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 September 30, 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 0-14283 ANGELES INCOME PROPERTIES, LTD. IV (Exact name of small business issuer as specified in its charter) California 95-3974194 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 55 Beattie Place, PO 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 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___ PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS a) ANGELES INCOME PROPERTIES, LTD. IV CONSOLIDATED BALANCE SHEET (Unaudited) (in thousands, except unit data) September 30, 2000 Assets Cash and cash equivalents $ 250 Receivables and deposits, net of $104 allowance for doubtful accounts 240 Restricted escrows 793 Other assets 404 Investment property: Land $ 2,414 Buildings and related personal property 18,173 20,587 Less accumulated depreciation (13,113) 7,474 $ 9,161 Liabilities and Partners' Deficit Liabilities Accounts payable $ 36 Tenant security deposit liabilities 16 Accrued property taxes 129 Other liabilities 220 Mortgage note payable 14,710 Partners' Deficit General partner $ (135) Limited partners (131,585 units issued and outstanding) (5,815) (5,950) $ 9,161 See Accompanying Notes to Consolidated Financial Statements b) ANGELES INCOME PROPERTIES, LTD. IV CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data) Three Months Ended Nine Months Ended September 30, September 30, 2000 1999 2000 1999 Revenues: Rental income $ 824 $ 887 $ 2,565 $ 2,853 Other income 19 66 61 183 Gain on sale of property -- -- -- 3,565 Total revenues 843 953 2,626 6,601 Expenses: Operating 449 417 1,208 1,264 General and administrative 63 75 143 162 Depreciation 237 235 711 766 Interest 376 373 1,102 1,121 Property taxes 30 40 108 151 Bad debt (recovery) expense, net (18) (23) 51 233 Total expenses 1,137 1,117 3,323 3,697 Net (loss) income $ (294) $ (164) $ (697) $ 2,904 Net (loss) income allocated to general partner $ (6) $ (3) $ (14) $ 1,323 Net (loss) income allocated to limited partners (288) (161) (683) 1,581 $ (294) $ (164) $ (697) $ 2,904 Net (loss) income per limited partnership unit $ (2.19) $ (1.22) $ (5.19) $ 12.02 Distributions per limited partnership unit $ -- $ 49.90 $ 7.08 $ 49.90 See Accompanying Notes to Consolidated Financial Statements c) ANGELES INCOME PROPERTIES, LTD. IV CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT (Unaudited) (in thousands, except unit data) Limited Partnership General Limited Units Partner Partners Total Original capital contributions 131,800 $ 1 $65,900 $65,901 Partners' deficit at December 31, 1999 131,585 $ (102) $(4,201) $(4,303) Distributions to partners -- (19) (931) (950) Net loss for the nine months ended September 30, 2000 -- (14) (683) (697) Partners' deficit at September 30, 2000 131,585 $ (135) $(5,815) $(5,950) See Accompanying Notes to Consolidated Financial Statements d) ANGELES INCOME PROPERTIES, LTD. IV CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Nine Months Ended September 30, 2000 1999 Cash flows from operating activities: Net (loss) income $ (697) $ 2,904 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Gain on sale of property -- (3,565) Depreciation 711 766 Amortization of loan costs and leasing commissions 86 88 Bad debt expense 51 233 Change in accounts: Receivables and deposits 295 69 Other assets 40 75 Accounts payable 1 (7) Tenant security deposit liabilities 10 (1) Accrued property taxes (32) (25) Other liabilities (9) (396) Net cash provided by operating activities 456 141 Cash flows from investing activities: Lease commissions paid (59) (45) Property improvements and replacements (69) (8) Net deposits to restricted escrows (144) (97) Net proceeds from sale of investment property -- 4,588 Net cash (used in) provided by investing activities (272) 4,438 Cash flows from financing activities: Payments on mortgage note payable (154) (140) Distribution to partners (950) (6,700) Net cash used in financing activities (1,104) (6,840) Net decrease in cash and cash equivalents (920) (2,261) Cash and cash equivalents at beginning of period 1,170 3,637 Cash and cash equivalents at end of period $ 250 $ 1,376 Supplemental disclosure of cash flow information: Cash paid for interest $ 1,082 $ 1,095 Supplemental disclosure of non-cash transaction: Distribution payable to general partner $ -- $ 144 See Accompanying Notes to Consolidated Financial Statements e) ANGELES INCOME PROPERTIES, LTD. IV NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note A - Basis of Presentation The accompanying unaudited consolidated financial statements of Angeles Income Properties, Ltd. IV (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 II ("ARC II" or 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, 2000, are not necessarily indicative of the results that may be expected for the fiscal 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 fiscal year ended December 31, 1999. Principles of Consolidation The consolidated financial statements of the Partnership include its wholly-owned limited partnership interest in Factory Merchants, AIP IV, L.P. and AIP IV GP, LP. The Partnership may remove the general partner of Factory Merchants, AIP IV, L.P. and AIP IV GP, LP; therefore, the partnerships are controlled and consolidated by the Partnership. All significant interpartnership balances have been eliminated. Minority interest is immaterial and not shown separately in the consolidated financial statements. 