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 September 29, 1997
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: 0-19217
American Tax Credit Properties III L.P.
(Exact name of Registrant as specified in its charter)
Delaware
13-3545006
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification No.)
Richman Tax Credit Properties III L.P.
599 West Putnam Avenue, 3rd Floor
Greenwich, Connecticut 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 ___.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES III L.P.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Table of Contents
Balance Sheets as of September 29, 1997 (Unaudited)
and March 30, 1997 (Unaudited).......3
Statements of Operations for the three and six month periods ended
September 29, 1997 (Unaudited) and September 29, 1996 (Unaudited)........
Statements of Cash Flows for the six months ended September 29, 1997(Unaudited)
and September 29, 1996 (Unaudited).....................................
Notes to Financial Statements as of September 29, 1997 (Unaudited)...........
<PAGE>
<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES III L.P.
BALANCE SHEETS
(UNAUDITED)
September 29, March 30,
Notes 1997 1997
----- -----------------------------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents 439,888 $ 409,413
Restricted cash 3 84,433 1,309,208
Investments in bonds available-for-sale 2 2,969,464 2,854,771
Investment in local partnerships 3 9,822,210 10,905,064
Interest receivable 21,487 25,173
---------------- ----------------
$ 13,337,482 $ 15,503,629
============ ============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities
Accounts payable and accrued expenses 901,025 $ 862,114
Payable to general partner 865,328 800,043
Capital contributions payable 3 84,433 1,309,208
Other 16,450 21,200
---------------- ----------------
1,867,236 2,992,565
Commitments and contingencies 4
Partners' equity (deficit)
General partner (200,083) (188,365)
Limited partners (35,883 units of limited partnership
interest outstanding) 11,721,455 12,881,544
Unrealized loss on investments in bonds 2 (51,126) (182,115)
--------------- --------------
available-for-sale, net
11,470,246 12,511,064
$ 13,337,482 $ 15,503,629
============ ============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES III L.P.
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Six Months Three Months Six Months
Ended Ended Ended Ended
September September 29, September 29, September 29,
29,
Notes 1997 1997 1996 1996
----- -----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
REVENUE
Interest $ 85,664 151,393 $ 78,986 $ 157,422
Other income from local 4,172
partnerships
------- --------- -------- -------
TOTAL REVENUE 85,664 155,565 78,986 157,422
---------------------------------------------------------------
EXPENSES
Administration fees 57,642 115,285 57,642 115,285
Management fees 57,642 115,285 57,642 115,285
Professional fees 7,349 18,099 5,647 13,849
Printing, postage and other 4,336 10,236 3,237 11,166
----------------------------------------------------------------
TOTAL EXPENSES 126,969 258,905 124,168 255,585
------------------------------ --------------- ----------------
Loss from operations (41,305) (103,340) (45,182) (98,163)
Equity in loss of investment in
local partnerships (552,778) (1,068,467) (571,331) (1,210,336)
------------------------------ --------------- --------------
NET LOSS $ (594,083) $(1,171,807) $ (616,513) $(1,308,499)
============== ============== ============== ==============
NET LOSS ATTRIBUTABLE TO
General partner $ (5,941) (11,718) $ (6,165) $ (13,085)
Limited partners (588,142) (1,160,089) (610,348) (1,295,414)
-------------- --------------- --------------- ---------------
$ 594,083) $(1,171,807) $ (616,513) $ (1,308,499)
============== ============== ============== ==============
NET LOSS per unit of limited
partnership interest (35,883
units of limited partnership $ (16.39) (32.33) (17.01) (36.10)
===============================================================
interest)
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES III L.P.
