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, 1999
[ ] 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 0-15710
CENTURY PENSION INCOME FUND XXIV
(Exact name of small business issuer as specified in its charter)
California 94-2984976
(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)
CENTURY PENSION INCOME FUND XXIV
BALANCE SHEET
(in thousands, except unit data)
(Unaudited)
September 30, 1999
Assets
Cash and cash equivalents $ 9,239
Receivables and deposits 40
Other assets 176
Investments in unconsolidated joint ventures 2,109
$ 11,564
Liabilities and Partners' (Deficit) Capital
Liabilities
Accounts payable $ 4
Due to general partner 610
Distribution payable 8,393
Other liabilities 271
Partners' (Deficit) Capital
General partner $ (88)
Limited partners (73,341 units issued and
outstanding) 2,374 2,286
$ 11,564
See Accompanying Notes to Financial Statements
b)
CENTURY PENSION INCOME FUND XXIV
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
Revenues:
Rental income $ -- $ 199 $ -- $ 1,232
Other income 22 76 85 123
Gain on sale of investment
properties -- 3,381 -- 3,381
Total revenues 22 3,656 85 4,736
Expenses:
Operating -- 66 -- 228
General and administrative 491 128 678 410
Depreciation -- 81 -- 322
Property taxes -- 22 -- 108
Total expenses 491 297 678 1,068
(Loss) income before equity in
income of unconsolidated
joint ventures (469) 3,359 (593) 3,668
Equity in income of
unconsolidated joint ventures 124 188 149 434
Net (loss) income $ (345) $ 3,547 $ (444) $ 4,102
Net (loss) income allocated
to general partner $ (3) $ 168 $ (4) $ 174
Net (loss) income allocated
to limited partners (342) 3,379 (440) 3,928
$ (345) $ 3,547 $ (444) $ 4,102
Net (loss) income per limited
partnership unit $ (4.66) $ 46.07 $ (6.00) $ 53.56
Distributions per
limited partnership unit $113.29 $206.23 $113.29 $213.73
See Accompanying Notes to Financial Statements
c)
CENTURY PENSION INCOME FUND XXIV
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 73,341 $ -- $36,671 $36,671
Partners' capital at
December 31, 1998 73,341 $ -- $11,123 $11,123
Distribution to partners -- (84) (8,309) (8,393)
Net loss for the nine months
ended September 30, 1999 -- (4) (440) (444)
Partners' (deficit) capital at
September 30, 1999 73,341 $ (88) $ 2,374 $ 2,286
See Accompanying Notes to Financial Statements
d)
CENTURY PENSION INCOME FUND XXIV
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
1999 1998
Cash flows from operating activities:
Net (loss) income $ (444) $ 4,102
Adjustments to reconcile net (loss) income to net cash
(used in) provided by operating activities:
Depreciation -- 322
Amortization of lease commissions -- 32
Gain on sale of investment property -- (3,381)
Equity in income of unconsolidated joint ventures (149) (434)
Change in accounts:
Receivables and deposits (40) 162
Other assets 10 4
Accounts payable 1 (4)
Accrued property taxes -- 26
Due to general partner 434 --
Other liabilities (3) 288
Net cash (used in) provided by operating
activities (191) 1,117
Cash flows from investing activities:
Proceeds from sale of investment property -- 16,651
Distribution received from joint venture 5,901 --
Net cash provided by investing activities 5,901 16,651
Cash flows used in financing activities:
Distributions paid to partners -- (15,833)
Net increase in cash and cash equivalents 5,710 1,935
Cash and cash equivalents at beginning of period 3,529 1,889
Cash and cash equivalents at end of period $ 9,239 $ 3,824
Supplemental disclosure of non-cash financing activity:
Distribution payable $ 8,393 $ --
See Accompanying Notes to Financial Statements
e)
CENTURY PENSION INCOME FUND XXIV
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements of Century Pension Income Fund
XXIV (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 Fox Capital Management Corporation (the "Managing General
Partner" or "FCMC"), 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, 1999, are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 1999. For further information, refer to the financial
statements and footnotes thereto included in the Partnership's Annual Report on
Form 10-K for the fiscal year ended December 31, 1998.
