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, 2000
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.
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
(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 ___ No X .
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
INDEX TO FORM 10 - Q
For the Quarter Ended September 30, 2000
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets 2
September 30, 2000 and March 31, 2000
Statements of Operations
For the three and six months ended September 30, 2000 and 1999 3
Statement of Partners' Equity (Deficit)
For the six months ended September 30, 2000 4
Statements of Cash Flows
For the six months ended September 30, 2000 and 1999 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risks 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
1
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, March 31,
2000 2000
---------------- ----------------
(unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 41,791 $ 47,877
Investments in limited partnerships, net (Note 2) 1,052,395 1,187,690
--------------- ----------------
$ 1,094,186 $ 1,235,567
=============== ================
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities:
Accrued asset management fee due to
General Partner $ 1,013,323 $ 957,395
--------------- ----------------
Partners' equity (deficit):
General partner (64,032) (62,059)
Limited partners (10,000 units
authorized, 7,450 units issued
and outstanding) 144,895 340,231
--------------- ----------------
Total partners' equity 80,863 278,172
--------------- ----------------
$ 1,094,186 $ 1,235,567
=============== ================
</TABLE>
See accompanying notes to financial statements
2
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
For the Three and Six Months Ended September 30, 2000 and 1999
(unaudited)
<TABLE>
<CAPTION>
2000 1999
------------------------------------ -----------------------------------
Three Months Six Months Three Months Six Months
------------------ -------------- ------------------ --------------
<S> <C> <C> <C> <C>
Interest income $ 483 $ 963 $ 463 $ 932
------------------ -------------- ------------------ --------------
Operating expenses:
Amortization (Note 2) 3,726 7,452 3,726 7,452
Asset management fees 27,964 55,928 27,964 55,928
Legal and accounting 2,803 4,141 2,503 7,581
Other 1,328 3,399 1,345 3,173
------------------ -------------- ------------------ --------------
Total operating expenses 35,821 70,920 35,538 74,134
------------------ -------------- ------------------ --------------
Losses from operations (35,338) (69,957) (35,075) (73,202)
Equity in losses of
limited partnerships (Note 2) (63,095) (127,352) (82,637) (165,274)
------------------ -------------- ------------------ --------------
Net loss $ (98,433) $ (197,309) $ (117,712) $ (238,476)
================== ============== ================== ==============
Net loss allocated to:
General partner $ (984) $ (1,973) $ (1,177) $ (2,385)
================== ============== ================== ==============
Limited partners $ (97,449) $ (195,336) $ (116,535) $ (236,091)
================== ============== ================== ==============
Net loss per limited partnership unit $ (13) $ (26) $ (16) $ (32)
================== ============== ================== ==============
Outstanding weighted limited
partner units 7,450 7,450 7,450 7,450
================== ============== ================== ==============
</TABLE>
See accompanying notes to financial statements
3
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
STATEMENT OF PARTNERS' EQUITY (DEFICIT)
For the Six Months Ended September 30, 2000
(unaudited)
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
------------------ --------------- ------------------
<S> <C> <C> <C>
Partners' equity (deficit) at March 31, 2000 $ (62,059) $ 340,231 $ 278,172
Net loss
(1,973) (195,336) (197,309)
------------------ --------------- ------------------
Partners' equity (deficit) at September 30, 2000 $ (64,032) $ 144,895 $ 80,863
================== =============== ==================
</TABLE>
See accompanying notes to financial statements
4
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
For the Six Months Ended September 30, 2000 and 1999
(unaudited)
<TABLE>
<CAPTION>
2000 1999
-------------------- -----------------
Cash flows from operating activities:
<S> <C> <C>
Net loss $ (197,309) $ (238,476)
Adjustments to reconcile net loss to net
cash used in operating activities:
Amortization 7,452 7,452
Equity in losses of limited partnerships 127,352 165,274
Change in accrued fees and expense due to
General Partner and affiliates 55,928 53,415
-------------------- -----------------
Net cash used in operating activities (6,577) (12,335)
-------------------- -----------------
Cash flows from investing activities:
Distributions from limited partnerships 491 2,921
-------------------- -----------------
Net decrease in cash and cash equivalents (6,086) (9,414)
Cash and cash equivalents, beginning of period 47,877 61,123
-------------------- -----------------
Cash and cash equivalents, end of period $ 41,791 $ 51,709
==================== =================
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
Taxes paid $ 800 $ 800
==================== =================
</TABLE>
See accompanying notes to financial statements
5
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
September 30, 2000
(unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
The accompanying condensed consolidated unaudited financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q for
quarterly reports under Section 13 or 15(d) of the Securities Exchange Act of
1934. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three and six months ended September 30,
2000 are not necessarily indicative of the results that may be expected for the
fiscal year ending March 31, 2001. For further information, refer to the
financial statements and footnotes thereto included in the Partnership's annual
report on Form 10-K for the fiscal year ended March 31, 2000.
