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 0-24656
LIBERTY TAX CREDIT PLUS III L.P.
--------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3491408
- ------------------------------- -------------------
(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 Rule 12b-2 of the Act).
Yes No X
----- -----
PART I - Financial Information
Item 1. Financial Statements
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
============= =============
December 31, March 31,
2003 2003
------------- -------------
ASSETS
Property and equipment at cost,
net of accumulated depreciation
of $120,837,677 and $124,137,316,
respectively $ 165,790,297 $ 175,906,203
Cash and cash equivalents 3,261,530 5,098,740
Cash held in escrow 14,213,505 13,369,452
Deferred costs, net of accumulated
amortization of $2,161,523
and $2,083,006, respectively 2,677,531 3,048,279
Other assets 3,042,510 2,691,106
------------- -------------
Total assets $ 188,985,373 $ 200,113,780
============= =============
2
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
(continued)
============= =============
December 31, March 31,
2003 2003
------------- -------------
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Mortgage notes payable $ 173,063,926 $ 185,593,622
Due to debt guarantor 48,872,550 46,343,389
Accounts payable and other
liabilities 24,856,243 23,628,888
Due to local general partners and
affiliates 10,785,869 17,303,330
Due to general partners and
affiliates 11,665,507 10,358,805
------------- -------------
Total liabilities 269,244,095 283,228,034
------------- -------------
Minority interest (1,415,752) (867,942)
------------- -------------
Commitments and contingencies
(Note 3)
Partners' deficit:
Limited partners (139,101.5 BACs
issued and outstanding) (76,819,083) (80,188,392)
General Partners (2,023,887) (2,057,920)
------------- -------------
Total partners' deficit (78,842,970) (82,246,312)
------------- -------------
Total liabilities and partners'
deficit $ 188,985,373 $ 200,113,780
============= =============
See accompanying notes to consolidated financial statements.
3
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
============================ ============================
Three Months Ended Nine Months Ended
December 31, December 31,
---------------------------- ----------------------------
2003 2002* 2003 2002*
---------------------------- ----------------------------
Revenues
Rental income $ 8,519,709 $ 8,611,866 $ 26,109,662 $ 25,982,145
Other 376,914 466,709 1,124,447 1,267,519
(Loss) gain of sale of
property (Note 4) (5,830) 0 9,901,956 0
------------ ------------ ------------ ------------
Total revenue 8,890,793 9,078,575 37,136,065 27,249,664
------------ ------------ ------------ ------------
Expenses
General and
administrative 1,967,249 1,853,414 6,230,755 5,591,643
General and
administrative-
related parties
(Note 2) 931,842 948,611 2,815,258 2,795,844
Operating 901,429 852,985 3,073,276 2,982,555
Repairs and
maintenance 1,390,931 1,501,480 4,156,330 4,280,675
Real estate taxes 532,169 579,358 1,659,598 1,735,452
Insurance 395,078 393,360 1,383,314 1,124,123
Interest 3,360,207 3,819,452 10,850,241 11,255,696
Depreciation and
amortization 2,427,605 3,051,778 7,789,338 8,214,572
------------ ------------ ------------ ------------
Total expenses 11,906,510 13,000,438 37,958,110 37,980,560
------------ ------------ ------------ ------------
Loss before minority
interest and extra-
ordinary item (3,015,717) (3,921,863) (822,045) (10,730,896)
Minority interest
in losses of
subsidiary
partnerships 59,137 73,313 184,665 193,114
------------ ------------ ------------ ------------
Loss before extra-
ordinary item (2,956,580) (3,848,550) (637,380) (10,537,782)
Extraordinary item
forgiveness of in-
debtedness income
(Note 4) 0 0 4,040,722 0
------------ ------------ ------------ ------------
Net (loss) income $ (2,956,580) $ (3,848,550) $ 3,403,342 $(10,537,782)
============ ============ ============ ============
4
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
(continued)
============================ ============================
Three Months Ended Nine Months Ended
December 31, December 31,
---------------------------- ----------------------------
2003 2002* 2003 2002*
---------------------------- ----------------------------
Loss before extra-
ordinary item -
limited partners $ (2,927,014) $ (3,810,065) $ (631,006) $(10,432,404)
Extraordinary item -
limited partners 0 0 4,000,315 0
------------ ------------ ------------ ------------
Net (loss) income -
limited partners $ (2,927,014) $ (3,810,065) $ 3,369,309 $(10,432,404)
============ ============ ============ ============
Number of BACs
outstanding 139,101.5 139,101.5 139,101.5 139,101.5
============ ============ ============ ============
Net (loss) income
before extra-
ordinary item
per BAC $ (21.04) $ (27.39) $ (4.54) $ (75.00)
Extraordinary item
per BAC 0 0 28.76 0
------------ ------------ ------------ ------------
Net (loss) income
per BAC $ (21.04) $ (27.39) $ 24.22 $ (75.00)
============ ============ ============ ============
* Reclassified for comparative purposes.
