Total Current Liabilities 2,533,755
Tenants' Security Deposits - Contra 677,618
Long-Term Debt, less current portion 5,891,221
-----------
Total Liabilities 9,102,594
-----------
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 1,511,808
-----------
Total Stockholders' Equity 1,828,856
-----------
Total Liabilities and Stockholders' Equity $10,931,450
===========
In the opinion of management, the accompanying financial statements of
Knickerbocker Village, Inc. as at September 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 NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED)
2000 1999
---------- ----------
Revenues:
Rentals $8,151,360 $7,887,860
Other income 37,010 21,046
---------- ----------
8,188,370 7,908,906
---------- ----------
Expenses:
Wages and related costs 1,938,647 1,829,872
Real estate taxes 545,960 600,264
Utilities 1,845,012 1,368,529
Maintenance, repairs and decorating 1,080,372 882,301
Depreciation and amortization 349,584 406,561
Mortgage and other interest 399,971 408,030
Management and administrative fee 723,725 724,926
Provision for doubtful accounts 2,270 18,730
Miscellaneous operating and general expenses 1,233,500 1,210,631
---------- ----------
8,119,041 7,449,844
---------- ----------
Income before income taxes 69,329 459,062
Provision for income taxes 47,000 224,000
---------- ----------
Net income and comprehensive income 22,329 235,062
Retained earnings at beginning of the period 1,489,479 1,278,583
---------- ----------
Retained earnings at end of the period $1,511,808 $1,513,645
========== ==========
Earnings per share $ 0.15 $ 1.59
========== ==========
In the opinion of management, the accompanying financial statements of
Knickerbocker Village, Inc. as at September 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 NINE MONTHS ENDED SEPTEMBER, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
--------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 22,329 $ 235,062
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 349,584 406,561
Provision for bad debts 2,270 18,730
Deferred income taxes (20,000) (48,000)
Changes in assets (increase) decrease:
Accounts receivable 937 2,267
Other receivables 136,501 135,487
Prepaid expenses 480,764 738,008
Other assets 1,135 0
Changes in liabilities increase (decrease):
Accounts payable and accrued expenses (264,782) (329,071)
Unearned rental income 12,712 48,434
Other liabilities 0 (170,707)
--------- -----------
Net cash provided by operating activities 721,450 1,036,771
--------- -----------
Cash Flows From Investing Activities:
Interest earned on reserve fund investments (3,786) (5,384)
Capital expenditures (712,302) (410,490)
Contributions of cash from operations to replacement fund (686,610) (748,320)
Reimbursement of expenditures paid by housing company
from replacement fund 778,354 517,708
--------- -----------
Net cash used in investing activities (624,344) (646,486)
--------- -----------
Cash flows from financing activities:
Payments on long-term debt (71,852) (66,017)
Payments on capital lease obligation (4,419) (6,304)
--------- -----------
Net cash used in financing activities (76,271) (72,321)
--------- -----------
Net increase in cash 20,835 317,964
Cash at beginning of period 517,751 92,956
--------- -----------
Cash at end of period $ 538,586 $ 410,920
========= ===========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ 400,000 $ 390,000
========= ===========
Income taxes $ 192,000 $ 186,000
========= ===========
</TABLE>
In the opinion of management, the accompanying financial statements of
Knickerbocker Village, Inc. as at September 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
SEPTEMBER 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 September 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 $339,000 and $396,000 for the nine months ended September
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
SEPTEMBER 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
SEPTEMBER 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 September 30, 2000:
Cash $ 271,922
=========
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 September 30, 2000 are approximately $103,000, (2001); $112,000,
(2002); $122,000, (2003); $133,000 (2004); and $145,000,(2005);
$5,379,000, (thereafter).
NOTE 5 - 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.
Cumulative dividends unpaid to September 30, 2000 amounted to $608,735 or
approximately $4.13 per share and unpaid to September 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 September 30, 2000.
Such dividends were approved by the DHCR. No dividends were declared or
paid in 2000 or 1999.
