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 September 30, 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 (IRS employer identification no.)
of incorporation or organization)
One Beacon Street, Boston, Massachusetts 02108
(Address of principal executive offices) (Zip Code)
(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
September 30, December 31,
1999 1998
<S> <C> <C>
Participating Insured Mortgages ("PIMs") $ 28,827,933 $ 29,074,105
(Note 2)
Mortgage-Backed Securities and
insured mortgage ("MBS") (Note 3) 22,512,729 23,880,438
Total mortgage investments 51,340,662 52,954,543
Cash and cash equivalents 3,417,731 3,653,130
Interest receivable and other assets 347,821 367,780
Prepaid acquisition fees and expenses, net of
accumulated amortization of $640,996 and
$590,032 respectively 203,256 254,220
Prepaid participation servicing fees, net of
accumulated amortization of $217,942 and
$193,113, respectively 113,110 137,939
Total assets $ 55,422,580 $ 57,367,612
LIABILITIES AND PARTNERS' EQUITY
Liabilities $ 13,501 $ 20,198
Partners' equity (deficit)(Note 4):
Limited Partners
(7,500,099 Limited Partner interests
outstanding) 55,086,351 56,720,679
General Partners (240,503) (237,028)
Accumulated Comprehensive Income 563,231 863,763
Total Partners' equity 55,409,079 57,347,414
Total liabilities and Partners' equity $ 55,422,580 $ 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 For the Nine Months
Ended September 30, Ended September 30,
1999 1998 1999 1998
Revenues:
Interest income - PIMs
<S> <C> <C> <C> <C>
Basic interest $ 534,946 $ 453,296 $ 1,608,194 $ 1,722,914
Participation interest - - - 250,000
Interest income - MBS 469,560 507,670 1,437,736 1,549,773
Other interest income 46,343 48,284 136,131 211,181
Total revenues 1,050,849 1,009,250 3,182,061 3,733,868
Expenses:
Asset management fee to an affiliate 96,135 99,698 287,540 308,444
Expense reimbursements to affiliates 13,512 11,577 28,770 15,836
Amortization of prepaid fees and expenses 25,263 25,265 75,793 75,795
General and administrative 28,251 23,100 67,557 90,492
Total expenses 163,161 159,640 459,660 490,567
Net income 887,688 849,610 2,722,401 3,243,301
Other comprehensive income:
Net change in unrealized gain on MBS (102,487) 84,125 (300,532) 233,192
Total comprehensive income $ 785,201 $ 933,735 $ 2,421,869 $ 3,476,493
Allocation of net income (Note 4):
Limited Partners $ 861,057 $ 824,122 $ 2,640,729 $ 3,146,002
Average net income per Limited
Partner interest
(7,500,099 Limited Partner
interests outstanding) $ .11 $ .11 $ .35 $ .42
General Partners $ 26,631 $ 25,488 $ 81,672 $ 97,299
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<PAGE>
<TABLE>
KRUPP INSURED PLUS LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
<CAPTION>
For the Nine Months
Ended September 30,
1999 1998
Operating activities:
<S> <C> <C>
Net income $ 2,722,401 $ 3,243,301
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of prepaid fees and expenses 75,793 75,795
Premium amortization 3,022 -
Prepayment premium - (250,000)
Changes in assets and liabilities:
Decrease in interest receivable
and other assets 19,959 169,188
Decrease in liabilities (6,697) (5,906)
Net cash provided by operating activities 2,814,478 3,232,378
Investing activities:
Principal collections on PIMs including
prepayment premium of $250,000 in 1998 246,172 8,888,709
Principal collections on MBS 1,064,155 1,185,696
Net cash provided by investing activities 1,310,327 10,074,405
Financing activities:
Quarterly distributions (4,360,204) (4,386,475)
Special distributions - (8,400,111)
Net cash used for financing activities (4,360,204) (12,786,586)
Net (decrease)/increase in cash and cash equivalents (235,399) 520,197
Cash and cash equivalents, beginning of period 3,653,130 3,100,615
Cash and cash equivalents, end of period $ 3,417,731 $ 3,620,812
</TABLE>
The accompanying notes are an integral
part of the financial statements.
<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, 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 September 30, 1999, its results of operations
for the three and nine months ended September 30, 1999 and 1998 and cash
flows for the nine months ended September 30, 1999 and 1998.
The results of operations for the three and nine months ended
September 30, 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 September 30, 1999, the Partnership's PIMs had a fair market value
of $28,773,703 and gross unrealized gains and losses of $38,176 and
$92,406, respectively. The PIMs have maturities ranging from 2006 to
2033. At September 30, 1999, the Partnership's participating insured
mortgage loan was not delinquent with respect to principal or interest
payments.
