FORM 10-Q/A
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, 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: 0-20056
WNC CALIFORNIA HOUSING TAX CREDITS II, L.P.
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
California 33-0433017
WNC CALIFORNIA HOUSING TAX CREDITS II, 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 ____ No X
<PAGE>
Part I. Financial Information
WNC CALIFORNIA HOUSING TAX CREDITS II, L.P.
(A California Limited Partnership)
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1997
PART I. FINANCIAL INFORMATION
Balance Sheets, March 31, 1997 and December 31, 1996..............3
Statements of Operations
For the three months ended March 31, 1997 and 1996.......4
Statement of Partners' Equity
For the three months ended March 31, 1997 and 1996......5
Statement of Cash Flows
For the three months ended March 31, 1997 and 1996.......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>
WNC California Housing Tax Credits II, L.P.
(A California Limited Partnership)
BALANCE SHEETS
March 31, 1997 and December 31, 1996
1997 1996
---- ----
ASSETS
Cash and cash equivalents $ 524,635 $ 517,151
Investment in limited
partnerships -( Note 2) 8,150,204 8,447,282
Other assets 11,733 12,492
----------- ---------
$ 8,686,572 $ 8,976,925
========== =========
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Accrued fees and expenses due to
general partner and affiliates (Note 3) $ 756,370 $ 703,693
------- -------
756,370 703,693
-------- -------
Partners' equity (deficit):
General partner (85,959) (82,529)
Limited partners (17,747 units
issued and outstanding at 1997 and 1996) 8,016,161 8,355,761
--------- ---------
Total partners' equity 7,930,202 8,273,232
--------- ---------
$ 8,686,572 $ 8,976,925
========== =========
UNAUDITED
See Accompanying Notes to Financial Statements
3
<PAGE>
WNC California Housing Tax Credits II, L.P.
(A California Limited Partnership)
STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 1997 and 1996
1997 1996
---- ----
Interest income $ 5,166 $ 6,846
------ ------
Operating expenses:
Amortization 13,709 13,709
Asset management fees (Note 3) 52,446 52,452
Legal and accounting 2,543 2,000
Other 2,498 632
------ ---
Total operating expenses 71,196 68,793
------ ------
Loss from operations (66,030) (61,947)
-------- --------
Equity in loss from
limited partnerships (277,000) (370,000)
--------- ---------
Net loss $(343,030) $ (431,947)
========= =========
Net loss allocated to:
General partner $ (3,430) $ (4,319)
====== ======
Limited partners $(339,600) $(427,628)
========= ========
Net loss per limited
partner units (17,747 units
issued and outstanding) $ (19) $ (24)
=== ===
UNAUDITED
See Accompanying Notes to Financial Statements
4
<PAGE>
WNC California Housing Tax Credits II, L.P.
(A California Limited Partnership)
STATEMENT OF PARTNERS' EQUITY For the
Three Months Ended March 31, 1997 and 1996
<TABLE>
<CAPTION>
For the Three Months Ended March 31, 1997
General Limited
Partner Partner Total
------- ------- -----
<S> <C> <C> <C>
Equity (deficit), December 31, 1996 $ (82,529) $ 8,355,761 $ 8,273,232
Net loss for the three months ended
March 31, 1997 (3,430) (339,600) (343,030)
---------- ---------- ---------
Equity (deficit), March 31, 1997 $ (85,959) $ 8,016,161 $ 7,930,202
======== ========== =========
<CAPTION>
For the Three Months Ended March 31,1996
General Limited
Partner Partner Total
------- ------- -----
<S> <C> <C> <C>
Equity (deficit), December 31, 1995 $ (68,593) $ 9,735,425 $ 9,666,832
Net loss for the three months ended
March 31, 1996 (4,319) (427,628) (431,947)
--------- ---------- --------
Equity (deficit), March 31, 1996 $ (72,912) $ 9,307,797 $ 9,234,885
======= ========== =========
</TABLE>
UNAUDITED
See Accompanying Notes to Financial Statements
5
<PAGE>
WNC California Housing Tax Credits II, L.P.
(A California Limited Partnership)
STATEMENT OF CASH FLOWS For the Three
Months Ended March 31, 1997 and 1996
1997 1996
---- ----
Cash flows provided by operating activities:
Net loss $ (343,030) $ (431,947)
Adjustments to reconcile net loss to net
cash used in operating activities:
Equity in loss of limited partnerships 277,000 370,000
Amortization 13,709 13,707
Asset management fee 52,446 52,452
Change in other assets 678 27,802
Accrued fees and expense due to
general partner and affiliates 231 571
---- ---
Net cash provided by operating activities 1,034 32,585
------ ------
Cash flows provided by (used in) investing activities:
Investments in limited partnerships - (550,000)
Distribution from limited partnerships 6,771 -
------ ---------
Net cash flows provided by (used in) investing activities: 6,771 (550,000)
------ ----------
Cash flows provided by (used in) financing activities:
Decrease in receivable from affiliate (321) 2,000
----- -----
Net increase (decrease) in cash and cash equivalents 7,484 (515,415)
Cash and cash equivalents, beginning of period 517,151 1,113,575
-------- ---------
Cash and cash equivalent, end of period $ 524,635 $ 598,160
======== ========
UNAUDITED
See Accompanying Notes to Financial Statements
6
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS II, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
March 31, 1997
NOTE 1 - ORGANIZATION AND OTHER MATTERS
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 Partnership's Annual Report for the year ended December 31,
1996 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 March 31,
1997 and the results of operations and changes in cash flows for the three
months ended.
