UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC. 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 June 30, 2002
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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 33-11907
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DIVERSIFIED HISTORIC INVESTORS IV
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-2440837
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1521 Locust Street, Philadelphia, PA 19102
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 557-9800
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N/A
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(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets - June 30, 2002 (unaudited) and
December 31, 2001
Consolidated Statements of Operations - Three Months and Six
Months Ended June 30, 2002 and 2001 (unaudited)
Consolidated Statements of Cash Flows - Six Months Ended June
30, 2002 and 2001 (unaudited)
Notes to Consolidated Financial Statements (unaudited)
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
(1) Liquidity
As of June 30, 2002, Registrant had cash of $319,709.
The Registrant expects that those funds plus the cash generated from
operations at each property will be sufficient to fund the operating
expenses of the properties. The Registrant is not aware of any
additional sources of liquidity.
As of June 30, 2002, Registrant had restricted cash of
$22,674 consisting primarily of funds held as security deposits,
replacement reserves and escrows for taxes and insurance. As a
consequence of the restrictions as to use, Registrant does not deem
these funds to be a source of liquidity.
(2) Capital Resources
Any capital expenditures needed are generally replacement
items and are funded out of cash from operations. The Registrant is
not aware of any factors which would cause historical capital
expenditure levels not to be indicative of capital requirements in the
future and accordingly does not believe that it will have to commit
material resources to capital investment for the foreseeable future.
(3) Results of Operations
During the second quarter of 2002, Registrant incurred a
loss of $34,032 ($4.07 per limited partnership unit) compared to a
loss of $3,007 ($.35 per limited partnership unit) for the same period
in 2001. For the first six months of 2002, the Registrant incurred a
loss of $69,707 ($8.33 per limited partnership unit) compared to a
loss of $31,653 ($3.78 per limited partnership unit) for the same
period in 2001.
Rental income increased $728 from $52,390 in the
second quarter of 2001 to $53,118 in the same period in 2002 and
increased $2,535 from $100,632 for the first six months of 2001 to
$103,167 in the same period in 2002. The increase in rental income
from the second quarter of 2001, compared to the same period in 2002
is due to an increase in average rental rates at the Brass Works. The
increase from the first six months of 2001 to the same period in 2002
is due to an increase in average occupancy at Locke Mill Plaza (85% to
86%).
Interest income decreased $1,014 from $2,478 in the
second quarter of 2001 to $1,464 in the same period of 2002. Interest
income decreased $2,064 from $4,985 for the first six months of 2001
to $2,921 in the same period of 2002. The decrease in interest income
from both the second quarter and the first six months of 2001,
compared to the same periods in 2002 is due to a decrease in money
market interest rates.
Rental operations expense increased $20,766 from $29,110
in the second quarter of 2001 to $49,876 in the same period of 2002
and for the first six months increased by $28,181 from $67,740 for the
first six months of 2001 to $95,921 in the same period of 2002. The
increase from the second quarter of 2001, compared to the same period
in 2002, is due to an increase in maintenance service at Locke Mill
Plaza and the Brass Works, an increase in capital assessments at Locke
Mill Plaza and an increase in accounting expenses. The increase in
accounting expenses is due to the accrual of current and prior year
accounting fees. The increase from the first six months of 2001 to the
same period in 2002 is due to an increase in maintenance service and
insurance expense at Locke Mill Plaza and an increase in maintenance
expense, real estate tax expense and insurance expense at the Brass
Works. The increase in maintenance expense at the Brass Works is due
to increases in maintenance and cleaning services, partially offset by
a decrease in apartment preparation expense.
General and administrative expenses increased $6,000 from
$6,000 in the second quarter of 2001 to $12,000 in the same period of
2002, and for the first six months increased $6,000 from $24,000 in
the first six months of 2001 to $30,000 in the same period of 2002.
The increase in general and administrative expense from both the
second quarter and the first six months of 2001, compared to the same
periods in 2002, is due to timing differences in which the accrual of
the Registrant's administration fees were recorded. As of year end,
twelve months of administration fees were fully accrued for both 2001
and 2002.
Bad debt expense of $2,861 was incurred during the second
quarter of 2002 due to the write off of tenant accounts receivable
that were deemed uncollectible.
Income recognized during the quarter at the Registrant's
two properties was approximately $4,000 in 2002 compared to income of
$6,000 for the same period in 2001. For the first six months of 2002,
the Registrant incurred a loss of $12,000 compared to a loss of $1,000
for the same period in 2001.
