EXHIBIT 99
PDL, INC. AND ASSOCIATES,
LIMITED COPARTNERSHIP
Financial Statements for the
Years Ended December 31, 2003, 2002 and 2001
and Independent Auditors' Report
INDEPENDENT AUDITORS' REPORT
PDL, Inc. and Associates,
Limited Copartnership
We have audited the accompanying balance sheets of PDL, Inc. and Associates,
Limited Copartnership (the "Partnership") as of December 31, 2003 and 2002, and
the related statements of operations and partners' deficiency and of cash flows
for each of the three years in the period ended December 31, 2003. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Partnership at December 31, 2003 and
2002, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 2003, in conformity with accounting
principles generally accepted in the United States of America.
Deloitte & Touche LLP
Stamford, Connecticut
March 23, 2004
PDL, INC. AND ASSOCIATES, LIMITED COPARTNERSHIP
BALANCE SHEETS
DECEMBER 31, 2003 AND 2002
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ASSETS 2003 2002
CASH AND CASH EQUIVALENTS $ 1,097,648 $ 1,216,333
ACCOUNTS RECEIVABLE - Net of valuation allowance of $61,429 55,638 71,155
in 2003 and $77,930 in 2002
PROPERTY - Net of accumulated depreciation of $3,619,297 in 2003 4,295,672 4,471,850
and $3,308,503 in 2002
CASH IN ESCROW 621,367 575,998
PREPAID EXPENSES 122,627 228,207
DEFERRED MORTGAGE COSTS - Net of accumulated
amortization of $211,263 226,295 270,954
------------ ------------
TOTAL $ 6,419,247 $ 6,834,497
============ ============
LIABILITIES AND PARTNERS' DEFICIENCY
ACCOUNTS PAYABLE $ 115,367 $ 122,135
ACCRUED EXPENSES 322,260 370,986
OTHER LIABILITIES 314,039 297,225
MORTGAGE PAYABLE 16,531,798 16,737,569
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Total liabilities 17,283,464 17,527,915
------------ ------------
GENERAL PARTNER'S DEFICIENCY (108,642) (106,934)
LIMITED PARTNERS' DEFICIENCY (10,755,575) (10,586,484)
------------ ------------
Total partners' deficiency (10,864,217) (10,693,418)
------------ ------------
TOTAL $ 6,419,247 $ 6,834,497
============ ============
See notes to financial statements.
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PDL, INC. AND ASSOCIATES, LIMITED COPARTNERSHIP
STATEMENTS OF OPERATIONS AND PARTNERS' DEFICIENCY
YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
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2003 2002 2001
INCOME:
Rent $ 4,637,093 $ 4,304,830 $ 4,192,844
Other 79,420 96,783 80,254
------------ ------------ ------------
Total income 4,716,513 4,401,613 4,273,098
------------ ------------ ------------
EXPENSES:
Interest 1,244,476 1,259,676 1,273,260
Utilities 603,340 551,205 550,754
Repairs and maintenance 313,406 318,069 293,531
Depreciation 310,794 310,924 313,406
Real estate taxes, other taxes and fees 277,551 263,562 262,926
Insurance 224,777 196,925 128,226
Management fees 154,506 130,687 126,326
Security services 72,212 72,270 72,270
Rental expenses, including commissions 72,055 80,787 76,652
Salaries and wages 70,472 71,783 68,864
Amortization of mortgage costs 44,658 42,024 39,535
Provision for bad debts--net of recoveries 24,418 16,752 (5,789)
Parking 23,040 23,040 21,960
Professional services 23,005 17,475 21,702
Other 38,602 36,927 33,117
------------ ------------ ------------
Total expenses 3,497,312 3,392,106 3,276,740
------------ ------------ ------------
NET INCOME 1,219,201 1,009,507 996,358
PARTNERS' DEFICIENCY--Beginning of year (10,693,418) (10,732,925) (10,865,283)
DISTRIBUTIONS (1,390,000) (970,000) (864,000)
------------ ------------ ------------
PARTNERS' DEFICIENCY--End of year $(10,864,217) $(10,693,418) $(10,732,925)
============ ============ ============
See notes to financial statements.
