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 December 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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For the transition period from to ___________
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Commission file number: 0-18405
American Tax Credit Properties II L.P.
(Exact name of Registrant as specified in its charter)
13-3495678
(I.R.S. Employer
incorporation or organization)
Identification No.)
Richman Tax Credit Properties II L.P.
599 West Putnam Avenue, 3rd Floor
06830
(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (203) 869-0900
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 filing requirements
for the past 90 days.
Yes X No .
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AMERICAN TAX CREDIT PROPERTIES II L.P.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Table of Contents Page
<S> <C>
Balance Sheets as of December 30, 1997 (Unaudited) and March 30, 1997 3
(Unaudited)
Statements of Operations for the three and nine month periods ended 4
December 30, 1997 (Unaudited) and December 30, 1996 (Unaudited)
Statements of Cash Flows for the nine months ended December 30, 1997 (Unaudited)
and December 30, 1996 (Unaudited) 5
Notes to Financial Statements as of December 30, 1997 (Unaudited) 7
</TABLE>
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<CAPTION>
AMERICAN TAX CREDIT PROPERTIES II L.P.
BALANCE SHEETS
(UNAUDITED)
December 30, March 30,
Notes 1997 1997
----- ---------------- ----------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 508,914 $ 674,160
Investments in bonds available-for-sale 2 4,263,646 4,151,478
Investment in local partnerships 3 16,057,802 18,119,151
Interest receivable 68,311 77,340
--------------- ---------------
$ 20,898,673 $ 23,022,129
============ ============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities
Accounts payable and accrued expenses $ 565,321 $ 561,847
Payable to general partner 523,565 486,224
Other 55,600 62,600
--------------- ---------------
1,144,486 1,110,671
------------- -------------
Commitments and contingencies 4
Partners' equity (deficit)
General partner (295,954) (272,442)
Limited partners (55,746 units of limited partnership
interest outstanding) 19,977,698 22,305,343
Unrealized gain (loss) on investments in bonds
available-for-sale, net 2 72,443 (121,443)
--------------- -------------
19,754,187 21,911,458
------------ ------------
$ 20,898,673 $ 23,022,129
============ ============
</TABLE>
See Notes to Financial Statements.
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<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES II L.P.
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Nine Months Three Months Nine Months
Ended Ended Ended Ended
December 30, December 30, December 30, December 30,
Notes 1997 1997 1996 1996
----- -------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUE
Interest $ 87,207 $ 267,002 $ 87,364 $ 272,353
Other income from local partnerships 388
TOTAL REVENUE 87,207 267,390 87,364 272,353
-------------- ------------- -------------- -------------
EXPENSES
Administration fees 74,826 224,479 74,826 224,479
Management fees 74,826 224,479 74,826 224,479
Professional fees 30,342 59,308 16,815 41,140
Printing, postage and other 9,934 24,987 7,372 16,497
------- --------- ------ ------------
TOTAL EXPENSES 189,928 533,253 173,839 506,595
------------- ------------- ------------- -------------
Loss from operations (102,721) (265,863) (86,475) (234,242)
Equity in loss of investment in local
partnerships 3 (571,913) (2,085,294) (805,029) (2,387,365)
------------- ------------- ------------- -------------
NET LOSS $ (674,634) $ (2,351,157) $ (891,504) $ (2,621,607)
============ ============ ============ ============
NET LOSS ATTRIBUTABLE TO
General partner $ (6,746) $ (23,512) $ (8,915) $ (26,216)
Limited partners (667,888) (2,327,645) (882,589) (2,595,391)
------------- ------------- ------------- -------------
$ (674,634) $ (2,351,157) $ (891,504) $ (2,621,607)
============ ============ ============ ============
NET LOSS per unit of limited partnership
interest (55,746 units of limited
partnership interest) $ (11.98) $ (41.75) $ (15.83) $ (46.56)
============== =============== ============== ===============
</TABLE>
See Notes to Financial Statements.
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<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES II L.P.
