EX-99.1 11 v01924_ex99-1.txt 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 --------------------------------------------------------------------------------
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 ------------ ------------ 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. -2- PDL, INC. AND ASSOCIATES, LIMITED COPARTNERSHIP STATEMENTS OF OPERATIONS AND PARTNERS' DEFICIENCY YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 --------------------------------------------------------------------------------
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. -3- PDL, INC. AND ASSOCIATES, LIMITED COPARTNERSHIP STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 --------------------------------------------------------------------------------
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) ----------- ----------- ----------- 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) ----------- ----------- ----------- 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. -4- PDL, INC. AND ASSOCIATES, LIMITED COPARTNERSHIP NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001 -------------------------------------------------------------------------------- 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 ----------- $16,531,798 =========== 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 ----------- $ 5,166,117 =========== ******