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 December 31, 2003
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ------- EXCHANGE ACT OF 1934
Commission File Number 0-24660
LIBERTY TAX CREDIT PLUS II L.P.
-------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3458180
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
625 Madison Avenue, New York, New York 10022
- --------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 421-5333
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
----- -----
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes No X
----- -----
PART I - Financial Information
Item 1. Financial Statements
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
============= =============
December 31, March 31,
2003 2003
------------- -------------
ASSETS
Property and equipment, net of
accumulated depreciation
of $100,183,165 and $99,213,488,
respectively $ 122,764,832 $ 136,014,414
Cash and cash equivalents 1,507,075 1,577,939
Cash held in escrow 8,278,305 8,395,528
Deferred costs, net of accumulated
amortization of $2,053,333 and
$2,048,941, respectively 2,420,348 2,516,958
Other assets 4,248,565 4,546,756
------------- -------------
Total assets $ 139,219,125 $ 153,051,595
============= =============
2
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
(continued)
============= =============
December 31, March 31,
2003 2003
------------- -------------
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Liabilities
Mortgage notes payable $ 96,985,468 $ 104,624,793
Accounts payable and other
liabilities 7,808,189 7,513,253
Due to local general partners and
affiliates 14,882,672 16,444,523
Due to general partners and affiliates 15,353,558 13,829,040
Due to selling partners 2,463,240 2,457,615
------------- -------------
Total liabilities 137,493,127 144,869,224
------------- -------------
Minority interest 1,820,614 2,293,585
------------- -------------
Commitments and contingencies (Note 4)
Partners' capital (deficit)
Limited partners (115,917.5 BACs
issued and outstanding) 937,014 6,860,582
General partners (1,031,630) (971,796)
------------- -------------
Total partners' capital (deficit) (94,616) 5,888,786
------------- -------------
Total liabilities and partners'
capital (deficit) $ 139,219,125 $ 153,051,595
============= =============
See accompanying notes to consolidated financial statements.
3
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
============================ ============================
Three Months Ended Nine Months Ended
December 31, December 31,
---------------------------- ----------------------------
2003 2002 2003 2002
---------------------------- ----------------------------
Revenues
Rentals, net $ 6,651,274 $ 6,663,988 $ 20,054,519 $ 19,976,203
Other 120,111 166,463 442,099 448,961
(Loss) gain on sale
of properties (Note 3) (546,734) 14,583 (546,734) (44,883)
------------ ------------ ------------ ------------
Total revenue 6,224,651 6,845,034 19,949,884 20,380,281
------------ ------------ ------------ ------------
Expenses
General and ad-
ministrative 1,721,096 1,815,659 5,453,555 5,364,406
General and admini-
strative - related
parties (Note 2) 677,398 660,116 1,979,933 1,972,114
Repairs and main-
tenance 1,791,712 1,194,607 4,450,590 3,510,397
Operating 628,368 603,689 2,286,424 2,112,145
Taxes 219,154 229,340 751,861 765,705
Insurance 425,675 275,719 1,349,443 964,524
Interest 1,784,724 1,763,608 5,015,574 5,262,508
Depreciation and
amortization 1,915,124 2,645,448 5,722,822 6,865,552
------------ ------------ ------------ ------------
Total expenses 9,163,251 9,188,186 27,010,202 26,817,351
------------ ------------ ------------ ------------
Loss before
minority interest (2,938,600) (2,343,152) (7,060,318) (6,437,070)
Minority interest in
loss of subsidiaries 914,190 3,625 1,076,916 119,851
------------ ------------ ------------ ------------
Net loss $ (2,024,210) $ (2,339,527) $ (5,983,402) $ (6,317,219)
============ ============ ============ ============
Net loss - limited
partner $ (2,004,166) $ (2,316,132) $ (5,923,568) $ (6,254,047)
============ ============ ============ ============
Number of units
outstanding 115,917.5 115,917.5 115,917.5 115,917.5
============ ============ ============ ============
Net loss
per limited
partner unit $ (17.29) $ (19.98) $ (51.10) $ (53.95)
============ ============ ============ ============
See accompanying notes to consolidated financial statements.
