SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended: Commission File Number:
- ------------------ -----------------------
June 30, 1999 2-95034LA
ARMORED STORAGE INCOME INVESTORS LIMITED PARTNERSHIP
----------------------------------------------------
(Exact name of Registrant as specified in its charter)
Arizona 85-0503193
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
4425 North 24rd Street, Suite 225
Phoenix, Arizona 85016
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(Address of and zip code of principal executive offices)
(602) 230-1656
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(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 [ ]
<PAGE>
ARMORED STORAGE INCOME INVESTORS LIMITED PARTNERSHIP
an Arizona Limited Partnership
PART I
FINANCIAL INFORMATION
ITEM 1 FINANCIAL STATEMENTS PAGE
----
Balance Sheets 3
Statements of Operations 4
Statements of Cash Flows 5
Notes to Unaudited Financial Statements 6
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ARMORED STORAGE INCOME INVESTORS LIMITED PARTNERSHIP
an Arizona Limited Partnership
BALANCE SHEETS
(Unaudited)
June 30, June 30,
1999 1998
---------- ----------
ASSETS
Property
Land $1,139,828 $1,139,828
Buildings 5,856,762 5,856,762
Furniture and fixtures 108,020 86,390
---------- ----------
7,104,610 7,082,980
Less accumulated depreciation 2,541,800 2,343,891
---------- ----------
4,562,810 4,739,089
Cash and cash equivalents 658,144 780,630
Other assets 15,165 18,165
---------- ----------
$5,236,119 $5,537,884
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 100,767 $ 95,898
Commitments (Note 3)
Partners' capital
General partner $ 85,632 $ 76,720
Limited partners 5,049,720 5,365,266
---------- ----------
$5,236,119 $5,537,884
========== ==========
See notes to financial statements.
3
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ARMORED STORAGE INCOME INVESTORS LIMITED PARTNERSHIP
an Arizona Limited Partnership
STATEMENTS OF OPERATIONS
(unaudited)
For the Six Months For the Years
Ended Ended
---------------------- -------------------------
June 30, June 30, Dec. 31, Dec. 31,
1999 1998 1998 1997
Income
Rental $532,319 $559,002 $1,089,040 $1,105,613
Interest 7,717 11,917 21,353 18,426
-------- -------- ---------- ----------
540,036 570,919 1,110,393 1,124,039
-------- -------- ---------- ----------
Expenses
Property Operations 235,728 214,663 454,890 436,207
Administration 72,800 58,266 91,685 96,005
Amortization &
Depreciation 99,000 99,000 197,909 195,224
-------- -------- ---------- ----------
407,528 371,929 744,484 727,436
-------- -------- ---------- ----------
Net Income $132,508 $198,990 $ 365,909 $ 396,603
======== ======== ========== ==========
See notes to financial statements.
4
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ARMORED STORAGE INCOME INVESTORS LIMITED PARTNERSHIP
an Arizona Limited Partnership
STATEMENTS OF CASH FLOWS
(unaudited)
For the six months ended
-----------------------------
June 30, 1999 June 30, 1998
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers $ 532,319 $ 559,002
Cash paid to suppliers (298,927) (269,436)
Interest received 7,717 11,917
--------- ---------
Net cash provided by (used in) operating
activities $ 241,109 $ 301,483
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital improvements $ -- $ (11,814)
--------- ---------
Net cash used in investing activities -- (11,814)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash used in financing activities -- --
--------- ---------
Increase (decrease) in cash $ 241,109 $ 289,669
Cash and cash equivalents:
Beginning 417,035 490,961
--------- ---------
Ending $ 658,144 $ 780,630
========= ---------
RECONCILIATION OF NET LOSS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net income $ 132,508 $ 198,990
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 99,000 99,000
Increase (decrease) in accounts payable 9,601 3,493
--------- ---------
Net cash provided by operating activities $ 241,109 $ 301,483
========= =========
See notes to financial statements.
