FORM 10-QSB--QUARTERLY OR TRANSITIONAL 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 September 30, 1997 [ ] 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) (864) 239-1000 (Issuer's telephone number) 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) September 30, 1997 Assets Cash and cash equivalents: Unrestricted $ 749 Restricted--tenant security deposits 117 Accounts receivable 39 Escrows for taxes 360 Restricted escrows 675 Other assets 613 Investment properties: Land $ 3,083 Buildings and related personal property 33,502 36,585 Less accumulated depreciation (22,247) 14,338 $ 16,891 Liabilities and Partners' Deficit Liabilities Accounts payable $ 130 Tenant security deposits 118 Accrued taxes 369 Other liabilities 191 Mortgage notes payable 19,822 Partners' Deficit General partner $ (213) Limited partners (20,000 units issued and 19,975 outstanding) (3,526) (3,739) $ 16,891 See Accompanying Notes to Consolidated Financial Statements b) ANGELES PARTNERS IX CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data) Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 Revenues: Rental income $ 1,772 $ 1,798 $ 5,338 $ 5,293 Other income 110 99 295 282 Total revenues 1,882 1,897 5,633 5,575 Expenses: Operating 687 687 2,064 2,028 General and administrative 78 72 203 205 Maintenance 344 343 937 939 Depreciation 457 432 1,352 1,266 Interest 436 526 1,311 1,439 Property taxes 108 112 325 341 Total expenses 2,110 2,172 6,192 6,218 Loss before extraordinary item (228) (275) (559) (643) Extraordinary loss on extinguishment of debt -- (173) -- (173) Net loss $ (228) $ (448) $ (559) $ (816) Net loss allocated to general partner (1%) $ (2) $ (4) $ (6) $ (8) Net loss allocated to limited partners (99%) (226) (444) (553) (808) Net loss $ (228) $ (448) $ (559) $ (816) Per limited partnership unit: Loss before extraordinary item $ (11.31) $ (13.63) $ (27.68) $ (31.87) Extraordinary item -- (8.57) -- (8.57) Net loss $ (11.31) $ (22.20) $ (27.68) $ (40.44) <FN> See Accompanying Notes to Consolidated Financial Statements </FN> 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 nine months ended September 30, 1997 -- (6) (553) (559) Partners' deficit at September 30, 1997 19,975 $ (213) $ (3,526) $ (3,739) <FN> See Accompanying Notes to Consolidated Financial Statements </FN> d) ANGELES PARTNERS IX CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Nine Months Ended September 30, 1997 1996 Cash flows from operating activities: Net loss $ (559) $ (816) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 1,352 1,266 Amortization of loan costs and discounts 86 169 Extraordinary loss on extinguishment of debt -- 173 Change in accounts: Restricted cash 10 36 Accounts receivable 17 (39) Escrows for taxes (62) (29) Other assets (72) 2 Accounts payable (120) (52) Tenant security deposit liabilities (11) (36) Accrued taxes 40 150 Other liabilities (7) 51 Net cash provided by operating activities 674 875 Cash flows from investing activities: Property improvements and replacements (532) (611) Deposits to restricted escrows (95) (15) Receipts from restricted escrows -- 164 Net cash used in investing activities (627) (462) Cash flows from financing activities: Proceeds from refinancing -- 4,900 Repayment of mortgage notes payable -- (3,888) Prepayment penalty -- (122) Payments on mortgage notes payable (167) (176) Loan costs paid (8) (102) Net cash (used in) provided by financing activities (175) 612 Net (decrease) increase in unrestricted cash and cash equivalents (128) 1,025 Unrestricted cash and cash equivalents at beginning of period 877 451 Unrestricted cash and cash equivalents at end of period $ 749 $ 1,476 Supplemental disclosure of cash flow information: Cash paid for interest $ 1,228 $ 1,223 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 nine month periods ended September 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 nine months ended September 30, 1997 and 1996: 1997 1996 (in thousands) Property management fees $279 $277 Reimbursement of services of affiliates (includes approximately $8,000 and $23,000 for construction oversight costs for the nine months ended September 30, 1997 and 1996, respectively) 141 174 For the period from January 1, 1996, to August 31, 1997, the Partnership insured 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 master policy. The agent assumed the financial obligations to the affiliate of the General Partner who receives payment on these obligations from the agent. The amount of the Partnership's insurance premiums that accrued to the benefit of the affiliate of the General Partner by virtue of the agent's obligations was not significant. NOTE C - REFINANCE OF MORTGAGE NOTE PAYABLE In July 1996, the General Partner refinanced the mortgage debt secured by Village Green Apartments. The bridge loan, in the principal amount of $4,900,000, matured in September 1996. The Partnership exercised an option to extend the maturity date to November 1996. On November 1, 1996, the Partnership closed on the long term 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. Village Green Apartments incurred losses of approximately $173,000 resulting from the refinance of the mortgage note. Of these losses, $122,000 related to pre-payment penalties on the previous mortgage and the remainder of the loss was due to the write off of the unamortized loan costs. 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 nine months ended September 30, 1997 and 1996: Average Occupancy Property 1997 1996 Pines of Northwest Crossing Apartments 91% 92% Houston, Texas (1) Panorama Terrace Apartments 90% 94% Birmingham, Alabama (2) Forest River Apartments 92% 94% Gadsden, Alabama (3) Village Green Apartments 92% 93% Montgomery, Alabama (4) Rosemont Crossing Apartments 94% 90% San Antonio, Texas (5) (1) The General Partner believes that occupancy will improve as a result of exterior building improvements made to improve the appearance of the complex and attract new tenants. (2) Occupancy at Panorama Terrace Apartments decreased due to construction of new apartments in the Birmingham area and is consistent with occupancy rates in the local market. The General Partner will increase concessions in order to elevate occupancy. (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 Village Green Apartments decreased due to an increase in first time home purchases. These purchases resulted from attractive interest rates and builder specials offered in the Montgomery area. Occupancy at Village Green Apartments is consistent with the local market. (5) Occupancy at Rosemont Crossing Apartments has increased due to a stronger rental market and attractive move-in specials. The Partnership's net loss for the three and nine months ended September 30, 1997, was approximately $228,000 and $559,000, respectively, versus net losses of approximately $448,000 and $816,000 for the corresponding periods of 1996. The decrease in net loss for the nine months ended September 30, 1997, versus the same period in 1996 is primarily due to an increase in rental revenues, a decrease in interest expense and no extraordinary loss on extinguishment of debt. The decrease in net loss for the three months ended September 30, 1997, versus the same period in 1996, is due to a decrease in interest expense and no extraordinary loss on extinguishment of debt. Rental revenue increased for the nine months ended September 30, 1997, as a result of increased occupancy at Rosemont Crossing Apartments and increases in rental rates at Rosemont Crossing Apartments, Forest River Apartments, The Pines of Northwest Crossing Apartments and Village Green Apartments. Interest expense decreased due to the refinancing of the mortgage note secured by Village Green Apartments (see "Note C"). The new mortgage indebtedness, which carries a stated interest rate of 7.33%, replaced previous mortgage indebtedness which carried a stated interest rate of 9.875%. In 1996, Village Green Apartments incurred extraordinary losses of approximately $173,000 resulting from the refinance of the mortgage note. Of these losses, $122,000 related to pre-payment penalties on the previous mortgage and the remainder of the loss was due to the write off of the unamortized loan costs. Partially offsetting these favorable impacts on income for the nine months ended September 30, 1997, were increases in operating and depreciation expenses. 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 the addition of depreciable assets throughout 1997. Included in maintenance expense for the nine months ended September 30, 1997, is approximately $193,000 of major repairs and maintenance comprised of exterior building improvements, exterior painting, parking lot repairs, and major landscaping. Included in maintenance expense for the nine months ended September 30, 1996, is $161,000 of major repairs and maintenance comprised of exterior building improvements, swimming pool repairs, parking lot 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 September 30, 1997 the Partnership held unrestricted cash and cash equivalents of approximately $749,000, compared to approximately $1,476,000 at September 30, 1996. Net cash provided by operating activities decreased, despite a decreased net loss, due to an increase in other assets and the timing of payments for accounts payable and other liabilities. Net cash used in investing activities increased due to an increase in deposits to restricted escrow and a decrease in receipts from restricted escrows. Net cash used in financing activities increased resulting from the net proceeds received from the refinancing in 1996 of Village Green Apartments offset, in part, by the repayment of the mortgage debt that was refinanced, payment of associated loan costs and the prepayment penalty. 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 $19,822,000, 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 nine months ended September 30, 1997, or the nine months ended September 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 September 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: November 10, 1997