4
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Consolidated Statement of Changes in Partners' Capital
(Deficit)
(Unaudited)
=========================================
Limited General
Total Partners Partners
-----------------------------------------
Partners' capital
(deficit) -
April 1, 2003 $ 5,888,786 $ 6,860,582 $ (971,796)
Net loss (5,983,402) (5,923,568) (59,834)
----------- ----------- -----------
Partners' capital
(deficit) -
December 31, 2003 $ (94,616) $ 937,014 $(1,031,630)
=========== =========== ===========
See accompanying notes to consolidated financial statements.
5
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
=============================
Nine Months Ended
December 31,
-----------------------------
2003 2002*
-----------------------------
Cash flows from operating activities:
Net loss $ (5,983,402) $ (6,317,219)
------------ ------------
Adjustments to reconcile net loss
to net cash provided by
operating activities:
Loss on sale of properties (Note 3) 546,734 44,883
Depreciation and amortization 5,722,822 6,865,552
Minority interest in loss of
subsidiaries (1,076,916) (119,851)
Decrease (increase) in cash held
in escrow 259,870 (441,578)
Decrease in other assets 183,523 69,200
Increase in accounts
payable and other liabilities 1,104,717 184,490
Increase in due to local general
partners and affiliates 604,446 277,320
Decrease in due to local general
partners and affiliates (2,188,047) (577,769)
Increase in due to general partners
and affiliates 1,527,018 1,461,226
------------ ------------
Total adjustments 6,864,167 7,763,473
------------ ------------
Net cash provided by operating
activities 700,765 1,446,254
------------ ------------
Cash flows from investing activities:
Proceeds from sale of properties 834,392 0
Acquisitions of property and
equipment (555,590) (386,231)
Increase in cash held
in escrow (388,543) (791,835)
------------ ------------
Net cash used in investing activities (109,741) (1,178,066)
------------ ------------
6
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
(continued)
=============================
Nine Months Ended
December 31,
-----------------------------
2003 2002*
-----------------------------
Cash flows from financing activities:
Increase in deferred costs (71,686) (545,391)
Proceeds from mortgage notes 0 30,922,410
Repayments of mortgage notes (1,199,772) (30,231,272)
Increase in due to selling
partners 5,625 5,625
Increase (decrease) in capitalization
of consolidated subsidiaries
attributable to minority
interest 603,945 (203,490)
------------ ------------
Net cash used in financing activities (661,888) (52,118)
------------ ------------
Net (decrease) increase in cash and
cash equivalents (70,864) 216,070
Cash and cash equivalents at
beginning of period 1,577,939 1,253,722
------------ ------------
Cash and cash equivalents at
end of period $ 1,507,075 $ 1,469,792
============ ============
7
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
(continued)
=============================
Nine Months Ended
December 31,
-----------------------------
2003 2002*
-----------------------------
Summarized below are the
components of the loss on sale
of properties (Note 3):
Decrease in property and
equipment - net of accumulated
depreciation $ 8,250,646 $ 0
Decrease in property and
equipment - held for sale -
net of accumulated depreciation 0 4,420,312
Decrease in cash held in escrow 245,896 110,641
Decrease in other assets 114,668 130,197
Decrease in mortgage notes payable (6,439,553) (4,061,142)
Decrease in accounts payable and
other liabilities (809,781) (556,126)
Increase in due to local general
partners and affiliates 21,750 0
(Decrease) increase in due to general
partners and affiliates (2,500) 1,001
Supplemental disclosures of noncash
activities:
Decrease in property and equipment
net of accumulated depreciation $ 54,520 $ 0
Decrease in mortgage note payable (6,439,553) 0
Decrease in accounts payable and
other liabilities (113,431) 0
Payment of project selling expenses (136,254) 0
Decrease in due to local general
partners and affiliates (316,370) 0
* Reclassified for comparative purposes.
See accompanying notes to consolidated financial statements.
