<PAGE>
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 September 30, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR
--- 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-24660
LIBERTY TAX CREDIT PLUS II L.P.
(Exact name of registrant as specified in its charter)
Delaware 13-3458180
-------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
625 Madison Avenue, New York, New York 10022
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 421-5333
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
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
============= ============
September 30, March 31,
2000 2000
------------- ------------
<S> <C> <C>
ASSETS
Property and equipment, net of
accumulated depreciation
of $83,645,898 and $79,787,758,
respectively $157,001,141 $160,643,092
Cash and cash equivalents 1,390,337 2,463,141
Cash held in escrow 8,071,711 7,798,477
Deferred costs, net of accumulated
amortization of $2,445,974
and $2,323,641, respectively 3,817,878 3,937,473
Other assets 4,398,106 5,229,595
----------- -----------
Total assets $174,679,173 $180,071,778
=========== ===========
</TABLE>
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<PAGE>
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
(continued)
<TABLE>
<CAPTION>
============= ============
September 30, March 31,
2000 2000
------------- ------------
<S> <C> <C>
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Mortgage notes payable $117,697,659 $119,104,452
Accounts payable and other
liabilities 8,217,273 9,094,539
Due to local general partners and
affiliates 10,656,538 10,326,684
Due to general partners and affiliates 9,535,458 8,887,441
Due to selling partners 2,163,443 2,159,692
----------- -----------
Total liabilities 148,270,371 149,572,808
----------- -----------
Minority interest 3,120,069 3,542,196
----------- -----------
Commitments and contingencies (Note 5)
Partners' capital (deficit)
Limited partners (115,917.5 BACs
issued and outstanding) 24,086,529 27,717,890
General partners (797,796) (761,116)
----------- -----------
Total partners' capital (deficit) 23,288,733 26,956,774
----------- -----------
Total liabilities and partners'
capital (deficit) $174,679,173 $180,071,778
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
========================= ==========================
Three Months Ended Six Months Ended
September 30, September 30,
------------------------- --------------------------
2000 1999* 2000 1999*
------------------------- --------------------------
<S> <C> <C> <C> <C>
Revenues
Rentals, net $ 6,545,373 $ 6,451,367 $13,090,255 $12,868,560
Other 230,494 143,304 379,201 317,796
---------- ---------- ---------- ----------
Total revenue 6,775,867 6,594,671 13,469,456 13,186,356
---------- ---------- ---------- ----------
Expenses
General and
administrative 1,643,207 1,536,395 3,324,758 3,120,606
General and
administrative-
related parties
(Note 2) 696,905 656,715 1,340,061 1,292,411
Repairs and
maintenance 1,559,382 1,198,432 2,671,705 2,227,168
Operating 726,268 631,943 1,480,966 1,392,822
Taxes 274,203 261,219 549,137 541,008
Insurance 272,909 259,480 562,567 554,134
Interest 1,409,689 2,003,930 3,363,700 3,988,203
Depreciation and
amortization 2,048,268 2,028,009 3,980,473 3,967,530
---------- ---------- ---------- ----------
Total expenses 8,630,831 8,576,123 17,273,367 17,083,882
---------- ---------- ---------- ----------
Loss before
minority interest (1,854,964) (1,981,452) (3,803,911) (3,897,526)
Minority interest
in loss of
subsidiaries 67,089 56,314 135,870 171,692
---------- ---------- ---------- ----------
Net loss $(1,787,875) $(1,925,138) $(3,668,041) $(3,725,834)
========== ========== ========== ==========
Net loss-limited
partners $(1,769,997) $(1,905,887) $(3,631,361) $(3,688,576)
========== ========== ========== ==========
Number of BACs
outstanding 115,917.5 115,917.5 115,917.5 115,917.5
========== ========== ========== ==========
Net loss per BAC $ (15.27) $ (16.44) $ (31.33) $ (31.82)
========== ========== ========== ==========
</TABLE>
*Reclassified for comparative purposes.
See accompanying notes to consolidated financial statements.
