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:
September 30, 1996 33-2732
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ARMORED STORAGE INCOME INVESTORS 2
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(Exact name of Registrant as specified in its charter)
California 93-0930503
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3839 N. 3rd Street, Suite 108
Phoenix, Arizona 85012
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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 2,
a California 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 2
a California Limited Partnership
BALANCE SHEETS
(Unaudited)
September 30, September 30,
1996 1995
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ASSETS
Property
Land $ 242,825 $ 242,825
Buildings 1,068,145 1,059,970
Furniture and fixtures 22,656 22,655
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1,333,626 1,325,450
Less accumulated depreciation 363,717 327,241
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969,909 998,209
Cash and cash equivalents 55,634 49,109
Other assets 2,400 5,700
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$ 1,027,943 $ 1,053,018
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable 12,671 27,174
Commitments (Note 3)
Partners' capital
General partner (3,050) (3,984)
Limited partners 1,075,671 1,090,965
Less amount due from
general partner (57,349) (61,137)
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$ 1,027,943 $ 1,053,018
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See notes to financial statements.
<PAGE>
ARMORED STORAGE INCOME INVESTORS 2,
a California Limited Partnership
STATEMENT OF OPERATIONS
(unaudited)
For the Nine Months For the Year For the Year
Ended Ended Ended
-------------------- ------------ ------------
September September December December
30, 1996 30, 1995 31, 1995 31, 1994
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Income
Rental $167,069 $ 143,306 $ 190,029 $ 191,360
Interest 1,126 766 974 724
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168,195 144,072 191,603 192,084
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Expenses
Property Operations 72,660 70,644 96,143 76,089
Administration 41,858 39,477 50,148 50,649
Amortization &
Depreciation 27,357 26,094 35,213 37,237
-------- --------- --------- ---------
141,875 136,215 181,514 163,975
-------- --------- --------- ---------
Net Income (loss) $ 26,320 $ 7,857 $ 10,089 $ 28,109
======== ========== ========= =========
See notes to financial statements.
<PAGE>
ARMORED STORAGE INCOME INVESTORS 2,
a California Limited Partnership
STATEMENTS OF CASH FLOW
(unaudited)
For the Nine Months Ended
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September 30, 1996 September 30, 1995
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Cash Flows From Operating Activities
Cash received from customers $ 167,069 $ 143,306
Cash paid to suppliers (121,064) (97,415)
Interest received 1,126 $ 766
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Net cash provided by operating activities $ 47,131 $ 46,657
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Cash Flows From Investing Activities
Property additions $ (8,175) $ (8,500)
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Net cash used in investing activities $ (8,175) $ (8,500)
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Cash Flows From Financing Activities
Distributions to partners $ (42,908) $ (37,887)
Payment on general partner receivable 3,788 -0-
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Net cash used in financing activities $ (39,120) $ (37,887)
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Increase (decrease) in cash $ (164) $ 270
Cash and cash equivalents:
Beginning 55,798 48,839
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Ending $ 55,634 $ 49,109
========= =========
Reconciliation Of Net Income (Loss) To Net Cash
Provided By Operating Activities:
Net income (loss) $ 26,320 $ 7,857
Adjustments to reconcile net income (loss)
to net cash provided by
operating activities:
Depreciation and amortization 27,357 26,094
Change in assets and liabilities:
Increase (decrease) in accounts payable (6,546) (12,706)
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Net cash provided by operating activities $ 47,131 $ 46,657
========= =========
See Notes to Financial Statements.
<PAGE>
ARMORED STORAGE INCOME INVESTORS 2,
a California Limited Partnership
NOTES OF FINANCIAL STATEMENTS
September 30, 1996
NOTE 1: Partnership Organization
Armored Storage Income Investors 2 ("the Partnership") was organized
under the laws of the State of California pursuant to an agreement of
limited partnership filed January 13, 1986, for the purpose of
acquiring, developing and operating self-service storage facilities.
The Partnership was authorized to issue a total of 20,000 units for a
total offering of $10,000,000. Sales of the Partnership units commenced
in April of 1986. The Partnership reached its minimum funding
requirement of 2,400 units of limited partnership interests on
September 22, 1986, and has sold 4,210 units in total. The
Partnership's offering period closed on April 3, 1987.
