<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: MARCH 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-20058
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(Exact name of registrant as specified in its charter)
CALIFORNIA 33-0316953
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3158 REDHILL AVENUE, SUITE 120, COSTA MESA, CA 92626
(Address of principal executive offices)
(714) 662-5565
(Registrant's telephone number, including area code)
N/A
(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>
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1996
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets, March 31, 1996 and December 31, 1995 3
Statement of Operations
For the three months ended March 31, 1996 and 1995 4
Statement of Partners' Equity
For the three months ended March 31, 1996 and 1995 5
Statement of Cash Flows
For the three months ended March 31, 1996 and 1995 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
2
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
BALANCE SHEETS
March 31, 1996 And December 31, 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 84,040 $ 84,504
Investment in limited
partnerships - Note 2 2,846,326 2,943,052
Other assets 319 358
---------- ----------
$ 2,930,685 $ 3,027,914
---------- ----------
---------- ----------
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Accrued fees and expenses due to
general partner and affiliates - Note 3 $ 511,738 $ 483,938
Partners' equity (deficit):
General partner (40,651) (39,401)
Limited partners (10,000 units
authorized, 7,450 units issued
and outstanding) 2,459,598 2,583,377
---------- ----------
Total partners' equity
2,418,947 2,543,976
---------- ----------
$ 2,930,685 $ 3,027,914
---------- ----------
---------- ----------
</TABLE>
UNAUDITED
See Accompanying Notes to Financial Statements
3
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
STATEMENT OF OPERATIONS
For the Three months Ended March 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Interest income $ 892 $ 914
------ ------
Operating expenses:
Amortization 3,726 3,726
Asset management fees (Note 3) 27,923 27,923
Legal and accounting 1,000 3,000
Other 272 1,567
------ -------
Total operating expenses 32,921 36,216
------ -------
Loss from operations (32,029) (35,302)
Equity in loss from limited partnerships (93,000) (108,755)
-------- --------
Net loss $ (125,029) $ (144,057)
-------- -------
-------- -------
Net loss allocated to:
General partner $ (1,250) $ (1,441)
-------- -------
-------- -------
Limited partners $ (123,779) $ (142,616)
-------- -------
-------- -------
Net loss per limited partner units
(7,450 units issued
and outstanding) $ (17) $ (19)
-------- -------
-------- -------
</TABLE>
UNAUDITED
See Accompanying Notes to Financial Statements
4
<PAGE>
WNC CALIFORNIA TAX CREDITS, L.P.
(A California Limited Partnership)
STATEMENT OF PARTNERS' EQUITY
For The Three months Ended March 31, 1996
FOR THE THREE MONTHS ENDED MARCH 31, 1996
<TABLE>
<CAPTION>
General Limited
Partner Partner Total
------- ------- -----
<S> <C> <C> <C>
Equity (deficit),
December 31, 1995 $ (39,401) $ 2,583,377 $ 2,543,976
Net loss for the three
months ended March 31, 1996 (1,250) (123,779) (125,029)
--------- --------- ---------
Equity (deficit),
March 31, 1996 $ (40,651) $ 2,459,598 $ 2,418,947
--------- --------- ---------
--------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 1995
General Limited
Partner Partner Total
------- ------- -----
<S> <C> <C> <C>
Equity (deficit),
December 31, 1994 $ (33,859) $ 3,132,021 $ 3,098,162
Net loss for the three months
ended March 31, 1995 (1,441) (142,616) (144,057)
--------- --------- ---------
Equity (deficit),
March 31, 1995 $ 35,300) $ 2,989,405 $ 2,954,105
--------- --------- ---------
--------- --------- ---------
</TABLE>
UNAUDITED
See Accompanying Notes to Financial Statements
5
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS
(A California Limited Partnership)
STATEMENT OF CASH FLOWS
For The Three months Ended March 31, 1996 and 1996
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows used by operating activities:
Net loss $ (125,029) $ (144,057)
Adjustments to reconcile net loss to net
cash used in operating activities:
Equity in loss of limited partnerships 93,000 108,755
Amortization 3,726 3,726
Change in other assets 39 (268)
Accrued fees and expense due to
general partner and affiliates 27,800 31,804
------ ------
Net cash used by operating activities (464) (40)
------ ------
Cash flows provide by investing activities:
Distribution from limited partnerships 0 2,752
------ ------
Net change in cash and cash equivalents (464) 2,712
------ ------
Cash and cash equivalents, beginning of period 84,504 93,726
------ ------
Cash and cash equivalents, end of period $ 84,040 $ 96,438
------ ------
------ ------
</TABLE>
UNAUDITED
See Accompanying Notes to Financial Statements
6
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
WNC California Housing Tax Credits, L.P., was formed on March 15, 1988 under
the laws of the State of California. The Partnership was formed to invest
primarily in other limited partnerships which will own and operate multi-family
housing complexes that qualify for low income housing credits.