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED DECEMBER 30, 1997 AND 1996
(UNAUDITED)
1997 1996
-------------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received $ 279,338 $ 290,574
Other income from local partnerships 388
Cash used from local partnerships for deferred expenses (7,000) (7,000)
Cash paid for
administration fees (187,138) (187,138)
management fees (187,138) (187,138)
professional fees (79,055) (51,890)
printing, postage and other expenses (39,107) (13,761)
------------- -------------
Net cash used in operating activities (219,712) (156,353)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash distributions from local partnerships 160,558 26,602
Maturity/redemption of bonds 130,000 200,000
Investment in a local partnership (184,503)
Investments in bonds, includes $1,089 of accrued interest paid at purchase
of investment (51,589)
------------- -------------
Net cash provided by investing activities 54,466 226,602
-------------- -------------
Net increase (decrease) in cash and cash equivalents (165,246) 70,249
Cash and cash equivalents at beginning of period 674,160 538,912
-------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 508,914 $ 609,161
============= =============
SIGNIFICANT NON-CASH INVESTING ACTIVITIES
Unrealized gain (loss) on investments in bonds available-for-sale, net $ 193,886 $ (8,483)
============= ===============
- ----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
See reconciliation of net loss to net cash used in operating activities on page
6.
</TABLE>
See Notes to Financial Statements.
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<CAPTION>
AMERICAN TAX CREDIT PROPERTIES II L.P.
STATEMENTS OF CASH FLOWS - (Continued)
NINE MONTHS ENDED DECEMBER 30, 1997 AND 1996
(UNAUDITED)
<S> <C> <C>
1997 1996
---------------- ----------
RECONCILIATION OF NET LOSS TO NET CASH USED IN
OPERATING ACTIVITIES
Net loss $ (2,351,157) $ (2,621,607)
Adjustments to reconcile net loss to net cash used in operating activities
Equity in loss of investment in local partnerships 2,085,294 2,387,365
Amortization of net premium on investments in bonds 33,175 38,691
Accretion of zero coupon bonds (30,957) (29,321)
Decrease in interest receivable 10,118 8,851
Increase in payable to general partner 37,341 37,341
Increase in accounts payable and accrued expenses 3,474 29,327
Decrease in other liabilities (7,000) (7,000)
--------------- ---------------
NET CASH USED IN OPERATING ACTIVITIES $ (219,712) $ (156,353)
============= ============
</TABLE>
See Notes to Financial Statements.
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<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES II L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 30, 1997
(UNAUDITED)
1. Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information. They do not include all information and footnotes
required by generally accepted accounting principles for complete financial
statements. The results of operations are impacted significantly by the
combined results of operations of the Local Partnerships, which are
provided by the Local Partnerships on an unaudited basis during interim
periods. Accordingly, the accompanying financial statements are dependent
on such unaudited information. In the opinion of the General Partner, the
financial statements include all adjustments necessary to present fairly
the financial position as of December 30, 1997 and the results of
operations and cash flows for the interim periods presented. All
adjustments are of a normal recurring nature. The results of operations for
the three and nine month periods ended December 30, 1997 are not
necessarily indicative of the results that may be expected for the entire
year.
2. Investments in Bonds Available-For-Sale
As of December 30, 1997, certain information concerning investments in
bonds available-for-sale is as follows:
Gross Gross
Amortized unrealized unrealized Estimated
Description and maturity cost gains losses fair value
------------------------ ------------------ ----------------- -------------- -----------
<S> <C> <C> <C> <C>
Corporate debt securities
After one year through five years $ 950,401 $ 28,902 $ -- $ 979,303
After five years through ten years 1,922,396 247,417 (216,942) 1,952,871
After ten years 202,732 -- (5,480) 197,252
------------- ------------- ------------------ ------------
3,075,529 276,319 (222,422) 3,129,426
------------ ------------ ----------- -----------
U.S. Treasury debt securities
After ten years 473,399 6,676 -- 480,075
------------- ------------- ----------------- ------------
U.S. government and agency securities
After five years through ten years 591,933 13,590 -- 605,523
After ten years 50,342 -- (1,720) 48,622
-------------- ------------- ---------------- --------------
642,275 13,590 (1,720) 654,145
------------- -------------- -------------- -------------
$ 4,191,203 $ 296,585 $ (224,142) $ 4,263,646
=========== ============ =========== ===========
</TABLE>
3. Investment in Local Partnerships
The Partnership owns a limited partnership interest in fifty Local
Partnerships representing capital contributions in the aggregate amount of
$45,877,165. As of September 30, 1997, the Local Partnerships have
outstanding mortgage loans payable totaling approximately $92,538,000 and
accrued interest payable on such loans totaling approximately $4,357,000,
which are secured by security interests and liens common to mortgage loans
on the Local Partnerships' real property and other assets.
