10-Q 1 d55655_10q.txt FORM 10-Q 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, 2003 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 incorporation or organization) identification no.) 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 |_| Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes |_| No |X| -1- 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. When used in this Form 10-Q, the words "believes," "anticipates," "expects," "plans," "intends," "estimates," "continue," "may" or "will" (or the negative of such words) and similar expressions are intended to identify forward-looking statements. Such statements are subject to a number of risks and uncertainties, including but not limited to the following: federal, state or local regulations; adverse changes in general economic or local conditions; prepayments of mortgages; failure of borrowers to pay participation interests due to poor operating results of properties underlying the mortgages; uninsured losses and potential conflicts of interest between the Partnership and its Affiliates, including the General Partners. The Company's filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2002, contain additional information concerning such risk factors. Actual results in the future could differ materially from those described in any forward-looking statements as a result of the risk factors set forth above, and the risk factors described in the Annual Report. -2- KRUPP INSURED PLUS LIMITED PARTNERSHIP BALANCE SHEETS
ASSETS March 31, December 31, 2003 2002 ------------ ------------ Participating Insured Mortgages ("PIMs") (Note 2) $ 13,085,709 $ 13,112,739 Mortgage-Backed Securities and insured mortgage ("MBS") (Note 3) 7,034,971 9,164,511 ------------ ------------ Total mortgage investments 20,120,680 22,277,250 Cash and cash equivalents 2,539,280 573,389 Interest receivable and other assets 129,262 142,887 ------------ ------------ Total assets $ 22,789,222 $ 22,993,526 ============ ============ LIABILITIES AND PARTNERS' EQUITY Liabilities $ 23,152 $ 34,942 ------------ ------------ Partners' equity (deficit)(Note 4): Limited Partners (7,500,099 Limited Partner interests outstanding) 22,383,452 22,509,510 General Partners (247,502) (242,538) Accumulated comprehensive income 630,120 691,612 ------------ ------------ Total Partners' equity 22,766,070 22,958,584 ------------ ------------ Total liabilities and Partners' equity $ 22,789,222 $ 22,993,526 ============ ============
The accompanying notes are an integral part of the financial statements. -3- KRUPP INSURED PLUS LIMITED PARTNERSHIP STATEMENTS OF INCOME AND COMPREHENSIVE INCOME For the Three Months Ended March 31, --------------------- 2003 2002 --------- -------- Revenues: Interest income - PIMs Basic interest $ 241,435 $282,191 Participation interest -- 504,639 Interest income - MBS 105,820 184,803 Other interest income 11,709 16,040 --------- -------- Total revenues 358,964 987,673 --------- -------- Expenses: Asset management fee to an affiliate 37,403 44,203 Expense reimbursements to affiliates 32,662 10,722 Amortization of prepaid fees and expenses -- 24,445 General and administrative 32,254 14,465 --------- -------- Total expenses 102,319 93,835 --------- -------- Net income 256,645 893,838 Other comprehensive income: Net change in unrealized gain on MBS (61,492) 22,640 --------- -------- Total comprehensive income $ 195,153 $916,478 ========= ======== Allocation of net income (Note 4): Limited Partners $ 248,946 $867,023 ========= ======== Average net income per Limited Partner interest (7,500,099 Limited Partner interests outstanding) $ .03 $ .12 ========= ======== General Partners $ 7,699 $ 26,815 ========= ======== The accompanying notes are an integral part of the financial statements. -4- KRUPP INSURED PLUS LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, -------------------------- 2003 2002 ----------- ----------- Operating activities: Net income $ 256,645 $ 893,838 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of prepaid fees and expenses -- 24,445 Premium amortization 42,475 -- Shared Appreciation Interest -- (378,480) Changes in assets and liabilities: Decrease in interest receivable and other assets 13,625 42,141 Increase (decrease) in liabilities (11,790) 713 ----------- ----------- Net cash provided by operating activities 300,955 582,657 ----------- ----------- Investing activities: Principal collections on MBS 2,025,573 160,068 Principal collections on PIMs including Shared Appreciation Interest of $378,480 in 2002 27,030 5,967,094 ----------- ----------- Net cash provided by investing activities 2,052,603 6,127,162 ----------- ----------- Financing activities: Quarterly distributions (387,667) (764,413) Special distributions -- (6,000,079) ----------- ----------- Net cash used for financing activities (387,667) (6,764,492) ----------- ----------- Net increase (decrease) in cash and cash equivalents 1,965,891 (54,673) Cash and cash equivalents, beginning of period 573,389 1,422,582 ----------- ----------- Cash and cash equivalents, end of period $ 2,539,280 $ 1,367,909 =========== =========== Non cash activities: Increase (decrease) in unrealized gain on MBS $ (61,492) $ 22,640 =========== ===========