The information contained in the following notes to the financial statements is
condensed from that which would appear in the annual financial statements;
accordingly, the financial statements included herein should be reviewed in
conjunction with the financial statements and related notes thereto contained in
the WNC California Housing Tax Credits, L.P. (the "Partnership") Annual Report
for the year ended December 31, 1995.
In the opinion of the Partnership, the accompanying unaudited financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position as of March 31,
1996 and changes in cash flows for the three month period then ended. Accounting
measurements at interim dates inherently involve greater reliance on estimates
than at year end. The results of operations for the interim period presented
are not necessarily indicative of the results for the entire year.
The general partner is WNC & Associates, Inc. Wilfred N. Cooper Sr., through
the Cooper Revocable Trust, owns 70% of the outstanding stock of WNC &
Associates, Inc. John B. Lester is the original limited partner of the
Partnership and, through the Lester Family Trust, owns 30% of the outstanding
stock of WNC & Associates, Inc.
ALLOCATIONS UNDER THE TERMS OF THE PARTNERSHIP AGREEMENT
The General Partner has a 1% interest in operating profits and losses of the
Partnership. The limited partners will be allocated the remaining 99% interest
in proportion to their respective investments.
7
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 1 - ORGANIZATION AND OTHER MATTERS (CONTINUED)
After the limited partners have received sale or refinancing proceeds equal to
their capital contributions and their return on investment (as defined in the
Partnership's Agreement of Limited Partnership) and the General Partner has
received a subordinated disposition fee (as described in Note 2 below), any
additional sale or refinancing proceeds will be distributed 90% to the limited
partners (in proportion to their respective investments) and 10% to the General
Partner.
METHOD OF ACCOUNTING FOR INVESTMENT IN LIMITED PARTNERSHIPS
The Partnership accounts for its investments in limited partnerships using the
equity method of accounting, whereby the Partnership adjusts its investment
balance for its share of each limited partnership's results of operations and
for any distributions received. Costs incurred by the Partnership in acquiring
the investments in limited partnerships are capitalized as part of the
investment.
CASH AND CASH EQUIVALENTS
The Partnership considers all bank certificates of deposit with a maturity of
less than three months to be cash equivalents.
NOTE 2 - INVESTMENT IN LIMITED PARTNERSHIPS
As of March 31, 1996, the Partnership had acquired limited partnership interests
in eleven limited partnerships which own and operate eleven apartment complexes.
The Partnership, as a limited partner, is a 99% owner and is entitled to 99% of
the operating profits and losses of the limited partnerships.
