FORM 10-QSB--QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 QUARTERLY OR TRANSITIONAL REPORT U.S. Securities and Exchange Commission Washington, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1997 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period.........to......... Commission file number 0-9704 ANGELES PARTNERS IX (Exact name of small business issuer as specified in its charter) California 95-3417137 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Insignia Financial Plaza Greenville, South Carolina 29602 (Address of principal executive offices) Issuer's telephone number (864) 239-1000 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the past 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 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS a) ANGELES PARTNERS IX CONSOLIDATED BALANCE SHEET (Unaudited) (in thousands, except unit data) June 30, 1997 Assets Cash and cash equivalents: Unrestricted $ 808 Restricted--tenant security deposits 122 Accounts receivable 36 Escrows for taxes 260 Restricted escrows 645 Other assets 626 Investment properties: Land $ 3,083 Buildings and related personal property 33,291 36,374 Less accumulated depreciation (21,790) 14,584 $ 17,081 Liabilities and Partners' Deficit Liabilities Accounts payable $ 144 Tenant security deposits 123 Accrued taxes 262 Other liabilities 189 Mortgage notes payable 19,874 Partners' Deficit General partner $ (210) Limited partners (19,975 units issued and outstanding) (3,301) (3,511) $ 17,081 See Accompanying Notes to Consolidated Financial Statements b) ANGELES PARTNERS IX CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data) Three Months Ended Six Months Ended June 30, June 30, 1997 1996 1997 1996 Revenues: Rental income $ 1,781 $ 1,773 $ 3,566 $ 3,495 Other income 87 85 185 183 Total revenues 1,868 1,858 3,751 3,678 Expenses: Operating 685 697 1,377 1,341 General and administrative 59 79 125 133 Maintenance 348 289 593 596 Depreciation 452 423 895 834 Interest 438 456 875 913 Property taxes 107 114 217 229 Bad debt (11) -- -- -- Total expenses 2,078 2,058 4,082 4,046 Net loss $ (210) $ (200) $ (331) $ (368) Net loss allocated to general partner (1%) $ (2) $ (2) $ (3) $ (4) Net loss allocated to limited partners (99%) (208) (198) (328) (364) Net loss $ (210) $ (200) $ (331) $ (368) Net loss per limited partnership unit $ (10.41) $ ( 9.91) $ (16.42) $ (18.22) See Accompanying Notes to Consolidated Financial Statements c) ANGELES PARTNERS IX CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT (Unaudited) (in thousands, except unit data) Limited Partnership General Limited Units Partner Partners Total Original capital contributions 20,000 $ 1 $ 20,000 $ 20,001 Partners' deficit at December 31, 1996 19,975 $ (207) $ (2,973) $ (3,180) Net loss for the six months ended June 30, 1997 -- (3) (328) (331) Partners' deficit at June 30, 1997 19,975 $ (210) $ (3,301) $ (3,511) <FN> See Accompanying Notes to Consolidated Financial Statements d) ANGELES PARTNERS IX CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Six Months Ended June 30, 1997 1996 Cash flows from operating activities: Net loss $ (331) $ (368) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 895 834 Amortization of loan costs and discounts 57 71 Change in accounts: Restricted cash 5 28 Accounts receivable 20 (38) Escrows for taxes 38 (49) Other assets (61) -- Accounts payable (106) (17) Tenant security deposit liabilities (6) (28) Accrued taxes (67) 37 Other liabilities (9) 25 Net cash provided by operating activities 435 495 Cash flows from investing activities: Property improvements and replacements (321) (397) Deposits to restricted escrows (65) (10) Receipts from restricted escrows -- 18 Net cash used in investing activities (386) (389) Cash flows from investing activities: Payments on mortgage notes payable (110) (127) Loan costs (8) (21) Net cash used in financing activities (118) (148) Net decrease in unrestricted cash and cash equivalents (69) (42) Unrestricted cash and cash equivalents at beginning of period 877 451 Unrestricted cash and cash equivalents at end of period $ 808 $ 409 Supplemental disclosure of cash flow information: Cash paid for interest $ 820 $ 842 See Accompanying Notes to Consolidated Financial Statements e) ANGELES PARTNERS IX NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE A - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of Angeles Partners IX (the "Partnership" or the "Registrant") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of Angeles Realty Corporation (the "General Partner"), all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six month periods ended June 30, 1997, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 1997. For further information, refer to the financial statements and footnotes thereto included in the Partnership's annual