The accompanying notes are an integral part of the financial statements. -5- 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 accounting principles generally accepted in the United States of America 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, 2002 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, 2003, the results of operations for the three months ended March 31, 2003 and 2002 and its cash flows for the three months ended March 31, 2003 and 2002. The results of operations for the three months ended March 31, 2003 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, 2003, the FHA insured mortgage portion of the Partnership's remaining PIM had a fair value of $13,838,137 including a gross unrealized gain of $752,428. Fair value assumes that the FHA insured first mortgage could be sold at a price that MBS with similar interest rates are currently being sold at. Fair value does not include any value for the participation feature. The PIM matures in 2023. 3. MBS At March 31, 2003, the Partnership's MBS portfolio had an amortized cost of $6,404,851 and gross unrealized gains of $630,120. The portfolio has maturities ranging from 2006 to 2032. On February 18, 2003, the Partnership received a prepayment of the Mission Terrace Apartments MBS. The Partnership received $1,873,040 representing the principal proceeds on the first mortgage. A prepayment premium was not required from the payoff of the MBS as the prepayment provisions expired five years after the issuance of the loan. On May 5, 2003, the Partnership paid a special distribution of $0.25 per Limited Partner interest from the proceeds received. 4. Changes in Partners' Equity A summary of changes in Partners' Equity for the three months ended March 31, 2003 is as follows:
Accumulated Total Limited General Comprehensive Partners' Partners Partners Income Equity ------------- ------------- ------------- ------------- Balance at December 31, 2002 $ 22,509,510 $ (242,538) $ 691,612 $ 22,958,584 Net income 248,946 7,699 -- 256,645 Quarterly distributions (375,004) (12,663) -- (387,667) Change in unrealized gain on MBS -- -- (61,492) (61,492) ------------- ------------- ------------- ------------- Balance at March 31, 2003 $ 22,383,452 $ (247,502) $ 630,120 $ 22,766,070 ============= ============= ============= =============
-6- Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with the financial statements and accompanying notes contained in the Partnership's 2002 Annual Report Form 10-K and in this Form 10-Q. Certain statements in this Management's Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this Form 10-Q constitute "forward-looking statements" within the meaning of the Federal Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the Partnership's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. These factors include, among other things, federal, state or local regulations; adverse changes in general economic or local conditions; pre-payments of mortgages; failure of borrowers to pay participation interests due to poor operating results at properties underlying the mortgages; uninsured losses and potential conflicts of interest between the Partnership and its Affiliates, including the General Partners. Liquidity and Capital Resources At March 31, 2003, the Partnership had liquidity consisting of cash and cash equivalents of approximately $2.5 million as well as the cash flow provided by its investments in its remaining PIM and MBS. The Partnership anticipates that these sources will be adequate to provide the Partnership with sufficient liquidity to meet its obligations as well as to provide distributions to its investors. The most significant demand on the Partnership's liquidity is the quarterly distributions paid to investors, which are approximately $375,000 per quarter. Funds for the quarterly distributions come from the monthly principal and basic interest payments received on the remaining PIM and MBS, the principal prepayments of the MBS and interest earned on the Partnership's cash and cash equivalents. The portion of distributions attributable to the principal collections and cash reserves reduces the capital resources of the Partnership. As the capital resources decrease, the total cash flows to the Partnership also will decrease and over time will result in periodic adjustments to the 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. To the extent that quarterly distributions do not fully utilize the cash available for distributions and cash balances increase, the General Partners may adjust the distribution rate or distribute such cash through a special distribution. Based on current projections, the General Partners expect that the Partnership will reduce the distribution rate of $0.05 per Limited Partner interest per quarter to $0.04 per Limited Partner interest per quarter with the August 2003 distribution. In addition to providing insured monthly principal and basic interest payments from the insured first mortgage portion of the PIM, the Partnership's investment in the remaining PIM also may provide additional income through a participation interest in the underlying property. The Partnership may receive a share in any operating cash flow that exceeds debt service obligations and capital needs or a share in any appreciation in value when the property is sold or