UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1999
OR
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 0-15815
Krupp Insured Plus Limited Partnership
Massachusetts 04-2915281
(State or other jurisdiction of (IRS employer identification no.)
incorporation or organization)
One Beacon Street, Boston, Massachusetts 02108
(Address of principal (Zip Code)
executive offices)
(617) 523-0066
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
This Form 10-Q contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Actual results could differ materially from those projected in the
forward-looking statements as a result of a number of factors, including those
identified herein.
<TABLE>
KRUPP INSURED PLUS LIMITED PARTNERSHIP
BALANCE SHEETS
<CAPTION>
ASSETS
March 31, December 31,
1999 1998
<S> <C> <C> <C>
Participating Insured Mortgages ("PIMs") $ 28,947,560 $ 29,074,105
(Note 2)
Mortgage-Backed Securities and
insured mortgage("MBS") (Note 3) 23,476,311 23,880,438
Total mortgage investments 52,423,871 52,954,543
Cash and cash equivalents 3,875,693 3,653,130
Interest receivable and other assets 355,256 367,780
Prepaid acquisition fees and expenses, net of
accumulated amortization of $607,021 and
$590,032 respectively 237,231 254,220
Prepaid participation servicing fees, net of
accumulated amortization of $201,390 and
$193,113,respectively 129,662 137,939
Total assets $ 57,021,713 $ 57,367,612
LIABILITIES AND PARTNERS' EQUITY
Liabilities $ 209,359 $ 20,198
Partners' equity (deficit)(Note 4):
Limited Partners
(7,500,099 Limited Partner interests
outstanding) 56,203,389 56,720,679
General Partners (237,543) (237,028)
Accumulated Comprehensive Income 846,508 863,763
Total Partners' equity 56,812,354 57,347,414
Total liabilities and Partners' equity $ 57,021,713 $ 57,367,612
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE>
<TABLE>
KRUPP INSURED PLUS LIMITED PARTNERSHIP
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
<CAPTION>
For the Three Months
Ended March 31,
1999 1998
Revenues:
Interest income - PIMs
<S> <C> <C>
Basic interest $ 537,184 $ 649,078
Interest income - MBS 489,226 505,848
Other interest income 45,683 65,333
Total revenues 1,072,093 1,220,259
Expenses:
Asset management fee to an affiliate 95,558 109,342
Expense reimbursements to affiliates 1,746 20,132
Amortization of prepaid fees and expenses 25,266 25,266
General and administrative 13,720 24,458
Total expenses 136,290 179,198
Net income 935,803 1,041,061
Other Comprehensive Income:
Net change in unrealized gain on MBS (17,255) (14,360)
Total Comprehensive Income $ 918,548 $ 1,026,701
Allocation of net income (Note 4):
Limited Partners $ 907,729 $ 1,009,829
Average net income per Limited Partner
interest (7,500,099 Limited Partner
interests outstanding) $ .12 $ .13
General Partners $ 28,074 $ 31,232
The accompanying notes are an integral
part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
KRUPP INSURED PLUS LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
<CAPTION>
For the Three Months
Ended March 31,
1999 1998
Operating activities:
<S> <C> <C>
Net income $ 1,041,061 $ 935,803
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of prepaid fees and expenses 25,266 25,266
Premium amortization MBS - 1,471
Changes in assets and liabilities:
Decrease in interest receivable and other assets 12,524 158,183
Increase in liabilities 189,161 294
Net cash provided by operating activities 1,162,754 1,226,275
Investing activities:
Principal collections on MBS 386,872 365,555
Principal collections on PIMs 126,545 8,527,880
Net cash provided by investing activities 513,417 8,893,435
Financing activity:
Quarterly distributions (1,453,608) (1,470,611)
Net increase in cash and cash equivalents 222,563 8,649,099
Cash and cash equivalents, beginning of period 3,653,130 3,100,615
Cash and cash equivalents, end of period $ 3,875,693 $ 11,749,714
The accompanying notes are an integral
part of the financial statements.
</TABLE>
<PAGE>
KRUPP INSURED PLUS LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policies
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in this report on Form 10-Q pursuant to the Rules
and Regulations of the Securities and Exchange Commission. However, in the
opinion of the general partners, The Krupp Corporation and The Krupp Company
Limited Partnership-IV (collectively the "General Partners"), of Krupp Insured
Plus Limited Partnership (the "Partnership") the disclosures contained in this
report are adequate to make the information presented not misleading. See Notes
to Financial Statements included in the Partnership's Form 10-K for the year
ended December 31, 1998 for additional information relevant to significant
accounting policies followed by the Partnership.
In the opinion of the General Partners of the Partnership, the accompanying
unaudited financial statements reflect all adjustments (consisting of only
normal recurring accruals) necessary to present fairly the Partnership's
financial position as of March 31, 1999 and its results of operations and cash
flows for the three months ended March 31, 1999 and 1998.
The results of operations for the three months ended March 31, 1999 are not
necessarily indicative of the results, which may be expected for the full year.
See Management's Discussion and Analysis of Financial Condition and Results of
Operations included in this report.