<PAGE>
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AMERICAN TAX CREDIT PROPERTIES II L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
DECEMBER 30, 1997
(UNAUDITED)
3. Investment in Local Partnerships (continued)
For the nine months ended December 30, 1997, the investment in Local
Partnerships activity consists of the following:
<S> <C>
Investment in Local Partnerships as of March 30, 1997 $ 18,119,151
Investment in a Local Partnership 184,503
Equity in loss of investment in Local Partnerships (2,085,294) (A)
Cash distributions received from Local Partnerships (160,558)
-------------
Investment in Local Partnerships as of December 30, 1997 $ 16,057,802
============
</TABLE>
(A) Equity in loss of investment in Local Partnerships is limited to the
Partnership's investment balance in each Local Partnership; any
excess is applied to other partners' capital in any such Local
Partnership. The amount of such excess losses applied to other
partners' capital was $298,283 for the nine months ended September
30, 1997 as reflected in the combined statements of operations of the
Local Partnerships reflected herein Note 3.
The combined unaudited balance sheets of the Local Partnerships as of
September 30, 1997 and December 31, 1996 and the combined unaudited
statements of operations of the Local Partnerships for the three and nine
month periods ended September 30, 1997 and 1996 are reflected on pages 9
and 10, respectively.
<PAGE>
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<CAPTION>
AMERICAN TAX CREDIT PROPERTIES II L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
DECEMBER 30, 1997
(UNAUDITED)
3. Investment in Local Partnerships (continued)
The combined balance sheets of the Local Partnerships as of September 30, 1997 and December 31, 1996 are as
follows:
September 30, December 31,
1997 1996
------------------- -----------
<S> <C> <C>
ASSETS
Cash and other investments $ 4,104,764 $ 4,338,030
Rental receivable 388,797 331,265
Escrow deposits and reserves 5,610,701 5,141,484
Land 4,180,673 4,180,673
Buildings and improvements (net of accumulated depreciation of
$41,054,616 and $37,016,338) 98,459,441 102,236,052
Intangible assets (net of accumulated amortization of $997,708
and $992,006) 1,780,035 1,848,817
Other 1,030,696 993,891
---------------- -----------------
$ 115,555,107 $ 119,070,212
============= =============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities
Accounts payable and accrued expenses $ 1,560,895 $ 1,520,643
Due to related parties 4,455,451 4,650,126
Mortgage loans 92,537,654 93,336,971
Notes payable 2,645,372 2,804,927
Accrued interest 4,356,907 3,948,452
Other 653,303 628,190
---------------- ----------------
106,209,582 106,889,309
------------- -------------
Partners' equity (deficit)
American Tax Credit Properties II L.P.