refinanced. However, this payment is not insured and is dependent upon whether property operations or its terminal value meet certain criteria. On February 18, 2003, the Partnership received a prepayment of the Mission Terrace Apartments MBS. The Partnership received $1,873,040 representing the principal proceeds on the first mortgage. A prepayment premium was not required from the payoff of the MBS as the prepayment provisions of the MBS expired five years after the issuance of the loan. On May 5, 2003, the Partnership paid a special distribution of $0.25 per Limited Partner interest from the proceeds received. The Partnership's only remaining PIM investment is backed by the first mortgage loan on Vista Montana. Presently, the General Partners do not expect Vista Montana to pay the Partnership any participation interest during 2003. The borrower has indicated that they are considering refinancing the property in 2003. There are no contractual obligations remaining that would prevent a prepayment of the underlying first mortgage. Due to the declining economic conditions currently affecting the Phoenix, Arizona sub-market, the occupancy rate at the property is currently 87%. The owner has lowered rents and is offering move-in concessions in an effort to increase occupancy. The Partnership has the option to call its remaining PIM by accelerating the maturity date of the loan. If the call feature is exercised for the whole PIM then the insurance feature of the loan would be canceled. Therefore, the Partnership will -7- determine the merits of exercising the call option 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. Critical Accounting Policies The Partnership's critical accounting policies relate primarily to revenue recognition related to the Partnership's remaining PIM investment, the amortization of Prepaid Fees and Expenses and the carrying value of the MBS. The Partnership's policies are as follows: The Partnership accounted for its MBS portion of its PIM investment in accordance with the Financial Accounting Standards Board's Statement 115, "Accounting for Certain Investments in Debt and Equity Securities" ("FAS 115"), under the classification of held to maturity as the investment had a participation feature. As a result, the Partnership would not sell or otherwise dispose of the MBS. Accordingly, the Partnership had both the intention and ability to hold the investment to expected maturity. The Partnership carried the MBS at amortized cost. The Partnership holds the insured mortgage portion of the Federal Housing Administration PIM (FHA PIM) at amortized cost and does not establish loan loss reserves as this investment is fully insured by the FHA. Basic interest on PIMs is recognized at the stated rate of the Federal Housing Administration insured mortgage (less the servicer's fee). The Partnership recognizes interest related to the participation features when the amount becomes fixed and the transaction that gives rise to such amount is finalized, cash is received and all contingencies are resolved. This could be the sale or refinancing of the underlying real estate, which results in a cash payment to the Partnership or a cash payment made to the Partnership from surplus cash relative to the participation feature. The Partnership, in accordance with FAS 115 classifies its MBS portfolio as available-for-sale. The Partnership classifies its MBS portfolio as available-for-sale as a portion of the MBS portfolio may remain after all of the PIMs pay off and that it will be necessary to then sell the remaining MBS portfolio at that time in order to close out the Partnership. In addition, other situations such as liquidity needs could arise which would necessitate the sale of a portion of the MBS portfolio. As such, the Partnership carries its MBS at fair market value and reflects any unrealized gains (losses) as a separate component of Partners' equity. The Partnership amortizes purchase premiums or discounts over the life of the underlying mortgages using the effective interest method. Prepaid fees and expenses represented prepaid acquisition fees and expenses and prepaid participation servicing fees paid for the acquisition and servicing of PIMs. The Partnership amortized the prepaid acquisition fees and expenses using a method that approximated the effective interest method over a period of ten to twelve years, which represented the estimated life of the underlying mortgage. The Partnership amortized the prepaid participation servicing fees using a method that approximated the effective interest method over a ten year period beginning from the acquisition of the Fannie Mae MBS or final endorsement of the FHA loan. Upon the repayment of a PIM, any unamortized acquisition fees and expenses and unamortized participation servicing fees related to such loan were expensed. Results of Operations Net income decreased for the first quarter of 2003 as compared to the same period in 2002 due primarily to decreases in participation interest, basic interest income on PIMs and interest income on MBS and increases in expense reimbursements to affiliates and general and administrative expense. This is partially offset by a decrease in amortization expense. Participation interest was greater in 2002 due to the collection of shared appreciation interest and minimum additional interest from the Royal Palm Place PIM payoff in February 2002. Basic interest income on PIMs decreased due to the payoff of the Royal Palm Place PIM mentioned above. Interest income on MBS decreased due to the accelerated recognition of the Mission Terrace Apartments MBS purchase premium as a reduction in income upon the prepayment of the MBS in February 2003 and due to lower single family MBS balances generating interest income. The lower balances resulted from on-going principal collections. General and administrative expenses and expense reimbursements to affiliates increased for the period ended March 31, 2002 primarily due to a change in the estimated cost of services provided to the Partnership in 2002. Amortization expense decreased due to the full recognition of prepaid fees and expenses associated with the Vista Montana PIM payoff in 2002. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Assessment of Credit Risk The Partnership's investments in its insured mortgage portion of its PIM and its MBS are guaranteed or insured by the Government National Mortgage Association ("GNMA"), Fannie Mae, the Federal Home Loan Mortgage Corporation -8- ("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. These obligations are not guaranteed by the U.S. Government or the Federal Home Loan Bank Board. However, Fannie Mae and FHLMC are two of the largest corporations in the United States with significant experience in mortgage securitizations. In addition, their MBS instruments carry the highest credit rating given to financial instruments. 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. At March 31, 2003, the Partnership includes in cash and cash equivalents approximately $2.3 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. Interest Rate Risk The Partnership's primary market risk exposure is to interest rate risk, which can be defined as the exposure of the Partnership's net income, comprehensive income or financial condition to adverse movements in interest rates. At March 31, 2003, the Partnership's PIM and MBS comprise the majority of the Partnership's assets. Decreases in interest rates may accelerate the prepayment of the Partnership's investments. The Partnership does not utilize any derivatives or other instruments to manage this risk as the Partnership plans to hold its PIM investment to expected maturity, while it is expected that substantially all of the MBS will prepay over the same time period, thereby mitigating any potential interest rate risk to the disposition value of any remaining MBS. The Partnership monitors prepayments and considers prepayment trends, as well as distribution requirements of the Partnership, when setting regular distribution policy. For MBS, the fund forecasts prepayments based on trends in similar securities as reported by statistical reporting entities such as Bloomberg. For its remaining PIM, the Partnership continues to monitor the borrower for any indication of a prepayment. Item 4. CONTROLS AND PROCEDURES (a) Evaluation of Disclosure Controls and Procedures Within the 90 days prior to the date of this Quarterly Report on Form 10-Q, the Principal Executive Officer and Chief Accounting Officer of Krupp Corporation, a general partner of the Partnership, carried out an evaluation of the effectiveness of the design and operation of the Partnership's disclosure controls and procedures. Based upon that evaluation, the Principal Executive Officer and the Chief Accounting Officer concluded that the Partnership's disclosure controls and procedures were effective as of the date of their evaluation in timely alerting them to material information relating to the Partnership required to be included in this Quarterly Report on Form 10-Q. (b) Changes in Internal Controls There were no significant changes in the Partnership's internal controls or in other factors that could significantly affect such internal controls subsequent to the date of the evaluation described in paragraph (a) above. -9- KRUPP INSURED PLUS LIMITED PARTNERSHIP PART II - OTHER INFORMATION Item 1. Legal Proceedings None 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 (a) Exhibits (99.1) Principal Executive Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002. (99.2) Chief Accounting Officer Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K None -10- 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/ Alan Reese -------------------------------------------- Alan Reese Vice-President (Chief Accounting Officer) of The Krupp Corporation, a General Partner of the Registrant. DATE: April 28, 2003 -11- I, Douglas Krupp, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Krupp Insured Plus Limited Partnership; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: April 28, 2003 /s/ Douglas Krupp --------------------------- Douglas Krupp Principal Executive Officer -12- Certifications I, Alan Reese, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Krupp Insured Plus Limited Partnership; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a. designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b. evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: April 28, 2003 /s/ Alan Reese ------------------------------------ Alan Reese Chief Accounting Officer -13-