2. PIMs
At March 31, 1999, the Partnership's PIMs have a fair market value of
approximately $29,790,000 and gross unrealized gains of $842,000. The PIMs have
maturities ranging from 2006 to 2033.
3. MBS
At March 31, 1999, the Partnership's MBS portfolio has an amortized cost of
$22,629,803 and gross unrealized gains of $846,508 with maturities from 2006 to
2033.
4. Changes in Partners' Equity
A summary of changes in Partners' Equity for the three months ended
March 31, 1999 is as follows:
<TABLE>
<CAPTION>
Accumulated Total
Limited General Comprehensive Partners'
Partners Partners Income Equity
<S> <C> <C> <C> <C>
Balance at December 31, 1998 $ 56,720,679 $(237,028) $863,763 $57,347,414
Net income 907,729 28,074 - 935,803
Quarterly distributions (1,425,019) (28,589) - (1,453,608)
Change in unrealized gain
on MBS - - (17,255) (17,255)
Balance at March 31, 1999 $ 56,203,389 $(237,543) $846,508 $56,812,354
</TABLE>
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements including those concerning
Management=s expectations regarding the future financial performance and future
events. These forward-looking statements involve significant risk and
uncertainties, including those described herein. Actual results may differ
materially from those anticipated by such forward-looking statements.
The General Partners of the Partnership have conducted an assessment of the
Partnership's core internal and external computer information systems and have
taken the further necessary steps to understand the nature and extent of the
work required to make its systems Year 2000 ready in those situations in which
it is required to do so. The Year 2000 readiness issue concerns the inability of
computerized information systems to accurately calculate, store or use a date
after 1999. This could result in a system failure or miscalculations causing
disruptions of operations. The Year 2000 issue affects virtually all companies
and all organizations.
In this regard, the General Partners of the Partnership, along with certain
affiliates, began a computer systems project in 1997 to significantly upgrade
its existing hardware and software. The General Partners completed the testing
and conversion of the financial accounting operating systems in February 1998.
As a result, the General Partners have generated operating efficiencies and
believe their financial accounting operating systems are Year 2000 ready. The
General Partners of the Partnership incurred hardware costs as well as
consulting and other expenses related to the infrastructure and facilities
enhancements necessary to complete the upgrade and prepare for the Year 2000.
There are no other significant internal systems or software that the Partnership
is using at the present time.
The General Partners of the Partnership are in the process of evaluating the
potential adverse impact that could result from the failure of material
third-party service providers (including but not limited to its banks and
telecommunications providers) and significant vendors to be Year 2000 ready. The
General Partners of the Partnership are in the process of surveying these third
party providers and assessing their readiness with year 2000. To date, the
Partnership is not aware of any problems that would materially impact its
results of operations, liquidity or capital resources. However, the Partnership
has not yet obtained all written assurances that these providers would be Year
2000 ready.
The Partnership currently does not have a contingency plan in the event of a
particular provider or system not being Year 2000 ready. Such plan will be
developed if it becomes clear that a provider is not going to achieve its
scheduled readiness objectives by June 30, 1999. The inability of one of these
providers to complete its Year 2000 resolution process could impact the
Partnership. In addition, the Partnership is also subject to external forces
that might generally affect industry and commerce, such as utility and
transportation company Year 2000 readiness failures and related service
interruptions. To date, the Partnership has not incurred any cost associated
with being Year 2000 ready. All costs have been incurred by the General Partners
and it is estimated that any future Year 2000 readiness costs will be borne by
the General Partners. No estimate can be made at this time as to the impact of
the readiness of such third parties.
Liquidity and Capital Resources
The most significant demands on the Partnership's liquidity are regular
quarterly distributions paid to investors of approximately $1.5 million. Funds
used for investor distributions come from (i) interest received on the PIMs,
MBS, cash and cash equivalents, (ii) the principal collections received on the
PIMs and MBS and (iii) cash reserves. The Partnership funds a portion of the
distribution from principal collections and as a result the capital resources of
the Partnership will continually decrease. As a result of this decrease, the
total cash inflows to the Partnership will also decrease which will result in
periodic adjustments to the quarterly distributions paid to investors.
<PAGE>
The General Partners periodically review the distribution rate to
determine whether an adjustment to the distribution rate is necessary based on
projected future cash flows. In general, the General Partners try to set a
distribution rate that provides for level quarterly distributions of cash
available for distribution. To the extent quarterly distributions differ
from cash available for distribution, the General Partners may adjust the
distribution rate or distribute funds through a special distribution.
Based on current projections, the General Partners believe the Partnership can
maintain the current distribution rate through 1999. However, in the event of
PIM prepayments, the Partnership would be required to distribute any proceeds
from the prepayments as a special distribution which may cause an adjustment
to the distribution rate to reflect the anticipated future cash inflows
from the remaining mortgage investments.
