<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 June 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.
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(Exact name of registrant as specified in its charter)
DELAWARE 13-3458180
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
625 MADISON AVENUE, NEW YORK, NEW YORK 10022
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(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>
============ ============
June 30, March 31,
2000 2000
------------ ------------
<S> <C> <C>
ASSETS
Property and equipment, net of
accumulated depreciation
of $81,670,565 and $79,787,758,
respectively $158,809,358 $160,643,092
Cash and cash equivalents 1,865,340 2,463,141
Cash held in escrow 8,137,839 7,798,477
Deferred costs, net of accumulated
amortization of $2,373,039
and $2,323,641, respectively 3,888,075 3,937,473
Other assets 5,190,853 5,229,595
------------ ------------
Total assets $177,891,465 $180,071,778
============ ============
</TABLE>
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LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
============ ============
June 30, March 31,
2000 2000
------------ ------------
<S> <C> <C>
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Mortgage notes payable $118,741,054 $119,104,452
Accounts payable and other
liabilities 8,849,119 9,094,539
Due to local general partners and
affiliates 10,652,834 10,326,684
Due to general partners and affiliates 8,955,747 8,887,441
Due to selling partners 2,161,568 2,159,692
------------ ------------
Total liabilities 149,360,322 149,572,808
------------ ------------
Minority interest 3,454,535 3,542,196
------------ ------------
Commitments and contingencies (Note 5)
Partners' capital (deficit)
Limited partners (115,917.5 BACs
issued and outstanding) 25,856,526 27,717,890
General partners (779,918) (761,116)
------------ ------------
Total partners' capital (deficit) 25,076,608 26,956,774
------------ ------------
Total liabilities and partners'
capital (deficit) $177,891,465 $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
JUNE 30,
2000 1999*
-----------------------------
<S> <C> <C> <C>
Revenues
Rentals, net $ 6,544,882 $ 6,417,193
Other 148,707 174,492
----------- -----------
Total revenue 6,693,589 6,591,685
----------- -----------
Expenses
General and administrative 1,681,551 1,584,211
General and administrative-
related parties (Note 2) 643,156 635,696
Repairs and maintenance 1,112,323 1,028,736
Operating 754,698 760,879
Taxes 274,934 279,789
Insurance 289,658 294,654
Interest 1,954,011 1,984,273
Depreciation and amortization 1,932,205 1,939,521
----------- -----------
Total expenses 8,642,536 8,507,759
----------- -----------
Loss before minority interest (1,948,947) (1,916,074)
Minority interest in loss of
subsidiaries 68,781 115,378
----------- -----------
Net loss $(1,880,166) $(1,800,696)
=========== ===========
Net loss-limited partners $(1,861,364) $(1,782,689)
=========== ===========
Number of BACs outstanding 115,917.5 115,917.5
=========== ===========
Net loss per BAC $ (16.06) $ (15.38)
=========== ===========
</TABLE>
*Reclassified for comparative purposes.
See accompanying notes to consolidated financial statements.
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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 (1,880,166) (1,861,364) (18,802)
------------ ------------ ------------
Partners' capital
(deficit) -
June 30, 2000 $ 25,076,608 $ 25,856,526 $ (779,918)
============ ============ ============
</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>
=====================================
Three Months Ended
June 30,
-------------------------------------
2000 1999
-------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,880,166) $(1,800,696)
----------- -----------
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization 1,932,205 1,939,521
Minority interest in loss of
subsidiaries (68,781) (115,378)
Decrease (increase) in other assets 38,742 (7,561)
Increase in cash held
in escrow (203,747) (1,197,224)
Decrease in accounts payable and
other liabilities (245,420) (1,441,007)
Increase in due to general partners
and affiliates 68,306 351,328
Increase in due to local general
partners and affiliates 419,125 365,497
Decrease in due to local general
partners and affiliates (92,975) (568,714)
----------- -----------
Total adjustments 1,847,455 (673,538)
----------- -----------
Net cash used in operating activities (32,711) (2,474,234)
----------- -----------
Cash flows from investing activities:
Acquisitions of property and
equipment (49,073) (179,577)
Increase in cash held in escrow (135,615) (229,544)
----------- -----------
Net cash used in investing activities (184,688) (409,121)
----------- -----------
</TABLE>
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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)
<TABLE>
<CAPTION>
=====================================
Three Months Ended
June 30,
-------------------------------------
2000 1999
-------------------------------------
<S> <C> <C>
Cash flows from financing activities:
Increase in deferred costs 0 (192,204)
Repayments of mortgage notes (363,398) (2,031,854)
Proceeds of mortgage notes 0 5,865,000
Increase (decrease) in due to selling
partners 1,876 (1,448,129)
Decrease in capitalization
of consolidated subsidiaries
attributable to minority
interest (18,880) (127,501)
----------- -----------
Net cash (used in) provided by
financing activities (380,402) 2,065,312
----------- -----------
Net decrease in cash and
cash equivalents (597,801) (818,043)
Cash and cash equivalents at
beginning of period 2,463,141 3,334,363
----------- -----------
Cash and cash equivalents at
end of period $ 1,865,340 $ 2,516,320
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
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LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 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 June 30.