Capital contributions, net of distributions 44,990,370 45,115,322
Cumulative loss (28,990,068) (26,904,774)
-------------- -------------
16,000,302 18,210,548
--------------- --------------
General partners and other limited partners, including ATCP
& ATCP III
Capital contributions, net of distributions 3,478,651 3,503,853
Cumulative loss (10,133,428) (9,533,498)
-------------- ---------------
(6,654,777) (6,029,645)
--------------- ---------------
9,345,525 12,180,903
---------------- ---------------
$ 115,555,107 $ 119,070,212
============= =============
</TABLE>
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<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES II L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
DECEMBER 30, 1997
(UNAUDITED)
3. Investment in Local Partnerships (continued)
The combined statements of operations of the Local Partnerships for the
three and nine month periods ended September 30, 1997 and 1996 are as
follows:
Three Months Nine Months Three Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
1997 1997 1996 1996
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUE
Rental $ 4,993,299 $ 15,019,507 $ 4,945,521 $ 14,775,376
Interest and other 130,599 351,374 159,783 515,131
---------------- ----------------- ---------------- -----------------
TOTAL REVENUE 5,123,898 15,370,881 5,105,304 15,290,507
--------------- --------------- --------------- ---------------
EXPENSES
Administrative 783,192 2,377,229 732,855 2,299,755
Utilities 498,229 1,909,753 516,557 1,904,330
Operating, maintenance and other 1,065,494 3,016,073 1,217,644 3,116,765
Taxes and insurance 581,498 1,783,411 568,235 1,728,658
Interest (including amortization of
$23,134, $68,782, $22,520 and $73,134)
1,633,244 4,931,361 1,684,370 5,057,441
Depreciation 1,292,464 4,038,278 1,380,093 4,167,645
--------------- --------------- --------------- --------------
TOTAL EXPENSES 5,854,121 18,056,105 6,099,754 18,274,594
--------------- -------------- --------------- ---------------
NET LOSS $ (730,223) $ (2,685,224) $ (994,450) $ (2,984,087)
=============== ============== =============== ==============
NET LOSS ATTRIBUTABLE TO
American Tax Credit Properties II L.P. $ (571,913) $ (2,085,294) $ (805,029) $ (2,387,365)
General partners and other limited
partners, including ATCP & ATCP III,
which includes $81,671,
$298,283, $82,487 and $276,754 of
American Tax Credit Properties II
L.P. loss in excess of investment (158,310) (599,930) (189,421) (596,722)
---------------- --------------- ---------------- ---------------
$ (730,223) $ (2,685,224) $ (994,450) $ (2,984,087)
=============== ============== =============== ==============
</TABLE>
The combined results of operations of the Local Partnerships for the three
and nine month periods ended September 30, 1997 are not necessarily
indicative of the results that may be expected for an entire operating
period.
<PAGE>
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AMERICAN TAX CREDIT PROPERTIES II L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
DECEMBER 30, 1997
(UNAUDITED)
4. Commitments and Contingencies
On July 16, 1997, the Partnership received a demand for certain information
with respect to the holders of Units, the stated purpose of which was to
assist such party in making an offer to Unit holders to purchase their
Units and otherwise to communicate with them concerning such an offer.
Subsequently, the Partnership requested certain information from such party
in order to assess the appropriateness of the demand. To date, the
information has not been provided. On July 28, 1997, a complaint was filed
in the Court of Chancery of the State of Delaware in and for New Castle
County against the Partnership, the General Partner and its general partner
seeking, among other things, an order directing the defendants to
immediately furnish the requested information and awarding the plaintiff
any resulting damages. A one day trial was held on September 29, 1997. On
December 5, 1997, the Court of Chancery issued a memorandum opinion and
order, holding that plaintiff is entitled to the requested information
regarding Unit holders. On December 15, 1997, defendants filed a Notice of
Appeal to the Supreme Court of Delaware, and briefing on that appeal is
currently in progress. The Court of Chancery has stayed enforcement of its
December 5, 1997 memorandum opinion and order pending resolution of
defendants' appeal.
5. Additional Information
Additional information, including the audited March 30, 1997 Financial
Statements and the Organization, Purpose and Summary of Significant
Accounting Policies, is included in the Partnership's Annual Report on Form
10-K for the fiscal year ended March 30, 1997 on file with the Securities
and Exchange Commission.
<PAGE>
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AMERICAN TAX CREDIT PROPERTIES II L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Material Changes in Financial Condition
As of December 30, 1997, Registrant has not experienced a significant change in
financial condition as compared to March 30, 1997. Principal changes in assets
are comprised of periodic transactions and adjustments and anticipated equity in
loss from operations of the Local Partnerships and payment of a capital
contribution to a Local Partnership. During the nine months ended December 30,
1997, Registrant received cash from interest earnings, maturity of bonds and
distributions from Local Partnerships and utilized cash for operating expenses,
investing in bonds and for a capital contribution to a Local Partnership. Cash
and cash equivalents and investments in bonds available-for-sale decreased, in
the aggregate, by approximately $53,000 during the nine months ended December
30, 1997, which decrease includes a net unrealized gain recorded on investments
in bonds of approximately $194,000, the amortization of net premium on
investments in bonds of approximately $33,000 and the accretion of zero coupon
bonds of approximately $31,000. During the nine months ended December 30, 1997,
the investment in Local Partnerships decreased as a result of Registrant's
equity in the Local Partnerships' net loss for the nine months ended September
30, 1997 of $2,085,294 and cash distributions received from Local Partnerships
of $160,558, partially offset by the increase in investment in Ann Ell
Apartments Associates, Ltd. of $184,503. Accounts payable and accrued expenses
and payable to general partner are comprised primarily of accrued administration
fees and management fees, respectively.