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 Managing General Partner. The Managing General Partner does not believe
that this transaction 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 Managing 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 as reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership. The following transactions with the
Managing General Partner and/or its affiliates were incurred during the nine
month periods ended September 30, 1999 and 1998:
1999 1998
(in thousands)
Partnership management fee $434 $ 93
Reimbursement for services of affiliates 50 90
The Partnership Agreement provides for the payment of a Partnership management
fee to the general partner equal to ten percent of cash available for
distribution. This management fee is intended to defray some of the expenses
related to services provided by the general partner, or an affiliate, but not
reimbursed by the Partnership. For the nine months ended September 30, 1999, a
fee of approximately $434,000 was accrued in connection with the declared
distribution and is included in "Due to general partner" on the balance sheet.
For the nine months ended September 30, 1999, a fee of approximately $93,000 was
paid.
An affiliate of the Managing General Partner received reimbursement of
accountable administrative expenses amounting to approximately $50,000 and
$90,000 for the nine months ended September 30, 1999 and 1998, respectively.
The Partnership Agreement provides for the payment of a subordinated sales
interest to the general partner not to exceed the lesser of (i) three percent of
the gross sales price of a property or (ii) one-half of the competitive real
estate commission, as defined in the Partnership Agreement. The general partner
was entitled to this fee in connection with the sale of the Partnership's three
investment properties during 1998. Payment cannot be made until the limited
partners receive their original invested capital plus a 6% per annum return.
Once the limited partners have received their priority return and return of
their original investment, the subordinated sales interest can be paid. The
Partnership has recognized a deferred asset of approximately $176,000, which is
included on the Partnership's balance sheet, until the fee becomes payable.
NOTE D - INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES
The Partnership has investments in two unconsolidated joint ventures as follows:
Coral Palm Plaza Joint Venture
On January 23, 1987, the Partnership acquired a 33.33% ownership interest in
Coral Palm Plaza Joint Venture ("Coral Palm"), a joint venture with Century
Pension Income Fund XXIII, a California Limited Partnership ("CPIF XXIII") and
an affiliate of FCMC. Also on January 23, 1987, Coral Palm acquired the Coral
Palm Plaza, a shopping center located in Coral Springs, Florida. The
Partnership's interest in Coral Palm is reported using the equity method of
accounting.
Summary financial information for Coral Palm is as follows (in thousands):
September 30,
1999
Total assets $ 5,319
Total liabilities (255)
Total venture's equity $ 5,064
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
Total revenues $ 416 $ 315 $ 870 $ 897
Total expenses (170) (225) (603) (657)
Net income $ 246 $ 90 $ 267 $ 240
The Partnership did not receive distributions from Coral Palm during either of
the nine months ended September 30, 1999 and 1998. For the nine months ended
September 30, 1999, the Partnership recognized equity in the income of Coral
Palm of approximately $89,000 as compared to equity in the income of Coral Palm
of approximately $80,000 for the comparable period in 1998.
Minneapolis Business Parks Joint Venture
On April 30, 1987, the Partnership acquired a 32% ownership interest in
Minneapolis Business Parks Joint Venture ("Minneapolis"), a joint venture with
CPIF XXIII. On May 5, 1987, Minneapolis acquired Alpha Business Center located
in Bloomington, Minnesota, Plymouth Service Center located in Plymouth,
Minnesota, and Westpoint Business Center located in Plymouth, Minnesota. The
Partnership's interest in Minneapolis is reported using the equity method of
accounting.
Summary financial information for Minneapolis is as follows (in thousands):
September 30,
1999
Total assets $ 1,029
Total liabilities (13)
Total venture's equity $ 1,016
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
Total revenues $ 131 $ 825 $ 1,674 $ 2,498
Total expenses -- (543) (1,487) (1,601)
Net income $ 131 $ 282 $ 187 $ 897
The Partnership received a distribution of approximately $5,901,000 from
Minneapolis during the nine months ended September 30, 1999. There was no
distribution during the comparable period in 1998. The Partnership recognized
equity in the income of Minneapolis of approximately $60,000 and $354,000 for
the nine months ended September 30, 1999 and 1998, respectively.