The Partnership's fiscal quarter ends June 30 in order to allow adequate time
for the subsidiaries' financial statements to be prepared and consolidated. All
subsidiary partnerships have fiscal quarters ending March 31. Accounts of the
subsidiary partnerships have been adjusted for intercompany transactions from
April 1 through June 30.
All intercompany accounts and transactions have been eliminated in
consolidation.
Increases (decreases) in the 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 $175,000 and $140,000 for the three months ended June 30,
2000 and 1999, respectively. The Partnership's investment in each subsidiary
partnership is equal to the 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.
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LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000
(Unaudited)
The books and records of the Partnership are maintained on the accrual basis in
accordance with generally accepted accounting principles. 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 June 30, 2000 and
the results of operations and cash flows for the three months ended June 30,
2000 and 1999. However, the operating results for the three months ended June
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 generally accepted accounting principles
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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LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000
(Unaudited)
The costs incurred to related parties for the three months ended June 30, 2000
and 1999 were as follows:
<TABLE>
<CAPTION>
=========================
Three Months Ended
June 30,
-------------------------
2000 1999
-------------------------
<S> <C> <C>
Partnership management fees (a) $374,000 $374,000
Expense reimbursement (b) 27,680 25,330
Property management fees incurred
to affiliates of the General Partners (c) 90,984 89,268
Local administrative fee (d) 13,000 12,000
-------- --------
Total general and administrative-
General Partners 505,664 500,598
-------- --------
Property management fees incurred
to affiliates of the subsidiary
partnerships' general partners (c) 137,492 135,098
-------- --------
Total general and administrative-
related parties $643,156 $635,696
======== ========
</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 $7,190,000 and
$6,816,000 were accrued and unpaid as of June 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 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
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<PAGE>
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000
(Unaudited)
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
$378,362 and $395,949 for the three months ended June 30, 2000 and 1999,
respectively. Of these fees $228,476 and $224,366 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 for the three months ended June
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.
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
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<PAGE>
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000
(Unaudited)
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"). It is anticipated that the New General Partner will
release approximately $65,000 from the restricted escrow account to bring the
first mortgage current and $25,000 will be released and paid to St. Louis
Community Development Agency ("CDA") to fully defease and extinguish the
promissory note payable. If the above transaction is consummated, then
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
service to allow the current anticipated cash flow to continue to maintain the
property for the long term.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2000 the Partnership has invested all of the net proceeds 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 three months
ended June 30, 2000, distributions received by the Partnership from operations
of the Local Partnerships were approximately $240,000.
During the three months ended June 30, 2000, cash and cash equivalents decreased
approximately $598,000. This decrease was primarily due to cash used in
operating activities ($33,000), acquisitions of property and equipment
($49,000), repayments of mortgage notes ($364,000), a decrease in capitalization
of consolidated subsidiaries attributable to minority interest ($19,000), and an
increase in cash held in escrow relating to investing activities ($136,000).
Included in the adjustments to reconcile the net loss to cash used in operating
activities is depreciation and amortization ($1,932,000).
Partnership management fees owed to the General Partners amounting to
approximately $7,190,000 and $6,816,000 were accrued and unpaid as of June 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. However, 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
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<PAGE>
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 months ended June 30, 2000 consisted
primarily of the results of the Partnership's investment in twenty-seven Local
Partnerships.
Rental income increased approximately 2% for the three months ended June 30,
2000 as compared to the corresponding period in 1999 primarily due to rental
rate increases.
Other income decreased approximately $26,000 for the three months ended June 30,
2000 as compared to the corresponding period in 1999 primarily due to a drug
grant received at one Local Partnership in 1999.
Total expenses, remained fairly consistent with an increase of approximately 2%
for the three months ended June 30, 2000 as compared to the corresponding period
in 1999.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
None.
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PART II. OTHER INFORMATION
Item 1. Legal Proceeding - 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.
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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: August 10, 2000
By: /s/ Alan P. Hirmes
-----------------------
President and Chief Executive Officer
(Principal Executive and Financial
Officer)
and
By: LIBERTY GP II INC.,
a General Partner
Date: August 10, 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: August 10, 2000
By: /s/ Alan P. Hirmes
-----------------------
Alan P. Hirmes,
President
and
By: Liberty GP II Inc.,
its General Partner
Date: August 10, 2000
By: /s/ Alan P. Hirmes
-----------------------
Alan P. Hirmes,
President