The Properties are principally comprised of subsidized and leveraged low-income
multifamily residential complexes located throughout the United States and
Puerto Rico. The rents of the Properties, many of which receive rental subsidy
payments pursuant to subsidy agreements ("HAP Contracts") are subject to
specific laws, regulations and agreements with federal and state agencies. Six
Local Partnerships' HAP Contracts, which cover certain rental units, are
scheduled to expire in 1998 after being renewed in 1997 for a one year period.
In addition, the Local Partnerships have various financing structures which
include (i) required debt service payments ("Mandatory Debt Service") and (ii)
debt service payments which are payable only from available cash flow subject to
the terms and conditions of the notes, which may be subject to specific laws,
regulations and agreements with appropriate federal and state agencies
("Non-Mandatory Debt Service or Interest"). During the nine months ended
September 30, 1997, revenue from operations and reserves of the Local
Partnerships have generally been sufficient to cover the operating expenses and
Mandatory Debt Service. Substantially all of the Local Partnerships are
effectively operating at or near break even levels, although certain Local
Partnerships' operating information reflects operating deficits that do not
represent cash deficits due to their mortgage and financing structure and the
required deferral of property management fees. However, as discussed below,
certain Local Partnerships' operating information indicates below break even
operations after taking into account their mortgage and financing structure and
any required deferral of property management fees.
The Local General Partners have informed Registrant that the Christian Street
Associates Limited Partnership (the "Christian Street Local Partnership") and
2000-2100 Christian Street Associates (the "2000 Christian Street Local
Partnership"), which have common Local General Partners and first mortgage
lenders, have not made the required principal and interest payments under their
first mortgage obligations since December 1996 and that the lender has declared
both mortgages in default. The Local General Partners have approached the lender
and are currently in the process of negotiating a workout; however the lender
has clearly indicated that in connection with any proposed workout, the Local
General Partners would be responsible for funding a portion of any remaining
operating deficit after taking into account the economic benefits of a workout.
However, the Local General Partners, which have fulfilled their respective
deficit guarantees, informed Registrant that they do not intend to continue to
solely fund the operating deficits of the properties. Such amounts would likely
be significant. There can be no assurance that any workout agreement with the
lender will be achieved. Of Registrant's total annual Low-income Tax Credits,
approximately 6% and 3% are allocated from the Christian Street Local
Partnership and the 2000 Christian Street Local Partnership, respectively, and
are scheduled to expire in 2000.
During the nine months ended September 30, 1997, Forest Village Housing
Partnership (the "Forest Village Local Partnership") incurred an operating
deficit of approximately $10,000. Although the property experienced occupancy
fluctuations throughout the first quarter, occupancy has stabilized at
approximately 94% and payments on the mortgages and real estate taxes are
current. Of Registrant's total annual Low-income Tax Credits, approximately 1%
is allocated from the Forest Village Local Partnership.
<PAGE>
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AMERICAN TAX CREDIT PROPERTIES II L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
The terms of the partnership agreement of De Queen Villas Limited Partnership
(the "De Queen Villas Local Partnership") require the Local General Partners of
the De Queen Villas Local Partnership to cause the management agent to defer
property management fees in order to avoid a default under the mortgage. The De
Queen Villas Local Partnership incurred an operating deficit for the nine months
ended September 30, 1997 of approximately $12,000 which includes property
management fees of approximately $9,000. Accordingly, the net operating deficit
was approximately $3,000. Of Registrant's total annual Low-income Tax Credits,
approximately 1% is allocated from the De Queen Villas Local Partnership.