8
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003
(Unaudited)
Note 1 - General
The consolidated financial statements for the nine months ended December 31,
2003 and 2002 include the accounts of Liberty Tax Credit Plus II L.P. (the
"Partnership") and 26 and 27 subsidiary partnerships ("subsidiaries",
"subsidiary partnerships" or "Local Partnerships"), respectively, in which the
Partnership is the limited partner. Through the rights of the Partnership and/or
Related Credit Properties II L.P., a Delaware limited partnership, Liberty
Associates II L.P., a Delaware limited partnership, or Liberty GP II Inc., a
Delaware corporation (each a "General Partner" and collectively, the "General
Partners"), which General Partners have a contractual obligation to act on
behalf of the Partnership, to remove the general partner of the subsidiary
partnerships (each, a "Local General Partner"), and to approve certain major
operating and financial decisions, the Partnership has a controlling financial
interest in each of the subsidiary partnerships. As of December 31, 2003, the
Partnership has disposed of three of its twenty-seven original investments (see
Note 3).
For financial reporting purposes, the Partnership's fiscal quarter ends December
31 in order to allow adequate time for the subsidiaries' financial statements to
be prepared and consolidated. All subsidiary partnerships have fiscal quarters
ending September 30. Accounts of the subsidiary partnerships have been adjusted
for intercompany transactions from October 1 through December 31.
All intercompany accounts and transactions have been eliminated in
consolidation.
Increase (decrease) in capitalization of consolidated subsidiary partnerships
attributable to minority interest arise from cash contributions from and cash
distributions to the minority interest partners.
Losses attributable to minority interests which exceed the minority interests'
investment in a subsidiary partnership have been charged to the Partnership.
Such losses aggregated $0 and $210,000 and $0 and $529,000 for the three and
nine months ended December 31, 2003 and 2002, respectively. The Partnership's
9
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003
(Unaudited)
investment in each subsidiary is equal to the respective subsidiary partners'
equity less minority interest capital, if any.
The books and records of the Partnership are maintained on the accrual basis in
accordance with generally accepted accounting principles ("GAAP"). In the
opinion of each of the General Partners, the accompanying unaudited financial
statements contain all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the financial position of the
Partnership as of December 31, 2003, the results of operations of the
Partnership for the three and nine months ended December 31, 2003 and 2002 and
the cash flows of the Partnership for the nine months ended December 31, 2003
and 2002, respectively. However, the operating results for the nine months ended
December 31, 2003 may not be indicative of the results for the year.
Certain information and note disclosures normally included in financial
statements prepared in accordance with GAAP have been omitted or condensed.
These consolidated financial statements should be read in conjunction with the
financial statements and notes thereto included in the Partnership's Annual
Report on Form 10-K for the year ended March 31, 2003.
10
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003
(Unaudited)
Note 2 - Related Party Transactions
One of the General Partners has a 1% interest as a special limited partner in
each of the subsidiary partnerships. An affiliate of the General Partners also
has a minority interest in certain subsidiary partnerships.
The costs incurred to related parties for the three and nine months ended
December 31, 2003 and 2002 were as follows:
Three Months Ended Nine Months Ended
December 31, December 31,
----------------------- ----------------------
2003 2002 2003 2002
----------------------- ----------------------
Partnership manage-
ment fees (a) $ 365,000 $ 374,000 $1,095,000 $1,122,000
Expense reimburse-
ment (b) 67,355 38,574 145,483 115,610
Property management
fees incurred to
affiliates of the
General Partners (c) 100,157 98,100 300,472 294,299
Local administrative
fee (d) 13,000 13,000 39,000 39,000
---------- ---------- ---------- ----------
Total general and ad-
ministrative-General
Partners 545,512 523,674 1,579,955 1,570,909
---------- ---------- ---------- ----------
Property management
fees incurred to affili-
ates of the subsidiary
partnerships' general
partners (c) 131,886 136,442 399,978 401,205
---------- ---------- ---------- ----------
Total general and admi-
nistrative-related parties $ 677,398 $ 660,116 $1,979,933 $1,972,114
========== ========== ========== ==========
(a) The General Partners are entitled to receive a partnership management fee,
after payment of all Partnership expenses, which together with the annual local
administrative fees will not exceed a maximum of 0.5% per annum of invested
assets (as defined in the Partnership Agreement), for administering the affairs
of the Partnership. The partnership management fee, subject to the foregoing
limitation, will be determined by the General Partners in their sole discretion
based upon their review of the Partnership's investments. Partnership management
11
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003
(Unaudited)
fees owed to the General Partners amounting to approximately $12,363,000 and
$11,268,000 were accrued and unpaid as of December 31, 2003 and March 31, 2003,
respectively. Without the General Partners' continued accrual without payment,
the Partnership will not be in a position to meet its obligations. The General
Partners have allowed for the accrual without payment of these amounts but are
under no obligation to continue to do so.