See accompanying notes to consolidated financial statements.
5
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Consolidated Statement of Changes in Partners' Deficit
(Unaudited)
============================================
Limited General
Total Partners Partners
--------------------------------------------
Partners' deficit -
April 1, 2003 $(82,246,312) $(80,188,392) $ (2,057,920)
Net income -
nine months ended
December 31, 2003 3,403,342 3,369,309 34,033
------------ ------------ ------------
Partners' deficit -
December 31, 2003 $(78,842,970) $(76,819,083) $ (2,023,887)
============ ============ ============
See accompanying notes to consolidated financial statements.
6
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
============================
Nine Months Ended
December 31,
----------------------------
2003 2002*
----------------------------
Cash flows from operating activities:
Net income (loss) $ 3,403,342 $(10,537,782)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Gain on sale of property (Note 4) (9,901,956) 0
Extraordinary item - forgiveness
of indebtedness income (Note 4) (4,040,722) 0
Depreciation and amortization 7,789,338 8,214,572
Minority interest in loss of
subsidiaries (184,665) (193,114)
Increase in accounts
payable and other liabilities 1,596,705 2,103,092
Increase in cash held in escrow (762,650) (406,278)
Increase in other assets (414,426) (830,892)
Increase in due to general partners
and affiliates 1,306,702 1,336,802
Increase in due to local
general partners and affiliates 331,640 466,331
Decrease in due to local general
partners and affiliates (472,154) (51,831)
Increase in due to debt guarantor 2,529,161 2,493,985
------------ ------------
Net cash provided by operating
activities 1,180,315 2,594,885
------------ ------------
Cash flows from investing activities:
Acquisition of property and equipment (792,891) (803,192)
Increase in cash held in escrow (81,403) (337,926)
Increase (decrease) in due to local general
partners and affiliates 2,427 (63,402)
------------ ------------
Net cash used in investing activities (871,867) (1,204,520)
------------ ------------
7
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
(continued)
============================
Nine Months Ended
December 31,
----------------------------
2003 2002*
----------------------------
Cash flows from financing activities:
Principal payments of mortgage
notes payable (1,769,696) (6,708,461)
Borrowings on mortgage notes 0 5,318,700
Increase in deferred costs 0 (247,868)
Decrease in due to local general
partners and affiliates (12,817) (545)
Decrease in capitalization of
consolidated subsidiaries
attributable to minority interest (363,145) (502,454)
------------ ------------
Net cash used in financing activities (2,145,658) (2,140,628)
------------ ------------
Net decrease in cash and
cash equivalents (1,837,210) (750,263)
Cash and cash equivalents at
beginning of period 5,098,740 6,104,774
------------ ------------
Cash and cash equivalents at
end of period $ 3,261,530 $ 5,354,511
============ ============
8
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
(continued)
============================
Nine Months Ended
December 31,
----------------------------
2003 2002*
----------------------------
Supplemental disclosures of
noncash activities:
Forgiveness of indebtedness income
Decrease in due to local general partners
and their affiliates $ (4,040,722) $ 0
Summarized below are the components
of the gain on sale of properties:
Decrease in property and equipment,
net of accumulated depreciation $ 3,267,097 $ 0
Decrease in deferred costs 223,110 0
Decrease in prepaid expenses and
other assets 63,022 0
Decrease in accounts payable,
accrued expenses and other liabilities (369,350) 0
Decrease in mortgage notes payable (10,760,000) 0
Decrease in due to local general
partners and their affiliates (2,325,835) 0
* Reclassified for comparative purposes.
See accompanying notes to consolidated financial statements.