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED SEPTEMBER 29, 1997 AND 1996
(UNAUDITED)
1997 1996
---------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received $ 96,375 $ 127,104
Other income from local partnerships 4,172
Cash used for local partnerships for deferred expenses (4,750) (4,750)
Cash paid for
administration fees (50,000) (50,000)
management fees (50,000) (50,000)
professional fees (39,599) (40,999)
printing, postage and other expenses (15,110) (4,348)
------------- --------------
Net cash used in operating activities (58,912) (22,993)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash distributions from local partnerships 14,387 23,509
Maturity/redemption of bonds 75,000 200,000
Transfer from restricted cash 1,224,775
Investment in a local partnership (1,224,775)
----------- ------------
Net cash provided by investing activities 89,387 223,509
-------------- --------------
Net increase in cash and cash equivalents 30,475 200,516
Cash and cash equivalents at beginning of period 409,413 389,931
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 439,888 $ 590,447
============ ============
SIGNIFICANT NON-CASH INVESTING ACTIVITIES
Unrealized gain (loss) on investments in bonds $ 130,989 $ (58,253)
============ ============
available-for-sale, net
- ------------------------------------------------------------------------------------------------------------
See reconciliation of net loss to net cash used in operating activities on page
6.
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES III L.P.
STATEMENTS OF CASH FLOWS - (Continued)
SIX MONTHS ENDED SEPTEMBER 29, 1997 AND 1996
(UNAUDITED)
1997 1996
----------------------------
<S> <C> <C>
RECONCILIATION OF NET LOSS TO NET CASH USED IN OPERATING
ACTIVITIES
Net loss $ (1,171,807) $ (1,308,499)
Adjustments to reconcile net loss to net cash used in
operating activities
Equity in loss of investment in local partnerships 1,068,467 1,210,336
Amortization of net premium on investments in bonds 7,453 8,427
Accretion of zero coupon bonds (66,157) (44,128)
Decrease in interest receivable 3,686 5,383
Increase in payable to general partner 65,285 65,285
Increase in accounts payable and accrued expenses 38,911 44,953
Decrease in other liabilities (4,750 (4,750)
--------------------------------
NET CASH USED IN OPERATING ACTIVITIES $ (58,912) $ (22,993)
============== ==============
See Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 29, 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 September 29, 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 six month
periods ended September 29, 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 September 29, 1997, certain information concerning investments in
bonds available-for-sale is as follows:
<S> <C> <C> <C> <C>
Gross Gross
Amortized unrealized unrealized Estimated
Description and maturity cost gains losses fair
value
Corporate debt securities
After one year through five $ 483,328 $ 5,444 $ (865) $ 487,907
years
After five years through ten 454,285 5,204 (8,022) 451,467
years
After ten years 957,300 15,526 (12,138) 960,688
------------- ------------ ------------ -------------
1,894,913 26,174 (21,025) 1,900,062
------------ ------------ ------------ ------------
U.S. Treasury debt securities
After ten years 999,895 -- (47,895) 952,000
------------- -------------- ----------- -------------
U.S. government and agency
securities
After ten years 125,782 -- (8,380) 117,402
------------ ---------------------------- -------------
$ 3,020,590 $ 26,174 $ (77,300) $ 2,969,464
=========== =========== =========== ===========
</TABLE>
3. Investment in Local Partnerships
The Partnership owns a limited partnership interest in forty-three Local
Partnerships representing capital contributions in the aggregate amount of
$29,264,476, of which the Partnership has paid $29,180,043 and $84,433 are
outstanding as of September 29, 1997. Restricted cash in the accompanying
balance sheet as of September 29, 1997 represents such outstanding capital
contribution, which is payable upon one Local Partnership providing
information that it has satisfied specific conditions related to operations.
As of June 30, 1997, the Local Partnerships have outstanding mortgage loans
payable totaling approximately $87,182,000 and accrued interest payable on
such loans totaling approximately $1,928,000, which are secured by security
interests and liens common to mortgage loans on the Local Partnerships' real
property and other assets.
<PAGE>
<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
SEPTEMBER 29, 1997
(UNAUDITED)
3. Investment in Local Partnerships (continued)
For the six months ended September 29, 1997, the investment in Local
Partnerships activity consists of the following:
<S> <C>
Investment in Local Partnerships as of March 30, $ 10,905,064
1997
Equity in loss of investment in Local
Partnerships (1,068,467) (A)
for the six months ended June 30, 1997
Cash distributions received from Local
Partnerships (14,387)
------------------
during the six months ended September 29, 1997
Investment in Local Partnerships as of September $ 9,822,210
================
29, 1997
</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
$464,675 for the six months ended June 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 June
30, 1997 and December 31, 1996 and the combined unaudited statements of
operations of the Local Partnerships for the three and six month periods
ended June 30, 1997 and 1996 are reflected on pages 9 and 10, respectively.
