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, 1998 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)
June 30, June 30,
1998 1997
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ASSETS
Property
Land $ 242,825 $ 242,825
Buildings 1,100,520 1,068,145
Furniture and fixtures 25,446 22,656
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1,368,791 1,333,626
Less accumulated depreciation 425,462 388,122
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943,329 945,504
Cash and cash equivalents 87,516 119,497
Other assets 2,700 1,600
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$ 1,033,545 $ 1,066,601
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LIABILITIES AND PARTNERS' CAPITAL
Accounts payable 21,485 20,573
Commitments (Note 3)
Partners' capital
General partner (3,477) (1,512)
Limited partners 1,067,583 1,104,889
Less amount due from
general partner (52,046) (57,349)
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$ 1,033,545 $ 1,066,601
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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 Six Months For the Year For the Year
Ended Ended Ended
------------------ ------------ ------------
June June December December
30, 1998 30, 1997 31, 1997 31, 1996
-------- -------- -------- --------
Income
Rental $108,474 $117,783 $231,117 $221,032
Interest 854 864 1,854 1,504
-------- -------- -------- --------
109,328 118,647 232,967 222,536
-------- -------- -------- --------
Expenses
Property Operations 48,326 50,315 107,676 95,154
Administration 37,700 37,002 52,718 49,875
Amortization &
Depreciation 18,000 16,270 35,610 35,492
-------- -------- -------- --------
104,026 103,587 196,004 180,521
-------- -------- -------- --------
Net Income $ 5,302 $ 15,060 $ 36,963 $ 42,015
======== ======== ======== ========
See notes to financial statements.
<PAGE>
ARMORED STORAGE INCOME INVESTORS 2,
a California Limited Partnership
STATEMENTS OF CASH FLOW
(unaudited)
For the Six Months Ended
-----------------------------
June 30, 1998 June 30, 1997
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Cash Flows From Operating Activities
Cash received from customers $ 108,474 $ 117,738
Cash paid to suppliers (86,150) (87,024)
Interest received 854 $ 864
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Net cash provided by operating activities $ 23,178 $ 31,623
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Cash Flows From Investing Activities
Capital Improvements $ (35,165) $ --
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Net cash used in investing activities $ (35,165) $ --
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Cash Flows From Financing Activities
Distributions to partners $ -- $ --
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Net cash used in financing activities $ -- $ --
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Increase (decrease) in cash $ (11,987) $ 31,623
Cash and cash equivalents:
Beginning 99,503 87,874
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Ending $ 87,516 $ 119,497
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Reconciliation Of Net Income (Loss) To Net Cash
Provided By Operating Activities:
Net income (loss) $ 5,302 $ 15,060
Adjustments to reconcile net income (loss)
to net cash provided by
operating activities:
Depreciation and amortization 18,000 16,270
Change in assets and liabilities:
Increase (decrease) in accounts payable (124) 293
--------- ---------
Net cash provided by operating activities $ 23,178 $ 31,623
========= =========
See Notes to Financial Statements.
<PAGE>
ARMORED STORAGE INCOME INVESTORS 2,
a California Limited Partnership
NOTES OF FINANCIAL STATEMENTS
June 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
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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
June 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 six months ended June 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.
<PAGE>
ARMORED STORAGE INCOME INVESTORS 2,
a California Limited Partnership
NOTES OF FINANCIAL STATEMENTS
June 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 June 30, 1998 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
$108,474 during the first six months of 1998 compared to $117,783 during the
first six months of 1997. The facility maintained an occupancy level of 81% at
the end of June, 1998, down from 91% the prior year.
Operating expenses through June 30, 1998 were $48,326 compared to
$50,315 for 1997. Administrative expenses for 1998 were $37,700 nearly identical
to $37,002 in 1997.
Financial results reflect a continud decrease in revenues. An increase
in self storage supply is partially responsible for the decreasing occupancy
percentage. We invested over $35,000 in the first half of 1998 in an effort to
upgrade our facility to make it more competitive. We expect occupancy levels to
gradually increase to the long-term norm of 90%. Expenses are expected to remain
stable for the balance of the year.
Liquidity and Capital Resources
As of June 30, 1998, the Partnership held cash and cash equivalents
totaling $87,516 as compared to $119,497 for the corresponding quarter of 1997.
<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: 7/30/98
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 87,516
<SECURITIES> 0
<RECEIVABLES> 5,400
<ALLOWANCES> 2,700
<INVENTORY> 0
<CURRENT-ASSETS> 90,216
<PP&E> 1,368,791
<DEPRECIATION> 425,462
<TOTAL-ASSETS> 1,033,545
<CURRENT-LIABILITIES> 21,485
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,012,060
<TOTAL-LIABILITY-AND-EQUITY> 1,033,545
<SALES> 0
<TOTAL-REVENUES> 108,474
<CGS> 0
<TOTAL-COSTS> 66,326
<OTHER-EXPENSES> 37,700
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 5,302
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,302
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,302
<EPS-PRIMARY> 1.20
<EPS-DILUTED> 1.20
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