3. MBS
At September 30, 1999, the Partnership's MBS portfolio had an
amortized cost of $21,949,498 and gross unrealized gains of $563,231
with maturities from 2006 to 2033. At September 30, 1999,
the Partnership's insured mortgage loan was not delinquent with respect
to principal or interest payments.
4. Changes in Partners' Equity
A summary of changes in Partners' Equity for the nine months ended
September 30, 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 2,640,729 81,672 - 2,722,401
Quarterly distributions (4,275,057) (85,147) - (4,360,204)
Change in unrealized gain
on MBS - - (300,532) (300,532)
Balance at September 30, 1999 $ 55,086,351 $ (240,503) $ 563,231 $ 55,409,079
</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.
Impact of the Year 2000 Issue
The General Partners have conducted an assessment of the Partnership's core
internal and external computer information systems and have taken the necessary
steps to further 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, 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
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 surveyed the Partnership's material third-party
service providers (including but not limited to its banks and telecommunications
providers) and significant vendors and received assurances that such service
providers and vendors are Year 2000 ready. The Partnership does not anticipate
any problems with such providers and vendors that would materially impact its
results of operations, liquidity or capital resources. Nevertheless, the General
Partners are developing contingency plans for all of their "mission-critical
functions" to insure business continuity.
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. However, the General
Partners do not anticipate any material impact on the Partnership's results of
operations, liquidity or capital resources.
To date, the Partnership has incurred $10,370 associated with being Year
2000 ready. The Partnership does not expect to incur any additional Year 2000
readiness costs.
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.
The General Partners periodically review the distribution rate to determine
whether an adjustment 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 February 2000. 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 7.375% 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. The first mortgage loan underlying the PIM
on La Costa Apartments went into default in June 1999. However, the Partnership
will continue to receive its full principal and interest payments until the
default is resolved because GNMA has guaranteed those payments to the
Partnership. The Partnership expects to receive a prepayment of the outstanding
principal balance due on the PIM, but will not receive any participation
interest.
<PAGE>
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 $3.2
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.
Results of Operations
The following discussion relates to the operations of the Partnership
during the three and nine months ended September 30, 1999 and 1998.
Net income increased by approximately $38,000 for the three months ended
September 30, 1999 as compared to the corresponding period in 1998. The increase
was due to an over accrual of interest income on PIMs during the third quarter
of 1998, net of lower interest income on MBS resulting from the on-going
principal collections on the single-family MBS.
Net income decreased by approximately $521,000 for the nine months ended
September 30, 1999, as compared to the corresponding period in 1998. The
decrease was due primarily to lower basic interest on PIMs resulting from the
prepayment of the Greentree PIM in March 1998 and the receipt of $250,000 of
participation interest in 1998. Additionally, interest income on MBS declined
due to ongoing amortization of the portfolio and other interest income decreased
due to lower average cash balances in 1999 as compared to 1998.
Interest income on PIMs and MBS will continue to decline as principal
collections reduce the outstanding balance of the portfolios. The Partnership
funds a portion of distributions with MBS and PIM principal collections, which
reduces the invested assets generating income for the Partnership. As the
invested assets decline, interest income to the Partnership will decline.
<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: October 29, 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> 9-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-END> Sep-30-1999
<CASH> 3,417,731
<SECURITIES> 51,340,662<F1>
<RECEIVABLES> 347,821
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 316,366<F2>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 55,422,580
<CURRENT-LIABILITIES> 13,501
<BONDS> 0
0
0
<COMMON> 54,845,848<F3>
<OTHER-SE> 563,231<F4>
<TOTAL-LIABILITY-AND-EQUITY> 55,422,580
<SALES> 0
<TOTAL-REVENUES> 3,182,061<F5>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 459,660<F6>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,722,401
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,722,401
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,722,401
<EPS-BASIC> 0<F7>
<EPS-DILUTED> 0<F7>
<FN>
<F1>Includes Participating Insured Mortgages ("PIMs") of $28,827,933 and
Mortgage-Backed Securities ("MBS") of $22,512,729.
<F2>Includes prepaid acquisition fees and expenses of $844,252 net of
accumulated amortization of $640,996 and prepaid participation servicing
fees of $331,052 net of accumulated amortization of $217,942.
<F3>Represents total equity of General Partners and Limited Partners.
General Partners deficit of ($240,503) and Limited Partners equity
of $55,086,351.
<F4>Unrealized gains on MBS.
<F5>Represents interest income on investments in mortgages and cash.
<F6>Includes $75,793 of amortization of prepaid fees and expenses.
<F7>Net income allocated $81,672 to the General Partners and $2,640,729 to
the Limited Partners. Average net income per Limited Partner interest
is $.35 on 7,500,099 Limited Partner interests outstanding.
</FN>
</TABLE>