- ------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
SEPTEMBER 29, 1997
(UNAUDITED)
3. Investment in Local Partnerships (continued)
The combined balance sheets of the Local Partnerships as of June 30, 1997
and December 31, 1996 are as follows:
June 30, December 31,
1997 1996
----------------------------
<S> <C> <C>
ASSETS
Cash and other investments $ 1,337,287 $ 1,340,942
Rental receivable 311,265 354,108
Capital contributions receivable 84,433 1,309,208
Escrow deposits and reserves 4,031,589 3,763,306
Land 3,964,692 3,964,692
Buildings and improvements (net of accumulated depreciation
of $25,267,550 and $23,212,364) 90,426,698 92,443,378
Intangible assets (net of accumulated amortization of
$637,849 and $1,039,889) 784,733 748,879
Other 1,186,25 772,465
---------------------------------
$ 102,126,949 $ 104,696,978
============= =============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities
Accounts payable and accrued expenses $ 578,405 $ 512,801
Due to related parties 5,027,120 5,127,931
Mortgage and construction loans 87,181,575 87,351,443
Notes payable 66,150 70,804
Accrued interest 1,927,608 1,782,695
Other 579,165 557,856
---------------------------------
95,360,023 95,403,530
Partners' equity (deficit)
American Tax Credit Properties III L.P.
Capital contributions, net of distributions (includes
receivable of $84,433 and $1,309,208) 29,055,122 29,079,605
Cumulative loss (19,232,912) (18,164,445)
-------------- --------------
9,822,210 10,915,160
General partners and other limited partners, including
ATCP II
Capital contributions, net of distributions (64,402) 764,757
Cumulative loss (2,990,882) (2,386,469)
--------------- ---------------
(3,055,284) (1,621,712)
6,766,926 9,293,448
$ 102,126,949 $ 104,696,978
============= =============
</TABLE>
- -----------------------------------------------------------------------------
<PAGE>
- -----------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
SEPTEMBER 29, 1997
(UNAUDITED)
3. Investment in Local Partnerships (continued)
The combined statements of operations of the Local Partnerships for the
three and six month periods ended June 30, 1997 and 1996 are as follows:
Three Months Six Months Three Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1997 1997 1996 1996
--------------------------------------------- -----------
<S> <C> <C> <C> <C>
REVENUE
Rental $ 2,584,104 $ 5,205,060 $ 2,630,886 $ 5,130,715
Interest and other 87,181 168,790 101,376 179,841
-------------- -------------- ------------- --------------
TOTAL REVENUE 2,671,285 5,373,850 2,732,262 5,310,556
------------ ------------- ------------ -------------
EXPENSES
Administrative 526,913 1,036,508 491,384 1,028,898
Utilities 241,748 530,441 255,879 586,566
Operating, maintenance and other 562,896 1,038,125 553,114 1,015,675
Taxes and insurance 326,146 652,464 313,085 630,207
Interest (including amortization
of $14,284, $25,938, $31,708
and $70,293) 850,088 1,734,006 935,532 1,789,380
Depreciation 1,038,254 2,055,186 1,030,753 2,063,937
------------ ------------- ------------ -------------
TOTAL EXPENSES 3,546,045 7,046,730 3,579,747 7,114,663
------------ ------------- ------------ -------------
NET LOSS (874,760) $ (1,672,880) $ (847,485) $ (1,804,107)
============ ============ ============ ============
NET LOSS ATTRIBUTABLE TO
American Tax Credit Properties $ (552,778) $ (1,068,467) $ (571,331) $(1,210,336)
III L.P.