The first mortgage of Ann Ell Apartments Associates, Ltd. (the "Ann Ell Local
Partnership") had been in default due to insufficient deposits to the
replacement reserve and the lender had alleged certain other incidents of
default including, among other things, inadequate funding of real estate tax and
insurance escrows and failure to procure certain minimum insurance coverage,
resulting in the lender filing a foreclosure action and a motion for summary
judgment. Registrant replaced the Local General Partner and the management agent
of the Ann Ell Local Partnership effective July 10, 1997 and advanced
approximately $185,000 to cure defaults and sufficiently fund the replacement
reserve and escrows. The foreclosure action has been voluntarily dismissed.
Littleton Avenue Community Village, L.P. (the "Littleton Local Partnership") is
a defendant in a lawsuit resulting from an accident in 1989 during the
construction of the complex owned by the Littleton Local Partnership. In
November 1995 the Littleton Local Partnership and one co-defendant were found
liable in the lawsuit, of which the Littleton Local Partnership's potential
liability is approximately $300,000. The Littleton Local Partnership has
appealed the result of the trial and has filed a lawsuit against the
construction period insurance companies, which were not co-defendants in the
lawsuit. Although the Local General Partner of the Littleton Local Partnership
expects the incident to be covered by insurance, it has agreed to indemnify the
Littleton Local Partnership and has established an escrow of approximately
$325,000 from development proceeds in the event the Littleton Local Partnership
is unsuccessful in its appeal and its action against the construction period
insurance companies.
Results of Operations
Registrant's operating results are dependent upon the operating results of the
Local Partnerships and are significantly impacted by the Local Partnerships'
policies. In addition, the operating results herein are not necessarily the same
for tax reporting. Registrant accounts for its investment in Local Partnerships
in accordance with the equity method of accounting, under which the investment
is carried at cost and is adjusted for Registrant's share of the Local
Partnership's results of operations and by any cash distributions received.
Equity in loss of each investment in Local Partnership allocated to Registrant
is recognized to the extent of Registrant's investment balance in each Local
Partnership. Any equity in loss in excess of Registrant's investment balance in
a Local Partnership is allocated to other partners' capital in each such Local
Partnership. As a result, the reported equity in loss of investment in Local
Partnerships is expected to decrease as Registrant's investment balances in the
respective Local Partnerships become zero. The combined statements of operations
of the Local Partnerships reflected in Note 3 to Registrant's financial
statements include the operating results of all Local Partnerships, irrespective
of Registrant's investment balances.
Cumulative losses and cash distributions in excess of investment in Local
Partnerships may result from a variety of circumstances, including a Local
Partnership's accounting policies, subsidy structure, debt structure and
operating deficits, among other things. Accordingly, cumulative losses and cash
distributions in excess of the investment are not necessarily indicative of
adverse operating results of a Local Partnership. See discussion above under
Material Changes in Financial Condition regarding certain Local Partnerships
currently operating below economic break even levels.
Three Months Ended December 30, 1997
For the three months ended December 30, 1997, Registrant had a net loss of
approximately $675,000, which included an equity in loss of investment in Local
Partnerships of approximately $572,000 for the three months ended September 30,
<PAGE>
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AMERICAN TAX CREDIT PROPERTIES II L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
1997. Registrant's loss from operations for the three months ended December 30,
1997 of approximately $103,000 was attributable to interest revenue of
approximately $87,000, exceeded by operating expenses of approximately $190,000.
Nonrecognition of losses in excess of Registrant's investment in certain Local
Partnerships during the period was approximately $82,000.
The Local Partnerships' net loss of approximately $730,000 for the three months
ended September 30, 1997 was attributable to rental and other revenue of
approximately $5,124,000, exceeded by operating and interest expenses (including
Non-Mandatory Interest) of approximately $4,538,000 and approximately $1,316,000
of depreciation and amortization expenses.
Three Months Ended December 30, 1996
For the three months ended December 30, 1996, Registrant had a net loss of
approximately $892,000, which included an equity in loss of investment in Local
Partnerships of approximately $805,000 for the three months ended September 30,
1996. Registrant's loss from operations for the three months ended December 30,
1996 of approximately $87,000 was attributable to interest revenue of
approximately $87,000, exceeded by operating expenses of approximately $174,000.