Organization
WNC California Housing Tax Credits, L.P., a California Limited Partnership (the
"Partnership"), was formed on September 15, 1988 under the laws of the State of
California. The Partnership was formed to invest primarily in other limited
partnerships (the "Local Limited Partnerships") which own and operate
multi-family housing complexes (the "Housing Complex") that are eligible for low
income housing tax credits. The local general partners (the "Local General
Partners") of each Local Limited Partnership retain responsibility for
maintaining, operating and managing the Housing Complex.
WNC & Associates, Inc., a California corporation and Wilfred N. Cooper, Sr. are
the general partners (collectively the "General Partner") of the Partnership.
Wilfred N. Cooper, Sr., through the Cooper Revocable Trust, owns 66.8% of the
outstanding stock of Associates. John B. Lester, Jr. was the original limited
partner of the Partnership and owns, through the Lester Family Trust, 28.6% of
the outstanding stock of Associates. Wilfred N. Cooper, Jr., President of WNC,
owns 2.1% of the outstanding stock of WNC. The business of the Partnership is
conducted primarily through Associates, as the Partnership has no employees of
its own.
The Partnership Agreement authorized the sale of up to 10,000 units at $1,000
per Unit ("Units"). The offering of Units concluded in October 1990 at which
time 7,450 Units representing subscriptions in the amount of $7,450,000, had
been accepted. The General Partners have a 1% interest in operating profits and
losses, taxable income and losses, in cash available for distribution from the
Partnership and tax credits of the Partnership. The limited partners will be
allocated the remaining 99% of these items in proportion to their respective
investments.
After the limited partners have received proceeds from a sale or refinancing
equal to their capital contributions and their return on investment (as defined
in the Partnership Agreement) and the General Partners have received proceeds
equal to their capital contributions from the remainder, any additional sale or
refinancing proceeds will be distributed 99% to the limited partners (in
proportion to their respective investments) and 1% to the General Partners.
Risks and Uncertainties
The Partnership's investments in Local Limited Partnerships are subject to the
risks incident to the management and ownership of low-income housing and to the
management and ownership of multi-unit residential real estate. Some of these
risks are that the low income housing credit could be recaptured and that
neither the Partnership's investments nor the Housing Complexes owned by the
Local Limited Partnerships will be readily marketable. To the extent the Housing
Complexes receive government financing or operating subsidies, they may be
subject to one or more of the following risks: difficulties in obtaining tenants
for the Housing Complexes; difficulties in obtaining rent increases; limitations
on cash distributions; limitations on sales or refinancing of Housing Complexes;
limitations on transfers of Local Limited Partnership Interests; limitations on
6
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
September 30, 2000
(unaudited)
NOTE 1 - ORGANIZATION AND OTHER MATTERS, continued
removal of Local General Partners; limitations on subsidy programs; and possible
changes in applicable regulations. The Housing Complexes are or will be subject
to mortgage indebtedness. If a Local Limited Partnership does not make its
mortgage payments, the lender could foreclose resulting in a loss of the Housing
Complex and low income housing credits. As a limited partner of the Local
Limited Partnerships, the Partnership will have very limited rights with respect
to management of the Local Limited Partnerships, and will rely totally on the
Local General Partners of the Local Limited Partnerships for management of the
Local Limited Partnerships. The value of the Partnership's investments will be
subject to changes in national and local economic conditions, including
unemployment conditions, which could adversely impact vacancy levels, rental
payment defaults and operating expenses. This, in turn, could substantially
increase the risk of operating losses for the Housing Complexes and the
Partnership. In addition, each Local Limited Partnership is subject to risks
relating to environmental hazards and natural disasters which might be
uninsurable. Because the Partnership's operations will depend on these and other
factors beyond the control of the General Partner and the Local General
Partners, there can be no assurance that the anticipated low income housing
credits will be available to Limited Partners.
In addition, Limited Partners are subject to risks in that the rules governing
the low income housing credit are complicated, and the use of credits can be
limited. The only material benefit from an investment in Units may be the low
income housing credits. There are limits on the transferability of Units, and it
is unlikely that a market for Units will develop. All management decisions will
be made by the General Partners.
Method of Accounting For Investments 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 the Local Limited Partnership's results of operations
and for any distributions received. The accounting policies of the Local Limited
Partnerships are consistent with those of the Partnership. Costs incurred by the
Partnership in acquiring the investments are capitalized as part of the
investment and are being amortized over 30 years.