In the second quarter of 2002, the Registrant recognized
net income of $6,000 at the Brass Works, including $13,000 of
depreciation expense, compared to net income of $7,000 including
$12,000 of depreciation expense in the second quarter of 2001. In the
first six months of 2002, Registrant incurred a net loss of $5,000 at
the Brass Works, including $25,000 of depreciation expense, compared
to a net income of $9,000 for the same period in 2001, including
$24,000 of depreciation expense. The decrease in net income from the
second quarter of 2001, compared to the same period in 2002, is due to
a decrease in average occupancy (100% to 97%) and an increase in
maintenance service, partially offset by an increase in average rental
rates. The decrease in net income from the first six months of 2001,
compared to the same period in 2002 is due to a decrease in average
occupancy (100% to 92%) and increases in maintenance expense, real
estate tax expense, insurance expense and bad debt expense. The
increase in maintenance expense is due to increases in maintenance and
cleaning services. The increase in real estate tax expense is due to
an increase in the property's assessed value and the increase in
insurance expense is due to higher premiums. Bad debt expense
increased due to the write off of tenant accounts receivable that were
deemed uncollectible.
In the second quarter of 2002, the Registrant incurred a
net loss of $2,000 at Locke Mill Plaza, including $7,000 of
depreciation expense, compared to a net loss of $1,000 including
$7,000 of depreciation expense in the second quarter of 2001. In the
first six months of 2002, the Registrant incurred a net loss of $7,000
including $14,000 of depreciation expense, compared to a net loss of
$10,000, including $13,000 of depreciation expense for the same period
in 2001. The increase in net loss from the second quarter of 2001,
compared to the same period in 2002, is due to a decrease in average
occupancy (100% to 77%) and increases in capital assessments and
maintenance wages, partially offset by a decrease in leasing
commissions. The decrease in net loss from the first six months of
2001, compared to the same period in 2002 is due to an increase in
average occupancy (85% to 86%) and decreases in leasing commissions,
capital assessments, and apartment preparation expenses. The decrease
in net loss is partially offset by an increase in insurance expense
and maintenance wages. The increase in insurance expense is due to
higher premiums.
Item 4. Controls and Procedures
We maintain disclosure controls and procedures that are
designed to ensure that information required to be disclosed in our
Securities Exchange Act of 1934 reports is recorded, processed,
summarized and reported within the time periods specified in the SEC's
rules and forms, and that such information is accumulated and
communicated to our management, including our managing partner's
principal executive officer and principal financial officer, as
appropriate, to allow timely decisions regarding required disclosure.
In designing and evaluating the disclosure controls and procedures,
our management recognized that any controls and procedures, no matter
how well designed and operated, can provide only reasonable assurance
of achieving the desired control objectives, and our management
necessarily was required to apply its judgment in evaluating the cost-
benefit relationship of possible controls and procedures.
Under the supervision of our managing partner's principal
executive officer and principal financial officer we have carried out
an evaluation of the effectiveness of our adopted disclosure controls
and procedures as of the end of the period covered by this report.
Based upon that evaluation, our managing partner's president and
treasurer concluded that our disclosure controls and procedures are
effective.
There have been no significant changes in our internal
controls over financial reporting that has materially affected, or is
reasonably likely to materially affect, our internal control over
financial reporting during our most recent fiscal quarter.
DIVERSIFIED HISTORIC INVESTORS IV
(a Pennsylvania limited partnership)
CONSOLIDATED BALANCE SHEETS
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Assets
June 30, 2002 December 31, 2001
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(Unaudited)
Rental properties, at cost:
Land $ 74,324 $ 74,324
Buildings and improvements 2,246,555 2,246,555
Furniture and fixtures 44,660 44,660
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2,365,539 2,365,539
Less - accumulated depreciation (1,274,724) (1,227,712)
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1,090,815 1,137,827
Cash and cash equivalents 319,709 336,033
Restricted cash 22,673 25,042
Other assets 24,004 21,459
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Total $1,457,201 $1,520,361
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Liabilities and Partners' Equity
Liabilities:
Accounts payable - trade $ 19,118 $ 16,268
Other liabilities 31,140 28,909
Tenant security deposits 13,755 12,290
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Total liabilities 64,013 57,467
Partners' equity 1,393,188 1,462,894
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Total $1,457,201 $1,520,361
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The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS IV
(a Pennsylvania limited partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
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(Unaudited)
Three months Six months
ended June 30, ended June 30,
2002 2001 2002 2001
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Revenues:
Rental income $53,118 $52,390 $103,167 $100,632
Interest income 1,464 2,478 2,921 4,985
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Total revenues 54,582 54,868 106,088 105,617
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Costs and expenses:
Rental operations 49,876 29,110 95,921 67,740
General and
administrative 12,000 6,000 30,000 24,000
Bad debt expense 2,861 0 2,861 0
Depreciation and
amortization 23,877 22,765 47,013 45,530
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Total costs and
expenses 88,614 57,875 175,795 137,270
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Net loss ($34,032) ($ 3,007) ($ 69,707)($ 31,653)
======= ======= ======== ========
Net loss per
limited
partnership unit ($ 4.07) ($ .35) ($ 8.33)($ 3.78)
======= ======= ======== ========
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS IV
(a Pennsylvania limited partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
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(Unaudited)
Six months ended
June 30,
2002 2001
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Cash flows from operating activities:
Net loss ($ 69,707) ($ 31,653)
Adjustments to reconcile net
loss to net cash
provided by operating activities:
Depreciation and amortization 47,013 45,529
Changes in assets and liabilities:
Decrease in restricted cash 2,369 1,281
Increase in other assets (2,545) (1,591)
Increase in accounts payable - trade 2,850 5,057
Increase (decrease) increase in
other liabilities 2,231 (465)
Increase in tenant security deposits 1,465 1,995
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Net cash (used in) provided by
operating activities (16,324) 20,153
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(Decrease) increase in cash and cash
equivalents (16,324) 20,153
Cash and cash equivalents at
beginning of period 336,033 330,149
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Cash and cash equivalents at end of
period $319,709 $350,302
======== ========
The accompanying notes are an integral part of these financial statements.
