UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2002
OR
_____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-17412
Secured Income L.P.
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(Exact name of Registrant as specified in its charter)
Delaware 06-1185846
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State or other jurisdiction of (IRS Employer
incorporation or organization Identification No.)
599 West Putnam Avenue
Greenwich, Connecticut 06830
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(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code: (203) 869-0900
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 filing requirements
for the past 90 days.
Yes X No
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SECURED INCOME L.P. AND SUBSIDIARIES
Part I - Financial Information
Table of Contents
Item 1 Financial Statements Page
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Consolidated Balance Sheets 3
Consolidated Statements of Earnings 4
Consolidated Statements of Cash Flows 5
Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Item 3 Quantitative and Qualitative Disclosure about Market Risk 8
2
SECURED INCOME L.P. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31,
2002 December 31,
(Unaudited) 2001
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ASSETS
Property and equipment (net of accumulated
depreciation of $20,975,984 and $20,598,397) $ 23,757,853 $ 24,135,440
Cash and cash equivalents 4,457,523 4,831,075
Restricted assets and funded reserves 845,327 518,969
Tenant security deposits 543,980 556,712
Accounts receivable 22,222 37,493
Prepaid expenses 314,625 629,621
Intangible assets, net of accumulated amortization 2,202,951 2,231,247
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$ 32,144,481 $ 32,940,557
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LIABILITIES AND PARTNERS' DEFICIT
Liabilities
Mortgages payable $ 41,740,596 $ 41,833,655
Accounts payable and accrued expenses 278,015 203,385
Tenant security deposits payable 539,355 555,626
Due to general partners and affiliates 357,220 359,226
Deferred revenue 104,598 104,598
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43,019,784 43,056,490
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Partners' deficit
Limited partners (9,794,471) (9,400,723)
General partners (1,080,832) (715,210)
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(10,875,303) (10,115,933)
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$ 32,144,481 $ 32,940,557
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See notes to consolidated financial statements.
3
SECURED INCOME L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
THREE MONTHS ENDED MARCH 31, 2002 AND 2001
(Unaudited)
2002 2001
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REVENUE
Rental $2,077,582 $2,009,934
Interest 29,735 36,691
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TOTAL REVENUE 2,107,317 2,046,625
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EXPENSES
Administrative and management 198,031 164,918
Operating and maintenance 301,532 367,481
Taxes and insurance 350,411 325,438
Financial 460,010 576,911
Depreciation and amortization 405,883 412,522
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TOTAL EXPENSES 1,715,867 1,847,270
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NET EARNINGS $ 391,450 $ 199,355
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NET EARNINGS ATTRIBUTABLE TO
Limited partners $ -- $ --
General partners 391,450 199,355
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$ 394,450 $ 199,355
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NET EARNINGS ALLOCATED PER UNIT OF
LIMITED PARTNERSHIP INTEREST $ -- $ --
========== ==========
See notes to consolidated financial statements.
4
SECURED INCOME L.P. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2002 AND 2001
(Unaudited)
2002 2001
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CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 391,450 $ 199,355
Adjustments to reconcile net earnings to net cash
provided by operating activities
Depreciation and amortization 405,883 412,522
Increase in restricted assets and funded reserves (326,358) (321,693)
Decrease in tenant security deposits 12,732 11,356
Decrease in accounts receivable 15,271 60,777
Decrease in prepaid expenses 314,996 294,994
Increase (decrease) in accounts payable and
accrued expenses 74,630 (173,171)
Increase (decrease) in tenant security deposits
payable (16,271) 18,730
Increase (decrease) in due to general partners
and affiliates (2,006) 15,005
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Net cash provided by operating activities 870,327 517,875
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CASH FLOWS FROM FINANCING ACTIVITIES
Distributions to partners (1,150,820)
Principal payments on mortgages (93,059) (111,948)
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Net cash used in financing activities (1,243,879) (111,948)
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (373,552) 405,927
Cash and cash equivalents at beginning of period 4,831,075 4,320,459
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,457,523 $ 4,726,386
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SUPPLEMENTAL INFORMATION
Financial expenses paid $ 406,034 $ 577,427
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See notes to consolidated financial statements.
5
SECURED INCOME L.P. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2002
(Unaudited)
1. The accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information. They do not
include all information and footnotes required by accounting principles
generally accepted in the United States of America for complete financial
statements. The results of operations are impacted significantly by the
results of operations of the Carrollton and Columbia Partnerships, which is
provided on an unaudited basis during interim periods. Accordingly, the
accompanying consolidated financial statements are dependent on such
unaudited information. In the opinion of the General Partners, the
consolidated financial statements include all adjustments necessary to
reflect fairly the results of the interim periods presented. All adjustments
are of a normal recurring nature. No significant events have occurred
subsequent to March 31, 2002 and no material contingencies exist which would
require additional disclosure in the report under Regulation S-X, Rule 10-01
paragraph A-5.
The results of operations for the three months ended March 31, 2002 are not
necessarily indicative of the results to be expected for the entire year.
2. Additional information, including the audited December 31, 2001 Consolidated
Financial Statements and the Summary of Significant Accounting Policies, is
included in the Partnership's Annual Report on Form 10-K for the fiscal year
ended December 31, 2001 on file with the Securities and Exchange Commission.
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SECURED INCOME L.P. AND SUBSIDIARIES
Item 2 Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources
The Partnership's primary sources of funds are rents generated by the Operating
Partnerships and interest derived from investments and deposits, a portion of
which are restricted in accordance with the terms of the mortgages of the
Operating Partnerships. The Partnership's investments are highly illiquid.