Organization
WNC California Housing Tax Credits II, L.P. (the "Partnership") was formed
on September 13, 1990 under the California Revised Limited Partnership Act. The
Partnership was formed to invest in other local limited partnerships which will
own and operate apartment complexes that qualify for low income housing credits.
The general partner is WNC Tax Credit Partners, L.P. (the "General Partner"), a
California limited partnership. WNC & Associates, Inc. and Wilfred N. Cooper are
the general partners of WNC Tax Credit Partners, L.P. The Cooper Revocable Trust
owns 70% of the outstanding stock of WNC & Associates, Inc. John B. Lester, Jr.
is the original limited partner of the Partnership and, through the Lester
Family Trust, owns 30% of the outstanding stock of WNC & Associates, Inc.
The General Partner has a 1% interest in operating profits and losses,
taxable income and loss and in cash available for distribution from 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 sale or refinancing proceeds equal
to their capital contributions and their preferred return (as defined in the
Partnership's Agreement of Limited Partnership) and the general partner has
received a subordinated disposition fee 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.
The Partnership considers all certificates of deposit with an original
maturity of three months or less as cash equivalents.
7
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS II, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
March 31, 1997
NOTE 2 - INVESTMENT IN LIMITED PARTNERSHIPS
The Partnership had acquired limited partnership interests in fifteen
local limited partnerships at March 31, 1997 and December 31, 1996. The
Partnership, as a limited partner, is generally entitled to 99% of the operating
profits and losses of the local limited partnerships. The following is a summary
of the Partnership's investment in limited partnerships:
1997 1996
---- ----
Investment balance,
beginning of period $ 8,447,282 $ 9,640,622
Investments in limited partnerships
Equity in loss of limited
partnership (277,000) (1,128,793)
Distributions (6,771) (11,319)
Amortization of capitalize
acquisition costs (13,307) (53,228)
-------- -------
Investment balance,
end of period $ 8,150,204 $ 8,447,282
========= =========
Selected operating information from the combined financial statements of the
local limited partnerships for the three months ended March 31, 1997 and 1996 is
as follows:
1997 1996
---- ----
Total revenue $ 773,000 $ 662,000
-------- -------
Interest expense 213,000 223,000
Depreciation 327,000 321,000
Operating expenses 513,000 492,000
-------- -------
Total expenses 1,053,000 1,036,000
---------- ---------
Net loss $ ($280,000) $ (374,000)
======== ========
Net loss allocable to the
Partnership $ ($277,000) $ ($370,000)
========= ==========
8
<PAGE>
WNC CALIFORNIA HOUSING TAX CREDITS II, L.P.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
March 31, 1997
NOTE 3 - RELATED PARTY TRANSACTIONS
Under the terms of its Agreement of Limited Partnership, the Partnership is
obligated to the General Partner or its affiliates for the an annual management
fee equal to .5% of the invested assets (defined as the Partnership's capital
contributions plus its allocable percentage of the permanent financing) of the
local limited partnerships. A fee of $52,446 and $52,452 was incurred for the
three months ended March 31, 1997 and 1996, respectively.
The "accrued fees and expenses due to general partner and affiliates" presented
on the balance sheets consists of the following:
March 31, 1997 December 31, 1996
-------------- -----------------
Asset management fee payable $ 752,225 $ 699,779
Reimbursement for expenses paid
by an affiliate 4,145 3,914
------- -------
$ 756,370 $ 703,693
======== ========
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 Operation
Liquidity and Capital Resources
- -------------------------------
The Partnership's primary source of capital has been the proceeds from its sale
of limited partnership units (the "Offering"). The Partnership completed raising
funds from investors through its public offering of units of limited partnership
interest ("Units") on January 21, 1993 at which time $17,726,000 was received
from the sale of units. These funds were applied to the acquisition of
investments in 15 limited partnerships, acquisition fees, the establishment of
reserves, the payment of operating expenses and the payment of expenses of this
offering. The Partnership has acquired limited partnership interests that
require approximately $12,845,000 of capital (or 72% of the proceeds realized
from the sale of units). 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
increase in cash and cash equivalents of approximately $7,500 for the three
months ended March 31, 1997. This increase in cash was due to the Partnership's
investing activities and operating activities, primarily the receipts of cash
distributions from local limited partnerships. The cash reserves are sufficient
to fund the Partnership's remaining capital contributions. Cash used by the
Partnership's operating activities was minimal compared to the Partnership's
other activities and consisted primarily of payments for operating fees and
expenses. Cash provided from operations consisted primarily of interest received
Overall, as reflected in its Statement of Cash Flows, the Partnership had a net
decrease in cash and cash equivalents of approximately $515,000 for the three
months ended March 31, 1996. This decrease in cash was due to the Partnership's
investing activities, primarily the payment of capital contributions payable on
investments in limited partnerships. The cash reserves are sufficient to fund
the Partnership's remaining capital contributions. Cash used by the
Partnership's operating activities was minimal compared to the Partnership's
other activities and consisted primarily of payments for operating fees and
expenses. Cash provided from operations consisted primarily of interest
received. The major components of all these activities are discussed in greater
detail below.