DIVERSIFIED HISTORIC INVESTORS IV
(a Pennsylvania limited partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The unaudited consolidated financial statements of Diversified
Historic Investors IV (the "Registrant") and related notes have been
prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
omitted pursuant to such rules and regulations. The accompanying
consolidated financial statements and related notes should be read in
conjunction with the audited financial statements and notes thereto in
the Registrant's Annual Report on Form 10-K for the year ended
December 31, 2001.
The information furnished reflects, in the opinion of management, all
adjustments, consisting of normal recurring accruals, necessary for a
fair presentation of the results of the interim periods presented.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
To the best of its knowledge, Registrant is not a party
to, nor is any of its property the subject of, any pending material
legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders
during the quarter covered by this report.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Number Document
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3 Registrant's Amended and
Restated Certificate of Limited
Partnership and Agreement of
Limited Partnership, previously
filed as part of Amendment No.
2 of Registrant's Registration
Statement on Form S-11, are
incorporated herein by
reference.
21 Subsidiaries of the Registrant
are listed in Item 2.
Properties on Form 10-K,
previously filed and
incorporated herein by
reference.
(b) Reports on Form 8-K:
No reports were filed on Form 8-K during the quarter
ended June 30, 2002.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Date: January 12, 2004 DIVERSIFIED HISTORIC INVESTORS IV
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By: Dover Historic Advisors III, General
Partner
By: EPK, Inc., General Partner
By: /s/ Spencer Wertheimer
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SPENCER WERTHEIMER
President
Exhibit 31
CERTIFICATION
I, Spencer Wertheimer, certify that:
1. I have reviewed this quarterly report on Form 10-Q for the
quarterly period ended June 30, 2002 of Diversified Historic
Investors IV;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect
to the period covered by this report;
3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented
in this report;
4. I am responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) [Omission in accordance with SEC Release Nos. 33-
8238, 34-47986 and IC-26068 (June 5, 2003)] for the registrant and
have:
(a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under my
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made
known to me by others within those entities, particularly during
the period in which this report is being prepared;
(b) [Omitted in accordance with SEC Release Nos. 33-8238, 34-
47986 and IC-26068 (June 5, 2003)];
(c) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report my
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
(d) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting; and
5. I have disclosed, based on my most recent evaluation of
internal control over financial reporting, to the registrant's
auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's
ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: January 12, 2004 /s/ Spencer Wertheimer
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Name: Spencer Wertheimer
Title: President (principal
executive officer) of the
registrant's managing
partner, EPK, Inc.
Date: January 12, 2004 /s/ Spencer Wertheimer
---------------- ----------------------
Name: Spencer Wertheimer
Title: Treasurer (principal
financial officer) of the
registrant's managing
partner, EPK, Inc.
Exhibit 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Diversified Historic
Investors IV on Form 10-Q for the quarterly period ended June 30, 2002
as filed with the Securities and Exchange Commission on the date
hereof (the "Report"), I, Spencer Wertheimer, President and Treasurer
of the Company's managing partner, EPK, Inc., certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a)
or 15(d) of the Securities Exchange Act of 1934, and
(2) The information contained in the Report fairly presents, in all
material respects, the , financial condition and results of operations
of the Company.
Date: January 12, 2004 /s/ Spencer Wertheimer
---------------- ----------------------
Name: Spencer Wertheimer
Title: President (principal
executive officer) of the
registrant's managing
partner, EPK, Inc.
Date: January 12, 2004 /s/ Spencer Wertheimer
---------------- ----------------------
Name: Spencer Wertheimer
Title: Treasurer (principal
financial officer) of the
registrant's managing
partner, EPK, Inc.