On June 1, 1999, Minneapolis sold Alpha Business Center, Plymouth Service
Center, and Westpoint Service Center to an unaffiliated third party for net
sales proceeds of approximately $14,202,000 after payment of closing costs.
Minneapolis realized a loss of approximately $433,000 on the sale during the
second quarter of 1999. The Partnership's share of the loss on the sale is
approximately $139,000.
NOTE E - SALE OF INVESTMENT PROPERTIES
In September 1998, the Partnership sold its three investment properties, Butler
Square Shopping Center, Kenilworth Commons Shopping Center, and Plantation
Pointe Shopping Center to an unaffiliated third party. The Partnership's net
proceeds were approximately $16,651,000 after payment of closing costs. The
Partnership realized a gain of approximately $3,381,000 on the sale during the
third quarter of 1998.
The sale transaction is summarized as follows:
(in thousands)
Cash proceeds received $ 16,651
Net real estate (a) (13,270)
Gain on sale of investment property $ 3,381
(a) Real estate at cost, net of accumulated depreciation of approximately
$4,508,000.
NOTE F - DISTRIBUTIONS
During the nine months ended September 30, 1999, a distribution from operations
of approximately $3,906,000 (approximately $3,867,000 to the limited partners,
$52.73 per limited partnership unit) and a distribution from sales proceeds of
Minneapolis Business Park Joint Venture of approximately $4,487,000
(approximately $4,442,000 to the limited partners, $60.56 per limited
partnership unit) was declared. The distribution was paid subsequent to
September 30, 1999. During the nine months ended September 30, 1998, a
distribution from operations of approximately $833,000 (approximately $825,000
to the limited partners, $11.25 per limited partnership unit) and a distribution
from sales proceeds of approximately $15,000,000 (approximately $14,850,000 to
the limited partners, $202.48 per limited partnership unit) was paid to the
partners.
NOTE G - SEGMENT REPORTING
Description of the types of products and services from which the reportable
segment derives its revenues:
For the nine months ended September 30, 1998, the Partnership had one reportable
segment: commercial properties. The commercial property segment consisted of
three retail shopping centers located in three different states: South Carolina,
North Carolina, and Georgia. All of the commercial properties were sold in
September 1998.
Measurement of segment profit or loss:
The Partnership evaluates performance based on net income. The accounting
policies of the reportable segments are the same as those of the Partnership as
described in Partnership's Annual Report on Form 10-K for the year ended
December 31, 1998.
Factors management used to identify the enterprise's reportable segment:
The Partnership's reportable segment consisted of investment properties that
offered similar products and services. Although each of the investment
properties were managed separately, they have been aggregated into one segment
as they provided services with similar types of products and customers.
Segment information for the nine months ended September 30, 1999 and 1998, is
shown in the following tables. The "Other" column includes partnership
administration related items and income and expense not allocated to the
reportable segment. Information for the nine months ended September 30, 1999, is
entirely administration-related due to the sale of the commercial properties in
1998.
1999 Commercial Other Totals
(in thousands)
Other income $ -- $ 85 $ 85
General and administrative expense -- 678 678
Equity in income of joint ventures -- 149 149
Segment loss -- (444) (444)
Total assets -- 11,564 11,564
1998 Commercial Other Totals
(in thousands)
Rental income $ 1,232 $ -- $ 1,232
Other income 9 114 123
Gain on sale of investment properties 3,381 -- 3,381
Depreciation 322 -- 322
General and administrative expense -- 410 410
Equity in income of joint ventures -- 434 434
Segment profit 3,964 138 4,102
Total assets 156 11,689 11,845
NOTE H - 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 Managing 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 (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 complaint seeks monetary damages and
equitable relief, including judicial dissolution of the Partnership. On June
25, 1998, the Managing 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 Managing 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 ("Stipulation"), settling claims, subject
to final court approval, on behalf of the Partnership and all limited partners
who own units as of November 3, 1999. The Court has preliminarily approved the
Settlement and scheduled a final approval hearing for December 10, 1999. In
exchange for a release of all claims, the Stipulation provides that, among other
things, an affiliate of the Managing General Partner will make tender offers for
all outstanding limited partnership interests in 49 partnerships, including the
Registrant, subject to the terms and conditions set forth in the Stipulation,
and has agreed to establish a reserve to pay an additional amount in settlement
to qualifying class members (the "Settlement Fund"). At the final approval
hearing, Plaintiffs' counsel will make an application for attorneys' fees and
reimbursement of expenses, to be paid in part by the partnerships and in part
from the Settlement Fund. The Managing 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 Partnership from time to time.
