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 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2000 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________to _________ Commission file number 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.) 55 Beattie Place, P.O. Box 1089 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 Exchange Act during the 12 months (or for such shorter period that the Partnership 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) March 31, 2000 Assets Cash and cash equivalents $ 1,126 Receivables and deposits 204 Restricted escrows 249 Other assets 457 Investment properties: Land $ 3,083 Buildings and related personal property 37,175 40,258 Less accumulated depreciation (27,014) 13,244 $ 15,280 Liabilities and Partners' Deficit Liabilities Accounts payable $ 364 Tenant security deposit liabilities 128 Accrued property taxes 173 Other liabilities 268 Mortgage notes payable 19,225 Partners' Deficit General partner $ (225) Limited partners (19,975 units issued and outstanding) (4,653) (4,878) $ 15,280 See Accompanying Notes to Consolidated Financial Statements b) ANGELES PARTNERS IX CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data) Three Months Ended March 31, 2000 1999 Revenues: Rental income $ 1,908 $ 1,886 Other income 83 81 Total revenues 1,991 1,967 Expenses: Operating 839 781 General and administrative 63 83 Depreciation 536 528 Interest 420 426 Property taxes 107 148 Total expenses 1,965 1,966 Net income $ 26 $ 1 Net income allocated to general partner (1%) $ -- $ -- Net income allocated to limited partners (99%) 26 1 $ 26 $ 1 Net income per limited partnership unit $ 1.30 $ .05 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, 1999 19,975 $ (225) $ (4,679) $ (4,904) Net income for the three months ended March 31, 2000 -- -- 26 26 Partners' deficit at March 31, 2000 19,975 $ (225) $ (4,653) $ (4,878) See Accompanying Notes to Consolidated Financial Statements d) ANGELES PARTNERS IX CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Three Months Ended March 31, 2000 1999 Cash flows from operating activities: Net income $ 26 $ 1 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 536 528 Amortization of loan costs and discounts 27 25 Change in accounts: Receivables and deposits 250 120 Other assets (75) (112) Accounts payable 46 (51) Tenant security deposit liabilities 10 3 Accrued property taxes (50) (104) Other liabilities (75) 7 Net cash provided by operating activities 695 417 Cash flows from investing activities: Property improvements and replacements (747) (107) Net (deposits to) withdrawals from restricted escrows (63) 88 Net cash used in investing activities (810) (19) Cash flows used in financing activities: Payments on mortgage notes payable (72) (64) Net (decrease) increase in cash and cash equivalents (187) 334 Cash and cash equivalents at beginning of period 1,313 799 Cash and cash equivalents at end of period $1,126 $1,133 Supplemental disclosure of cash flow information: Cash paid for interest $ 392 $ 401 Supplemental disclosure of non-cash activity: Property improvements and replacements included in accounts payable $ 200 $ -- At December 31, 1999 property improvements and replacements and accounts payable were adjusted by approximately $396,000. 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 "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" or "ARC"), all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2000, are not necessarily indicative of the results that may be expected for the year ending December 31, 2000. For further information, refer to the consolidated financial statements and footnotes thereto included in the Partnership's Annual Report on Form 10-KSB for the year ended December 31, 1999. Principles of Consolidation The financial statements include all of the accounts of the Partnership and its 99% owned partnership. The general partner of the consolidated partnership is Angeles Realty Corporation. Angeles Realty Corporation may be removed as the general partner of the consolidated partnership by the Registrant; therefore, the consolidated Partnership is controlled and consolidated by the Registrant. All significant interpartnership balances have been eliminated. Note B - Transfer of Control Pursuant to a series of transactions which closed on October 1, 1998 and February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust merged into Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust, with AIMCO being the surviving corporation (the "Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in the General Partner. The General Partner does not believe that this transaction has had or will have a material effect on the affairs and operations of the Partnership. Note C - Transactions with Affiliated Parties 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 (i) certain payments to affiliates for services and (ii) reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The following amounts were paid to the General Partner and its affiliates for the three months ended March 31, 2000 and 1999: 2000 1999 (in thousands) Property management fees (included in operating expenses) $101 $ 99 Reimbursement for services of affiliates (included in investment properties, operating expenses and general and administrative expenses) 64 55 During the three months ended March 31, 2000 and 1999, affiliates of the General Partner were entitled to receive 5% of gross receipts from all of the Registrant's properties for providing property management services. The Registrant paid to such affiliates approximately $101,000 and $99,000 for the three months ended March 31, 2000 and 1999, respectively. An affiliate of the General Partner received reimbursement of accountable administrative expenses amounting to approximately $64,000 and $55,000 for the three months ended March 31, 2000 and 1999, respectively. Included in these expenses for the three months ended March 31, 2000, is approximately $23,000 for construction oversight reimbursements. No such costs were incurred for the three months ended March 31, 1999. AIMCO and its affiliates currently own 11,986 limited partnership units in the Partnership representing 60.005% of the outstanding units. A number of these units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will make one or more additional offers to acquire additional limited partnership interests in the Partnership for cash or in exchange for units in the operating partnership of AIMCO. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters. As a result of its ownership of 60.005% of the outstanding units, AIMCO is in a position to influence all voting decisions with respect to the Registrant. When voting on matters, AIMCO would in all likelihood vote the Units it acquired in a manner favorable to the interest of the General Partner because of their affiliation with the General Partner. Note D - Segment Information Description of the types of products and services from which the reportable segment derives its revenue: The Partnership has one reportable segment: residential property. The Partnership's residential property segment consists of five apartment complexes located in Texas (2) and Alabama (3). The Partnership rents apartment units to tenants for terms that are typically twelve months or less. Measurement of segment profit or loss: The Partnership evaluates performance based on segment profit (loss) before depreciation. The accounting policies of the reportable segment are the same as those of the Partnership as described in the Partnership's Annual Report on Form 10-KSB for the year ended December 31, 1999. Factors management used to identify the enterprise's reportable segment: The Partnership's reportable segment consists of investment properties that offer similar products and services. Although each of the investment properties is managed separately, they have been aggregated into one segment as they provide services with similar types of products and customers. Segment information for the three months ended March 31, 2000 and 1999, is shown in the tables below. The "Other" column includes partnership administration related items and income and expense not allocated to the reportable segment. 2000 Residential Other Totals (in thousands) Rental income $ 1,908 $ -- $ 1,908 Other income 81 2 83 Interest expense 420 -- 420 Depreciation 536 -- 536 General and administrative expense -- 63 63 Segment income (loss) 87 (61) 26 Total assets 15,202 78 15,280 Capital expenditures for investment properties 551 -- 551 1999 Residential Other Totals (in thousands) Rental income $ 1,886 $ -- $ 1,886 Other income 77 4 81 Interest expense 426 -- 426 Depreciation 528 -- 528 General and administrative expense -- 83 83 Segment profit (loss) 80 (79) 1 Total assets 14,683 459 15,142 Capital expenditures for investment properties 107 -- 107 Note E - Legal Proceedings In March 1998, several putative unit holders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, the General Partner and several of their affiliated partnerships and corporate entities. The action purports to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) which are named as nominal defendants, challenging the acquisition by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia ("Insignia Affiliates") of interests in certain general partner entities, past tender offers by Insignia Affiliates to acquire limited partnership units, the management of partnerships by Insignia Affiliates and the Insignia Merger (see "Note B - Transfer of Control"). The plaintiffs seek monetary damages and equitable relief, including judicial dissolution of the Partnership. On June 25, 1998, the General Partner filed a motion seeking dismissal of the action. In lieu of responding to the motion, the plaintiffs have filed an amended complaint. The General Partner filed demurrers to the amended complaint which were heard February 1999. Pending the ruling on such demurrers, settlement negotiations commenced. On November 2, 1999, the parties executed and filed a Stipulation of Settlement, settling claims, subject to final court approval, on behalf of the Partnership and all limited partners who own units as of November 3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999 from the Superior Court of the State of California, County of San Mateo, at which time the Court set a final approval hearing for December 10, 1999. Prior to the December 10, 1999 hearing the Court received various objections to the settlement, including a challenge to the Court's preliminary approval based upon the alleged lack of authority of class plaintiffs' counsel to enter the settlement. On December 14, 1999, the General Partner and its affiliates terminated the proposed settlement. Certain plaintiffs have filed a motion to disqualify some of the plaintiffs' counsel in the action. The General Partner does not anticipate that costs associated with this case will be material to the Partnership's overall operations. The Partnership is unaware of any other pending or outstanding litigation that is not of a routine nature arising in the ordinary course of business. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The matters discussed in this Form 10-QSB contain certain forward-looking statements and involve risks and uncertainties (including changing market conditions, competitive and regulatory matters, etc.) detailed in the disclosures contained in this Form 10-QSB and the other filings with the Securities and Exchange Commission made by the Registrant from time to time. The discussions of the Registrant's business and results of operations, including forward-looking statements pertaining to such matters, does not take into account the effects of any changes to the Registrant's business and results of operations. Accordingly, actual results could differ materially from those projected in the forward-looking statements as a result of a number of factors, including those identified herein. The Partnership's investment properties consist of five apartment complexes. The following table sets forth the average occupancy of the properties for the three months ended March 31, 2000 and 1999: Average Occupancy Property 2000 1999 Pines of Northwest Crossing Apartments 97% 97% Houston, Texas Panorama Terrace Apartments 94% 97% Birmingham, Alabama Forest River Apartments 98% 95% Gadsden, Alabama Village Green Apartments 95% 96% Montgomery, Alabama Rosemont Crossing Apartments 95% 93% San Antonio, Texas The General Partner attributes the increase in occupancy at Forest River Apartments, to management's aggressive marketing campaign to attract new tenants. The General Partner attributes the decrease in occupancy at Panorama Terrace Apartments to the competitive market of the apartment industry in the Birmingham area. Results of Operations The Partnership's net income for the three months ended March 31, 2000 and 1999 was approximately $26,000 and $1,000, respectively. The increase in net income is due to an increase in total revenues. Total revenues increased primarily due to an increase in rental income. The increase in rental income is due primarily to increases in the average rental rates at all five of the Partnership's investment properties and an increase in occupancy at Forest River Apartments and Rosemont Crossing Apartments which more than offset the decrease in occupancy at Panorama Terrace Apartments and Village Green Apartments. The decreases in interest, property tax and general and administrative expenses, were partially offset by an increase in operating expense which resulted in total expenses remaining relatively constant. The decrease in interest expense is due to scheduled principal payments made on the properties respective mortgages. General and administrative expenses decreased primarily due to a decrease in management reimbursements to the General Partner allowed under the Partnership Agreement and, to a lesser extent, a decrease in legal costs, which included the Partnership's portion of settlement costs disclosed in previous quarters. Included in general and administrative expense at both March 31, 2000 and 1999 are costs associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit required by the Partnership Agreement are also included. The increase in operating expenses is due primarily to an increase in maintenance expense. The increase in maintenance expense is due primarily to insurance proceeds received during 1999 that exceeded the expenses relating to a casualty at The Pines of Northwest Crossing Apartments and fire damage at Panorama Terrace Apartments. Depreciation expense and interest expense remained relatively constant for the comparable periods. As part of the ongoing business plan of the Partnership, the General Partner monitors the rental market environment 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. Liquidity and Capital Resources At March 31, 2000, the Partnership had cash and cash equivalents of approximately $1,126,000 compared to approximately $1,133,000 at March 31, 1999. The decrease in cash and cash equivalents of approximately $187,000 for the three months ended March 31, 2000, from the Partnership's calendar year end, is due to approximately $810,000 of cash used in investing activities and approximately $72,000 of cash used in financing activities, which was partially offset by approximately $695,000 of cash provided by operating activities. Cash used in investing activities consisted of property improvements and replacements and to a lesser extent net deposits to escrow accounts maintained by the mortgage lender. Cash used in financing activities consisted of payments of principal made on the mortgages encumbering the Registrant's properties. The Partnership invests its working capital reserves in money market accounts. 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 and to comply with Federal, state, and local, legal and regulatory requirements. Capital improvements planned for each of the Partnership's properties are detailed below. Pines of Northwest Crossing Apartments: For 2000 the Partnership has budgeted approximately $144,000 for capital improvements, consisting primarily of plumbing improvements, and floor covering, appliances, and air conditioning replacements. The Partnership completed approximately $50,000 in capital expenditures at The Pines of Northwest Crossing Apartments as of March 31, 2000, consisting primarily of floor covering and appliance replacements. These improvements were funded primarily from operations. Panorama Terrace Apartments: For 2000 the Partnership has budgeted approximately $477,000 for capital improvements, consisting primarily of exterior painting, parking lot improvements, floor covering and appliance replacements, roof impairments and major landscaping. The Partnership completed approximately $398,000 in capital expenditures at Panorama Terrace Apartments as of March 31, 2000, consisting primarily of roof improvements, major landscaping, exterior painting and parking lot upgrades. These improvements were funded primarily from operations. Forest River Apartments: For 2000 the Partnership has budgeted approximately $99,000 for capital improvements, consisting primarily of floor covering, appliances, and air conditioning replacements. The Partnership completed approximately $24,000 in capital expenditures at Forest River Apartments as of March 31, 2000, consisting primarily of floor covering and appliance replacements. These improvements were funded primarily from operations and replacement reserves. Village Green Apartments: For 2000 the Partnership has budgeted approximately $134,000 for capital improvements, consisting primarily of floor covering, appliances and air conditioning replacement and plumbing improvements. The Partnership completed approximately $36,000 in capital expenditures at Village Green Apartments as of March 31, 2000, consisting primarily of floor covering replacements, appliances, and HVAC improvements. These improvements were funded primarily from operations. Rosemont Crossing Apartments: For 2000 the Partnership has budgeted approximately $530,000 for capital improvements, consisting primarily of floor covering, cabinet replacements, appliances and interior and exterior building improvements. The Partnership completed approximately $43,000 in capital expenditures at Rosemont Crossing Apartments as of March 31, 2000, consisting primarily of major landscaping. These improvements were funded primarily from operations. The additional capital expenditures will be incurred only if cash is available from operations and Partnership reserves. To the extent that such budgeted capital improvements are completed, the Partnership's distributable cash flow, if any, may be adversely affected at least in the short term. The Partnership's current assets are thought to be sufficient for any near-term needs (exclusive of capital improvements) of the Partnership. The mortgage indebtedness of approximately $19,225,000, net of discounts, is amortized over periods ranging from approximately 29 to 30 years with balloon payments due in 2002 and 2003. The General Partner may attempt to refinance such indebtedness and/or sell the properties prior to such maturity dates. If the properties cannot be refinanced or sold for a sufficient amount, the Partnership will risk losing such properties through foreclosure. No cash distributions were paid to the partners during the three months ended March 31, 2000 and 1999. The Partnership's distribution policy is reviewed on a semi-annual basis. Future cash distributions will depend on the levels of net cash generated from operations, the availability of cash reserves, and the timing of the debt maturities, property sales and/or refinancings. There can be no assurance, however, that the Partnership will generate sufficient funds from operations after required capital improvement expenditures, to permit distributions to its partners in 2000 or subsequent periods. In addition, the Partnership may be restricted from making distributions if the amount in the reserve account maintained by the mortgage lender is less than $400 per apartment unit at Forest River Apartments, Rosemont Crossing Apartments and The Pines of Northwest Crossing Apartments for a total of approximately $351,000. As of March 31, 2000 the balance in the reserve account is approximately $177,000. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In March 1998, several putative unit holders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, the General Partner and several of their affiliated partnerships and corporate entities. The action purports to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) which are named as nominal defendants, challenging the acquisition by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia ("Insignia Affiliates") of interests in certain general partner entities, past tender offers by Insignia Affiliates to acquire limited partnership units, the management of partnerships by Insignia Affiliates and the Insignia Merger (see "Part 1 - Financial Information, Item 1. Financial Statements, Note B - Transfer of Control"). The plaintiffs seek monetary damages and equitable relief, including judicial dissolution of the Partnership. On June 25, 1998, the General Partner filed a motion seeking dismissal of the action. In lieu of responding to the motion, the plaintiffs have filed an amended complaint. The General Partner filed demurrers to the amended complaint which were heard February 1999. Pending the ruling on such demurrers, settlement negotiations commenced. On November 2, 1999, the parties executed and filed a Stipulation of Settlement, settling claims, subject to final court approval, on behalf of the Partnership and all limited partners who own units as of November 3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999 from the Superior Court of the State of California, County of San Mateo, at which time the Court set a final approval hearing for December 10, 1999. Prior to the December 10, 1999 hearing the Court received various objections to the settlement, including a challenge to the Court's preliminary approval based upon the alleged lack of authority of class plaintiffs' counsel to enter the settlement. On December 14, 1999, the General Partner and its affiliates terminated the proposed settlement. Certain plaintiffs have filed a motion to disqualify some of the plaintiffs' counsel in the action. The General Partner does not anticipate that costs associated with this case will be material to the Partnership's overall operations. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: Exhibit 27, Financial Data Schedule, is filed as an exhibit to this report. b) No reports on Form 8-K were filed during the quarter ended March 31, 2000. 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 Its General Partner By: /s/Patrick J. Foye Patrick J. Foye Executive Vice President By: /s/Martha L. Long Martha L. Long Senior Vice President and Controller Date: May 12, 2000