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PDL, INC. AND ASSOCIATES, LIMITED COPARTNERSHIP
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
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2003 2002 2001
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,219,201 $ 1,009,507 $ 996,358
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 355,452 352,948 352,941
Provision for bad debts 24,418 16,752 (5,789)
Changes in assets and liabilities:
Increase in notes and accounts receivable (8,901) (25,133) (7,066)
Decrease (increase) in prepaid expenses 105,581 (125,613) 31,827
Increase in cash in escrow (45,369) (26,711) (87,335)
(Decrease) increase in accounts payable (6,768) 3,166 (20,757)
(Decrease) increase in accrued expenses (48,726) 6,869 44,456
Increase (decrease) in other liabilities 16,814 (10,575) (13,772)
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Net cash provided by operating activities 1,611,702 1,201,210 1,290,863
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Building additions and improvements (134,616) (125,008) (86,985)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Mortgage principal payments (205,771) (190,981) (177,254)
Distributions to partners (1,390,000) (970,000) (864,000)
----------- ----------- -----------
Net cash used in financing activities (1,595,771) (1,160,981) (1,041,254)
----------- ----------- -----------
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (118,685) (84,779) 162,624
CASH AND CASH EQUIVALENTS - Beginning of year 1,216,333 1,301,112 1,138,488
----------- ----------- -----------
CASH AND CASH EQUIVALENTS - End of year $ 1,097,648 $ 1,216,333 $ 1,301,112
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
CASH PAID FOR INTEREST $ 1,245,362 $ 1,260,498 $ 1,274,021
=========== =========== ===========
See notes to financial statements.
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PDL, INC. AND ASSOCIATES, LIMITED COPARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL - PDL, Inc. and Associates, Limited Copartnership (the
"Partnership") was formed in June of 1990. The general partner is PDL,
Inc., a wholly-owned subsidiary of Presidential Realty Corporation. The
primary asset of the Partnership is an office building located in Hato
Rey, Puerto Rico, known as Home Mortgage Plaza.
INCOME TAXES - No provision has been made for income taxes because, as a
partnership, such taxes are the responsibility of the individual partners.
PROPERTY - Property, principally a building, is stated at cost less
accumulated depreciation. Depreciation is provided on the straight-line
method over the estimated useful lives of the assets, generally ten to
thirty-one years. Building improvements are capitalized. Repairs and
maintenance are charged to operations as incurred.
The Partnership reviews its investment in its property for possible
impairment at least annually, and more frequently if circumstances
warrant. Impairment is determined to exist when estimated amounts
recoverable through future operations on an undiscounted basis are below
the property's carrying value. If the property is determined to be
impaired, it would be written down to its estimated fair value. No
impairment exists at December 31, 2003 and 2002.
DEFERRED MORTGAGE COSTS - Deferred mortgage costs are amortized over the
term of the mortgage using the interest method.
USE OF ESTIMATES - The preparation of financial statements in accordance
with accounting principles generally accepted in the United States of
America 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 revenue and expenses during the reporting
period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS - For the purposes of this statement, the
Partnership considers liquid investments having an original maturity of
three months or less to be cash equivalents.
CASH IN ESCROW - Cash in escrow is restricted deposits held by the
mortgagee for payments of real estate taxes, insurance, leasing
commissions and replacements for the property.
REVENUE RECOGNITION - The Partnership acts as a lessor under operating
leases with rental revenue recognized on a straight-line basis over the
related lease term.
2. MORTGAGE PAYABLE
The building is subject to a mortgage payable dated April 1998 with an
original principal balance of $17,500,000. The non-recourse mortgage bears
interest at a rate of 7.38% per annum until May 11, 2008, at which time it
is the intent of management to repay the outstanding principal balance
through a refinancing of the property. However, the maturity date of the
mortgage is May 11, 2028 and if the mortgage is not repaid in 2008, the
interest rate will be increased by 2% and additional repayments will be
required from the surplus cash flows from the operations of the property
(after payment of operating expenses) which will be applied to the
outstanding principal amount.
-5-
Scheduled principal payments on the mortgage payable are as follows:
2004 $ 218,129
2005 238,601
2006 257,079
2007 276,988
2008 and thereafter 15,541,001
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$16,531,798
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3. RELATED PARTY TRANSACTIONS
Included in the statement of operations and partners' deficiency are
$15,000, $15,000 and $12,500 of general partner administrative fees for
the years ended December 31, 2003, 2002, and 2001, respectively.
4. MINIMUM FUTURE RENTAL INCOME
The Partnership is the lessor for various commercial tenants under
noncancelable operating leases.
The future noncancelable lease payments are as follows:
2004 $ 2,994,549
2005 1,154,408
2006 572,422
2007 314,741
2008 and thereafter 129,997
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$ 5,166,117
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