Offering Expenses
Offering expenses consist of underwriting commissions, legal fees, printing,
filing and recordation fees, and other costs incurred with selling limited
partnership interests in the Partnership. WNC is obligated to pay all offering
and organization costs in excess of 15% (including sales commissions) of the
total offering proceeds. Offering expenses are reflected as a reduction of
limited partners' capital and amounted to $946,704 at the end of all periods
presented.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period.
Actual results could materially differ from those estimates.
Cash and Cash Equivalents
The Partnership considers all highly liquid investments with remaining
maturities of three months or less when purchased to be cash equivalents. As of
September 30 and March 31, 2000, , the Partnership had no cash equivalents.
7
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
September 30, 2000
(unaudited)
NOTE 1 - ORGANIZATION AND OTHER MATTERS, continued
Net Loss Per Limited Partner Unit
Net loss per limited partnership unit is calculated pursuant to Statement of
Financial Accounting Standards No. 128, Earnings Per Share. Net loss per unit
includes no dilution and is computed by dividing loss available to limited
partners by the weighted average number of units outstanding during the period.
Calculation of diluted net loss per unit is not required.
NOTE 2 - INVESTMENT IN LIMITED PARTNERSHIPS
As of the periods presented, the Partnership has acquired limited partnership
interests in eleven Local Limited Partnerships each of which owns one Housing
Complex consisting of an aggregate of 433 apartment units. The respective
general partners of the Local Limited Partnerships manage the day to day
operations of the entities. Significant Local Limited Partnership business
decisions require approval from the Partnership. The Partnership, as a limited
partner, is generally entitled to 99%, as specified in the Local Limited
Partnership agreements, of the operating profits and losses, taxable income and
losses, and tax credits of the Local Limited Partnerships.
Equity in losses of the local limited partnerships is recognized in the
financial statements until the related investment account is reduced to a zero
balance. Losses incurred after the investment account is reduced to zero are not
recognized. If the Local Limited Partnerships report net income in future years,
the Partnership will resume applying the equity method only after its share of
such net income equals the share of net losses not recognized during the
period(s) the equity method was suspended.
Distributions received by limited partners are accounted for as a reduction of
the investment balance. Distributions received after the investment has reached
zero are recognized as income. During the six months ended September 30, 2000
and the year ended March 31, 2000, three investment accounts in Local Limited
Partnerships reached a zero balance.
Following is a summary of the equity method activity of the investments in Local
Limited Partnerships for the periods presented:
<TABLE>
<CAPTION>
For the Six Months For the Year
Ended September 30, Ended March 31,
2000 2000
--------------------- -------------------
<S> <C> <C>
Investments per balance sheet,
beginning of period $ 1,187,690 $ 1,508,351
Equity in losses of limited
partnerships (127,352) (300,256)
Distributions received (491) (5,501)
Amortization of paid
acquisition fees and costs (7,452) (14,904)
--------------------- -------------------
Investments per balance sheet,
end of period $ 1,052,395 $ 1,187,690
===================== ===================
</TABLE>
8
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
September 30, 2000
(unaudited)
NOTE 2 - INVESTMENT IN LIMITED PARTNERSHIPS, continued
Selected financial information for the six months ended September 30 from the
unaudited combined financial statements of the limited partnerships in which the
partnership has invested is as follows:
<TABLE>
<CAPTION>
COMBINED CONDENSED STATEMENTS OF OPERATIONS
2000 1999
--------------------- --------------------
<S> <C> <C>
Revenues $ 925,000 $ 1,065,000
--------------------- --------------------
Expenses
Interest expense 201,000 351,000
Depreciation 311,000 301,000
Operating expenses 618,000 625,000
--------------------- --------------------
Total expenses
1,130,000 1,277,000
--------------------- --------------------
Net loss $ (205,000) $ (212,000)
===================== ====================
Net loss allocable to the Partnership $ (204,000) $ (210,000)
===================== ====================
Net loss recorded by the Partnership $ (127,000) $ (165,000)
===================== ====================
</TABLE>
Certain Local Limited Partnerships have incurred significant operating losses
and have working capital deficiencies. In the event these Local Limited
Partnerships continue to incur significant operating losses, additional capital
contributions by the Partnership and/or the Local General Partners may be
required to sustain operations of such Local Limited Partnerships. If additional
capital contributions are not made when they are required, the Partnership's
investment in certain of such Local Limited Partnerships could be impaired.