The Partnership is not expected to have access to additional sources of
financing. Accordingly, if unforeseen circumstances arise that cause an
Operating Partnership to require additional capital, potential sources from
which such capital needs will be able to be satisfied (other than reserves)
would be additional equity contributions of the Operating General Partners or
other equity reserves, if any, which could adversely impact the operating cash
flow of the Operating Partnerships.
Although the Partnership generated cash from operations during the three months
ended March 31, 2002, cash and cash equivalents decreased by approximately
$374,000 primarily as a result of the Columbia Partnership's distribution to its
general partners of 2001 cash flows in excess of the 8% preferred return under
the terms of the Columbia Partnership's partnership agreement. Mortgages payable
decreased due to principal amortization of approximately $93,000. Property and
equipment decreased by approximately $378,000 due to depreciation, while
intangible assets decreased by approximately $28,000 due to amortization.
Property and equipment and intangible assets are expected to decrease annually
as the cost of these assets is allocated to future periods over their remaining
estimated service lives. Prepaid expenses decreased and accounts payable and
accrued expenses increased in the ordinary course of operations.
The Partnership anticipates making a distribution on or about May 15, 2002 of
approximately $.40 per Unit to Unit holders of record as of March 31, 2002. The
Partnership made quarterly distributions in May, August and November 2001 and in
March 2002 totaling $1,577,991, resulting from cash flow generated by the
Operating Partnerships. Such distribution represents an annualized return to the
limited partners of approximately 8% for the year ended December 31, 2001. The
Partnership intends to make quarterly distributions on an ongoing basis, subject
to the operating results of the Operating Partnerships; the Operating
Partnerships' results from operations is highly contingent upon the interest
rates of the Columbia Partnership's low-floater mortgage and the strength of
their respective rental markets. There can be no assurance that the Operating
Partnerships will continue to generate cash flow sufficient to make quarterly
distributions or that future distributions will be in any specific amounts. The
events of September 11, 2001 have increased the risk that the operations of the
Properties may be adversely impacted as a result of the effect of these events
on the economy in general and because the Properties are located in New York
City and near Washington, D.C.
Results of Operations
Three Months Ended March 31, 2002
During the three months ended March 31, 2002, the Columbia Partnership and the
Carrollton Partnership generated income from operating activities, before
financial expenses, of approximately $992,000 and approximately $336,000,
respectively. Mortgage principal payments during the period for the Columbia
Partnership and the Carrollton Partnership were approximately $56,000 and
approximately $37,000, respectively. After considering the respective mandatory
mortgage principal payments and required deposits to mortgage escrows, among
other things, the Complexes generated combined cash flow of approximately
$726,000 during the three months ended March 31, 2002. There can be no assurance
that the level of cash flow generated by the Complexes during the three months
ended March 31, 2002 will continue in future periods.
7
SECURED INCOME L.P. AND SUBSIDIARIES
Item 2 Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Results of operations improved for the three months ended March 31, 2002 as
compared to the three months ended March 31, 2001. Operating and maintenance
expenses decreased for the three months ended March 31, 2002 as compared to the
three months ended March 31, 2001 primarily as a result of scheduled repairs and
improvements in the first quarter of 2001. Although administrative and
management expenses for the three months ended March 31, 2002 are higher
compared to the three months ended March 31, 2001, the expenses are consistent
with the total for the 2001 fiscal year. Financial expenses decreased primarily
as a result of a decrease in the weighted average interest rate on the Columbia
Partnership's first mortgage from approximately 3.10% for the first three months
of 2001 to approximately 1.36% for the first three months of 2002.
As of March 31, 2002, the occupancy of Fieldpointe Apartments (Carrollton) was
approximately 97% and the occupancy of The Westmont (Columbia) was approximately
94% as to residential units and 100% as to commercial space. The future
operating results of the Complexes will be extremely dependent on market
conditions and therefore may be subject to significant volatility.
Three Months Ended March 31, 2001
During the three months ended March 31, 2001, the Columbia Partnership and the
Carrollton Partnership generated income from operating activities, before
financial expenses, of approximately $893,000 and approximately $289,000,
respectively. Mortgage principal payments during the period for the Columbia
Partnership and the Carrollton Partnership were approximately $77,000 and
approximately $35,000, respectively. After considering the respective mandatory
mortgage principal payments and required deposits to mortgage escrows, among
other things, the Complexes generated combined cash flow of approximately
$472,000 during the three months ended March 31, 2001. As of March 31, 2001, the
occupancy of Fieldpointe Apartments was approximately 98% and the occupancy of
The Westmont was approximately 99% as to residential units and 100% as to
commercial space.
Item 3 Quantitative and Qualitative Disclosure about Market Risk
The Partnership has market risk sensitivity with regard to financial instruments
concerning potential interest rate fluctuations in connection with the low
floater rates associated with the Columbia Partnership's first mortgage.
Accordingly, a fluctuation in the low-floater interest rates of .25% would have
a $60,500 annualized impact on the Partnership's results of operations.
8
SECURED INCOME L.P. AND SUBSIDIARIES
Part II - Other Information
Item 1 Legal Proceedings
Registrant is not aware of any material legal proceedings.
Item 2 Changes in Securities
None
Item 3 Defaults upon Senior Securities
None
Item 4 Submission of Matters to a Vote of Security Holders
None
Item 5 Other Information
None
Item 6 Exhibits and Reports on Form 8-K
None
9
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 thereunto duly authorized.
SECURED INCOME L.P.
By: Wilder Richman Resources Corporation
General Partner
Date: May 15, 2002 /s/ Richard Paul Richman
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Richard Paul Richman
President, Chief Executive Officer and
Director
10