The Partnership's investments will not be 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 local
limited partnerships and the Partnership. These problems may result from a
number of factors, many of which cannot be controlled by the General Partner.
Nevertheless, the General Partner anticipates that capital raised from the sale
of the Units is sufficient to fund the Partnership's future investment
commitments and proposed operations.
The Partnership has established working capital reserves of approximately 4.3%
of capital contributions, an amount which is anticipated to be sufficient to
satisfy general working capital and administrative expense requirements of the
Partnership including 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 local limited partnerships for such purposes or to replenish or
increase working capital reserves.
It is not expected that any of the local limited partnerships in which the
Partnership will invest will generate cash from operations sufficient to provide
distributions to the limited partners in any significant
10
<PAGE>
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 the 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 local limited partnerships. Accordingly, if
circumstances arise that cause the local limited partnerships to require capital
in addition to that contributed by the Partnership and any equity of the local
general partners, 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
because the apartment complexes owned by the local limited partnerships are
already substantially leveraged), (ii) additional equity contributions or
advances of the local general partners, (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 local limited partnerships in question. If such funds are not available,
the local limited partnerships would risk foreclosure on their apartment
complexes if they were unable to re-negotiate the terms of their first mortgages
and any other debt secured by the apartment complexes to the extent the capital
requirements of the local 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
- ---------------------
As of March 31, 1997 the Partnership has acquired 15 local limited partnership
interests. Each of the 15 apartment complexes owned by such local limited
partnerships received or is expected to receive government assistance and each
of them has received a reservation for federal low income housing credits. All
of these had completed construction of their apartment complex as of March 31,
1997.
Consistent with the Partnership's investment objectives, each local limited
partnership is generating or is expected to generate federal low income housing
credits for a period of approximately ten years, commencing with completion of
construction or rehabilitation of its apartment complex(es), and (as discussed
below) is generating or is expected to generate losses until sale of the
apartment complex(es).
As reflected on its Statements of Operations, the Partnership has a loss of
approximately $343,000 and $432,000 the three months ended March 31, 1997 and
1996, respectively. 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 (i) as reserves, or (ii) pending
investment in local limited partnerships. Interest revenue in future years will
be a function of prevailing interest rates and the amount of cash balances. It
is anticipated that the Partnership will maintain cash reserves in an amount not
materially in excess of the minimum amount required by its partnership
agreement, which is 3% of capital contributions.
Expenses - The most significant component of operating expenses is, and is
expected to be, the asset management fee (called "Partnership management fee" in
the Statements of Operations). The asset management fee is equal to 0.5% of
invested assets in local limited partnerships; accordingly, the amount to be
incurred in the future is a function of the level of such invested assets (i.e.,
the sum of the Partnership's capital contributions to the local limited
partnerships plus the Partnership's share of the debts related to the apartment
complexes owned by such local limited partnerships).
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 local
limited partnership interests.
Office expenses and legal and accounting consists of the Partnership's
administrative expenses, such as accounting and legal fees, bank charges and
investor reporting expenses.
The amount of the asset management fee is increased over the amounts reported to
date. This is due to the completion of construction on one additional apartment
complex and the commencement of asset management fees on that building.
Equity in losses from local limited partnerships - The Partnership's equity in
losses from local limited partnerships is equal to 99% of the aggregate net loss
of the local limited partnerships. After rent-up, the local 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 local 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 fined during the quarter ended March 31,
1997.
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 II, L.P.
By WNC Tax Credit Partners, L.P. General Partner
By: WNC & ASSOCIATES, INC. General Partner
By /s/ John B. Lester Jr.
-----------------------------------------------------
John B. Lester, Jr. President
Date: June 20, 1997
By: /s/ Theodore M. Paul
-----------------------------------------------------
Theodore M. Paul Vice-President-Finance
Date: June 20, 1997
14
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000869660
<NAME> WNC CALIFORNIA HOUSING TAX CREDITS II, L.P.
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 524,635
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 524,635
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,686,572
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 7,930,202
<TOTAL-LIABILITY-AND-EQUITY> 8,686,572
<SALES> 0
<TOTAL-REVENUES> 5,166
<CGS> 0
<TOTAL-COSTS> 71,196
<OTHER-EXPENSES> 277,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (343,030)
<INCOME-TAX> 0
<INCOME-CONTINUING> (243,030)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (243,030)
<EPS-PRIMARY> (19)
<EPS-DILUTED> 0
</TABLE>