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<PAGE>
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Consolidated Statement of Changes in Partners' Capital
(Deficit)
(Unaudited)
<TABLE>
<CAPTION>
=======================================
Limited General
Total Partners Partners
---------------------------------------
<S> <C> <C> <C>
Partners' capital
(deficit) -
April 1, 2000 $26,956,774 $27,717,890 $(761,116)
Net loss (3,668,041) (3,631,361) (36,680)
----------- ----------- ---------
Partners' capital
(deficit) -
September 30,
2000 $23,288,733 $24,086,529 $(797,796)
========== ========== ========
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
<TABLE>
<CAPTION>
====================
Six Months Ended
September 30,
--------------------
2000 1999
--------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(3,668,041) $(3,725,834)
----------- -----------
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Depreciation and amortization 3,980,473 3,967,530
Minority interest in loss of
subsidiaries (135,870) (171,692)
Decrease in other assets 831,489 500,416
Increase in cash held
in escrow (141,089) (1,469,879)
Decrease in accounts payable and
other liabilities (877,266) (1,249,008)
Increase in due to general partners
and affiliates 648,017 977,030
Increase in due to local general
partners and affiliates 508,182 383,991
Decrease in due to local general
partners and affiliates (178,328) (598,133)
----------- -----------
Total adjustments 4,635,608 2,340,255
---------- ----------
Net cash provided by (used in)
operating activities 967,567 (1,385,579)
---------- ----------
Cash flows from investing activities:
Acquisitions of property and
equipment (216,189) (354,083)
Increase in cash held in escrow (132,145) (233,942)
---------- ----------
Net cash used in investing activities (348,334) (588,025)
---------- ----------
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<PAGE>
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
(continued)
<CAPTION>
====================
Six Months Ended
September 30,
--------------------
2000 1999
--------------------
<S> <C> <C>
Cash flows from financing activities:
Increase in deferred costs (2,738) (193,836)
Repayments of mortgage notes (1,406,793) (2,333,353)
Proceeds of mortgage notes 0 5,865,000
Increase (decrease) in due to selling
partners 3,751 (1,446,254)
Decrease in capitalization
of consolidated subsidiaries
attributable to minority
interest (286,257) (152,200)
----------- -----------
Net cash (used in) provided by
financing activities (1,692,037) 1,739,357
---------- ----------
Net decrease in cash and
cash equivalents (1,072,804) (234,247)
Cash and cash equivalents at
beginning of period 2,463,141 3,334,363
---------- ----------
Cash and cash equivalents at
end of period $ 1,390,337 $ 3,100,116
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
-7-
<PAGE>
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2000
(Unaudited)
Note 1 - General
The consolidated financial statements include the accounts of Liberty Tax Credit
Plus II L.P. (the "Partnership") and 27 subsidiary partnerships ("subsidiaries",
"subsidiary partnerships" or "Local Partnerships") in which the Partnership is
the limited partner. Through the rights of the Partnership and/or Related Credit
Properties II L.P., a Delaware limited partnership, Liberty Associates II L.P.,
a Delaware limited partnership, or Liberty GP II Inc., a Delaware corporation
(each a "General Partner" and collectively, the "General Partners"), which
General Partners have a contractual obligation to act on behalf of the
Partnership, to remove the general partner of the subsidiary partnerships (each,
a "Local General Partner"), and to approve certain major operating and financial
decisions, the Partnership has a controlling financial interest in each of the
subsidiary partnerships.
For financial reporting purposes, the Partnership's fiscal quarter ends
September 30. The Partnership's fiscal quarter ends September 30 in order to
allow adequate time for the subsidiaries' financial statements to be prepared
and consolidated. All subsidiary partnerships have fiscal quarters ending June
30. Accounts of the subsidiary partnerships have been adjusted for intercompany
transactions from July 1 through September 30.
All intercompany accounts and transactions have been eliminated in
consolidation.
Increase (decrease) in capitalization of consolidated subsidiary partnerships
attributable to minority interest arise from cash contributions from and cash
distributions to the minority interest partners.
