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, 1998 [ ] 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 (IRS Employer incorporation or organization) Identification No.) One Insignia Financial Plaza, 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 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) March 31, 1998 (in thousands, except unit data) Assets Cash and cash equivalents $ 845 Receivables and deposits 333 Restricted escrows 482 Other assets 510 Investment properties: Land $ 3,083 Buildings and related personal property 33,909 36,992 Less accumulated depreciation (23,178) 13,814 $15,984 Liabilities and Partners' Deficit Liabilities Accounts payable $ 126 Tenant security deposit liabilities 112 Accrued property taxes 153 Other liabilities 210 Mortgage notes payable 19,713 Partners' Deficit General partner's $ (219) Limited partners' (19,975 units issued and outstanding) (4,111) (4,330) $15,984 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, 1998 1997 Revenues: Rental income $ 1,795 $ 1,769 Other income 85 98 Total revenues 1,880 1,867 Expenses: Operating 955 921 General and administrative 69 66 Depreciation 459 443 Interest 434 437 Property taxes 108 110 Bad debt expense 34 11 Total expenses 2,059 1,988 Net loss $ (179) $ (121) Net loss allocated to general partner (1%) $ (2) $ (1) Net loss allocated to limited partners (99%) (177) (120) $ (179) $ (121) Net loss per limited partnership unit $ (8.86) $ (6.01) 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's Partners' Total Original capital contributions 20,000 $ 1 $20,000 $20,001 Partners' deficit at December 31, 1997 19,975 $(217) $(3,934) $(4,151) Net loss for the three months ended March 31, 1998 -- (2) (177) (179) Partners' deficit at March 31, 1998 19,975 $(219) $(4,111) $(4,330) See Accompanying Notes to Consolidated Financial Statements d) ANGELES PARTNERS IX CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Three Months Ended March 31, 1998 1997 Cash flows from operating activities: Net loss $ (179) $ (121) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 459 443 Amortization of loan costs and discounts 28 28 Bad debt expense 34 11 Change in accounts: Receivables and deposits 22 116 Other assets 35 (4) Accounts payable (172) (128) Tenant security deposit liabilities (3) (4) Accrued property taxes (71) (174) Other liabilities (23) (21) Net cash provided by operating activities 130 146 Cash flows from investing activities: Property improvements and replacements (132) (120) Net withdrawals from (deposits to) restricted escrows 224 (29) Net cash provided by (used in) investing activities 92 (149) Cash flows from financing activities: Payments on mortgage notes payable (60) (55) Loan costs paid -- (9) Net cash used in financing activities (60) (64) Net increase (decrease) in cash and cash equivalents 162 (67) Cash and cash equivalents at beginning of period 683 877 Cash and cash equivalents at end of period $ 845 $ 810 Supplemental disclosure of cash flow information: Cash paid for interest $ 405 $ 410 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") 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 months ended March 31, 1998, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 1998. 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, 1997. Certain reclassifications have been made to the 1997 information to conform to the 1998 presentation. Principles of Consolidation The consolidated financial statements of the Partnership include its 99% limited partnership interest in Houston Pines, Ltd. The Partnership may remove the general partner of Houston Pines; therefore, the partnership is controlled and consolidated by the Partnership. All significant interpartnership balances have been eliminated. Minority interest is immaterial and not shown separately in the financial statements. 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. Effective February 25, 1998, the General Partner became wholly-owned by Insignia Properties Trust ("IPT"), an affiliate of Insignia Financial Group, Inc. ("Insignia"). On February 25, 1998, the former owner of the Managing General Partner, MAE GP Corporation ("MAE GP"), an affiliate of Insignia, was merged into IPT. 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 its affiliates for the three months ended March 31, 1998 and 1997 (in thousands): 1998 1997 Property management fees (included in operating expenses) $ 93 $ 93 Reimbursement of services of affiliates, including approximately $7,000 and $5,000 of construction services reimbursements for the three months ended March 31, 1998 and 1997, respectively (included in general and administrative and operating expenses) 59 55 For the period from January 1, 1997 to August 31, 1997, the Partnership insured its properties under a master policy through an agency affiliated with the General Partner, with an 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 which received 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 is not significant. On March 17, 1998, Insignia entered into an agreement to merge its national residential property management operations, and its controlling interest in IPT, with Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. The closing, which is anticipated to happen in the third quarter of 1998, is subject to customary conditions, including government approvals and the approval of Insignia's shareholders. If the closing occurs, AIMCO will then control the General Partner of the Partnership. On April 13, 1998, an affiliate of Insignia commenced a tender offer for limited partnership interests in the Partnership. The Purchaser offered to purchase up to 8,300 of the outstanding units of limited partnership interest ("Units") in the Partnership at a purchase price of $325 per Unit, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated April 13, 1998 (the "Offer to Purchase") and in the related Assignment of Partnership Interest (which, together with any supplemental or amendments, collectively constitute the "Offer") per Schedule 14D-9 originally filed with the Securities and Exchange Commission on April 13, 1998. Because of the existing and potential future conflicts of interest (described in the Partnership's Statements on Schedule 14D-9 filed with the Securities and Exchange Commission), neither the Partnership nor the General Partner expressed any opinion as to the Offer to Purchase and made no recommendation as to whether unit holders should tender their units in response to the Offer to Purchase. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS 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, 1998 and 1997: Average Occupancy Property 1998 1997 Pines of Northwest Crossing Apartments 94% 92% Houston, Texas Panorama Terrace Apartments 89% 90% Birmingham, Alabama Forest River Apartments (1) 93% 89% Gadsden, Alabama Village Green Apartments 93% 93% Montgomery, Alabama Rosemont Crossing Apartments (2) 87% 94% San Antonio, Texas (1)Occupancy at Forest River Apartments has increased due to the increased marketing and resident retention efforts. Additionally, the unemployment rate in the Gadsden area has dropped and the market also has benefited from an increase in jobs from some large employers in the area. (2)Occupancy at Rosemont Crossing has decreased due to new construction in the area and low interest rates attracting first time home buyers. The Partnership's net loss for the three months ended March 31, 1998, was approximately $179,000 compared to approximately $121,000 for the three months ended March 31, 1997. The increase in net loss is primarily attributable to an increase in operating expense. The increase in operating expenses is primarily due to an increase in exterior building repairs at The Pines of Northwest Crossing Apartments resulting from an exterior renovation project which began second quarter of 1997. 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 operating expense for the three months ended March 31, 1998, is approximately $99,000 of major repairs and maintenance comprised primarily of exterior building repairs. Included in operating expenses for the three months ended March 31, 1997, is approximately $36,000 of major repairs and maintenance comprised primarily of exterior painting and landscaping. Also contributing to the increase in net loss was an increase in bad debt expense, which was primarily due to write-offs recorded at Rosemont Crossing during the first quarter of 1998. 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 March 31, 1998, the Partnership held cash and cash equivalents of approximately $845,000, compared to approximately $810,000 at March 31, 1997. For the three months ended March 31, 1998, net cash increased approximately $162,000, compared to a net decrease of approximately $67,000 for the corresponding period in 1997. Net cash provided by operating activities decreased primarily due to an increase in operating expenses, as discussed above, and a decrease in cash provided by receivables and deposits and accounts payable due to the timing of receipts and payments. This was partially offset by a decrease in cash used for accrued property taxes due to the timing of payments. For the three months ended March 31, 1998, net cash provided by investing activities increased as a result of withdrawals being made from restricted escrows, compared to the three months ended March 31, 1997, when net cash used in investing activities included net deposits to restricted escrows. Net cash used in financing activities decreased as a result of a decrease in loan costs paid, partially offset by an increase in principal payments paid. 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 $19,713,000, 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, refinancings, property sales and the availability of cash reserves. No cash distributions were paid during the three months ended March 31, 1998, or during the three months ended March 31, 1997. Year 2000 The Partnership is dependent upon the General Partner and Insignia for management and administrative services. Insignia has completed an assessment and will have to modify or replace portions of its software so that its computer systems will function properly with respect to dates in the year 2000 and thereafter (the "Year 2000 Issue"). The project is estimated to be completed not later than December 31, 1998, which is prior to any anticipated impact on its operating systems. The General Partner believes that with modifications to existing software and conversions to new software, the Year 2000 Issue will not pose significant operational problems for its computer systems. However, if such modifications and conversions are not made, or are not completed timely, the Year 2000 Issue could have a material impact on the operations of the Partnership. Other Certain items discussed in this quarterly report may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act") and as such may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Partnership to be materially different from any future results, performance or achievements expressed or implied by such forward- looking statements. Such forward-looking statements speak only as of the date of this quarterly report. The Partnership expressly disclaims any obligation or undertaking to release publicly any updates of revisions to any forward-looking statements contained herein to reflect any change in the Partnership's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On March 4, 1994, an employee of an affiliate of the General Partner who worked 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. A settlement was reached with the plaintiff, and liability is recorded in the financial statements at March 31, 1998, in connection with the settlement. 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 complaint purports to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships which are named as nominal defendants, challenging the acquisition by Insignia and its 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 as well as a recently announced agreement between Insignia and AIMCO. The complaint seeks monetary damages and equitable relief, including judicial dissolution of the Partnership. The General Partner was only recently served with the complaint which it believes to be without merit, and intends to vigorously defend the action. In May 1998, the Partnership and its General Partner were named as respondents in a Petition in Los Angeles Superior Court. The Petition, brought by a limited partner of the Partnership, seeks performance by the General Partner of certain alleged contractual obligations under the Partnership Agreement and compliance with certain alleged statutory requirements. Service on the Partnership was only recently accomplished, and the General Partner has not yet replied to the Petition. The Partnership is unaware of any other pending or outstanding litigation that is not of a routine nature. The General Partner of the Partnership 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, is filed as and exhibit to this report. (b) No reports on Form 8-K were filed during the three months ended March 31, 1998. 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/ Carroll D. Vinson Carroll D. Vinson President By: /s/ Robert D. Long, Jr. Robert D. Long, Jr. Vice President/CAO Date: May 11, 1998