report on Form 10-KSB for the fiscal year ended December 31, 1996. Certain reclassifications have been made to the 1996 information to conform to the 1997 presentation. NOTE B - TRANSACTION WITH AFFILIATES The Partnership has no employees and is dependent on the General Partner and its affiliates for the management and administration of all Partnership activities. The Partnership Agreement provides for payments to affiliates for services and as reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The following amounts were paid to the General Partner and affiliates for the six months ended June 30, 1997 and 1996: 1997 1996 (in thousands) Property management fees (included in operating expenses) $186 $184 Reimbursement of services of affiliates (included in general and administrative expenses) 84 93 The Partnership insures its properties under a master policy through an agency and insurer unaffiliated with the General Partner. An affiliate of the General Partner acquired, in the acquisition of a business, certain financial obligations from an insurance agency which was later acquired by the agent who placed the current year's master policy. The current agent assumed the financial obligations to the affiliate of the General Partner, who receives payments on these obligations from the agent. The amount of the Partnership's insurance premiums accruing to the benefit of the affiliate of the General Partner by virtue of the agent's obligations is not significant. NOTE C - REFINANCE OF MORTGAGE NOTE PAYABLE On November 1, 1996, the Partnership refinanced the mortgage debt secured by Village Green Apartments. The new loan had a principal amount of $4,900,000 and has a maturity date of November 1, 2003. This note carries a stated interest rate of 7.33% per annum and replaced debt that matured in June 1997 and carried a 9.875% stated interest rate. NOTE D - LAWSUIT AT THE PINES OF NORTHWEST CROSSING On March 4, 1994, an employee at The Pines of Northwest Crossing Apartments ("Plaintiff") allegedly sustained personal injuries during the ordinary course of business. The Plaintiff remained out of work until March 24, 1994. The Plaintiff alleges that upon his return back to work, he was terminated in retaliation for having filed a worker's compensation claim. The Plaintiff seeks actual damages, exemplary damages, attorney's fees and court costs. The General Partner can not predict the outcome of this proceeding or the range of settlement for the Plaintiff, if settled in favor of the Plaintiff; however the General Partner believes that this claim is without merit and intends to vigorously defend it. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS The Partnership's investment properties consists of five apartment complexes. The following table sets forth the average occupancy of the properties for the six months ended June 30, 1997 and 1996: Average Occupancy Property 1997 1996 Pines of Northwest Crossing Apartments 91% 92% Houston, Texas (1) Panorama Terrace Apartments 91% 93% Birmingham, Alabama (2) Forest River Apartments 91% 94% Gadsden, Alabama (3) Village Green Apartments 91% 93% Montgomery, Alabama (2) Rosemont Crossing Apartments 94% 88% San Antonio, Texas (4) (1) The General Partner believes that occupancy will improve as a result of exterior building improvements, as discussed below. (2) Occupancy at Panorama Terrace Apartments and Village Green Apartments is consistent with the Birmingham and Montgomery markets, which have occupancy rates of approximately 91%. (3) Occupancy at Forest River Apartments has decreased due to the attractive incentives that Gadsden area finance companies are offering to first time home buyers. (4) Occupancy at Rosemont Crossing Apartments has increased due to a stronger rental market and attractive move-in specials. The Partnership's net losses for the three and six months ended June 30, 1997, were approximately $210,000 and $331,000, respectively, versus $200,000 and $368,000 for the corresponding periods of 1996. The decreased net loss for the first six months of 1997 versus the first six months of 1996 is primarily due to increases in rental revenue. Rental income increased for the three and six months ended June 30, 1997, as a result of increased occupancy at Rosemont Crossing Apartments and increased rental rates at Village Green Apartments and Forest River Apartments. Partially offsetting the increase in rental income for the six months ended June 30, 1997, was an increase in operating and depreciation expense. Operating expenses increased due to increased rental incentives and advertising in an effort to increase occupancy at the Partnership's investment properties. Depreciation expense increased due to capitalized building improvements and purchases of appliances and carpeting during the second half of 1996 and the first six months