Royal Palm Place and Vista Montana operate under long-term restructure
programs. As an ongoing result of the Partnership's 1995 agreement to modify
the payment terms of the Royal Palm Place PIM, the Partnership will
receive basic interest-only payments on the Fannie Mae MBS at the rate of
7.0% per annum during 1999. Thereafter, the interest rate will range from
7.5% to 8.775% per annum through the maturity of the first mortgage loan in
2006. The Partnership also received its share ($68,423) of the scheduled
$250,000 principal payment in January 1999. The Partnership agreed in 1993 to
permanently reduce the interest rate on the Vista Montana first mortgage
loan to 7.375% per annum. The mediocre operating performance of the
remaining portfolio property, La Costa, has not generated a sufficient
increase in its value to provide an incentive for the owners to pursue either
a sale or a refinance of the property. La Costa is an older property with
physical shortcomings that affect rental income potential and increase
the cost of operations. Consequently, the property does not generate any
participation interest to the Partnership from operating cash flow.
The Partnership has the option to call certain PIMs by accelerating
their maturity if the loans are not prepaid by the tenth year after
permanent funding. The Partnership will determine the merits of
exercising the call option for each PIM as economic conditions warrant. Such
factors as the condition of the asset, local market conditions, interest rates
and available financing will have an impact on this decision.
Assessment of Credit Risk
The Partnership's investments in mortgages are guaranteed or insured by
Fannie Mae, the Government National Mortgage Association ("GNMA"),
the Federal Home Loan Mortgage Corporation ("FHLMC") or the United States
Department of Housing and Urban Development ("HUD") and therefore the
certainty of their cash flows and the risk of material loss of the amounts
invested depends on the creditworthiness of these entities.
Fannie Mae is a federally chartered private corporation that guarantees
obligations originated under its programs. FHLMC is a federally chartered
corporation that guarantees obligations originated under its programs and
is wholly-owned by the twelve Federal Home Loan Banks. These obligations are
not guaranteed by the U.S. Government or the Federal Home Loan Bank Board.
GNMA guarantees the full and timely payment of principal and basic interest
on the securities it issues, which represents interest in pooled mortgages
insured by HUD. Obligations insured by HUD, an agency of the U.S. Government,
are backed by the full faith and credit of the U.S. Government.
The Partnership includes in cash and cash equivalents approximately
$3.5 million of commercial paper, which is issued by entities with a credit
rating equal to one of the top two rating categories of a nationally
recognized statistical rating organization.
<PAGE>
Operations
The following discussion relates to the operations of the Partnership
during the three months ended March 31, 1999 and 1998.
Net income decreased by approximately $105,000 for the three months ended
March 31, 1999 as compared to the same period in 1998. This decrease was
primarily due to a reduction in basic interest on PIMs of $112,000 which
was primarily due to the payoff of the Greentree PIM in March 1998.
The Partnership funds a portion of its distributions with MBS and PIM principal
collections, which reduces the invested assets generating income for the
Partnership. As the invested assets decline so will interest income on MBS,
base interest income on PIMs and other interest income.
<PAGE>
KRUPP INSURED PLUS LIMITED PARTNERSHIP
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Response: None
Item 2. Changes in Securities
Response: None
Item 3. Defaults upon Senior Securities
Response: None
Item 4. Submission of Matters to a Vote of Security Holders
Response: None
Item 5. Other Information
Response: None
Item 6. Exhibits and Reports on Form 8-K
Response: None
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Krupp Insured Plus Limited Partnership
(Registrant)
BY: /s/Robert A. Barrows
Robert A. Barrows
Vice-President of
The Krupp Corporation,
a General Partner of the Registrant.
DATE: April 23, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
balance sheet and statement of income and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000786622
<NAME> Krupp Insured Plus Limited Partnership
<S> <C>
<PERIOD-TYPE> 3-Mos
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-END> Mar-31-1999
<CASH> 3,875,693
<SECURITIES> 52,423,871<F1>
<RECEIVABLES> 355,256
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 366,893<F2>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 57,021,713
<CURRENT-LIABILITIES> 209,359
<BONDS> 0
0
0
<COMMON> 55,965,846<F3>
<OTHER-SE> 846,508<F4>
<TOTAL-LIABILITY-AND-EQUITY> 57,021,713
<SALES> 0
<TOTAL-REVENUES> 1,072,093<F5>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 136,290<F6>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 935,803
<INCOME-TAX> 0
<INCOME-CONTINUING> 935,803
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 935,803
<EPS-PRIMARY> 0<F7>
<EPS-DILUTED> 0<F7>
<FN>
<F1> Includes Participating Insured Mortgages ("PIMs") of $28,947,560 and
Mortgage-Backed Securities ("MBS") of $23,476,311.
<F2> Includes prepaid acquisition fees and expenses of $844,252 net of
accumulated amortization of $607,021 and prepaid participation servicing
fees of $331,052 net of accumulated amortization of $201,390.
<F3> Represents total equity of General Partners and Limited Partners. General
Partners deficit of ($237,543) and Limited Partners equity of $56,203,389.
<F4> Unrealized gains on MBS.
<F5> Represents interest income on investments in mortgages and cash.
<F6> Includes $25,266 of amortization of prepaid fees and expaenses.
<F7> Net income allocated $28,074 to the General Partners and $907,729 to the
Limited Partners. Average net income per Limited Partner interest is $.12
on 7,500,099 Limited Partner interests outstanding.
</FN>
</TABLE>