NOTE 3 - RELATED PARTY TRANSACTIONS
The Partnership has no officers, employees, or directors. However, under the
terms of the Partnership Agreement the Partnership is obligated to the General
Partner or its affiliates during the current or future years for the following
fees:
(a) Annual Asset Management Fee. An annual asset management fee in an amount
equal to 0.5% of the Invested Assets of the Partnership, as defined.
"Invested Assets" means the sum of the Partnership's investment in Local
Limited Partnerships and the Partnership's allocable share of the amount of
the mortgage loans on and other debts related to the Housing Complexes
owned by such Local Limited Partnerships. Fees of $55,928 were incurred
during each of the six months ended September 30, 2000 and 1999. The
Partnership paid the General Partners and or their affiliates $0 of those
fees during each of the six months ended September 30, 2000 and 1999.
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
This Quarterly Report contains forward-looking statements concerning the
Partnership's anticipated future revenues and earnings, adequacy of future cash
flow and related matters. These forward-looking statements include, but are not
limited to, statements containing the words "expect", "believe", "will", "may",
"should", "project", "estimate", and like expressions, and the negative thereof.
These statements are subject to risks and uncertainties that could cause actual
results to differ materially from the statements, including competition, as well
as those risks described in the Partnership's SEC reports, including the
Partnership's Form 10-K filed pursuant to the Securities and Exchange Act of
1934 on June 29, 2000.
The following discussion and analysis compares the results of operations
for the three and six months ended September 30, 2000 and 1999, and should be
read in conjunction with the condensed consolidated financial statements and
accompanying notes included within this report.
Financial Condition
The Partnership's assets at September 30, 2000 consisted primarily of $42,000 in
cash and aggregate investments in the eleven Local Limited Partnerships of
$1,052,000. Liabilities at September 30, 2000 primarily consisted of $1,013,000
of accrued asset management fees due to the General Partner.
Results of Operations
Three Months Ended September 30, 2000 Compared to the and Three Months Ended
September 30, 1999. The Partnership's net loss for the three months ended
September 30, 2000 was $(98,000), reflecting a decrease of $20,000 from the
$(118,000) net loss experienced for the three months ended September 30, 1999.
The decline in net loss is primarily due to equity in losses from limited
partnerships which declined by $20,000 to $(63,000) for the three months ended
September 30, 2000 from $(83,000) for the three months ended September 30, 1999.
This decrease was a result of the Partnership not recognizing certain losses of
the Local Limited Partnerships. The investments in such Local Limited
Partnerships had reached $0 at September 30, 2000. Since the Partnership's
liability with respect to its investments is limited, losses in excess of
investments are not recognized. There was no change in loss from operations
which was $(35,000) for each of the three months ended September 30, 2000 and
1999.
Six Months Ended September 30, 2000 Compared to the and Six Months Ended
September 30, 1999. The Partnership's net loss for the six months ended
September 30, 2000 was $(197,000), reflecting a decrease of $41,000 from the
$(238,000) net loss experienced for the six months ended September 30, 1999. The
decline in net loss is primarily due to equity in losses of limited partnerships
which declined by $38,000 to $(127,000) for the six months ended September 30,
2000 from $(165,000) for the six months ended September 30, 1999. This decrease
was a result of the Partnership not recognizing certain losses of the Local
Limited Partnerships. The investments in such Local Limited Partnerships had
reached $0 at September 30, 2000. Since the Partnership's liability with respect
to its investments is limited, losses in excess of investments are not
recognized. Along with the decrease in equity in losses of limited partnerships,
there was a decrease in loss from operations of $3,000 for the six months ended
September 30, 2000 to $(70,000), from $(73,000) for the six months ended
September 30, 1999, due to a comparable decrease in operating expenses.
Cash Flows
Six Months Ended September 30, 2000 Compared to Six Months Ended September 30,
1999. Net cash used during the six months ended September 30, 2000 was $(6,000)
compared to a net decrease in cash for the six months ended September 30, 1999
of $(9,000). The change was due primarily to a decrease in cash used by
operating activities of $6,000 offset by a decrease in distributions from
limited partnerships of $3,000.
The Partnership expects its future cash flows, together with its net available
assets at September 30, 2000, to be sufficient to meet all currently foreseeable
future cash requirements.
10
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risks
NOT APPLICABLE
Part II. Other Information
Item 1. Legal Proceedings
NONE
Item 6. Exhibits and Reports on Form 8-K
NONE
11
<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/ Wilfred N. Cooper, Jr.
Wilfred N. Cooper, Jr.,
President - Chief Operating Officer of WNC & Associates, Inc.
Date: November 15, 2000
By: /s/ Michael L. Dickenson
Michael L. Dickenson,
Vice-President - Chief Financial Officer of WNC & Associates, Inc.
Date: November 15, 2000
12