of 1997. Interest expense decreased due to the refinancing in 1996 of the mortgage note secured by Village Green Apartments (See "Note C"). For the three months ended June 30, 1997, maintenance expense increased compared to the corresponding period in 1996. This increase occurred primarily as a result of the start of an exterior renovation project, during the second quarter of 1997, at the Pines of Northwest Crossing Apartments. These improvements are necessary in order to improve the appearance of the apartment complex in order to remain competitive in the market area. Included in maintenance expense for the six months ended June 30, 1997, is $104,000 of major repairs and maintenance comprised of exterior building improvements, exterior painting and major landscaping. Included in maintenance expense for the six months ended June 30, 1996, is $146,000 of major repairs and maintenance comprised of exterior building improvements, swimming pool repairs, and major landscaping. As part of the ongoing business plan of the Partnership, the General Partner monitors the rental market environment of each of its investment properties to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expenses. As part of this plan, the General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, due to changing market conditions, which can result in the use of rental concessions and rental reductions to offset softening market conditions, there is no guarantee that the General Partner will be able to sustain such a plan. At June 30, 1997, the Partnership had unrestricted cash and cash equivalents of approximately $808,000, compared to approximately $409,000 at June 30, 1996. Net cash provided by operating activities decreased primarily due to the timing of payments for accounts payable and accrued taxes. This was offset slightly by the decreased net loss, as discussed above, and decreased escrows for taxes. Net cash used in investing activities remained stable due to decreased purchases of property improvements and replacements, offset by increased deposits to restricted escrows. Net cash used in financing activities decreased due to decreased principal payments resulting from the refinancing in 1996 of the mortgage note secured by Village Green Apartments. Also, loan costs were paid in January 1997 that relate to the refinancing. The Partnership's primary source of cash is from the operations of its properties and from financing placed on such properties. Cash from these sources is utilized for property operations, capital improvements, and/or repayment of debt. The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the various properties to adequately maintain the physical assets and other operating needs of the Partnership. Such assets are currently thought to be sufficient for any near-term needs of the Partnership. The mortgage indebtedness of approximately $19,874,000, net of discount, is amortized over varying periods with required balloon payments of $18,258,000 from August 2002 to November 2003, at which time the properties will either be refinanced or sold. Future cash distributions will depend on the levels of cash generated from operations, property sales and the availability of cash reserves. No cash distributions were paid in the six months ended June 30, 1997, or the six months ended June 30, 1996. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On March 4, 1994, an employee at The Pines of Northwest Crossing Apartments ("Plaintiff") allegedly sustained personal injuries during the ordinary course of business. The Plaintiff remained out of work until March 24, 1994. The Plaintiff alleges that upon his return back to work, he was terminated in retaliation for having filed a worker's compensation claim. The Plaintiff seeks actual damages, exemplary damages, attorney's fees and court costs. The General Partner can not predict the outcome of this proceeding or the range of settlement for the Plaintiff, if settled in favor of the Plaintiff; however the General Partner believes that this claim is without merit and intends to vigorously defend it. The Partnership is unaware of any other pending or outstanding litigation that is not of a routine nature. The General Partner believes that all such pending or outstanding litigation will be resolved without a material adverse effect upon the business, financial condition, or operations of the Partnership. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: Exhibit 27, Financial Data Schedule. (b) No reports on Form 8-K were filed during the three months ended June 30, 1997. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ANGELES PARTNERS IX By: Angeles Realty Corporation General Partner By: /s/ Carroll D. Vinson Carroll D. Vinson President By: /s/ Robert D. Long, Jr. Robert D. Long, Jr. Vice President/CAO Date: August 7, 1997