9
LIBERTY TAX CREDIT PLUS III 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 III L.P. (the
"Partnership") and 61 subsidiary partnerships (the "subsidiary partnerships",
"Local Partnerships" or "subsidiaries"), respectively. The Partnership holds a
98% limited partnership interest in each subsidiary partnership except one
subsidiary partnership, in which the Partnership holds a 27% limited partnership
interest (the other 71% limited partnership interest is owned by an affiliate of
the Partnership with the same management). Through the rights of the Partnership
and/or an affiliate of Related Credit Properties III L.P. and Liberty GP III
Inc. (the "General Partners"), which affiliate has a contractual obligation to
act on behalf of the Partnership, to remove the general partner of each
subsidiary partnership (each a "Local General Partner") and to approve certain
major operating and financial decisions, the Partnership has a controlling
financial interest in the subsidiary partnerships. As of December 31, 2003, the
Partnership has disposed of two of its sixty-two original investments (see Note
4).
For financial reporting purposes, the Partnership's fiscal quarter ends December
31. All subsidiaries have fiscal quarters ending September 30. Accounts of the
subsidiaries have been adjusted for intercompany transactions from October 1
through December 31. 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 intercompany accounts and transactions have been eliminated in
consolidation.
Increases (decreases) in the capitalization of consolidated subsidiaries
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 have been charged to the Partnership. Such losses
aggregated approximately $0 and $66,000 and $0 and $182,000 for the three and
nine months ended December 31, 2003 and 2002, respectively. The Partnership's
10
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003
(Unaudited)
investment in each subsidiary is generally equal to the respective subsidiary
partners' equity less minority interest capital, if any. In consolidation, all
subsidiary partnership losses are included in the Partnership's capital account
except for losses allocated to minority interest capital.
The books and records of the Partnership are maintained on the accrual basis of
accounting in accordance with U.S. generally accepted accounting principles
("GAAP"). In the opinion of the General Partners of the Partnership, 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
for the three and nine months ended December 31, 2003 and 2002 and cash flows
for the nine months ended December 31, 2003 and 2002. 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 disclosure 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 period ended March 31, 2003.
11
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003
(Unaudited)
Note 2 - Related Party Transactions
Liberty Associates IV L.P. ("Liberty Associates"), an affiliate of the General
Partners, has a 1% and .998% interest as a Special Limited Partner in 59 and 1
of the Local Partnerships, respectively. Affiliates of the General Partners also
have a minority interest in certain Local 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 management
fees (a) $ 354,000 $ 358,500 $1,062,000 $1,075,500
Expense reimbursement (b) 53,378 76,145 205,276 189,256
Local administrative
fee (d) 50,000 52,000 150,000 156,000
---------- ---------- ---------- ----------
Total general and ad-
ministrative-General
Partners 457,378 486,645 1,417,276 1,420,756
---------- ---------- ---------- ----------
Property management
fees incurred to af-
filiates of the subsidi-
ary partnerships'
general partners (c) 474,464 461,966 1,397,982 1,375,088
---------- ---------- ---------- ----------
Total general and ad-
ministrative-related
parties $ 931,842 $ 948,611 $2,815,258 $2,795,844
========== ========== ========== ==========
(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. Unpaid partnership
management fees for any year will be accrued without interest and will be
payable only to the extent of available funds after the Partnership has made
distributions to the limited partners of sale or refinancing proceeds equal to
12
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003
(Unaudited)
their original capital contributions plus a 10% priority return thereon (to the
extent not theretofore paid out of cash flow). Partnership management fees owed
to the General Partners amounting to approximately $9,527,000 and $8,465,000
were accrued and unpaid at December 31, 2003 and March 31, 2003, respectively.
Without the General Partners' continued accrual without payment of these fees
and expense reimbursements, 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) The subsidiary partnerships incurred property management fees amounting to
$616,274 and $586,725 and $1,819,135 and $1,749,350 for the three and nine
months ended December 31, 2003 and 2002, respectively, of which $474,464 and
$461,966 and $1,397,982 and $1,375,088 for the three and nine months ended
December 31, 2003 and 2002, respectively, were incurred to affiliates of the
Local General Partners. There were no property management fees incurred to
affiliates of the General Partners.
(d) Liberty Associates IV L.P., 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.
Note 3 - Commitments and Contingencies
The following disclosure includes changes and/or additions to disclosures
regarding the Subsidiary Partnership which were included in the Partnership's
13
LIBERTY TAX CREDIT PLUS III L.P.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 2003
(Unaudited)
Annual Report on Form 10-K for the period ended March 31, 2003.
Site H Development Co. ("Site H")
- ---------------------------------
The Partnership has not been provided with the Site H audited financial
statements for fiscal year 2002.