Nonrecognition of losses in excess of Registrant's investment in certain Local
Partnerships during the period was approximately $82,000.
The Local Partnerships' net loss of approximately $994,000 for the three months
ended September 30, 1996 was attributable to rental and other revenue of
approximately $5,105,000, exceeded by operating and interest expenses (including
Non-Mandatory Interest) of approximately $4,696,000 and approximately $1,403,000
of depreciation and amortization expenses.
Nine Months Ended December 30, 1997
For the nine months ended December 30, 1997, Registrant had a net loss of
approximately $2,351,000, which included an equity in loss of investment in
Local Partnerships of approximately $2,085,000 for the nine months ended
September 30, 1997. Registrant's loss from operations for the nine months ended
December 30, 1997 of approximately $266,000 was attributable to interest revenue
of approximately $267,000, exceeded by operating expenses of approximately
$533,000. Nonrecognition of losses in excess of Registrant's investment in
certain Local Partnerships during the period was approximately $298,000.
The Local Partnerships' net loss of approximately $2,685,000 for the nine months
ended September 30, 1997 was attributable to rental and other revenue of
approximately $15,371,000, exceeded by operating and interest expenses
(including Non-Mandatory Interest) of approximately $13,949,000 and
approximately $4,107,000 of depreciation and amortization expenses.
Nine Months Ended December 30, 1996
For the nine months ended December 30, 1996, Registrant had a net loss of
approximately $2,622,000, which included an equity in loss of investment in
Local Partnerships of approximately $2,387,000 for the nine months ended
September 30, 1996. Registrant's loss from operations for the nine months ended
December 30, 1996 of approximately $234,000 was attributable to interest revenue
of approximately $272,000, exceeded by operating expenses of approximately
$507,000. Nonrecognition of losses in excess of Registrant's investment in
certain Local Partnerships during the period was approximately $277,000.
The Local Partnerships' net loss of approximately $2,984,000 for the nine months
ended September 30, 1996 was attributable to rental and other revenue of
approximately $15,291,000, exceeded by operating and interest expenses
(including Non-Mandatory Interest) of approximately $14,034,000 and
approximately $4,241,000 of depreciation and amortization expenses.
<PAGE>
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AMERICAN TAX CREDIT PROPERTIES II L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Three and Nine Month Periods Ended December 30, 1997 v.
Three and Nine Month Periods Ended December 30, 1996
Registrant's operations for the three months ended December 30, 1997 resulted in
a net loss of approximately $675,000, as compared to a net loss of approximately
$892,000 for the three months ended December 30, 1996. The decrease in net loss
is primarily attributed to a decrease in the equity in loss of investment in
Local Partnerships of approximately $233,000, which is primarily the result of a
decrease in the net rental income of certain Local Partnerships, partially
offset by an increase in Registrant's professional fees of approximately $14,000
as a result of legal expenses incurred in connection with the matter described
in Note 4 to the financial statements.
Registrant's operations for the nine months ended December 30, 1997 resulted in
a net loss of approximately $2,351,000, as compared to a net loss of
approximately $2,622,000 for the nine months ended December 30, 1996. The
decrease in net loss is primarily attributed to a decrease in the equity in loss
of investment in Local Partnerships of approximately $302,000, which is
primarily the result of a decrease in the net rental income of certain Local
Partnerships, partially offset by an increase in Registrant's professional fees
of approximately $18,000 as a result of legal expenses incurred in connection
with the matter described in Note 4 to the financial statements.
<PAGE>
- ------------------------------------------------------------------------------
AMERICAN TAX CREDIT PROPERTIES II L.P.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
As discussed in Part I, Item 2 - Management's Discussion and Analysis
of Financial Condition and Results of Operations, Littleton Avenue
Community Village, L.P. (the "Littleton Local Partnership") is a
defendant in a lawsuit resulting from an accident in 1989 during the
construction of the complex owned by the Littleton Local Partnership.