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 certain payments to affiliates for services and reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The following amounts were paid or accrued to the General Partner and affiliates during the nine months ended September 30, 2000 and 1999: 2000 1999 (in thousands) Reimbursement for services of affiliates (included in general and administrative expense) $ 36 $ 54 Real estate commission -- 144 An affiliate of the General Partner received reimbursement of accountable administrative expenses amounting to approximately $36,000 and $54,000 for the nine months ended September 30, 2000 and 1999, respectively. Pursuant to the Partnership Agreement, the General Partner is entitled to receive a distribution equal to 3% of the aggregate disposition price of sold properties. Pursuant to this provision, during the nine months ended September 30, 1999, the Partnership declared a distribution of approximately $144,000 payable to the General Partner related to the sale of Eastgate Mall. However, this fee is subordinate to the limited partners receiving a preferred return, as specified in the Partnership Agreement. In January 2000, the General Partner determined the limited partners preferred return would not be met and repaid approximately $144,000 to the Partnership. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates currently own 28,042 limited partnership units in the Partnership representing 21.319% 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, which would include without limitation, voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. 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 - Distribution During the nine months ended September 30, 2000, the Partnership declared a cash distribution from operations of approximately $950,000, of which approximately $931,000 ($7.08 per limited partnership unit) was paid to the limited partners. Subsequent to September 30, 2000, the Partnership declared a distribution from operations of approximately $89,000 of which approximately $87,000 ($0.66 per limited partnership unit) is allocable to the limited partners. During the nine months ended September 30, 1999, the Partnership distributed approximately $6,700,000 (approximately $6,566,000 to the limited partners, $49.90 per limited partnership unit) to the partners. Approximately $2,112,000 (approximately $2,070,000 to the limited partners, $15.73 per limited partnership unit) of the distribution was from operations and approximately $4,588,000 (approximately $4,496,000 to the limited partners, $34.17 per limited partnership unit) was from the sale of Eastgate Mall in June 1999. Note E - Sale of Investment Property On June 16, 1999, the Partnership sold Eastgate Mall to Pearce-Woodfield Development Co., LLC, an unrelated party, for net proceeds of approximately $4,588,000 after payment of closing costs. The Partnership recognized a gain of approximately $3,565,000 on the sale during the second quarter of 1999. Note F - Segment Reporting Description of the types of products and services from which reportable segment derives its revenues: The Partnership has one reportable segment: commercial properties. The Partnership's commercial property segment consists of one retail shopping center in Tennessee at September 30, 2000. This property leases space to various specialty retail outlets and fast food enterprises at terms ranging from 1 to 9 years. The Partnership's other commercial property was sold on June 16, 1999. 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 fiscal year ended December 31, 1999. Segment information for the three and nine month periods ended September 30, 2000 and 1999 is shown in the tables below (in thousands). The "Other" column includes Partnership administration related items and income and expense not allocated to the reportable segment. Three Months Ended September 30, 2000 Commercial Other Totals Rental income $ 824 $ -- $ 824 Other income 16 3 19 Interest expense 376 -- 376 Depreciation 237 -- 237 General and administrative expense -- 63 63 Segment loss (234) (60) (294) Nine Months Ended September 30, 2000 Commercial Other Totals Rental income $ 2,565 $ -- $ 2,565 Other income 37 24 61 Interest expense 1,102 -- 1,102 Depreciation 711 -- 711 General and administrative expense -- 143 143 Segment loss (578) (119) (697) Total assets 9,048 113 9,161 Capital expenditures for investment property 69 -- 69 Three Months Ended September 30, 1999 Commercial Other Totals Rental income $ 887 $ -- $ 887 Other income 11 55 66 Interest expense 373 -- 373 Depreciation 235 -- 235 General and administrative expense -- 75 75 Segment loss (144) (20) (164) Nine Months Ended September 30, 1999 Commercial Other Totals Rental income $ 2,853 $ -- $ 2,853 Other income 69 114 183 Interest expense 1,121 -- 1,121 Depreciation 766 -- 766 General and administrative expense -- 162 162 Gain on sale of property 3,565 -- 3,565 Segment profit (loss) 2,952 (48) 2,904 Total assets 10,037 1,089 11,126 Capital expenditures for investment property 8 -- 8 Note G - 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, its 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 of interests in certain general partner entities by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; the management of partnerships by the Insignia affiliates; and the Insignia Merger. 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 owned units as of November 3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999 from the Court, 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 prior lead counsel to enter the settlement. On December 14, 1999, the General Partner and its affiliates terminated the proposed settlement. In February 2000, counsel for some of the named plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated the settlement. On June 27, 2000, the Court entered an order disqualifying them from the case. The Court is considering applications for lead counsel and has currently scheduled a hearing on the matter for November 20, 2000. 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 operation. 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 property consists of one commercial property. The following table sets forth the average occupancy of the property for the nine months ended September 30, 2000 and 1999: Average Occupancy Property 2000 1999 Factory Merchants Mall 90% 91% Pigeon Forge, Tennessee Results from Operations The Partnership realized a net loss of approximately $697,000 for the nine months ended September 30, 2000 as compared to a net income of approximately $2,904,000 for the comparable period in 1999. The Partnership realized a net loss of approximately $294,000 for the three months ended September 30, 2000, as compared to a net loss of approximately $164,000 for the comparable period in 1999. The increase in net loss for the nine months ended September 30, 2000 is primarily due to the gain recognized on the sale of Eastgate Mall of approximately $3,565,000 in 1999. Excluding Eastgate Mall's operations, total expenses and total revenues decreased at Factory Merchant Mall, the Partnership's remaining investment property, for the three and nine months ended September 30, 2000. The decrease in total expenses is primarily due to decreases in operating, bad debt, general and administrative, and property tax expenses. Operating expenses decreased primarily due to a decrease in hazard insurance and management fees, which are based on the collection of cash based on rents partially offset by an increase in contract security at the property. Bad debt expense decreased due to write-offs from tenants that have vacated without paying all of their expenses. General and administrative expenses have decreased primarily due to a decrease in reimbursements to the General Partner. Property tax expense has decreased primarily due to a decrease in the assessed value for Factory Merchants Mall. Total revenues for Factory Merchants Mall decreased primarily due to a decrease in other income. Other income decreased primarily due to a decrease in the average cash balance held in interest bearing accounts and a decrease in late charges collected. Rental income decreased due to several tenants converting over to a percentage rent on their sales which is less than in previous years due to the competition among retailers in the area. Included in general and administrative expenses for the nine months ended September 30, 2000 and 1999, are reimbursements to the General Partner allowed under the Partnership Agreement associated with its management of the Partnership. In addition, 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. On June 16, 1999, the Partnership sold Eastgate Mall to Pearce-Woodfield Development Co., LLC, an unrelated party, for net proceeds of approximately $4,588,000 after payment of closing costs. The Partnership recognized a gain of approximately $3,565,000 on the sale during the second quarter of 1999. As part of the ongoing business plan of the Partnership, the General Partner monitors the rental market environment of its investment property 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 September 30, 2000, the Partnership had cash and cash equivalents of approximately $250,000 as compared to approximately $1,376,000 at September 30, 1999. For the nine months ended September 30, 2000, cash and cash equivalents decreased approximately $920,000 from the Partnership's year ended December 31, 1999. This decrease in cash and cash equivalents is due to approximately $1,104,000 of cash used in financing activities and approximately $272,000 of cash used in investing activities partially offset by approximately $456,000 of cash provided by operating activities. Cash used in financing activities consists of a distribution to the partners and, to a lesser extent, payments of principal made on the mortgage encumbering Factory Merchants Mall. The cash used in investing activities consists of net deposits to restricted escrows maintained by the mortgage lender, as well as property improvements and replacements and lease commissions. The Partnership invests its working capital reserves in a money market account. 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 property to adequately maintain the physical asset and other operating needs of the Registrant and to comply with Federal, state, and local legal and regulatory requirements. Capital improvements planned for the Partnership's property are detailed below. Factory Merchants Mall During the nine months ended September 30, 2000, the Partnership expended approximately $69,000 for capital improvements consisting of tenant improvements, curbs, sidewalk and parking lot improvements, and roof replacement. These improvements were funded from operating cash flow and replacement reserves. Capital improvements budgeted for 2000 are expected to be $138,000, which include, but are not limited to, tenant improvements, parking lot improvements, roof replacement, and curbs and sidewalk improvements. As the property is currently being marketed for sale, capital improvements will be made only as needed. The Registrant's current assets are thought to be sufficient for any near-term needs (exclusive of capital improvements) of the Registrant. The mortgage indebtedness of approximately $14,710,000 matures in October 2006. The General Partner will attempt to refinance such indebtedness and/or sell the property prior to such maturity date. Although the property is currently being marketed for sale, there is no guarantee when, or if, a buyer and the Partnership will agree to terms that are mutually acceptable to complete a sale transaction. If the property cannot be refinanced or sold for a sufficient amount, the Registrant will risk losing such property through foreclosure. During the nine months ended September 30, 2000, the Partnership paid a cash distribution from operations of approximately $950,000, of which approximately $931,000 ($7.08 per limited partnership unit) was paid to the limited partners. Subsequent to September 30, 2000, the Partnership declared a distribution from operations of approximately $89,000 of which approximately $87,000 ($0.66 per limited partnership unit) is allocable to the limited partners. During the nine months ended September 30, 1999, the Partnership distributed approximately $6,700,000 (approximately $6,566,000 to the limited partners, $49.90 per limited partnership unit) to the partners. Approximately $2,112,000 (approximately $2,070,000 to the limited partners, $15.73 per limited partnership unit) of the distribution was from operations and approximately $4,588,000 (approximately $4,496,000 to the limited partners, $34.17 per limited partnership unit) was from the sale of Eastgate Mall in June 1999. The Registrant's distribution policy is reviewed on a quarterly 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 maturity, refinancing and/or property sale. There can be no assurance, however, that the Registrant will generate sufficient funds from operations after required capital expenditures to permit additional distributions to its partners during the remainder of 2000 or subsequent periods. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEDINGS 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, its 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 of interests in certain general partner entities by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; the management of partnerships by the Insignia affiliates; and the Insignia Merger. 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 owned units as of November 3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999 from the Court, 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 prior lead counsel to enter the settlement. On December 14, 1999, the General Partner and its affiliates terminated the proposed settlement. In February 2000, counsel for some of the named plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated the settlement. On June 27, 2000, the Court entered an order disqualifying them from the case. The Court is considering applications for lead counsel and has currently scheduled a hearing on the matter for November 20, 2000. 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) Reports on Form 8-K: None filed during the quarter ended September 30, 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 INCOME PROPERTIES, LTD. IV By: Angeles Realty Corporation II 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: