UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC. 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, 1997
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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 33-11907
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DIVERSIFIED HISTORIC INVESTORS IV
- ----------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-2440837
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
Suite 500, 1521 Locust Street, Philadelphia, PA 19102
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 735-5001
N/A
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(Former name, former address and former fiscal year, if changed since
last report)
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.
Consolidated Balance Sheets - September 30, 1997
(unaudited) and December 31, 1996
Consolidated Statements of Operations - Three Months and
Nine Months Ended September 30 1997 and 1996 (unaudited)
Consolidated Statements of Cash Flows - Nine Months Ended
September 30, 1997 and 1996 (unaudited)
Notes to Consolidated Financial Statements (unaudited)
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
(1) Liquidity
As of September 30, 1997, Registrant had total
unrestricted cash of $578,862. Such funds are expected to be used to
pay liabilities of Registrant and to fund any cash deficits of the
properties. The Registrant expects that the $578,862 plus the cash
generated from operations at each property will be sufficient to fund
the operating expenses of the properties. The Registrant is not aware
of any additional sources of liquidity.
As of September 30, 1997, Registrant had
restricted cash of $74,499 consisting primarily of funds held as
security deposits, replacement reserves and escrows for taxes and
insurance. As a consequence of the restrictions as to use, Registrant
does not deem these funds to be a source of liquidity.
(2) Capital Resources
Due to the relatively recent rehabilitations of
the properties, any capital expenditures needed are generally
replacement items and are funded out of cash from operations or
replacement reserves, if any. The Registrant is not aware of any
factors which would cause historical capital expenditure levels not to
be indicative of capital requirements in the future and accordingly,
does not believe that it will have to commit material resources to
capital investment for the foreseeable future.
(3) Results of Operations
During the third quarter of 1997, Registrant
recognized income of $37,851 ($4.52 per limited partnership unit)
compared to a loss of $80,322 ($9.60 per limited partnership unit) for
the same period in 1996. For the first nine months of 1997, the
Registrant recognized income of $41,831 ($5.00 per limited partnership
unit) compared to a loss of $83,536 ($9.98 per limited partnership
unit) for the same period in 1996.
Rental income decreased $121 from $50,085 in the
third quarter of 1996 to $49,964 in the same period in 1997 and
decreased $35,082 from $169,430 for the first nine months of 1996 to
$134,348 in the same period in 1997. The decrease in rental income
for the third quarter and the first nine months of 1997 from the same
periods in 1996 is mainly the result of a decrease in rental income at
Henderson due to the sale of units, partially offset by an increase at
the Brass Works due to an increase in the average rental rates.
Interest income increased $7,070 from $53,766 in
the third quarter of 1996 to $60,836 in the same period in 1997 and
increased $39,324 from $142,536 for the first nine months of 1996 to
$181,860 in the same period in 1997. The increase for both the third
quarter and the first nine months of 1997 from the same periods in
1996 is the result of an increase in interest earned on notes
receivable.
Expense for rental operations decreased by $53,113
from $76,608 in the third quarter of 1996 to $23,495 in the same
period in 1997 and decreased by $147,169 from $273,184 for the first
nine months of 1996 to $126,015 in the same period in 1997. The
decrease for both the third quarter and the first nine months of 1997
from the same periods in 1996 is the result of the result of a
decrease at Henderson due to the sale of units combined with a
decrease in maintenance expense at Brass Works due to lower turnover
of apartment units and a slight overall decrease in operating expenses
at Locke Mill.
General and administrative expenses decreased
$20,000 from $101,000 for the first nine months of 1996 to $81,000 in
the same period in 1997. The decrease is due to fees paid in the
first quarter of 1996 to reimburse the General Partner for certain
services rendered.
Depreciation and amortization expense decreased
$7,655 from $30,109 in the third quarter of 1996 to $22,454 in the
same period in 1997 and decreased $34,252 from $101,614 for the first
nine months 1996 to $67,362 in the same period in 1997. The decrease
for the third quarter and the first nine months of 1997 from the same
periods in 1996 is due to the sale of units at the Henderson
Apartments resulting in a lower balance on which depreciation is
calculated.
Income recognized during the quarter at the
Registrant's three properties amounted to $69,000, compared to a loss
of approximately $36,000 for the same period in 1996. Included in the
third quarter of 1996 is a loss of $50,000 related to the sale of the
units at the Henderson. For the first nine months of 1997, the
Registrant recognized income of $137,000 compared to approximately
$23,000 for the same period in 1996. Included in income in the first
nine months of 1996 is a gain of $80,000 related to the sale of the
units at the Henderson.