(b) The Partnership reimburses the General Partners and their affiliates for
actual Partnership operating expenses incurred by the General Partners and their
affiliates on the Partnership's behalf. The amount of reimbursement from the
Partnership is limited by the provisions of the Partnership Agreement.
Another affiliate of the General Partners performs asset monitoring for the
Partnership. These services include site visits and evaluations of the
subsidiary partnerships' performance.
(c) Property management fees incurred by subsidiary partnerships amounted to
$394,949 and $420,240 and $1,255,782 and $1,228,209 for the three and nine
months ended December 31, 2003 and 2002, respectively. Of these fees, $232,043
and $234,542 and $700,450 and $695,504, respectively, were incurred to
affiliates of the Local General Partners. Included in amounts incurred to
affiliates of the Local General Partners are $100,157 and $98,100 and $300,472
and $294,299 for the three and nine months ended December 31, 2003 and 2002,
respectively, which were also incurred to affiliates of the Partnership.
(d) Liberty Associates II L.P., a General Partner and a special limited partner
of the subsidiary partnerships, is entitled to receive a local administrative
fee of up to $2,500 per year from each subsidiary partnership.
12
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003
(Unaudited)
Note 3 - Sale of Properties
On August 15, 2003, the property and the related assets and liabilities of
Polynesian Apartments Associates, Limited Partnership ("Polynesian") were sold
to an unaffiliated third party for $2,700,000, resulting in a loss of
approximately $287,000.
On August 15, 2003, the property and the related assets and liabilities of
Seagrape Village Associates, Limited Partnership ("Seagrape") were sold to an
unaffiliated third party for $5,140,000, resulting in a loss of approximately
$260,000.
On January 18, 2002, the property and the related assets and liabilities of
Campeche Isle Apartments, Limited Partnership ("Campeche") were sold to an
unaffiliated third party for $4,625,000, resulting in a loss of approximately
$45,000.
Note 4 - Commitments and Contingencies
Alexis Park Apartments
- ----------------------
A hazardous waste issue has affected Alexis Park Apartments ("Alexis") for
nearly 12 years. Although this environmental issue is in many respects beyond
its control, management believes that the selected remedy of the United States
Environmental Protection Agency is practical and is not likely to cause
significant disruption to the apartment project's operations beyond what it has
experienced over the last several years. The Local Partnership's congressman,
U.S. Senators and the Mayor of Bossier City have assisted Alexis in preventing
this issue from escalating unnecessarily and management believes that no
escalation will occur in the near term. Further, all indications are that an oil
company will bear all costs of remediation and that the Local Partnership will
not be called upon to share in those costs.
Gramco Development Limited Dividend Partnership, L.P.
- -----------------------------------------------------
Gramco Development Limited Dividend Partnership, L.P. ("Gramco") was granted net
funds of $4,867,000 by the Municipality of Bayamon (the "Municipality") and HUD.
In the event of a substantial violation to the provisions of certain agreements
between Gramco and the Municipality and between the Municipality and HUD, the
funds shall become immediately due and payable at the election of HUD and the
13
LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003
(Unaudited)
Municipality. Otherwise, the principal amount of the obligation together with
any interest will be forgiven. Proceeds from the loan have been deducted from
fixed assets.
Williamsburg Residential, L.P.
- ------------------------------
In November 1996, the Local General Partner of Williamsburg Residential, L.P.
("Williamsburg") stopped making the mortgage note payments which constituted an
event of default. A Reinstatement and Modification Agreement was entered into
effective March 1, 1997. The Partnership has advanced Williamsburg the necessary
funds to keep the mortgage and escrows current and it is expected to continue to
do so during 2004. As of December 31, 2003, the Partnership has advanced
approximately $1,136,000 to Williamsburg.
Property Development Associates, L.P.