The discussion of the Partnership'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 Partnership'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.
On September 1, 1998, the Partnership sold its three wholly-owned investment
properties and on June 1, 1999, a joint venture, in which the Partnership is
invested, sold its three properties. As a result, the Partnership currently has
an interest in one shopping center, Coral Palm Plaza, owned by one
unconsolidated joint venture between the Partnership and an affiliated
partnership.
Results of Operations
The Partnership realized a net loss of approximately $444,000 for the nine
months ended September 30, 1999, as compared to net income of approximately
$4,102,000 for the corresponding period in 1998. The Partnership realized a net
loss of approximately $345,000 for the three months ended September 30, 1999, as
compared to net income of approximately $3,547,000 for the corresponding period
in 1998. The increase in net loss was due to a decrease in total revenues
partially offset by a decrease in total expenses. Also contributing to the
increase in net loss was a decrease in equity in the Partnership's
unconsolidated joint ventures. Revenues and expenses decreased due to the sale
of the Partnership's three investment properties in September 1998 and the sale
of one of the joint venture's properties in June 1999, resulting in decreases in
rental income and expenses. The decrease in equity in income of the
unconsolidated joint venture is due to a decrease in the net income of the
remaining joint venture for the nine months ended September 30, 1999, as
compared to the same period in 1998.
The decrease in net income for Coral Palm Plaza Joint Venture for the nine
months ended September 30, 1999, is primarily due to a decrease in rental income
due to a decline in the physical occupancy at the related property and
corresponding bad debt expense and vacancy loss recorded during the period.
Also contributing to the decrease in net income is an increase in property tax
expense for the nine months ended September 30, 1999, due to the fact that a
property tax refund was recorded during the corresponding period of 1998. The
decrease in net income for Minneapolis Business Parks Joint Venture
("Minneapolis") for the three and nine months ended September 30, 1999, as
compared to the same period of 1998, is primarily attributable to the loss on
the sale of the three investment properties during the second quarter of 1999
(see discussion below).
General and administrative expenses increased primarily due to the accrual of
the Partnership management fee in association with the distribution to the
partners during the nine months ended September 30, 1999. Partially offsetting
this increase in general and administrative expenses is a decrease in the
third party asset management fees as a result of the September 1998, sale of the
Partnership's investment properties. Included in general and administrative
expenses at September 30, 1999 and 1998, are management reimbursements to the
Managing General Partner allowed under the Partnership Agreement. 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 1, 1999, Minneapolis sold Alpha Business Center, Plymouth Service
Center, and Westpoint Service Center to an unaffiliated third party for net
sales proceeds of approximately $14,202,000 after payment of closing costs.
Minneapolis realized a loss of approximately $433,000 on the sale during the
second quarter of 1999. The Partnership's share of the loss on the sale is
approximately $139,000.
In September 1998, the Partnership sold its three investment properties, Butler
Square Shopping Center, Kenilworth Commons Shopping Center, and Plantation
Pointe Shopping Center to an unaffiliated party. The Partnership's net proceeds
were approximately $16,651,000 after payment of closing costs. The Partnership
realized a gain of approximately $3,381,000 on the sale during the third quarter
of 1998.
Liquidity and Capital Resources
At September 30, 1999, the Partnership had cash and cash equivalents of
approximately $9,239,000 compared to approximately $3,824,000 at September 30,
1998. The increase in cash and cash equivalents for the nine months ended
September 30, 1999, from the Partnership's year ended December 31, 1998, is
approximately $5,710,000 and is largely due to a distribution received from the
joint venture.