In the third quarter of 1997, Registrant
recognized income of $68,000 at The Henderson Apartments, compared to
a loss of $27,000 in the third quarter of 1996, including $8,000 of
depreciation expense. Included in the third quarter of 1996 is a loss
of $50,000 related to the sale of Units. Overall, exclusive of the
loss resulting from the sale of Units, the property would have
recognized income of $23,000 in the third quarter of 1996. For the
first nine months of 1997, Registrant recognized income of $138,000 at
the Henderson Apartments, compared to income of $45,000 for the same
period of 1996, including $34,000 of depreciation expense. Included
in income for the first nine months of 1996 is a gain of $80,000
related to the sale of Units. Overall, exclusive of the gain
resulting from the sale of Units, the property would have recognized a
loss of $35,000 for the first nine months of 1996. The increase in
income is a result of an increase in interest earned on the notes
receivable and a decrease in operating expenses and marketing expenses
partially offset by a decrease in rental income due to the fact that
all of the apartments units were sold in 1996.
In the third quarter of 1997, Registrant incurred
a loss of $3,000 at the Brass Works, including $12,000 of depreciation
expense, compared to a loss of $6,000 including $12,000 of
depreciation expense in the first quarter of 1996. The decrease in
the loss for the third quarter of 1997 from the same period in 1996 is
due to a decrease in maintenance expense due to a lower turnover of
apartment units.
For the first nine months of 1997, Registrant
incurred a loss of $4,000 at the Brass Works, including $36,000 of
depreciation expense, compared to a loss of $17,000 for the same
period in 1996, including $36,000 of depreciation expense. The
decrease in the loss for the first nine months of 1997 from the same
period in 1996 is due to an increase in rental income due to an
increase in the average rental rates combined with a decrease in
maintenance expense due to a lower turnover of apartment units.
In the third quarter of 1997, Registrant
recognized income of $4,000 at the Locke Mill Plaza, including $6,000
of depreciation expense, compared to a loss of $3,000 including $6,000
of depreciation expense in the third quarter of 1996 and for the first
nine months of 1997, Registrant recognized income of $3,000 including
$19,000 of depreciation expense, compared to a loss of $5,000 for the
same period in 1996, including $19,000 of depreciation expense. The
increase in net income for both the third quarter and the first nine
months in 1997 from the same periods in 1996 is the result of a
overall decrease in operating expenses.
<PAGE>
DIVERSIFIED HISTORIC INVESTORS IV INCOME FUND
(a Pennsylvania limited partnership)
CONSOLIDATED BALANCE SHEETS
Assets
September 30, 1997 December 31, 1996
(Unaudited)
Rental properties, at cost:
Land $ 74,324 $ 74,324
Buildings and improvements 2,252,183 2,245,405
Furniture and fixtures 21,000 21,000
--------- ---------
2,347,507 2,340,729
Less - Accumulated depreciation (837,970) (770,607)
--------- ---------
1,509,537 1,570,122
Cash and cash equivalents 578,862 445,412
Restricted cash 74,499 107,436
Notes receivable 3,307,626 3,449,018
Other assets 6,656 2,576
--------- ---------
Total $5,477,180 $5,574,564
========= =========
Liabilities and Partners' Equity
Liabilities:
Accounts payable:
Trade 28,290 155,463
Related parties 0 39
Deferred income 0 13,282
Other liabilities 680 1,396
Tenant security deposits 11,880 9,885
--------- ---------
Total liabilities 40,850 180,065
--------- ---------
Partners' equity 5,436,330 5,394,499
--------- ---------
Total $5,477,180 $5,574,564
========= =========
The accompanying notes are an integral part of these financial statements.
<PAGE>
DIVERSIFIED HISTORIC INVESTORS IV
(a Pennsylvania limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months and Nine Months Ended September 30, 1997 and 1996
(Unaudited)
Three months Nine months
ended June 30, ended June 30,
1997 1996 1997 1996
Revenues:
Rental income $ 49,964 $ 50,085 $134,348 $169,430
Loss on sale of units 0 (50,456) 0 80,296
Interest income 60,836 53,766 181,860 142,536
------- ------- ------- -------
Total revenues 110,800 53,395 316,208 392,262
------- ------- ------- -------
Costs and expenses:
Rental operations 23,495 76,608 126,015 273,184
General and administrative 27,000 27,000 81,000 101,000
Depreciation and
amortization 22,454 30,109 67,362 101,614
------- ------- ------- -------
Total costs and expenses 72,949 133,717 274,377 475,798
------- ------- ------- -------
Net income (loss) $ 37,851 ($ 80,322) $ 41,831 ($ 83,536)
======= ======= ======= =======
Net income (loss) per limited
partnership unit $ 4.52 ($ 9.60) $ 5.00 ($ 9.98)
======= ======= ======= =======
The accompanying notes are an integral part of these financial statements.