Note 4 - Sale of Property
On June 26, 2003, the property and related assets and liabilities of Jefferson
Place L.P. ("Jefferson Place") were sold to an unaffiliated third party for
$13,650,000 resulting in a gain of approximately $9,902,000. No proceeds were
used to settle the Local Partnership's associated subordinate note and accrued
interest thereon, which had a total outstanding balance of approximately
$4,041,000 resulting in forgiveness of indebtedness income of approximately
$4,041,000.
14
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources
- -------------------------------
The Partnership's primary sources of funds include (i) working capital reserves
and (ii) cash distributions from the operations of the Local Partnerships,
neither of which are substantial in amount.
The Partnership has invested all of the net proceeds of its original offering in
62 Local Partnerships. As of December 31, 2003, the Partnership has sold its
limited partnership interest in one Local Partnership and the property and
related assets and liabilities of another Local Partnership was also sold. See
Note 4 for a discussion of property sales. Approximately $260,000 of the
purchase price of its investments remains to be paid by the Partnership (which
includes approximately $242,000 held in escrow).
During the nine months ended December 31, 2003, cash and cash equivalents of the
Partnership and its consolidated Local Partnerships decreased approximately
$1,837,000. This decrease was attributable to acquisitions of property and
equipment ($793,000), principal payments on mortgage notes payable ($1,770,000),
an increase in cash held in escrow relating to investing activities ($81,000), a
decrease in capitalization of consolidated subsidiaries attributable to minority
interest ($363,000) and a net decrease in due to local general partners and
affiliates relating to investing and financing activities ($10,000) which
exceeded cash provided by operating activities ($1,180,000). Included in the
adjustments to reconcile the net income to cash provided by operating activities
are gain on sale of property ($9,902,000), forgiveness of indebtedness income
($4,041,000), depreciation and amortization ($7,789,000) and an increase in due
to debt guarantor ($2,529,000).
The Partnership has a working capital reserve of approximately $282,000 at
December 31, 2003.
Cash distributions received from the Local Partnerships remain relatively
immaterial. These distributions, as well as the working capital reserves
referred to in the preceding paragraph, will be used towards the future
operating expenses of the Partnership. During the nine months ended December 31,
2003, the amounts received from operations of the Local Partnerships
approximated $155,000.
Partnership management fees owed to the General Partners amounting to
approximately $9,527,000 and $8,465,000 were accrued and unpaid at December 31,
2003 and March 31, 2003, respectively. Without the General Partners' continued
15
accrual without payment of these fees and expense reimbursements, 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 contingencies affecting certain Local Partnerships, see Note
3 to the financial statements. Since the maximum loss the Partnership would be
liable for is its net investment in the respective Local Partnerships, the
resolution of the existing contingencies is not anticipated to impact future
results of operations, liquidity or financial condition in a material way.
However, the Partnership's loss of its investment in a Local Partnership will
eliminate the ability to generate future tax credits from such Local Partnership
and may also result in recapture of tax credits if the investment is lost prior
to the end of the fifteenth anniversary after the beginning of the tax credit
period.
Management is not aware of any trends or 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 for
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. The Partnership has fully invested the proceeds of its
offering in 62 Local Partnerships and, as of December 31, 2003, two of the Local
Partnerships have been sold and eight still had their Tax Credits in place. The
tax credits are attached to the property for a period of ten years and are
transferable with the property during the balance of such ten year period. If
trends in the real estate market warranted the sale of a property, the remaining
tax credits would transfer to the new owner, thereby adding value to the
property on the market. However, such value declines each year and is not
included in the financial statement carrying amount.
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
16
financial statements. The summary should be read in conjunction with the more
complete discussion of the Company's accounting policies included in Note 2 to
the consolidated financial statements which are include in the Partnership's
annual report on Form 10-K for the year ended March 31, 2003.
a) Property and Equipment
Property and equipment to be held and used are carried at cost which includes
the purchase price, acquisition fees and expenses, and any other costs incurred
in acquiring the properties. 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. At that time 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.
b) Income Taxes
No provision has been made for income taxes in the accompanying consolidated
financial statements since such taxes, if any, are the responsibility of the
individual partners. 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
17
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.
Results of Operations
- ---------------------
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
consolidated Local Partnerships.
