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, 1997 33-2732
- ------------------ -----------------------
ARMORED STORAGE INCOME INVESTORS 2
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
California 93-0930503
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3839 N. 3rd Street, Suite 108
Phoenix, Arizona 85012
--------------------------------------------------------
(Address of and zip code of principal executive offices)
(602) 230-1655
----------------------------------------------------
(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 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,
1997 1996
------------- -------------
ASSETS
Property
Land $ 242,825 $ 242,825
Buildings 1,068,145 1,068,145
Furniture and fixtures 22,655 22,656
----------- -----------
1,333,626 1,333,626
Less accumulated depreciation 396,258 363,717
----------- -----------
937,368 969,909
Cash and cash equivalents 88,303 55,634
Other assets 1,600 2,400
----------- -----------
$ 1,027,271 $ 1,027,943
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable 27,671 12,671
Commitments (Note 3)
Partners' capital
General partner (4,100) (3,050)
Limited partners 1,083,417 1,075,671
Less amount due from
general partner (52,046) (57,349)
----------- -----------
$ 1,027,271 $ 1,027,943
=========== ===========
See notes to financial statements.
<PAGE>
ARMORED STORAGE INCOME INVESTORS 2,
a California Limited Partnership
STATEMENT OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
For the Nine Months For the Year For the Year
Ended Ended Ended
----------------------- ------------ ------------
September September December December
30, 1997 30, 1996 31, 1996 31, 1995
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Income
Rental $175,666 $167,069 $221,032 $190,029
Interest 1,456 1,126 1,504 974
-------- -------- -------- --------
177,122 168,195 222,536 191,603
-------- -------- -------- --------
Expenses
Property Operations 78,078 72,660 95,151 96,143
Administration 44,834 41,858 49,857 50,148
Amortization &
Depreciation 24,405 27,357 35,492 35,213
-------- -------- -------- --------
147,317 141,875 180,521 181,514
-------- -------- -------- --------
Net Income (loss) $ 29,805 $ 26,320 $ 42,015 $ 10,089
======== ======== ======== ========
</TABLE>
See notes to financial statements.
<PAGE>
ARMORED STORAGE INCOME INVESTORS 2,
a California Limited Partnership
STATEMENTS OF CASH FLOW
(unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended
-------------------------------------------
September 30, 1997 September 30, 1996
------------------ ------------------
<S> <C> <C>
Cash Flows From Operating Activities
Cash received from customers $ 175,666 $ 167,069
Cash paid to suppliers (115,522) (121,064)
Interest received 1,456 $ 1,126
--------- ---------
Net cash provided by operating activities $ 61,600 $ 47,131
--------- ---------
Cash Flows From Investing Activities
Property additions $ -- $ (8,175)
--------- ---------
Net cash used in investing activities $ -- $ (8,175)
--------- ---------
Cash Flows From Financing Activities
Distributions to partners $ (66,474) $ (42,908)
Payment on general partner receivable 5,303 3,788
--------- ---------
Net cash used in financing activities $ (61,171) $ (39,120)
--------- ---------
Increase (decrease) in cash $ 429 $ (164)
Cash and cash equivalents:
Beginning 87,874 55,798
--------- ---------
Ending $ 88,303 $ 55,634
========= =========
Reconciliation Of Net Income (Loss) To Net Cash
Provided By Operating Activities:
Net income (loss) $ 29,805 $ 26,320
Adjustments to reconcile net income (loss)
to net cash provided by
operating activities:
Depreciation and amortization 24,405 27,357
Change in assets and liabilities:
Increase (decrease) in accounts payable 7,390 (6,546)
--------- ---------
Net cash provided by operating activities $ 61,600 $ 47,131
========= =========
</TABLE>
See Notes to Financial Statements.
<PAGE>
ARMORED STORAGE INCOME INVESTORS 2,
a California Limited Partnership
NOTES OF FINANCIAL STATEMENTS
September 30, 1997
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
-----
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, 1997
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, 1997
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, 1997
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, 1997 the balance due from former
General Partner was $52,046.
<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
$175,666 during the first nine months of 1997 compared to $167,069 during the
first nine months of 1996. The facility reached an occupancy level of 87% at the
end of September, 1997, down from 94% a year ago.
Operating expenses through September 30, 1997 were $78,078 compared to
$72,660 for 1996. Administrative expenses for 1997 were $44,834 opposed to
$41,858 in 1996.
Financial results reflect a continued vibrant Arizona economy. Occupancies
have ranged from 86% to 95% over the past year with summer typically showing
higher rental activity. Both income and expenses are expected to remain fairly
stable throughout 1997 and overall results from operations are projected to be
similar to 1996.
Liquidity and Capital Resources
As of September 30, 1997, the Partnership held cash and cash equivalents
totaling $88,303 as compared to $55,634 for the corresponding quarter of 1996.
<PAGE>
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.
<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: 11/10/97
-------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 88,303
<SECURITIES> 0
<RECEIVABLES> 3,200
<ALLOWANCES> 1,600
<INVENTORY> 0
<CURRENT-ASSETS> 89,903
<PP&E> 1,333,626
<DEPRECIATION> 396,258
<TOTAL-ASSETS> 1,027,271
<CURRENT-LIABILITIES> 27,671
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 999,600
<TOTAL-LIABILITY-AND-EQUITY> 1,027,671
<SALES> 0
<TOTAL-REVENUES> 177,122
<CGS> 0
<TOTAL-COSTS> 102,483
<OTHER-EXPENSES> 44,834
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 29,805
<INCOME-TAX> 0
<INCOME-CONTINUING> 29,805
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 29,805
<EPS-PRIMARY> 6.73
<EPS-DILUTED> 6.73
</TABLE>