- ----------------------------------------
Property Development Associates, L.P. ("Property Development") is involved as a
defendant in a pending litigation case. This case was filed by the plaintiffs on
December 18, 2002 and served on the defendants on January 6, 2003. Opening
discovery was served on the plaintiffs by the defendants; however, the
plaintiff's answers to that discovery have not been received as of the date of
the Auditor's report. The plaintiff's petition consists of claims against
Property Development for assault, battery, constructive eviction, negligent
hiring, negligent retention, misuse of Housing and Urban Development funds,
slander, retaliatory eviction, and breach of implied warranty of habitability.
The potential verdict in this case ranges from complete defense verdict up
through the $2 million sought by the plaintiffs. The potential damages, other
than those for the alleged intentional acts of assault and battery, are covered
by insurance. Property Development denies each of these allegations and intends
to contest the case vigorously.
14
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources
- -------------------------------
The Partnership has invested all of the net proceeds of its original offering in
twenty-seven Local Partnerships. Through December 31, 2003, the Partnership has
sold the property and the related assets and liabilities of three Local
Partnerships.
The Partnership's primary sources of funds are (i) working capital reserves;
(ii) interest earned on working capital reserves; and (iii) cash distributions
from operations of the Local Partnerships. All of these sources of funds, none
of which are significant, are available to meet obligations of the Partnership.
During the nine months ended December 31, 2003, distributions received by the
Partnership from operations of the Local Partnerships were approximately
$42,000.
During the nine months ended December 31, 2003, cash and cash equivalents of the
Partnership and its consolidated Local Partnerships decreased approximately
$71,000. This decrease was due to acquisitions of property and equipment
($556,000), an increase in cash held in escrow relating to investing activities
($389,000), an increase in deferred costs ($72,000) and repayments of mortgage
notes ($1,200,000) which exceeded cash provided by operating activities
($701,000), proceeds from sale of properties ($834,000), an increase in due to
selling partners ($6,000) and an increase in capitalization of consolidated
subsidiaries attributable to minority interest ($604,000). In the adjustments to
reconcile the net loss to cash provided by operating are loss on sale of
properties ($547,000) and depreciation and amortization ($5,723,000).
Partnership management fees owed to the General Partners amounting to
approximately $12,363,000 and $11,268,000 were accrued and unpaid as of December
31, 2003 and March 31, 2003, respectively. Without the General Partners
continued accrual without payment, the Partnership will not be in a position to
meet its obligations. The General Partners have allowed for the accrual without
payment of these amounts but are under no obligation to continue to do so.
For a discussion of the sale of properties, see Note 3 to the financial
statements.
Management is not aware of any trends, events, commitments or uncertainties
which have not otherwise been disclosed, that will or are likely to impact
liquidity in a material way. Management believes the only impact would be from
15
laws that have not yet been adopted. The portfolio is diversified by the
location of the properties around the United States so that if one area of the
country is experiencing downturns in the economy, the remaining properties in
the portfolio may be experiencing upswings. However, the geographic
diversification of the portfolio may not protect against a general downturn in
the national economy.
Critical Accounting Policies
- ----------------------------
In preparing the consolidated financial statements, management has made
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting periods. Actual results could differ
from those estimates. Set forth below is a summary of the accounting policies
that management believes are critical to the preparation of the consolidated
financial statements. The summary should be read in conjunction with the more
complete discussion of the Partnership's accounting policies included in Note 2
to the consolidated financial statements in the annual report on Form 10-K.
Property and Equipment
- ----------------------
Property and equipment to be held and used are carried at cost which includes
the purchase price, acquisition fees and expenses, construction period interest
and any other costs incurred in acquiring such property and equipment. The cost
of property and equipment is depreciated over their estimated useful lives using
accelerated and straight-line methods. Expenditures for repairs and maintenance
are charged to expense as incurred; major renewals and betterments are
capitalized. At the time property and equipment are retired or otherwise
disposed of, the cost and accumulated depreciation are eliminated from the
assets and accumulated depreciation accounts and the profit or loss on such
disposition is reflected in earnings. The Partnership complies with Statement of
Financial Accounting Standards (SFAS) No. 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets". A loss on impairment of assets is recorded when
management estimates amounts recoverable through future operations and sale of
the property on an undiscounted basis are below depreciated cost. property
investments themselves are reduced to estimated fair value (generally using
discounted cash flows) when the Property is considered to be impaired and the
depreciated cost exceeds estimated fair value.
16
Income Taxes
- ------------
The Partnership is not required to provide for, or pay, any federal income
taxes. Net income or loss generated by the Partnership is passed through to the
partners and is required to be reported by them. The Partnership may be subject
to state and local taxes in jurisdictions in which it operates. For income tax
purposes, the Partnership has a fiscal year ending December 31.
New Accounting Pronouncements
- -----------------------------
In January 2003, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46").
FIN 46 is applicable immediately for variable interest entities created after
January 31, 2003. For variable interest entities created before February 1,
2003, the provisions of FIN 46 are applicable no later than December 15, 2003.
The Partnership has not created any variable interest entities after January 31,
2003. In December 2003, the FASB redeliberated certain proposed modifications
and revised FIN 46 ("FIN 46 (R)"). The revised provisions are applicable no
later than the first reporting period ending after March 15, 2004. The adoption
of FIN 46 and FIN 46 (R) is not anticipated to have a material impact on the
Partnership's financial reporting and disclosures.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity". SFAS No. 150
changes the accounting for certain financial instruments that, under previous
guidance, could be classified as equity or "mezzanine" equity, by now requiring
those instruments to be classified as liabilities (or assets in some
circumstances) in the Consolidated Balance Sheets. Further, SFAS No. 150
requires disclosure regarding the terms of those instruments and settlement
alternatives. The guidance in SFAS No. 150 generally was effective for all
financial instruments entered into or modified after May 31, 2003, and was
otherwise effective at the beginning of the first interim period beginning after
June 15, 2003. The Partnership has evaluated SFAS No. 150 and determined that it
does not have an impact on the Partnership's financial reporting and
disclosures.
17
Results of Operations
- ---------------------
During the nine months ended December 31, 2003 and the fiscal year ended March
31, 2003, Campeche, Polynesian and Seagrape (the "Sold Assets") sold their
properties and the related assets and liabilities. The results of operations of
the Partnership, as well as the Local Partnerships, remained fairly consistent
during the three and nine months ended December 31, 2003 and 2002, excluding the
Sold Assets, loss on sale of properties, other income, repairs and maintenance,
insurance and depreciation and amortization. The results of operations for the
three and nine months ended December 31, 2003 and 2002 consisted primarily of
the results of the Partnership's investment in the Local Partnership.
Rental income decreased less than 1% and increased less than 1% for the three
and nine months ended December 31, 2003 as compared to the corresponding periods
in 2002. Excluding the Sold Assets, rental income increased approximately 3% and
2% primarily due to rental rate increases.
Other income decreased approximately $46,000 for the three months ended December
31, 2003 as compared to the corresponding period in 2002. Excluding the Sold
Assets, other income decreased approximately $37,000 primarily due to a decrease
in late fee income at one Local Partnership and a decrease in tenant charges at
a second Local Partnership.
Total expenses, excluding the Sold Assets, repairs and maintenance, insurance
and depreciation and amortization remained fairly consistent with an increase of
approximately 3% and 2% for the three and nine months ended December 31, 2003 as
compared to the corresponding periods in 2002.
Repairs and maintenance increased approximately $597,000 and $940,000 for the
three and nine months ended December 31, 2003 as compared to the corresponding
periods in 2002. Excluding the Sold Assets, repairs and maintenance increased
approximately $480,000 and $806,000 primarily due to sealing the building
foundation at one Local Partnership, increased security costs, painting and wall
repairs at a second Local Partnership and increased security costs and insurance
proceeds from fire damage at a third Local Partnership.
Insurance increased approximately $150,000 and $385,000 for the three and nine
months ended December 31, 2003 as compared to the corresponding periods in 2002.
18
Excluding the Sold Assets, insurance increased approximately $137,000 and
$355,000 primarily due an increase in premiums at the Local Partnerships.
Depreciation and amortization decreased approximately $730,000 and $1,143,000
for the three and nine months ended December 31, 2003 as compared to the
corresponding periods in 2002. Excluding the Sold Assets, depreciation and
amortization decreased approximately $733,000 and $1,140,000 primarily due to
the write-off of deferred financing fees relating to refinancings at three Local
Partnerships in 2002.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
None.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
- ------------------------------------------------
The Chief Executive Officer and Chief Financial Officer of Related Credit
Properties II, Inc., the general partner of two of the General Partners of the
Partnership, has evaluated the Partnership's disclosure controls and procedures
(as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934 (the "Exchange Act")) as of December 31, 2003 (the
"Evaluation Date"). Based on such evaluation, such officer has concluded that,
as of the Evaluation Date, the Partnership's disclosure controls and procedures
are effective in alerting him, on a timely basis, to material information
relating to the Partnership required to be included in the Partnership's reports
filed or submitted under the Exchange Act .
Changes in Internal Control Over Financial Reporting
- ----------------------------------------------------
There has been no significant change in the Partnership's internal control over
financial reporting during the Partnership's fiscal quarter ended December 31,
2003 which has materially affected, or is reasonably likely to materially
affect, such internal control over financial reporting .
19
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities and Use of Proceeds - 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
(a) Exhibits:
31.1 Certification Pursuant to Rule 13a-14(a) or Rule 15d-(14a).
32.1 Certification Pursuant to Rule 13a-14(b) or Rule 15d-14(b) and
Section 1350 of Title 18 of the United States Code (18 U.S.C. 1350).
(b) Reports on Form 8-K - No reports on Form 8-K were filed during
the quarter.
20
SIGNATURES
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.
LIBERTY TAX CREDIT PLUS II L.P.
(Registrant)
By: RELATED CREDIT PROPERTIES II L.P.,
a General Partner
By: Related Credit Properties II Inc.,
its General Partner
Date: February 4, 2004
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes,
President and Principal Executive
Officer
(Principal Executive and Financial
Officer)
By: LIBERTY GP II INC.,
a General Partner
Date: February 4, 2004
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes,
President
and
By: LIBERTY ASSOCIATES II, L.P.
a General Partner
By: Related Credit Properties II Inc.,
its General Partner
Date: February 4, 2004
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes,
President
and
By:Liberty GP II Inc.,
its General Partner
Date: February 4, 2004
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes,
President
Exhibit 31.1
CERTIFICATION PURSUANT TO RULE
13a-14(a) OR RULE 15d-14(a)
I, Alan P. Hirmes, Chief Executive Officer and Chief Financial Officer of
Related Credit Properties II Inc. the general partner of Related Credit
Properties II L.P. and of Liberty GP II Inc., each of which is a General Partner
of Liberty Tax Credit Plus II L.P. (the "Partnership"), hereby certify that:
1. I have reviewed this quarterly report on Form 10-Q for the period
ending December 31, 2003 of the Partnership;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary in order 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 quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the Partnership as of, and for, the periods presented in
this quarterly 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)) and internal control over financial reporting (as defined in
Exchange Act Rues 13a-15(f) and 15d-15(f)) for the Partnership and I
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 Partnership
including its consolidated subsidiaries, is made known to me by others
within those entities, particularly during the period in which this
quarterly report was being prepared;
b) designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under my
supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles; and
c) evaluated the effectiveness of the Partnership's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures as of the end
of the period covered by this quarterly report based on such
evaluation; and
d) disclosed in this quarterly report any change in the Partnership's
internal control over financial reporting that occurred during the
period ending December 31, 2003 that has materially affected, or is
reasonably likely to materially affect, the Partnership'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 Partnership's auditors and to
the boards of directors of the General Partners:
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 Partnership'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 Partnership's
internal control over financial reporting.
Date: February 4, 2004
----------------
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes
Chief Executive Officer and
Chief Financial Officer
Exhibit 32.1
CERTIFICATION PURSUANT
TO RULE 13a-14(b) OR RULE 15d-14(b)
AND SECTION 1350 OF TITLE 18
OF THE UNITED STATES CODE (18 U.S.C. 1350)
In connection with the Quarterly Report of Liberty Tax Credit Plus II L.P. (the
"Partnership") on Form 10-Q for the period ending December 31, 2003 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, Alan P. Hirmes, Chief Executive Officer and Chief Financial Officer of
Related Credit Properties II Inc. (general partner of each of Related Credit
Properties II L.P. and Liberty Associates II, L.P., General Partners of
Registrant) and Liberty GP II, Inc. (general partner of Liberty Associates II,
L.P.), 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 result of operations of the
Partnership.
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes
Chief Executive Officer and
Chief Financial Officer
February 4, 2004