The following is a summary of the investment in limited partnerships and
reconciliation to the limited partnership accounts as of March 31, 1996 and
December 31, 1995:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Investment Balance -
Beginning of period $ 2,943,052 $ 3,376,715
Equity in loss of limited partnership (93,000) (412,291)
Distributions (5,402)
Amortization of capitalized
acquisition costs (3,726) (15,970)
--------- ---------
Investment Balance - End of period $ 2,846,326 $ 2.943.052
--------- ---------
--------- ---------
</TABLE>
8
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE 2 - INVESTMENT IN LIMITED PARTNERSHIPS (CONTINUED)
Selected financial information for the three months ended March 31, 1996 and
1995 from the combined financial statements of the limited partnerships in which
the partnership has invested is as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Total Revenue $446,000 $ 439,000
Interest expense 92,000 102,000
Depreciation 158,000 174,000
Operating expenses 290,000 273,000
------- -------
Total expenses 540,000 549,000
------- -------
Net Loss (94,000) (110,000)
------- -------
Net loss allocable to the Partnership $(93,000) $(108.755)
------- -------
------- -------
</TABLE>
NOTE 3 - RELATED PARTY TRANSACTIONS
Under the terms of the Agreement of the Limited Partnership Agreement, the
Partnership is obligated to the general partner or its affiliates for an annual
management fee equal to .5% of the invested assets of the limited partnerships.
A fee of $27,923 and $27,923 was incurred for the three months ended March 31,
1996 and 1995, respectfully, and is reflected as an expense of the Partnership.
NOTE 4 - INCOME TAXES
No provision for income taxes has been made as the liability for income taxes is
an obligation of the partners of the Partnership.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's primary source of capital was the proceeds from its offering.
The Partnership completed raising funds in July 1990 from investors by means of
a public offering. These funds were applied to the acquisition of investments
in eleven limited partnerships, acquisition fees, the establishment of reserves,
the payment of operating expenses and the payment of expenses of this offering.
The Partnership has paid all capital contributions due for its investments in
Limited Partnerships and has no further obligations for its property
investments.
Overall, as reflected in its Statement of Cash Flows, the Partnership had a net
decrease in cash and cash equivalents of approximately $500 for the three months
ended March 31, 1996. This decrease in cash resulted as cash used by operating
activities exceeded cash provided by operating activities. Cash used by the
Partnership's operating activities consisted primarily of payments for operating
fees and expenses. Cash provided by operations consisted primarily of interest
received on cash deposits. The major components of all these activities are
discussed in greater detail below.
The Partnership's investments are not readily marketable and may be affected by
adverse general economic conditions which, in turn, could substantially increase
the risk of operating losses for the apartment complexes, the limited
partnerships and the Partnership. These problems may result from a number of
factors, many of which cannot be controlled by the General Partner.
The Partnership's current working capital reserves of approximately $84,000 is
anticipated to be sufficient to satisfy general working capital and
administrative expense requirements of the Partnership excluding payment of the
asset management fee as well as expenses attendant to the preparation of tax
returns and reports to the limited partners and other investor servicing
obligations of the Partnership. Liquidity would, however, be adversely affected
by unanticipated or greater than anticipated operating costs. To the extent
that working capital reserves are insufficient to satisfy the cash requirements
of the Partnership, it is anticipated that additional funds would be sought
through bank loans or other institutional financing. The General Partner may
also apply any cash distributions received from the limited partnerships for
such purposes or to replenish or increase working capital reserves.
It is not expected that any of the limited partnerships in which the Partnership
will invest will generate cash from operations sufficient to provide
distributions to the limited partners in any significant amount. Such cash from
operations, if any, would first be used to meet operating expenses of the
Partnership, including the payment of the asset management fee to the General
Partner.