General partners and other
limited partners, including
ATCP II, which includes
$250,285, $464,675, $204,724
and $457,846 of American Tax
Credit Properties III L.P. (321,982) (604,413) (276,154) (593,771)
------------ -------------- ------------ --------------
loss in excess of investment
$ (874,760) $ (1,672,880) $ (847,485) $(1,804,107)
============ ============ ============ ============
</TABLE>
The combined results of operations of the Local Partnerships for the three
and six month periods ended June 30, 1997 are not necessarily indicative of
the results that may be expected for an entire operating period.
- ------------------------------------------------------------------------------
<PAGE>
- -----------------------------------------------------------------------------
AMERICAN TAX CREDIT PROPERTIES III L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
SEPTEMBER 29, 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. On July 28, 1997, a
complaint was filed 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 trial was held on September 29, 1997 and
the parties have submitted post-trial briefs to the Court. A hearing for
post-trial oral argument is scheduled for November 17, 1997.
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>
- ------------------------------------------------------------------------------
AMERICAN TAX CREDIT PROPERTIES III L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Material Changes in Financial Condition
As of September 29, 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 six months ended September 29,
1997, Registrant received cash from interest earnings, maturity of a bond and
distributions from Local Partnerships and utilized cash for operating expenses
and for a capital contribution to a Local Partnership. Cash and cash equivalents
and investments in bonds available-for-sale increased, in the aggregate, by
approximately $145,000 during the six months ended September 29, 1997, which
increase includes a net unrealized gain recorded on investments in bonds of
approximately $131,000, the amortization of net premium on investments in bonds
of approximately $7,000 and the accretion of zero coupon bonds of approximately
$66,000. During the six months ended September 29, 1997, the investment in Local
Partnerships decreased as a result of Registrant's equity in the Local
Partnerships' net loss for the six months ended June 30, 1997 of $1,068,467 and
cash distributions received from Local Partnerships of $14,387. 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, including payments under Section 8 of Title II of the Housing and
Community Development Act of 1974 ("Section 8"), are subject to specific laws,
regulations and agreements with federal and state agencies. The subsidy
agreements expire at various times during and after the Compliance Periods of
the Local Partnerships. The United States Department of Housing and Urban
Development ("HUD") has issued notices which implement provisions to renew
certain project based Section 8 contracts expiring during HUD's fiscal year
1997, where requested by an owner, for an additional one year term generally at
or below current rent levels, subject to certain guidelines. HUD has an
additional program which, in general, provides for restructuring rents and/or
mortgages where rents may be adjusted to market levels and mortgage terms may be
adjusted based on the reduction in rents, although there may be instances in
which only rents, but not mortgages, are restructured. Registrant cannot
reasonably predict legislative initiatives and governmental budget negotiations,
the outcome of which could result in a reduction in funds available for the
various federal and state administered housing programs including the Section 8
program. Such changes could adversely affect the future net operating income and
debt structure of any or all Local Partnerships currently receiving such subsidy
or similar subsidies. One Local Partnership's Section 8 contract, which covers
certain rental units, is 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"). In the
event rents are not sufficient to cover operating expenses, Mandatory Debt
Service requirements and other charges, certain Local General Partners are
obligated to provide advances to cover deficits for a certain period of time up
to certain amounts (the "Deficit Guarantee"). A Local General Partner's funding
of such Deficit Guarantee is dependent on its liquidity or ability to borrow the
required funds. During the six months ended June 30, 1997, revenue from
operations, Local General Partner advances 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' accounting 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
the required deferral of property management fees.
The terms of the partnership agreement of Christian Street Commons Associates
(the "Christian Street Local Partnership") require the Local General Partners of
the Christian Street Local Partnership to advance funds to cover operating
deficits
<PAGE>
AMERICAN TAX CREDIT PROPERTIES III L.P.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
(continued)
up to $150,000 through 2008 and to cause the management agent to defer property
management fees in order to avoid a default under the mortgage. The Christian
Street Local Partnership incurred an operating deficit of approximately $15,000
for the six months ended June 30, 1997, which includes property management fees
of approximately $2,000. Accordingly, the net operating deficit was
approximately $13,000. All required payments on the mortgage and real estate
taxes are current. As of June 30, 1997, the Local General Partners of the
Christian Street Local Partnership have advanced approximately $56,000 under
their Deficit Guarantee obligation. Of Registrant's total annual Low-income Tax
Credits, approximately 2% is allocated from the Christian Street Local
Partnership.