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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Building 30
Furniture and Fixtures 5
Interest, real estate taxes and other costs including
acquisition fees related directly to properties under
long-term development contracts were capitalized. Costs were
not capitalized beyond net realizable value. Costs related to
operating properties are expensed as incurred.
Rental income:
The Partnership receives rental income from its existing
self-storage facility. All rental agreements are for
month-to-month tenancy. Rental income is recognized on the
accrual basis in accordance with generally accepted accounting
principles.
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.
Syndication fees:
Syndication fees are those expenses incurred in the issuing
and marketing of partnership interests. These expenses include
broker and registration fees, legal fees, tax and accounting
fees, and printing costs. These fees are not amortizable and
are presented as a reduction in partners' capital in the
financial statements.
<PAGE>
ARMORED STORAGE INCOME INVESTORS 2,
a California Limited Partnership
NOTES OF FINANCIAL STATEMENTS
September 30, 1996
NOTE 2. Summary of Significant Accounting Policies, continued
Organization costs:
Organization costs which are included in other assets consist
of legal fees incident to the creation of the Partnership,
accounting fees for establishing an accounting system and
filing fees. These costs are being amortized using the
straight-line method over 60 months.
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 statements for the nine months ended September
30, 1996 are unaudited, however, in management's opinion they
include all adjustments necessary for a fair statement of the
results of operations for such interim periods. 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:
(a) The Partnership entered into an agreement with QuestCor, Inc.
on November 1, 1989, to manage the Partnership's self-storage
facility. The term of the agreement is for one year and shall
be renewed from year to year unless and until either party
terminates the agreement. The agreement provides that the
manager shall receive, as compensation for services, 6% of the
actual gross cash receipts.
(b) The Partnership also entered into an agreement with QuestCor,
Inc. 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 and until either
party terminates the agreement. The agreement provides for a
flat fee of $2,500 per month as compensation for
administrative services.
(c) 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.
<PAGE>
ARMORED STORAGE INCOME INVESTORS 2,
a California Limited Partnership
NOTES OF FINANCIAL STATEMENTS
September 30, 1996
NOTE 4: Due From Former General Partner
Due from former General Partner represents a receivable to the
Partnership for those amounts reimbursed to the former
Managing General Partner for syndication fees incurred in
excess of the percentage allowable by the Partnership's
prospectus with respect to the total amount of limited
partners capital raised. On April 3, 1987 the offering was
terminated. Based on actual units sold through the date of
termination, it was determined by the General Partner that too
much had been paid to the former Managing General Partner. The
excess, which amounted to $93,438, has been reclassified to
due from former General Partner. At September 30, 1996 the
balance due from former General Partner was $57,349.
<PAGE>
PART I. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
The Partnership has one operating facility located in Phoenix, Arizona.
The Partnership's facility generated an aggregate gross operating revenue of
$167,069 during the first nine months of 1996 compared to $143,306 during the
first nine months of 1995. The facility reached an occupancy level of 94% at the
end of September, 1996, down from 98% a year ago.
Operating expenses through September 30, 1996 were $72,660 compared to
$70,644 for 1995. Administrative expenses for 1996 were $41,858 opposed to
$39,477 in 1995.
Financial results reflect a pickup in Arizona economy. Occupancies have
ranged from 92% to 98% over the past year with summer typically showing higher
rental activity. The Partnership continues to upgrade the property and has
increased rental rates as a result. Both income and expenses are expected to
remain fairly stable throughout 1996 and overall results from operations are
projected to be significantly improved over 1995.
Liquidity and Capital Resources
As of September 30, 1996, the Partnership held cash and cash
equivalents totaling $55,634 as compared to $49,109 for the corresponding
quarter of 1995.
<PAGE>
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 2
(Registrant)
By: Armored Management L.L.C.
Its General Partner
By: /s/ Dale D. Ulrich
--------------------
Dale D. Ulrich, Member
Dated: 11/8/96
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 55,634
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0
0
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<TOTAL-LIABILITY-AND-EQUITY> 1,027,943
<SALES> 0
<TOTAL-REVENUES> 168,195
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<TOTAL-COSTS> 100,017
<OTHER-EXPENSES> 41,858
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<INCOME-PRETAX> 26,320
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<INCOME-CONTINUING> 26,320
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