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:
MARCH 31, 1999 2-95034LA
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ARMORED STORAGE INCOME INVESTORS LIMITED PARTNERSHIP
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(Exact name of Registrant as specified in its charter)
ARIZONA 85-0503193
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
4425 North 24th Street, Suite 225
PHOENIX, ARIZONA 85016
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(Address of and zip code of principal executive offices)
(602) 230-1655
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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
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<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
<PAGE>
ARMORED STORAGE INCOME INVESTORS LIMITED PARTNERSHIP
an Arizona Limited Partnership
BALANCE SHEETS
(Unaudited)
March 31, December 31,
1999 1998
----------- -----------
ASSETS
Property
Land $ 1,139,828 $ 1,139,828
Buildings 5,856,762 5,856,762
Furniture and fixtures 108,020 108,020
----------- -----------
7,104,610 7,104,610
Less accumulated depreciation (2,492,300) (2,442,800)
----------- -----------
4,612,310 4,661,810
Cash and cash equivalents 502,745 417,035
Other assets 15,165 15,165
----------- -----------
$ 5,130,220 $ 5,094,010
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 73,400 $ 91,165
Commitments (Note 3)
Partners' capital
General partner 81,706 79,007
Limited partners 4,975,114 4,923,838
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$ 5,130,220 $ 5,094,010
=========== ===========
See notes to financial statements.
<PAGE>
ARMORED STORAGE INCOME INVESTORS LIMITED PARTNERSHIP
an Arizona Limited Partnership
STATEMENTS OF OPERATIONS
(unaudited)
For the Three Months For the Years
ENDED ENDED
---------------------- -----------------------
March 31, March 31, Dec. 31, Dec. 31,
1999 1998 1998 1997
---------- ---------- ---------- ----------
Income
Rental $ 261,214 $ 283,693 $1,089,040 $1,105,613
Interest 3,450 5,170 21,353 18,426
---------- ---------- ---------- ----------
264,664 288,863 1,110,393 1,124,039
---------- ---------- ---------- ----------
Expenses
Property Operations 117,382 110,697 454,890 436,207
Administration 43,807 40,041 91,685 97,005
Amortization &
Depreciation 49,500 49,000 197,909 195,224
---------- ---------- ---------- ----------
210,689 199,738 744,484 727,436
---------- ---------- ---------- ----------
Net Income $ 53,975 $ 89,125 $ 365,909 $ 396,603
========== ========== ========== ==========
See notes to financial statements.
<PAGE>
ARMORED STORAGE INCOME INVESTORS LIMITED PARTNERSHIP
an Arizona Limited Partnership
STATEMENTS OF CASH FLOWS
(unaudited)
FOR THE THREE MONTHS ENDED
----------------------------------
MARCH 31, 1999 MARCH 31, 1998
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CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers $ 261,214 $ 283,693
Cash paid to suppliers (178,954) (171,408)
Interest received 3,450 5,170
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Net cash provided by (used in)
operating activities $ 85,710 $ 117,455
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of furniture and fixtures -- (2,938)
Net cash provided by (used in)
Investing activities $ -- $ (2,938)
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CASH FLOWS FROM FINANCING ACTIVITIES
Distributions to partners -- --
--------- ---------
Net cash used in financing activities -- --
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Increase (decrease) in cash $ 85,710 $ 114,517
Cash and cash equivalents:
Beginning 417,035 490,961
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Ending $ 502,745 $ 605,477
========= ---------
RECONCILIATION OF NET LOSS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Net income (loss) $ 53,975 $ 89,125
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 49,500 49,000
Increase (decrease) in accounts payable (17,765) (20,670)
--------- ---------
Net cash provided by (used in)
operating activities $ 85,710 $ 117,455
========= =========
See notes to financial statements.
<PAGE>
ARMORED STORAGE INCOME INVESTORS LIMITED PARTNERSHIP
an Arizona Limited Partnership
NOTES TO UNAUDITED FINANCIAL STATEMENTS
March 31, 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
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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.
<PAGE>
ARMORED STORAGE INCOME INVESTORS LIMITED PARTNERSHIP
an Arizona Limited Partnership
NOTES TO UNAUDITED FINANCIAL STATEMENTS
March 31, 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 three months ended March 31, 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.
<PAGE>
ARMORED STORAGE INCOME INVESTORS LIMITED PARTNERSHIP
an Arizona Limited Partnership
NOTES TO UNAUDITED FINANCIAL STATEMENTS
March 31, 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.
<PAGE>
ARMORED STORAGE INCOME INVESTORS LIMITED PARTNERSHIP
an Arizona Limited Partnership
NOTES TO UNAUDITED FINANCIAL STATEMENTS
March 31, 1999
ITEM 2 MANAGEMENT'S DISCUSSIONS AND ANALYSIS
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Results of Operations
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 $261,214 during the first
three months of 1999 compared to $283,693 during the first three months of 1998.
Rental income decreased at all three facilities compared to the prior period.
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:
MARCH 31, 1999 MARCH 31, 1998
------------------ -----------------
Bell Road 68% 86%
63rd Avenue 82% 75%
Tramway 78% 76%
Operational expenses through March 31, 1999 were $117,382 compared to
$110,097 for 1998. Administrative expenses for 1999 were $43,807 compared to
$43,807 for the corresponding period in 1998. 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 has sixty days from the date the Registrant provides it with the
required documentation to complete its due diligence. The buyer may extend the
due diligence period by an additional thirty days. Everest Storage II is an
affiliate of Everest Investors 8, LLC, which owns 1.26% of the Registrant.
<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 March 31, 1999, the Partnership held cash and cash equivalents
totaling $502,745 as compared to $605,477 for the corresponding quarter of 1998.
Should the potential sale referred to above close, the Partnership's liquidity
would increase substantially.
<PAGE>
ARMORED STORAGE INCOME INVESTORS LIMITED PARTNERSHIP
an Arizona Limited Partnership
PART II
OTHER INFORMATION
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ITEM 1: LEGAL PROCEEDINGS:
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Not applicable.
ITEM 2: CHANGES IN SECURITIES:
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Not applicable.
ITEM 3: DEFAULTS UPON SENIOR SECURITIES:
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Not applicable.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
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Not applicable.
ITEM 5: OTHER INFORMATION:
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Not applicable.
<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: 5/11/99
--------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 502,745
<SECURITIES> 0
<RECEIVABLES> 30,000
<ALLOWANCES> 15,000
<INVENTORY> 0
<CURRENT-ASSETS> 517,910
<PP&E> 7,104,610
<DEPRECIATION> 2,492,300
<TOTAL-ASSETS> 5,130,220
<CURRENT-LIABILITIES> 73,400
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 5,056,820
<TOTAL-LIABILITY-AND-EQUITY> 5,130,220
<SALES> 0
<TOTAL-REVENUES> 264,664
<CGS> 0
<TOTAL-COSTS> 166,882
<OTHER-EXPENSES> 43,807
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 53,975
<INCOME-TAX> 0
<INCOME-CONTINUING> 53,975
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53,975
<EPS-PRIMARY> 3.42
<EPS-DILUTED> 3.42
</TABLE>