Losses attributable to minority interests which exceed the minority interests'
investment in a subsidiary partnership have been charged to the Partnership.
Such losses aggregated $167,000 and $134,000 and $342,000 and $274,000 for the
three and six months ended September 30, 2000 and 1999, respectively. The
Partnership's investment in each subsidiary partnership is equal to the
-8-
<PAGE>
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2000
(Unaudited)
respective subsidiary partnership's partners' equity less minority interest
capital, if any. In consolidation, all subsidiary partnership losses are
included in the Partnership's capital account except for losses allocated to
minority interest capital.
The books and records of the Partnership are maintained on the accrual basis in
accordance with generally accepted accounting principles ("GAAP"). In the
opinion of each of the General Partners, the accompanying unaudited financial
statements contain all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the financial position of the
Partnership as of September 30, 2000, the results of operations for the three
and six months ended September 30, 2000 and 1999, respectively, and cash flows
for the six months ended September 30, 2000 and 1999, respectively. However, the
operating results for the six months ended September 30, 2000 may not be
indicative of the results for the year.
Certain information and note disclosures normally included in financial
statements prepared in accordance with GAAP have been omitted or condensed.
These consolidated financial statements should be read in conjunction with the
financial statements and notes thereto included in the Partnership's Annual
Report on Form 10-K for the year ended March 31, 2000.
Note 2 - Related Party Transactions
One of the General Partners has a 1% interest as a special limited partner in
each of the subsidiary partnerships. An affiliate of the General Partners also
has a minority interest in certain subsidiary partnerships.
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<PAGE>
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2000
(Unaudited)
The costs incurred to related parties for the three and six months ended
September 30, 2000 and 1999 were as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
--------------------- ------------------------
2000 1999 2000 1999
--------------------- ------------------------
<S> <C> <C> <C> <C>
Partnership manage-
ment fees (a) $ 374,000 $ 374,000 $ 748,000 $ 748,000
Expense reimburse-
ment (b) 40,177 35,100 67,857 60,430
Property manage-
ment fees incurred
to affiliates of the
General Partners (c) 90,984 89,268 181,968 178,536
Local administrative
fee (d) 13,000 12,000 26,000 24,000
---------- ---------- ---------- ---------
Total general and
administrative-
General Partners 518,161 510,368 1,023,825 1,010,966
---------- ---------- ---------- ---------
Property manage-
ment fees incurred
to affiliates of the
subsidiary
partnerships'
general
partners (c) 178,744 146,347 316,236 281,445
---------- ---------- ---------- ---------
Total general and
administrative-
related parties $ 696,905 $ 656,715 $ 1,340,061 $1,292,411
========== ========== ========== =========
</TABLE>
(a) The General Partners are entitled to receive a partnership management fee,
after payment of all Partnership expenses, which together with the annual local
administrative fees will not exceed a maximum of 0.5% per annum of invested
assets (as defined in the Partnership Agreement), for administering the affairs
of the Partnership. The partnership management fee, subject to the foregoing
limitation, will be determined by the General Partners in their sole discretion
based upon their review of the Partnership's investments. Partnership management
fees owed to the General Partners amounting to approximately $7,564,000 and
$6,816,000 were accrued and unpaid as of September 30, 2000 and March 31, 2000,
respectively. Without the General Partners' continued accrual without payment,
the Partnership will not be in a position to
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<PAGE>
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2000
(Unaudited)
meet its obligations. The General Partners have continued allowing the accrual
without payment of these amounts but are under no obligation to do so.
(b) The Partnership reimburses the General Partners and their affiliates for
actual Partnership operating expenses incurred by the General Partners and their
affiliates on the Partnership's behalf. The amount of reimbursement from the
Partnership is limited by the provisions of the Partnership Agreement. Another
affiliate of the General Partners performs asset monitoring for the Partnership.
These services include site visits and evaluations of the subsidiary
partnerships' performance.