Under its partnership agreement, the Partnership does not have the ability to
assess its partners for additional capital contributions to provide capital if
needed by the Partnership or limited partnerships. Accordingly, if
circumstances arise that cause the limited partnerships to require capital in
addition to that contributed by the Partnership and any equity of the general
partners of the limited partnerships,
10
<PAGE>
the only sources from which such capital needs will be able to be satisfied
(other than the limited reserves available at the Partnership level) will be (i)
third-party debt financing (which may not be available, as the apartment
complexes owned by the limited partnerships are already substantially
leveraged), (ii) additional equity contributions or advances of the general
partners of the limited partnerships, (iii) other equity source (which could
adversely affect the Partnership's interest in tax credits, cash flow and/or
proceeds of sale or refinancing of the apartment complexes and result in adverse
tax consequences to the limited partners), or (iv) the sale or disposition of
the apartment complexes (which could have the same adverse effects as discussed
in (iii) above). There can be no assurance that funds from any of such sources
would be readily available in sufficient amounts to fund the capital requirement
of the limited partnerships in question. If such funds are not available, the
limited partnerships would risk foreclosure on their apartment complexes if they
were unable to renegotiate the terms of their first mortgages and any other debt
secured by the apartment complexes to the extent the capital requirements of the
limited partnerships relate to such debt.
The Partnership's capital needs and resources are expected to be relatively
stable over the holding periods of the investments.
RESULTS OF OPERATIONS
Consistent with the Partnership's investment objectives, each limited
partnership is generating federal low income housing credits for a period of
approximately ten years, and (as discussed below) is generating losses until
sale of the apartment complex(es). Additionally, eight of the limited
partnerships are generating California low income housing credits for a period
of four years.
As reflected on its Statements of Operations, the Partnership has a loss of
approximately $125,000 and $144,000 for the three months ended March 31, 1996
and 1995. The components items of revenue and expense are discussed below.
REVENUE - Partnership revenues consisted entirely of interest earned on cash
deposits held in financial institutions as reserves. Interest revenue in future
years will be a function of prevailing interest rates and the amount of cash
balances.
EXPENSES - The most significant component of operating expenses is, and is
expected to be, the asset management fee. The asset management fee is equal to
0.5% of invested assets in limited partnerships (the sum of the Partnership's
capital contributions to the limited partnerships plus the Partnership's share
of the debts related to the apartment complexes owned by such limited
partnerships). The amount of the asset management fee is expected to be the
same in future periods as the amount of invested assets is expected to remain
stable until disposition of the underlying apartment complexes.
Amortization expense consists of the amortization over a period of 30 years of
the 9% selection fee and other expenses attributable to the acquisition of
limited partnership interests.
11
<PAGE>
Office expenses consists of the Partnership's administrative expenses, such as
bank charges and investor reporting expenses. Although these amounts are
expected to remain consistent on an annual basis, there may be variations
between quarters depending on the timing of preparing and mailing reports to
investors.
EQUITY IN LOSSES FROM LIMITED PARTNERSHIPS - The Partnership's equity in losses
from limited partnerships is equal to 99% of the aggregate net loss of the
limited partnerships. After rent-up, the limited partnerships are expected to
generate losses during each year of operations; this is so because, although
rental income is expected to exceed cash operating expenses, depreciation and
amortization deductions claimed by the limited partnerships are expected to
exceed net rental income.
12
<PAGE>
PART II - OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) None
(b) No reports on Form 8-K were filed during the quarter ended
March 31, 1996.
13
<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.
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(Registrant)
By: WNC & ASSOCIATES, INC., General Partner
By: /s/ John B. Lester, Jr.
--------------------------------
John B. Lester, Jr.,
President
Date: 5/13/96
------------------------
By: /s/ Theodore M. Paul
-------------------------------------------
Theodore M. Paul,
Vice President-Finance
Date: 5/13/96
------------------------
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 84,040
<SECURITIES> 0
<RECEIVABLES> 319
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 84,359
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,930,685
<CURRENT-LIABILITIES> 511,738
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,418,947
<TOTAL-LIABILITY-AND-EQUITY> 2,930,685
<SALES> 0
<TOTAL-REVENUES> 892
<CGS> 0
<TOTAL-COSTS> 32,921
<OTHER-EXPENSES> 93,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (125,029)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (125,029)
<EPS-PRIMARY> (17)
<EPS-DILUTED> 0
</TABLE>