In November 1995 the Littleton Local Partnership and one co-defendant
were found liable in the lawsuit, of which the Littleton Local
Partnership's potential liability is approximately $300,000. The
Littleton Local Partnership has appealed the result of the trial and
has filed a lawsuit against the construction period insurance
companies, which were not co-defendants in the lawsuit. Although the
Local General Partner of the Littleton Local Partnership expects the
incident to be covered by insurance, it has agreed to indemnify the
Littleton Local Partnership and has established an escrow of
approximately $325,000 from development proceeds in the event the
Littleton Local Partnership is unsuccessful in its appeal and its
action against the construction period insurance companies.
On July 16, 1997, Everest Properties, Inc. ("Everest") demanded certain
information with respect to the holders of Units. Everest stated that
the purpose of the demand was to assist Everest in making an offer to
Unit holders to purchase their Units and otherwise to communicate with
them concerning such an offer. On July 25, 1997, Registrant requested
certain information from Everest in order to assess the appropriateness
of the demand. To date, the information has not been provided. On July
28, 1997, Everest filed a complaint in the Court of Chancery of the
State of Delaware in and for New Castle County against the Registrant,
the General Partner and its general partner seeking, among other
things, an order directing the defendants to immediately furnish the
requested information and awarding the plaintiff any resulting damages.
A one day trial was held on September 29, 1997. On December 5, 1997,
the Court of Chancery issued a memorandum opinion and order, holding
that plaintiff is entitled to the requested information regarding Unit
holders. On December 15, 1997, defendants filed a Notice of Appeal to
the Supreme Court of Delaware, and briefing on that appeal is currently
in progress. The Court of Chancery has stayed enforcement of its
December 5, 1997 memorandum opinion and order pending resolution of
defendants' appeal.
As discussed in Part I, Item 2 - Management's Discussion and Analysis
of Financial Condition and Results of Operations, the first mortgage of
Ann Ell Apartments Associates, Ltd. (the "Ann Ell Local Partnership")
had been in default due to insufficient deposits to the replacement
reserve and the lender had alleged certain other incidents of default
including, among other things, inadequate funding of real estate tax
and insurance escrows and failure to procure certain minimum insurance
coverage, resulting in the lender filing a foreclosure action and a
motion for summary judgment. Registrant replaced the Local General
Partner and the management agent of the Ann Ell Local Partnership
effective July 10, 1997 and advanced approximately $185,000 to cure
defaults and sufficiently fund the replacement reserve and escrows. The
foreclosure action has been voluntarily dismissed.
Registrant is not aware of any other material legal proceedings.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None; see Items 1 and 5 regarding mortgage defaults of certain Local
Partnerships.
Item 4. Submission of Matters to a Vote of Security Holders
None
<PAGE>
- -------------------------------------------------------------------------------
AMERICAN TAX CREDIT PROPERTIES II L.P.
PART II - OTHER INFORMATION- (continued)
Item 5. Other Information
As discussed in Part I, Item 2 - Management's Discussion and Analysis
of Financial Condition and Results of Operations, the first mortgages
of both Christian Street Associates Limited Partnership and 2000-2100
Christian Street Associates are in default due to the non payment of
required principal and interest payments since December 1996. The Local
General Partners have approached the lender and are currently in the
process of negotiating a workout.
Item 6. Exhibits and Reports on Form 8-K
None
<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.
AMERICAN TAX CREDIT PROPERTIES II L.P.
(a Delaware limited partnership)
By: Richman Tax Credit Properties II L.P.,
General Partner
by: Richman Tax Credits Inc.,
general partner
Dated: February 13, 1998 /s/ Richard Paul Richman
----------------- -------------------------
Richard Paul Richman
President, Chief Executive Officer and
Director of the general partner of the
General Partner
Dated: February 13, 1998 /s/ Neal Ludeke
Neal Ludeke
Treasurer of the general partner
of the General Partner
(Principal Financial and Accounting
Officer of Registrant)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted
from the quarter ended December 30, 1997 Form 10-Q Balance Sheets
and Statements of Operations and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000842314
<NAME> American Tax Credit Properties, II L.P.
<MULTIPLIER> 1000
<CURRENCY> 1.00
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-30-1998
<PERIOD-START> MAR-31-1997
<PERIOD-END> DEC-30-1997
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<CASH> 509
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<RECEIVABLES> 68
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