5
<PAGE>
ARMORED STORAGE INCOME INVESTORS LIMITED PARTNERSHIP
an Arizona Limited Partnership
NOTES TO UNAUDITED FINANCIAL STATEMENTS
June 30, 1999
NOTE 1. Partnership Organization
Armored Storage Income Investors Limited Partnership ("the Partnership")
was organized under the laws of the State of Arizona pursuant to an
agreement of limited partnership filed December 4, 1984, for the purpose of
acquiring, developing, owning and operating self-service storage
facilities. The initial General Partners were Armored Storage, Inc., an
Arizona corporation (the "Managing General Partner") and Armored Storage
One Limited Partnership, an Arizona Limited Partnership. The Partnership
commenced full activity on January 9, 1985. During 1986, the Partnership
completed an offering of limited partnership units wherein 15,000 limited
partnership units were purchased by investors for $7,500,000. In December
1987 Armored Storage, Inc., withdrew and Armored Storage One Limited
Partnership, became the "Managing General Partner."
NOTE 2. Summary of Significant Accounting Policies
Property and equipment:
Property and equipment is stated at cost. Depreciation is computed
principally by the straight-line method over the following estimated
useful lives:
Years
-----
Buildings 30
Furniture and fixtures 5
Rental Income:
The Partnership receives rental income from its self-storage
facilities. All rental agreements are for month-to-month tenancy.
Rental income is recognized on the accrual basis in accordance with
generally accepted accounting principles.
6
<PAGE>
ARMORED STORAGE INCOME INVESTORS LIMITED PARTNERSHIP
an Arizona Limited Partnership
NOTES TO UNAUDITED FINANCIAL STATEMENTS
June 30, 1999
NOTE 2. Summary of Significant Accounting Policies, continued
Income taxes:
The Partnership does not record a provision for income taxes, since
Federal and state income tax regulations provide that any taxes on
income of a Partnership are payable by the partners as individuals.
The Partnership's tax returns are prepared on the accrual basis.
Cash and cash equivalents:
For purposes of reporting cash flows, the Partnership considers all
money market funds to be cash equivalents.
Unaudited financial statements:
The financial statement for the six months ended June 30, 1999 are
unaudited, however, in management's opinion they include all
adjustments necessarily for a fair statement of the results of
operations for such interim period. The interim period results of
operations are not necessarily indicative of results for a full year.
NOTE 3. Commitments
The Partnership has the following commitments:
The Partnership entered into agreements with Armored Management LLC,
on January 1, 1999, to manage the Partnership's self-storage
facilities. The term of the agreements are for one year and shall be
renewed from year to year unless, and until, either party terminates
the agreements. The agreements provide that the manager shall receive,
as compensation for services, 6% of the actual gross cash receipts.
7
<PAGE>
ARMORED STORAGE INCOME INVESTORS LIMITED PARTNERSHIP
an Arizona Limited Partnership
NOTES TO UNAUDITED FINANCIAL STATEMENTS
June 30, 1999
NOTE 3 Commitments, continued
The Partnership also entered into an agreement with Armored
Management, LLC for the management of the Partnership's accounting,
securities reporting, database and investor relations activities. The
term of the agreement is for one year and shall be renewed from year
to year unless either party terminates the agreement. The agreement
provides for a flat fee of $5,000 per month as compensation for
administration services.
The Partnership reimburses the General Partner for the costs of goods
and materials used by and for the Partnership and administrative
services necessary to the operation of the Partnership.
NOTE 4 Impact of Year 2000
The Company's assessment of its Year 2000 issues is complete. The
Company has determined that there is likely to be no material adverse
consequence of Year 2000 issues on the Company's business, results of
operations, or financial condition. The Company has few information
technology or non-information technology aspects which may be affected
by Year 2000; those that may be affected are the computing system used
to administer operations. Investigation and queries of the software
and hardware suppliers have determined by written statements or other
assurances that they are Year 2000 compliant. The Company has no major
supplier, vendor, or customers which is likely to materially affect
the Company if it is affected by the Year 2000 problem. The Company
has determined that it is at little risk of material disruption of its
business due to Year 2000 issues.
In the event the computing system fails, the Company will purchase and
replace the necessary hardware and software for critical systems and
contact the software and hardware suppliers to replace, at their cost,
the failed components for remaining computers. Costs for the Year 2000
compliance have been for investigation only and no remedial actions
have or will be taken. The costs have been minimal and are not
material to the financial condition of the Company.
8
<PAGE>
ARMORED STORAGE INCOME INVESTORS LIMITED PARTNERSHIP
an Arizona Limited Partnership
ITEM 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS
RESULTS OF OPERATION
The Partnership has three operating facilities, two located in Phoenix,
Arizona, and one in Albuquerque, New Mexico. The Partnership's three facilities
generated an aggregate gross operating revenue of $532,319 during the first six
months of 1999 compared to $559,002 during the first six months of 1998. A
decrease in income at the Bell Road facility is primarily responsible for the
overall reduction. Management continues to work on ways to increase rental
revenue, be it through increased marketing, rental rate adjustments, or employee
incentive programs.
Occupancies (based on number of available units) at the three facilities
are summarized as follows:
June 30, 1999 June 30, 1998
------------------ -----------------
Bell Road 76% 90%
63rd Avenue 80% 77%
Tramway 80% 77%
Operational expenses through June 30, 1999 were $235,728 compared to
$214,663 for 1998. Administrative expenses for 1999 were $72,800 compared to
$58,266 for the corresponding period in 1998. Legal expenses incurred as a
result of the pending sale are responsible for the increase. Expenses for 1999
should continue to be similar or slightly higher than 1998.
Pursuant to the authority granted under the limited partnership agreement
of the Registrant, the General Partner, on behalf of the Registrant, opened an
escrow on April 6, 1999 with Everest Storage II, a California limited liability
company to sell substantially all its assets, consisting of three mini-storage
facilities, to Everest Storage II for a total sales price of $7,113,402. The
General Partner has evaluated the offer and, after reviewing comparable sales
and capitalization rates in the real estate market today, believes it to be in
the best interest of the Registrant to proceed with the transaction. The terms
of the contract, which became effective April 6, 1999, provide for no assumption
of liabilities by the buyer, except for customary prorations of property taxes
and prepaid rents.
The contract is contingent on the buyer's evaluation of the properties.
Everest Storage II had sixty days from the date the Registrant provides it with
the required documentation to complete its due diligence. The buyer and seller
extended due diligence period to August 16, 1999. Everest Storage II is an
affiliate of Everest Investors 8, LLC, which owns 1.26% of the Registrant.
9
<PAGE>
The terms of the contract provide that Everest Storage II will enter into a
management contract with the current property manager, Armored Management, LLC,
the general partner of the general partner of the Registrant, for a period of
one year after the closing. It is anticipated that the terms of the management
agreement will be substantially the same as the existing agreement in place with
the Registrant. A six percent commission will be paid should the sale be
consummated, split between the buyers broker, Everest Financial Inc. and the
seller's broker, Dale D. Ulrich, a member of Armored Management, LLC. Should the
sale occur, the Registrant has agreed to a limited non-competition covenant with
Everest Storage II.
Should the transaction be consummated, the General Partner would begin to
wind up the affairs of the Registrant in order to make a liquidation
distribution. The General Partner estimates the final distribution would be in
the range of $425 to $445 per unit. It is anticipated the final distribution
would be made 60 to 120 days after the transaction closes.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1999, the Partnership held cash and cash equivalents
totaling $658,144 as compared to $780,630 for the corresponding quarter of 1998.
Should the potential sale referred to above close, the Partnership's liquidity
would increase substantially.
10
<PAGE>
ARMORED STORAGE INCOME INVESTORS LIMITED PARTNERSHIP
an Arizona Limited Partnership
PART II
OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS:
Not applicable.
ITEM 2: CHANGES IN SECURITIES:
Not applicable.
ITEM 3: DEFAULTS UPON SENIOR SECURITIES:
Not applicable.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
Not applicable.
ITEM 5: OTHER INFORMATION:
Not applicable.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ARMORED STORAGE INCOME INVESTORS
(Registrant)
By: Armored Management L.L.C.
Its General Partner
By: /s/ Dale D. Ulrich
---------------------------
Dale D. Ulrich
Its: Member
Dated: August 9, 1999
-------------------------
12
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 658,144
<SECURITIES> 0
<RECEIVABLES> 30,000
<ALLOWANCES> 15,000
<INVENTORY> 0
<CURRENT-ASSETS> 673,309
<PP&E> 7,104,610
<DEPRECIATION> 2,541,800
<TOTAL-ASSETS> 5,236,119
<CURRENT-LIABILITIES> 100,767
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 5,135,352
<TOTAL-LIABILITY-AND-EQUITY> 5,236,119
<SALES> 0
<TOTAL-REVENUES> 540,036
<CGS> 0
<TOTAL-COSTS> 334,728
<OTHER-EXPENSES> 72,800
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 132,508
<INCOME-TAX> 0
<INCOME-CONTINUING> 132,508
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 132,508
<EPS-BASIC> 8.39
<EPS-DILUTED> 8.39
</TABLE>