NOTE 6 - INCOME TAXES
The provision for income taxes for the nine months ended September 30,
2000 and 1999 consist of the following:
2000 1999
-------- ---------
Current Taxes
Federal $ 46,000 $ 212,000
New York City 21,000 60,000
-------- ---------
Total 67,000 272,000
-------- ---------
Deferred Taxes
Federal (16,000) (39,000)
New York City (4,000) (9,000)
-------- ---------
Total (20,000) (48,000)
-------- ---------
Provision For Income Taxes $ 47,000 $ 224,000
======== =========
8
<PAGE>
KNICKERBOCKER VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
NOTE 6 - INCOME TAXES - (continued)
The provision for income taxes differs from amounts computed at statutory
rates as follows:
2000 1999
------- --------
Federal income taxes at statutory rate $24,000 $156,000
New York City corporation tax -
net of federal benefit 21,000 39,000
Other, net 2,000 29,000
------- --------
Total $47,000 $224,000
======= ========
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
September 30, 2000, the net deferred tax assets of $380,000, were included
in the Company's balance sheet as follows.
Deferred tax asset, net - current $ 74,000
Deferred tax asset, net - long term 306,000
--------
Deferred tax asset, net $380,000
========
Significant components of the Company's net deferred tax asset at
September 30, 2000 are as follows:
Tax effects of:
Accounts receivable $ 132,000
Unearned rental income 17,000
Buildings and building equipment 612,000
---------
Gross deferred tax asset 761,000
Valuation allowance (381,000)
---------
Net deferred tax asset $ 380,000
=========
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 nine months ended September 30, 2000 was an increase of
$21,000.
NOTE 7 - 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.
9
<PAGE>
KNICKERBOCKER VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND 1999
On September 2, 1999, the DHCR approved an increase in the management fee
of approximately 1.4% effective July 1, 1999.
NOTE 8 - 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 $71,000 and
$59,000 for the nine months ended September 30, 2000 and 1999
respectively.
NOTE 9 - 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 September 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.
NOTE 10- 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 11- PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets in the accompanying balance
sheet at September 30, 2000 are as follows:
Escrow Account $248,305
Employee Loans 1,000
Prepaid:
Insurance 148,817
Real Estate Taxes 197,063
Supplies 93,397
Federal Corporation Income Taxes 104,000
NYC Corporation Taxes 21,000
Expenses - Other 14,405
--------
TOTAL $827,987
========
10
<PAGE>
FORM 10-QSB
KNICKERBOCKER VILLAGE, INC
MANAGEMENTS DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION
SEPTEMBER 30, 2000
(UNAUDITED)
Liquidity - As of September 30, 2000, the Registrant has a working capital
deficit of approximately $929,000. 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 $272,000 as of September 30, 2000.
Results of operations - During the nine months ended September 30, 2000, as
compared to the nine months ended September 30, 1999, total revenues increased
by approximately $279,000 or approximately 3.5%, due primarily to the two step
rent increase which was effective February 1, 1999 and April 1, 2000.
Operating expenses increased by approximately $669,000 or approximately 9.0%
during the nine months ended September 30, 2000, as compared to the nine months
ended September 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 $108,000 or approximately 5.9%, primarily due to increases in
union wage rates, union pension rates and related payroll taxes. Utilities
increased by approximately $476,000 or approximately 34.8%, primarily due to
significant increases in the prices of fuel oil and electricity in 2000 as
compared to 1999. Maintenance, repairs and decorating expense increased by
approximately $198,000 or approximately 22.4% primarily due to increases in
electrical repairs, structural expenses, painting and decorating, supplies and
grounds expenses, offset by decreases in heating, plumbing and elevator repairs.
Miscellaneous operating and general expenses increased by approximately $23,000
or approximately 1.9%, 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 $54,000 or approximately 9.0% due to a
decrease in the property's assessed value for the tax year ended June 30, 2000.
Depreciation and amortization decreased by approximately $57,000 or
approximately 14.0% 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 $177,000 or approximately 79.0%, primarily due to a decrease in
income before taxes (see Note 6 to the financial statements pages 8 and 9.)
11
<PAGE>
FORM 10-QSB
KNICKERBOCKER VILLAGE, INC
MANAGEMENTS DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION
SEPTEMBER 30, 2000
(UNAUDITED)
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
None.
(b) Reports on Form 8-K.
None.
12
<PAGE>
FORM 10-QSB
KNICKERBOCKER VILLAGE, INC
MANAGEMENTS DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION
SEPTEMBER 30, 2000
(UNAUDITED)
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: November 14, 2000 By: S/ROBERT GERSHON
---------------------------------------
ROBERT GERSHON,
Vice President and Treasurer
Dated: November 14, 2000 By: S/MELVIN GERSHON
------------------------------------
MELVIN GERSHON,
Secretary