During the nine months ended September 30, 1999, a distribution from operations
of approximately $3,906,000 (approximately $3,867,000 to the limited partners,
$52.73 per limited partnership unit) and a distribution from sales proceeds at
Minneapolis Business Park Joint Venture of approximately $4,487,000
(approximately $4,442,000 to the limited partners, $60.56 per limited
partnership unit) was declared. The distribution was paid subsequent to
September 30, 1999. During the nine months ended September 30, 1998, a
distribution from operations of approximately $833,000 (approximately $825,000
to the limited partners, $11.25 per limited partnership unit) and a distribution
from sales proceeds of approximately $15,000,000 (approximately $14,850,000 to
the limited partners, $202.48 per limited partnership unit) was paid to the
partners.
Year 2000 Compliance
General Description of the Year 2000 Issue and the Nature and Effects of the
Year 2000 on Information Technology (IT) and Non-IT Systems
The Year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. The Partnership
is dependent upon the Managing General Partner and its affiliates for management
and administrative services ("Managing Agent"). Any of the computer programs or
hardware that have date-sensitive software or embedded chips may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
Over the past two years, the Managing Agent has determined that it will be
required to modify or replace significant portions of its software and certain
hardware so that those systems will properly utilize dates beyond December 31,
1999. The Managing Agent presently believes that with modifications or
replacements of existing software and certain hardware, the Year 2000 issue can
be mitigated. However, if such modifications and replacements are not made, or
not completed in time, the Year 2000 issue could have a material impact on the
operations of the Partnership.
The Managing Agent's plan to resolve Year 2000 issues involves four phases:
assessment, remediation, testing, and implementation. To date, the Managing
Agent has fully completed its assessment of all the information systems that
could be significantly affected by the Year 2000, and has begun the remediation,
testing and implementation phases on both hardware and software systems.
Assessments are continuing in regards to embedded systems. The status of each
is detailed below.
Status of Progress in Becoming Year 2000 Compliant, Including Timetable for
Completion of Each Remaining Phase
Computer Hardware:
During 1997 and 1998, the Managing Agent identified all of the computer systems
at risk and formulated a plan to repair or replace each of the affected systems.
In August 1998, the main computer system used by the Managing Agent became fully
functional. In addition to the main computer system, PC-based network servers,
routers and desktop PCs were analyzed for compliance. The Managing Agent has
begun to replace each of the non-compliant network connections and desktop PCs
and, as of September 30, 1999, had virtually completed this effort.
The total cost to the Managing Agent to replace the PC-based network servers,
routers and desktop PCs is expected to be approximately $1.5 million of which
$1.3 million has been incurred to date.
Computer Software:
The Managing Agent utilizes a combination of off-the-shelf, commercially
available software programs as well as custom-written programs that are designed
to fit specific needs. Both of these types of programs were studied, and
implementation plans written and executed with the intent of repairing or
replacing any non-compliant software programs.
In April 1999 the Managing Agent embarked on a data center consolidation project
that unifies its core financial systems under its Year 2000 compliant system.
The estimated completion date for this project is October 1999.
During 1998, the Managing agent began converting the existing property
management and rent collection systems to its management properties Year 2000
compliant systems. The estimated additional costs to convert such systems at
all properties, is $200,000, and the implementation and testing process was
completed in June 1999.
The final software area is the office software and server operating systems.
The Managing Agent has upgraded all non-compliant office software systems on
each PC and has upgraded virtually all of the server operating systems.
Operating Equipment:
The Managing Agent has operating equipment, primarily at the property sites,
which needed to be evaluated for Year 2000 compliance. In September 1997, the
Managing Agent began taking a census and inventory of embedded systems
(including those devices that use time to control systems and machines at
specific properties, for example elevators, heating, ventilating, and air
conditioning systems, security and alarm systems, etc.).
The Managing Agent has chosen to focus its attention mainly upon security
systems, elevators, heating, ventilating and air conditioning systems, telephone
systems and switches, and sprinkler systems. While this area is the most
difficult to fully research adequately, management has not yet found any major
non-compliance issues that put the Managing Agent at risk financially or
operationally.
A pre-assessment of the properties by the Managing Agent has indicated virtually
no Year 2000 issues. A complete, formal assessment of all the properties by the
Managing Agent was virtually completed by September 30, 1999. Any operating
equipment that is found non-compliant will be repaired or replaced.
The total cost incurred for all properties managed by the Managing Agent as of
September 30, 1999 to replace or repair the operating equipment was
approximately $75,000. The Managing Agent estimates the cost to replace or
repair any remaining operating equipment is approximately $125,000.