The results of the operations of the Partnership, as well as the Local
Partnerships remained fairly consistent during the three and nine months ended
December 31, 2003 as compared to the corresponding periods in 2002, excluding
gain on sale of property, forgiveness of indebtedness income, administrative and
management, operating, insurance, depreciation and amortization and capital
events with respect to Jefferson Place L.P., which sold its property and related
assets and liabilities (the "Sold Asset").
Rental income decreased approximately 1% and increased approximately 1% for the
three and nine months ended December 31, 2003 as compared to the corresponding
periods in 2002, respectively. Excluding the Sold Asset, rental income increased
approximately 4% and 3% primarily due to rental rate increases.
Other income decreased approximately $90,000 and $143,000 for the three and nine
months ended December 31, 2003 as compared to the corresponding periods in 2002,
respectively. Excluding the Sold Asset, other income decreased approximately
$50,000 and $93,000 primarily due to a decrease in laundry income at one Local
Partnership, a decrease in escrow balances earning interest at a second Local
18
Partnership, a real estate tax rebate in 2002 at a third Local Partnership and
an overaccrual of interest income in 2002 at a fourth Local Partnership.
Total expenses, excluding the Sold Asset, administrative and management,
operating, insurance and depreciation and amortization remained fairly
consistent with decreases of approximately 4% and 2% for the three and nine
months ended December 31, 2003 as compared to the corresponding periods in 2002.
Administrative and management increased approximately $114,000 and $639,000 for
the three and nine months ended December 31, 2003 as compared to the
corresponding periods in 2002. Excluding the Sold Asset, administrative and
management increased approximately $257,000 and $744,00 primarily due to
increases in payroll and employee benefits at two Local Partnerships, an
incentive fee paid at a third Local Partnership, the write-off of old
receivables at a fourth Local Partnership and withholding taxes paid on Ohio
source income at the Partnership level.
Operating increased approximately $48,000 for the three months ended December
31, 2003 as compared to the corresponding periods in 2002, respectively.
Excluding the Sold Asset, operating increased approximately $94,000 primarily
due to underaccruals of utility expenses for the quarter ended September 30,
2003 as well as overaccruals of utility expenses for the quarter ended September
30, 2002 at the same Local Partnership.
Insurance expense increased approximately $2,000 and $259,000 for the three and
nine months ended December 31, 2003 as compared to the corresponding periods in
2002, respectively. Excluding the Sold Asset, insurance increased approximately
$44,000 and $245,000 primarily due to increases in insurance premiums at the
Local Partnerships.
Depreciation and amortization decreased approximately $624,000 and $425,000 for
the three and nine months ended December 31, 2003 as compared to the
corresponding periods in 2002, respectively. Excluding the Sold Asset,
depreciation and amortization decreased approximately $474,000 and $288,000
primarily due to the write off of deferred costs in 2002 relating to the
refinancing of a loan at one Local Partnership.
Item 3. Quantitative and Qualitative Disclosures about
Market Risk.
The Partnership does not have any market risk sensitive instruments.
19
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
- ------------------------------------------------
The Chief Executive Officer and Chief Financial Officer of Related Credit
Properties III, Inc., the general partner of each of the General Partners of the
Partnership and Liberty GP III, Inc., 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 .
20
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-14(a).
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.
21
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 III L.P.
--------------------------------
(Registrant)
By: RELATED CREDIT PROPERTIES III L.P.,
a General Partner
By: Related Credit Properties III Inc.,
its General Partner
Date: February 11, 2004
By: /s/ Alan P. Hirmes
-------------------
Alan P. Hirmes,
President (Chief Executive Officer and
Chief Financial Officer)
Date: February 11, 2004
By: /s/ Glenn F. Hopps
-------------------
Glenn F. Hopps,
Treasurer
(principal accounting officer)
By: LIBERTY GP III INC.,
a General Partner
Date: February 11, 2004
By: /s/ Alan P. Hirmes
-------------------
Alan P. Hirmes,
President (Chief Executive Officer and
Chief Financial Officer)
Date: February 11, 2004
By: /s/ Glenn F. Hopps
-------------------
Glenn F. Hopps,
Treasurer
(principal accounting officer)
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 III Inc. the general partner of Related Credit
Properties III L.P. and of Liberty GP III Inc., each of which is a General
Partner of Liberty Tax Credit Plus III 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 my conclusion 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 11, 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 III 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 III Inc., the General Partner of Related Credit
Properties III, L.P. and of Liberty GP III Inc., each of which is a general
partner of the Partnership, 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 11, 2004