(c) Property management fees incurred by subsidiary partnerships amounted to
$431,429 and $421,686 and $809,791 and $817,635 for the three and six months
ended September 30, 2000 and 1999, respectively. Of these fees, $269,728 and
$235,615 and $498,204 and $459,981, respectively, were incurred to affiliates of
the Local General Partners. Included in amounts incurred to affiliates of the
Local General Partners are $90,984 and $89,268 and $181,968 and $178,536 for the
three and six months ended September 30, 2000 and 1999, respectively, which were
also incurred to affiliates of the Partnership.
(d) Liberty Associates II L.P., a special limited partner of the subsidiary
partnerships, is entitled to receive a local administrative fee of up to $2,500
per year from each subsidiary partnership.
Note 3 - Mortgage Note Payable
ROLLING GREEN L.P. ("ROLLING GREEN")
On February 1, 1999, Rolling Green refinanced its existing indebtedness by
borrowing $5,865,000 from the United States Department of Housing and Urban
Development ("HUD"). The loan bears interest at the rate of 6.85% per annum, and
matures on March 1, 2034. Rolling Green's prior mortgage indebtedness in the
principal amount of approximately $1,671,000 and a purchase money note of
$1,450,000 along with $1,695,000 in accrued interest were repaid.
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<PAGE>
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2000
(Unaudited)
Note 4 - Commitments and Contingencies
The following disclosures include changes and/or additions to disclosures
regarding the subsidiary partnerships which were included in the Partnership's
Annual Report on Form 10-K for the period ended March 31, 2000.
ROBIN HOUSING ASSOCIATES
Robin Housing Associates ("Robin Housing") is a defendant in several personal
injury lawsuits. The Partnership's insurance carrier intends to defend the
Partnership vigorously. Counsel believes that the insurance coverage is adequate
to cover any liability arising from this action. It is management's opinion that
no accrual for potential losses is currently warranted in the financial
statements. Because the Partnership is a limited partner in Robin Housing, the
maximum loss which the Partnership would suffer is its net investment in Robin
Housing.
METROPOLITAN TOWERS ASSOCIATES, L.P.
The subsidiary partnership, Metropolitan Towers Associates, L.P.
("Metropolitan"), is a defendant in a legal proceeding brought about by the
family of an employee who died in a work related accident. It is management's
opinion that the claim should be covered by Metropolitan's insurance policy.
Because the Partnership is a limited partner in Metropolitan, the maximum loss
which the Partnership would suffer is its net investment in Metropolitan.
GOODFELLOW PLACE LIMITED PARTNERSHIP
On March 31, 2000, the general partner of Goodfellow withdrew from the
partnership and Liberty Associates II, L.P. became the new general partner (the
"New General Partner"). On August 21, 2000 the New General Partner released
approximately $65,000 from the restricted escrow account to bring the first
mortgage current and $25,000 was released and paid to St. Louis Community
Development Agency ("CDA") to fully defease and extinguish the promissory note
payable. Goodfellow will recognize approximately $1,600,000 as forgiveness of
indebtedness income with respect to the promissory note. Goodfellow is
considering contacting the first mortgage lender to seek a reduction of the debt
-12-
<PAGE>
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2000
(Unaudited)
service to allow the current anticipated cash flow to continue to maintain the
property for the long term.
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<PAGE>
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 2000
(Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2000 the Partnership has invested all of the net proceeds of
its original offering in twenty-seven Local Partnerships.
The Partnership's primary sources of funds are rental revenues which are fully
utilized at the property level and cash distributions from the operations of the
Local Partnerships in which the Partnership has invested. These sources of funds
are available to meet obligations of the Partnership. During the six months
ended September 30, 2000, distributions received by the Partnership from
operations of the Local Partnerships were approximately $240,000.
During the six months ended September 30, 2000, cash and cash equivalents
decreased approximately $1,073,000. This decrease was primarily due to
acquisitions of property and equipment ($216,000), repayments of mortgage notes
($1,407,000), a decrease in capitalization of consolidated subsidiaries
attributable to minority interest ($286,000) and an increase in cash held in
escrow relating to investing activities ($132,000) which exceeded cash provided
by operating activities ($968,000). Included in the adjustments to reconcile the
net loss to cash provided by operating activities is depreciation and
amortization ($3,980,000).