The Managing Agent continues to have "awareness campaigns" throughout the
organization designed to raise awareness and report any possible compliance
issues regarding operating equipment within its enterprise.
Nature and Level of Importance of Third Parties and Their Exposure to the Year
2000
The Managing Agent has banking relationships with three major financial
institutions, all of which have designated their compliance. The Managing Agent
has updated data transmission standards with all of the financial institutions.
All financial institutions have communicated that they are Year 2000 compliant
and accordingly no accounts were required to be moved from the existing
financial institutions.
The Partnership does not rely heavily on any single vendor for goods and
services, and does not have significant suppliers and subcontractors who share
information systems (external agent). To date, the Partnership is not aware of
any external agent with a Year 2000 compliance issue that would materially
impact the Partnership's results of operations, liquidity, or capital resources.
However, the Partnership has no means of ensuring that external agents will be
Year 2000 compliant.
The Managing Agent does not believe that the inability of external agents to
complete their Year 2000 remediation process in a timely manner will have a
material impact on the financial position or results of operations of the
Partnership. However, the effect of non-compliance by external agents is not
readily determinable.
Costs to Address Year 2000
The total cost of the Year 2000 project to the Managing Agent is estimated at
$3.5 million and is being funded from operating cash flows. To date, the
Managing Agent has incurred approximately $2.9 million ($0.7 million expenses
and $2.2 million capitalized for new systems and equipment) related to all
phases of the Year 2000 project. Of the total remaining project costs,
approximately $0.5 million is attributable to the purchase of new software and
operating equipment, which will be capitalized. The remaining $0.2 million
relates to repair of hardware and software and will be expensed as incurred.
The Partnership's portion of these costs are not material.
Risks Associated with the Year 2000
The Managing Agent believes it has an effective program in place to resolve the
Year 2000 issue in a timely manner. As noted above, the Managing Agent has not
yet completed all necessary phases of the Year 2000 program. In the event that
the Managing Agent does not complete any additional phases, certain worst case
scenarios could occur. The worst case scenarios could include elevators,
security and heating, ventilating and air conditioning systems that read
incorrect dates and operate with incorrect schedules (e.g., elevators will
operate on Monday as if it were Sunday). Although such a change would be
annoying to residents, it is not business critical.
In addition, disruptions in the economy generally resulting from Year 2000
issues could also adversely affect the Partnership. The Partnership could be
subject to litigation for, among other things, computer system failures,
equipment shutdowns or failure to properly date business records. The amount of
potential liability and lost revenue cannot be reasonably estimated at this
time.
Contingency Plans Associated with the Year 2000
The Managing Agent has contingency plans for certain critical applications and
is working on such plans for others. These contingency plans involve, among
other actions, manual workarounds and selecting new relationships for such
activities as banking relationships and elevator operating systems.
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 Managing 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 (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 I - Financial Information, Item 1. Financial Statements, Note B - Transfer
of Control"). The complaint seeks monetary damages and equitable relief,
including judicial dissolution of the Partnership. On June 25, 1998, the
Managing 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 Managing 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 ("Stipulation"), settling claims, subject
to final court approval, on behalf of the Partnership and all limited partners
who own units as of November 3, 1999. The Court has preliminarily approved the
Settlement and scheduled a final approval hearing for December 10, 1999. In
exchange for a release of all claims, the Stipulation provides that, among other
things, an affiliate of the Managing General Partner will make tender offers for
all outstanding limited partnership interests in 49 partnerships, including the
Registrant, subject to the terms and conditions set forth in the Stipulation,
and has agreed to establish a reserve to pay an additional amount in settlement
to qualifying class members (the "Settlement Fund"). At the final approval
hearing, Plaintiffs' counsel will make an application for attorneys' fees and
reimbursement of expenses, to be paid in part by the partnerships and in part
from the Settlement Fund. The Managing 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 filed in the third quarter of fiscal year
1999.
None.
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.
CENTURY PENSION INCOME FUND XXIV
By: FOX PARTNERS VI
Its General Partner
By: FOX CAPITAL MANAGEMENT CORPORATION
Its Managing 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: