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 September 30, 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.
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
California 33-0316953
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
3158 Redhill Avenue, Suite 120, Costa Mesa, CA 92626
(714) 662-5565
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
INDEX
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets 3
September 30, 1996 and December 31, 1995
Statement of Operations
For the Three and Nine Months Ended
September 30, 1996 and 1995 4
Statement of Partners' Equity
For The Nine Months Ended September 30, 1996 and 1995 5
Statement of Cash Flows
For The Nine Months Ended September 30, 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
<PAGE>
FINANCIAL STATEMENTS
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
BALANCE SHEETS
September 30, 1996 and December 31, 1995
1996 1995
---- ----
ASSETS
Cash and cash equivalents $ 83,794 $ 84,504
Investment in limited
partnerships - Note 2 2,625,839 2,943,052
Other assets - Note 4
37 358
--- ---
$ 2,709,670 $ 3,027,914
========== =========
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Accrued fees and expenses due to
general partner and affiliates - Note 3 $ 567,088 $ 483,938
Partners' equity (deficit):
General partner (43,415) (39,401)
Limited partners (10,000 units
authorized, 7,450 units issued
and outstanding) 2,185,997 2,583,377
---------- ---------
Total partners' equity 2,142,582 2,543,976
---------- ---------
$ 2,709,670 $ 3,027,914
========== =========
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 and Nine Months Ended September 30, 1996 and 1995
1996 1995
---- ----
Three Nine Three Nine
Months Months Months Months
------ ------ ------ ------
Interest income $ 916 $ 2,660 $ 978 $ 2,914
-------- -------- ------ ----------
Operating expenses:
Amortization 3,726 11,178 3,992 11,978
Asset management fees (Note 4) 27,923 83,769 27,922 83,768
Legal and accounting - 5,175 7,000
Other 477 6,932 1,408 9,748
-------- ------- ------- -------
Total operating expenses 32,126 107,054 33,322 112,494
------ ------- ------ -------
Loss from operations (31,210) (104,394) (32,344) (109,580)
Equity in loss from
limited partnerships (99,000) (297,000) (119,812) (357,302)
-------- --------- -------- ---------
Net loss $ (130,210) $ (401,394) $ (152,156) $ (466,882)
========= ========= ========= =========
Net loss allocated to:
General partner $ (1,302) $ (4,014) $ (1,522) $ (4,669)
========= ======= ======= ======
Limited partners $ (128,908) $ (397,380) $ (150,634) $(462,213)
========= ========= ========= =========
Net loss per limited
partner units (7,450 units
issued and outstanding) $ (17) $ (53) $ (20) $ (62)
=========== ======== ====== ======
UNAUDITED
See Accompanying Notes to Financial Statements
4
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
STATEMENT OF PARTNERS' EQUITY For The
Nine Months Ended September 30, 1996 and 1995
For The Nine Months Ended September 30, 1996
General Limited
Partner Partner Total
------- ------- -----
Equity (deficit), December 31, 1995 $ (39,401) $2,583,377 $2,543,976
Net loss for the nine months ended
September 30, 1996 (4,014) (397,380) (401,394)
------ ---------- ---------
Equity (deficit), September 30, 1996 $ (43,415) $2,185,997 $2,142,582
======== ========== =========
For The Nine Months Ended September 30, 1995
General Limited
Partner Partner Total
------- ------- -----
Equity (deficit), December 31, 1994 $ (33,859) $3,132,021 $2,098,162
Net loss for the nine months ended
September 30, 1995 (4,669) (462,213) (466,882)
----------- ----------- --------
Equity (deficit), September 30, 1995 $ (38,528) $ 2,669,808 $2,631,280
========= ========== =========
UNAUDITED
See Accompanying Notes to Financial Statements
5
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
STATEMENT OF CASH FLOWS For The
Nine Months Ended September 30, 1996 and 1995
1996 1995
---- ----
Cash flows used by operating activities:
Net loss $(401,394) $ (466,882)
Adjustments to reconcile net loss to
net cash used in operating activities:
Equity in loss of limited partnerships 297,000 357,302
Amortization 11,178 11,978
Asset management fee 83,769 83,768
Change in other assets 321 (291)
Accrued fees and expense due
to general partner and affiliates (619) 506
------- -------
Net cash used by operating activities (9,745) (13,619)
------- -------
Cash flows provide by investing activities:
Distribution from limited partnerships 9,035 5,401
------ --------
Cash flows used by financing activities:
Repayment of original limited partner capital (1,500)
------
Net decrease in cash and cash equivalents (710) (9,718)
Cash and cash equivalents, beginning of period 84,504 93,726
------- -------
Cash and cash equivalent, end of period $ 83,794 $ 84,008
======= =======
UNAUDITED
See Accompanying Notes to Financial Statements
6
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
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. 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.
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 September 30,
1996 and the results of operations and changes in cash flows for the nine months
ended.
Organization
The Partnership was formed on September 15, 1988 under the laws of the State of
California. The Partnership was formed to invest, as a limited partner, in other
limited partnerships which will acquire, develop, rehabilitate, own and operate
apartment complexes. All eleven of the apartment complexes qualify for federal
low income housing tax credits and eight of the apartment complexes qualify for
California low income housing tax credits.
WNC & Associates, Inc., a California corporation and Wilfred N. Cooper, Sr. are
the general partners (collectively the "General Partner") of the Partnership.
The Cooper Revocable Trust is the principal shareholder of WNC & Associates,
Inc.
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
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 six months to be cash equivalents.
NOTE 2 - INVESTMENT IN LIMITED PARTNERSHIPS
As of September 30, 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 September 30, 1996 and
December 31, 1995:
1996 1995
---- ----
Investment balance,
beginning of period $ 2,943,052 $ 3,376,715
Equity in loss of limited
partnership (297,000) (412,291)
Distributions (9,035) (5,402)
Amortization of capitalized
acquisition costs (11,178) (15,970)
------- -------
Investment balance,
end of period $ 2,625,839 $ 2,943,052
========== ==========
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 nine months ended September 30, 1996 and
1995 from the combined financial statements of the limited partnerships in which
the partnership has invested is as follows:
1996 1995
---- ----
Total revenue $ 1,337,000 $ 1,273,000
---------- ---------
Interest expense 293,000 308,000
Depreciation 475,000 509,000
Operating expenses 869,000 817,000
-------- -------
Total expenses 1,637,000 1,634,000
---------- ---------
Net loss $ ($300,000) $ (361,000)
========== =========
Net loss allocable to the
Partnership $ ($297,000) $ ($357,390)
========== ==========
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 $83,769 and $83,768 was incurred for the nine months ended September
30, 1996 and 1995 and is reflected as an expense of the Partnership.
NOTE 4 - OTHER ASSETS
Other assets is presented net of accumulated amortization of $59,142 at
September 30, 1996 and December 31, 1995.
NOTE 5 - 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 net
decreases in cash and cash equivalents of approximately $700 and $9,700 for the
nine months ended September 30, 1996 and 1995. This decrease in cash resulted as
cash used by operating activities exceeded cash provided by investing activities
and operating activities. Cash used by the Partnership's operating activities
consisted primarily of payments for operating fees and expenses. Cash provided
by investing activities consisted of distributions from limited partnerships;
cash provided 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 $82,000 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.
10
<PAGE>
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, 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 $401,000 and $467,000 the nine months ended September 30, 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.
11
<PAGE>
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.
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 1. Legal Proceedings
None
Item 6. Exhibits and Reports on Form 8-K
1. None.
No reports on Form 8-K were filed during the quarter ended September
30, 1996.
13
<PAGE>
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.
By: WNC & Associates, Inc. General Partner
By:/s/John B. Lester, Jr.
- -------------------------
John B. Lester, Jr. President- WNC & Associates, Inc.
Date: 11/12/96
By:/s/ Theodore M. Paul
- -----------------------
Theodore M. Paul Vice President-Finance, WNC & Associates, Inc.
Date: 11/12/96
14
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<NAME> WNC CALIFORNIA DHOUSING TAX CREDITS, L.P.
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
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