<PAGE>
DIVERSIFIED HISTORIC INVESTORS IV INCOME FUND
(a Pennsylvania limited partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1997 and 1996
(Unaudited)
Nine months ended
September 30,
1997 1996
Cash flows from operating activities: ------ ------
Net income (loss) $ 41,831 ($ 83,536)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Gain on sale of units 0 (80,296)
Depreciation and amortization 67,362 101,614
Changes in assets and liabilities:
Decrease in restricted cash 32,937 186,426
Increase in other assets (4,079) (26,382)
Decrease in accounts payable - trade (127,173) (229,290)
(Decrease) increase in accounts payable - related
parties (39) 13,548
Decrease in deferred income (13,282) (34,688)
Decrease in other liabilities (716) 0
Decrease (increase) in tenant security deposits 1,995 (4,638)
------- -------
Net cash used in operating activities (1,164) (158,242)
------- -------
Cash flows from investing activities:
Capital expenditures (6,778) (108,120)
Decrease in notes receivable 141,392 369,185
Proceeds from sale of units 0 (111,113)
------- -------
Net cash provided by investing activities 134,614 149,952
------- -------
Cash flows from financing activities:
Distributions to partners 0 (273,690)
------- -------
Net cash used in financing activities 0 (273,690)
------- -------
Increase (decrease) in cash and cash equivalents 133,450 (281,980)
Cash and cash equivalents at beginning of period 445,412 346,511
------- -------
Cash and cash equivalents at end of period $578,862 $ 64,531
======= =======
Supplemental Schedule of Non-Cash Investing Activities:
Net assets transferred $ 0 $1,395,331
Notes receivable received from sale of Units 0 1,609,500
The accompanying notes are an integral part of these financial statements.
<PAGE>
DIVERSIFIED HISTORIC INVESTORS IV INCOME FUND
(a Pennsylvania limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The unaudited consolidated financial statements of Diversified
Historic Investors IV Income Fund (the "Registrant") and related notes
have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, certain information
and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles
have been omitted pursuant to such rules and regulations. The
accompanying consolidated financial statements and related notes
should be read in conjunction with the audited financial statements in
Form 10-K of the Registrant, and notes thereto, for the year ended
December 31, 1996.
The information furnished reflects, in the opinion of management, all
adjustments, consisting of normal recurring accruals, necessary for a
fair presentation of the results of the interim periods presented.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
To the best of its knowledge, Registrant is not party
to, nor is any of its property the subject of, any pending material
legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted during the quarter covered by
this report to a vote of security holders.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Document
Number
3 Registrant's Amended and Restated Certificate
of Limited Partnership and Agreement of
Limited Partnership, previously filed as part
of Amendment No. 2 of Registrant's
Registration Statement on Form S-11, are
incorporated herein by reference.
21 Subsidiaries of the Registrant are listed in
Item 2. Properties on Form 10-K, previously
filed and incorporated herein by reference.
(b) Reports on Form 8-K:
No reports were filed on Form 8-K during the
quarter ended September 30, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date: November 17, 1997 DIVERSIFIED HISTORIC INVESTORS IV Income Fund
-----------------
By: Dover Historic Advisors III, General Partner
By: SWDHA, Inc., General Partner
By: /s/ Spencer Wertheimer
----------------------
SPENCER WERTHEIMER
President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 578,862
<SECURITIES> 0
<RECEIVABLES> 3,307,626
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,347,507
<DEPRECIATION> 837,970
<TOTAL-ASSETS> 5,477,180
<CURRENT-LIABILITIES> 28,290
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 5,436,330
<TOTAL-LIABILITY-AND-EQUITY> 5,477,180
<SALES> 0
<TOTAL-REVENUES> 316,208
<CGS> 0
<TOTAL-COSTS> 126,015
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 41,831
<INCOME-TAX> 0
<INCOME-CONTINUING> 41,831
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41,831
<EPS-PRIMARY> 5.00
<EPS-DILUTED> 0
</TABLE>
