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, 1998 33-2732
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ARMORED STORAGE INCOME INVESTORS LIMITED PARTNERSHIP 2
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(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 North 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 [ ]
<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 2
a California Limited Partnership
BALANCE SHEETS
(Unaudited)
September 30, September 30,
1998 1997
------------- -------------
ASSETS
Property
Land $ 242,825 $ 242,825
Buildings 1,100,520 1,068,145
Furniture and fixtures 25,446 22,655
----------- -----------
1,368,791 1,333,626
Less accumulated depreciation 434,462 396,258
----------- -----------
934,329 937,368
Cash and cash equivalents 54,196 88,303
Other assets 2,700 1,600
----------- -----------
$ 991,225 $ 1,027,271
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable 33,479 27,671
Commitments (Note 3)
Partners' capital
General partner (3,035) (4,100)
Limited partners 1,012,827 1,083,417
Less amount due from
general partner (52,046) (52,046)
----------- -----------
$ 991,225 $ 1,027,271
=========== ===========
See notes to financial statements.
3
<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, 1998 30, 1997 31, 1997 31, 1996
-------- -------- -------- --------
Income
Rental $161,817 $175,666 $231,117 $221,032
Interest 1,220 1,456 1,854 1,504
-------- -------- -------- --------
163,037 177,122 232,967 222,536
-------- -------- -------- --------
Expenses
Property Operations 74,745 78,078 107,676 95,151
Administration 47,154 44,834 52,718 49,857
Amortization &
Depreciation 27,000 24,405 35,610 35,492
-------- -------- -------- --------
148,899 147,317 196,004 180,521
-------- -------- -------- --------
Net Income (loss) $ 14,138 $ 29,805 $ 36,963 $ 42,015
======== ======== ======== ========
See notes to financial statements.
4
<PAGE>
ARMORED STORAGE INCOME INVESTORS 2,
a California Limited Partnership
STATEMENTS OF CASH FLOW
(unaudited)
For the Nine Months Ended
--------------------------------
September 30, September 30,
1998 1997
------------- -------------
Cash Flows From Operating Activities
Cash received from customers $ 161,817 $ 175,666
Cash paid to suppliers (110,029) (115,522)
Interest received 1,220 1,456
--------- ---------
Net cash provided by operating activities $ 53,008 $ 61,600
--------- ---------
Cash Flows From Investing Activities
Capital improvements $ (35,165) $ --
--------- ---------
Net cash used in investing activities $ (35,165) $ --
--------- ---------
Cash Flows From Financing Activities
Distributions to partners $ (63,150) $ (66,474)
Payment on general partner receivable -- 5,303
--------- ---------
Net cash used in financing activities $ (63,150) $ (61,171)
--------- ---------
Increase (decrease) in cash $ (45,307) $ 429
Cash and cash equivalents:
Beginning 99,503 87,874
--------- ---------
Ending $ 54,196 $ 88,303
========= =========
Reconciliation Of Net Income (Loss) To Net Cash
Provided By Operating Activities:
Net income (loss) $ 14,138 $ 29,805
Adjustments to reconcile net income (loss)
to net cash provided by
operating activities:
Depreciation and amortization 27,000 24,405
Change in assets and liabilities:
Increase (decrease) in accounts payable 11,870 7,390
--------- ---------
Net cash provided by operating activities $ 53,008 $ 61,600
========= =========
See Notes to Financial Statements.
5
<PAGE>
ARMORED STORAGE INCOME INVESTORS 2,
a California Limited Partnership
NOTES OF FINANCIAL STATEMENTS
September 30, 1998
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.
6
<PAGE>
ARMORED STORAGE INCOME INVESTORS 2,
a California Limited Partnership
NOTES OF FINANCIAL STATEMENTS
September 30, 1998
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,
1998 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 Armored
Management, LLC on January 1, 1998, 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 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 and until
either party terminates the agreement. The agreement provides
for a flat fee of $3,000 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.
7
<PAGE>
ARMORED STORAGE INCOME INVESTORS 2,
a California Limited Partnership
NOTES OF FINANCIAL STATEMENTS
September 30, 1998
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, 1998 the balance due
from former General Partner was $52,046.
8
<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
$161,817 during the first nine months of 1998 compared to $175,666 during the
first nine months of 1997. The facility reached an occupancy level of 83% at the
end of September, 1998, down from 87% a year ago.
Operating expenses through September 30, 1998 were $74,745 compared to
$78,078 for 1997. Administrative expenses for 1998 were $47,154 opposed to
$44,834 in 1997.
Liquidity and Capital Resources
As of September 30, 1998, the Partnership held cash and cash
equivalents totaling $54,196 as compared to $88,303 for the corresponding
quarter of 1997.
9
<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.
10
<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
Dated: 11/5/98
----------------------------
11
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 54,196
<SECURITIES> 0
<RECEIVABLES> 5,400
<ALLOWANCES> 2,700
<INVENTORY> 0
<CURRENT-ASSETS> 56,896
<PP&E> 1,368,791
<DEPRECIATION> 434,462
<TOTAL-ASSETS> 991,225
<CURRENT-LIABILITIES> 33,469
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 957,746
<TOTAL-LIABILITY-AND-EQUITY> 991,225
<SALES> 0
<TOTAL-REVENUES> 163,037
<CGS> 0
<TOTAL-COSTS> 101,745
<OTHER-EXPENSES> 47,154
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 14,138
<INCOME-TAX> 0
<INCOME-CONTINUING> 14,138
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,138
<EPS-PRIMARY> 3.19
<EPS-DILUTED> 3.19
</TABLE>