The terms of the partnership agreement of Orange City Plaza, Limited Partnership
(the "Orange City Plaza Local Partnership") require the Local General Partner of
the Orange City Plaza Local Partnership to advance funds to cover operating
deficits through 2005 and to cause the management agent to defer property
management fees in order to avoid a default under the mortgage. During the six
months ended June 30, 1997, the Orange City Plaza Local Partnership incurred an
operating deficit of approximately $6,000, which includes property management
fees of approximately $3,000. Accordingly, the net operating deficit was
approximately $3,000. All required payments on the mortgage and real estate
taxes are current. Of Registrant's total annual Low-income Tax Credits,
approximately 2% is allocated from the Orange City Plaza Local Partnership.
The terms of the partnership agreement of Westminster Apartments Limited
Partnership (the "Westminster Local Partnership") require the Local General
Partner of the Westminster Local Partnership to cause the management agent to
defer property management fees in order to avoid a default under the mortgage.
During the six months ended June 30, 1997, the Westminster Local Partnership
incurred an operating deficit of approximately $10,000, which includes property
management fees of approximately $5,000. Accordingly, the net operating deficit
was approximately $5,000. The Westminster Local Partnership was entitled to a
real estate tax abatement which expired in 1996, resulting in an increase of
approximately $17,000 per annum in real estate tax expense. The Local General
Partner of the Westminster Local Partnership reports that as of November 7,
1997, the Westminster Local Partnership is three months in arrears on its
mortgage, but the lender has not declared the mortgage in default. Although the
Local General Partner intends to appeal the real estate tax, there is no
assurance that the Local General Partner will be successful in its appeal. Of
Registrant's total annual Low-income Tax Credits, approximately 4% is allocated
from the Westminster Local Partnership.
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 which includes capital contributions payable, 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 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.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES III L.P.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
(continued)
Three Months Ended September 29, 1997
For the three months ended September 29, 1997, Registrant had a net loss of
approximately $594,000, which included an equity in loss of investment in Local
Partnerships of approximately $553,000 for the three months ended June 30, 1997.
Registrant's loss from operations for the three months ended September 29, 1997
of approximately $41,000 was attributable to interest revenue of approximately
$86,000, exceeded by operating expenses of approximately $127,000.
Nonrecognition of losses in excess of Registrant's investment in certain Local
Partnerships during the period was approximately $250,000.
The Local Partnerships' net loss of approximately $875,000 for the three months
ended June 30, 1997 was attributable to rental and other revenue of
approximately $2,671,000, exceeded by operating and interest expenses (including
Non-Mandatory Interest) of approximately $2,493,000 and approximately $1,053,000
of depreciation and amortization expenses.
Three Months Ended September 29, 1996
For the three months ended September 29, 1996, Registrant had a net loss of
approximately $616,000, which included an equity in loss of investment in Local
Partnerships of approximately $571,000 for the three months ended June 30, 1996.
Registrant's loss from operations for the three months ended September 29, 1996
of approximately $45,000 was attributable to interest revenue of approximately
$79,000, exceeded by operating expenses of approximately $124,000.
Nonrecognition of losses in excess of Registrant's investment in certain Local
Partnerships during the period was approximately $205,000.
The Local Partnerships' net loss of approximately $847,000 for the three months
ended June 30, 1996 was attributable to rental and other revenue of
approximately $2,732,000, exceeded by operating and interest expenses (including
Non-Mandatory Interest) of approximately $2,517,000 and approximately $1,062,000
of depreciation and amortization expenses.