Partnership management fees owed to the General Partners amounting to
approximately $7,564,000 and $6,816,000 were accrued and unpaid as of September
30, 2000 and March 31, 2000, respectively. Without the General Partners
continued accrual without payment, the Partnership will not be in a position to
meet its obligations. The General Partners have continued allowing the accrual
without payment of these amounts but are under no obligation to continue to do
so.
Management is not aware of any trends or events, commitments or uncertainties
which have not otherwise been disclosed, that will or are likely to impact
liquidity in a material way. Management believes the only impact would be from
laws that have not yet been adopted. The portfolio is diversified by the
location of the properties around the United States so that if one area of the
country is experiencing downturns in the economy, the remaining properties in
the portfolio may be experiencing upswings. How-
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<PAGE>
ever, the geographic diversification of the portfolio may not protect against
a general downturn in the national economy. The Partnership has fully
invested the proceeds of its offerings in 27 Local Partnerships, all of which
fully have their tax credits in place. The tax credits are attached to the
project for a period of ten years and are transferable with the property
during the remainder of such ten year period. If the General Partners
determined that a sale of a property is warranted, the remaining tax credits
would transfer to the new owner, thereby adding value to the property on the
market, which are not included in the financial statement carrying amount.
RESULTS OF OPERATIONS
Results of operations for the three and six months ended September 30, 2000
consisted primarily of the results of the Partnership's investment in
twenty-seven Local Partnerships.
Rental income increased approximately 1% and 2% for the three and six months
ended September 30, 2000 as compared to the corresponding periods in 1999,
primarily due to rental rate increases.
Other income increased approximately $87,000 and $61,000 for the three and six
months ended September 30, 2000 as compared to the corresponding periods in
1999, primarily due to the receipt of a tax refund for prior years' taxes at one
Local Partnership.
Total expenses, excluding repairs and maintenance, operating and interest
remained fairly consistent with increases of approximately 4% and 3% for the
three and six months ended September 30, 2000 as compared to the corresponding
periods in 1999.
Repairs and maintenance increased approximately $361,000 and $445,000 for the
three and six months ended September 30, 2000 as compared to the corresponding
periods in 1999, primarily due to window repairs, pool repairs and painting at
two Local Partnerships.
Operating increased approximately $94,000 and $88,000 for the three and six
months ended September 30, 2000 as compared to the corresponding periods in
1999, primarily due to increased utilities expenses at two Local Partnerships.
Interest decreased approximately $594,000 and $625,000 for the three and six
months ended September 30, 2000 as compared to
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<PAGE>
the corresponding periods in 1999, primarily due to the reversal of accrued
interest at one Local Partnership in 2000.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
None.
-16-
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities and Use of Proceeds - 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
27 Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K - No reports on Form 8-K were filed during
the quarter.
-17-
<PAGE>
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.
LIBERTY TAX CREDIT PLUS II L.P.
(Registrant)
By: RELATED CREDIT PROPERTIES II L.P.,
a General Partner
By: Related Credit Properties II Inc.,
its General Partner
Date: November 1, 2000
By:/s/ Alan P. Hirmes
----------------------------
Alan P. Hirmes,
President and Chief Executive Officer
(Principal Executive and Financial
Officer)
and
By: LIBERTY GP II INC.,
a General Partner
Date: November 1, 2000
By:/s/ Alan P. Hirmes
----------------------------
Alan P. Hirmes,
President
<PAGE>
and
By: LIBERTY ASSOCIATES II, L.P.
a General Partner
By: Related Credit Properties II Inc.,
its General Partner
Date: November 1, 2000
By: /s/ Alan P. Hirmes
----------------------------
Alan P. Hirmes,
President
and
By: Liberty GP II Inc.,
its General Partner
Date: November 1, 2000
By: /s/ Alan P. Hirmes
----------------------------
Alan P. Hirmes,
President