Six Months Ended September 29, 1997
For the six months ended September 29, 1997, Registrant had a net loss of
approximately $1,172,000, which included an equity in loss of investment in
Local Partnerships of approximately $1,069,000 for the six months ended June 30,
1997. Registrant's loss from operations for the six months ended September 29,
1997 of approximately $103,000 was attributable to interest revenue of
approximately $152,000 and other income from Local Partnerships of approximately
$4,000, exceeded by operating expenses of approximately $259,000. Nonrecognition
of losses in excess of Registrant's investment in certain Local Partnerships
during the period was approximately $465,000.
The Local Partnerships' net loss of approximately $1,673,000 for the six months
ended June 30, 1997 was attributable to rental and other revenue of
approximately $5,374,000, exceeded by operating and interest expenses (including
Non-Mandatory Interest) of approximately $4,966,000 and approximately $2,081,000
of depreciation and amortization expenses.
Six Months Ended September 29, 1996
For the six months ended September 29, 1996, Registrant had a net loss of
approximately $1,308,000, which included an equity in loss of investment in
Local Partnerships of approximately $1,210,000 for the six months ended June 30,
1996. Registrant's loss from operations for the six months ended September 29,
1996 of approximately $98,000 was attributable to interest revenue of
approximately $157,000, exceeded by operating expenses of approximately
$255,000. Nonrecognition of losses in excess of Registrant's investment in
certain Local Partnerships during the period was approximately $458,000.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES III L.P.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
(continued)
The Local Partnerships' net loss of approximately $1,804,000 for the six months
ended June 30, 1996 was attributable to rental and other revenue of
approximately 5,311,000, exceeded by operating and interest expenses (including
Non-Mandatory Interest) of approximately $4,981,000 and approximately $2,134,000
of depreciation and amortization expenses.
Three and Six Month Periods Ended September 29, 1997 v.
Three and Six Month Periods Ended September 29, 1996
Registrant's operations for the three months ended September 29, 1997 resulted
in a net loss of approximately $594,000 as compared to a net loss of
approximately $616,000 for the three months ended September 29, 1996. The
decrease in net loss is primarily attributed to a decrease in the equity in loss
of investment in Local Partnerships of approximately $19,000, which is primarily
the result of an increase in the nonrecognition of losses in excess of
Registrant's investment in Local Partnerships of approximately $46,000 in
accordance with the equity method of accounting, partially offset by an increase
in the net operating loss of the Local Partnerships.
Registrant's operations for the six months ended September 29, 1997 resulted in
a net loss of approximately $1,172,000 as compared to a net loss of
approximately $1,308,000 for the six months ended September 29, 1996. The
decrease in net loss is primarily attributed to a decrease in the equity in loss
of investment in Local Partnerships of approximately $142,000, which is
primarily the result of (i) an increase in the nonrecognition of losses in
excess of Registrant's investment in Local Partnerships of approximately $7,000
in accordance with the equity method of accounting and (ii) a decrease in the
net operating loss of the Local Partnerships.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES III L.P.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
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 against Registrant, the General
Partner, and its general partner in the Court of Chancery of the State
of Delaware in and for New Castle County seeking, among other things,
an order directing the defendants to furnish immediately the requested
information and awarding the plaintiff any resulting damages (the
"Delaware Action"). A trial in connection with the Delaware Action was
held on September 29, 1997 and the parties have submitted post-trial
briefs to the Court. A hearing for post-trial oral argument is
scheduled for November 17, 1997.
Registrant is not aware of any other material legal proceedings.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
AMERICAN TAX CREDIT PROPERTIES III L.P.
(a Delaware limited partnership)
By: Richman Tax Credit Properties III L.P.,
General Partner
by: Richman Housing Credits Inc.,
general partner
Dated: November 13, 1997 /s/ Richard Paul Richman
----------------- ------------------------
Richard Paul Richman
President, Chief Executive
Officer and Director of the
general partner of the
General Partner
Dated: November 13, 1997 /s/ Neal Ludeke
----------------- --------------
Neal Ludeke
Vice President and
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 Sept. 29, 1997 Form 10Q Balance Sheets and Statements
of Operations and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000856135
<NAME> American Tax Credit Properties, III L.P.
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