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, 1999 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)
4425 N. 24th Street, Suite 225
Phoenix, Arizona 85016
--------------------------------------------------------
(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
2
<PAGE>
ARMORED STORAGE INCOME INVESTORS 2
a California Limited Partnership
BALANCE SHEETS
(Unaudited)
June 30, June 30,
1999 1998
----------- -----------
ASSETS
Property
Land $ 242,825 $ 242,825
Buildings 1,100,520 1,100,520
Furniture and fixtures 25,446 25,446
----------- -----------
1,368,791 1,368,791
Less accumulated depreciation 462,741 425,462
----------- -----------
906,050 943,329
Cash and cash equivalents 71,755 87,516
Other assets 3,200 2,700
----------- -----------
$ 981,005 $ 1,033,545
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable 23,203 21,485
Commitments (Note 3)
Partners' capital
General partner (6,493) (3,477)
Limited partners 1,010,281 1,067,583
Less amount due from general partner (45,986) (52,046)
----------- -----------
$ 981,005 $ 1,033,545
=========== ===========
See Notes to financial statements.
3
<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, 1999 30, 1998 31, 1998 31, 1997
--------- -------- -------- --------
Income
Rental $ 109,822 $108,474 $216,513 $231,117
Interest 345 854 1,420 1,854
--------- -------- -------- --------
110,167 109,328 217,933 232,967
--------- -------- -------- --------
Expenses
Property Operations 61,865 48,326 103,495 107,676
Administration 39,466 37,700 56,537 52,718
Amortization &
Depreciation 18,400 18,000 36,879 36,610
--------- -------- -------- --------
119,731 104,026 196,911 196,004
--------- -------- -------- --------
Net Income(Loss) $ (9,564) $ 5,302 $ 21,022 $ 36,963
========= ======== ======== ========
See notes to financial statements.
4
<PAGE>
ARMORED STORAGE INCOME INVESTORS 2,
a California Limited Partnership
STATEMENTS OF CASH FLOW
(unaudited)
For the Six Months Ended
-----------------------------
June 30, 1999 June 30, 1998
------------- -------------
Cash Flows From Operating Activities
Cash received from customers $ 109,822 $ 108,474
Cash paid to suppliers (101,525) (86,150)
Interest received $ 345 $ 854
--------- ---------
Net cash provided by operating activities $ 8,642 $ 23,178
--------- ---------
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 $ -- $ --
--------- ---------
Net cash used in financing activities $ -- $ --
--------- ---------
Increase (decrease) in cash $ 8,642 $ (11,987)
Cash and cash equivalents:
Beginning 63,113 99,503
--------- ---------
Ending $ 71,755 $ 87,516
========= =========
Reconciliation Of Net Income (Loss) To Net Cash
Provided By Operating Activities:
Net income (loss) $ (9,564) $ 5,302
Adjustments to reconcile net income (loss)
to net cash provided by
operating activities:
Depreciation and amortization 18,400 18,000
Change in assets and liabilities:
Increase (decrease) in accounts payable (194) (124)
--------- ---------
Net cash provided by operating activities $ 8,642 $ 23,178
========= =========
See Notes to Financial Statements.
5
<PAGE>
ARMORED STORAGE INCOME INVESTORS 2,
a California Limited Partnership
NOTES OF FINANCIAL STATEMENTS
June 30, 1999
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
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.
6
<PAGE>
ARMORED STORAGE INCOME INVESTORS 2,
a California Limited Partnership
NOTES OF FINANCIAL STATEMENTS
June 30, 1999
NOTE 2. Summary of Significant Accounting Policies, continued
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, 1999, 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
June 30, 1999
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, 1999 the balance due from former General
Partner was $45,986.
NOTE 5: 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.
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
$109,822 during the first six months of 1999 compared to $108,474 during the
first six months of 1998. The facility maintained an occupancy level of 81% at
the end of June, 1999, the same as in the prior year.
Operating expenses through June 30, 1999 were $61,865 compared to $48,326
for 1998. Salaries, property taxes, maintenance and advertising all contributed
to the increase in expenses. Administrative expenses for 1999 were $39,466
nearly identical to $37,700 in 1998.
The facility's vacancy rate remains higher than normal. Revenue is expected
to increase slightly in the second half of 1999 due to the rent increase
recently implemented. All costs will be reviewed in detail to combat the
increase in expenses.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1999, the Partnership held cash and cash equivalents
totaling $71,755 as compared to $87,516 for the corresponding quarter of 1998.
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, Member
Dated: 8/9/99
---------------------------
11
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 71,755
<SECURITIES> 0
<RECEIVABLES> 6,400
<ALLOWANCES> 3,200
<INVENTORY> 0
<CURRENT-ASSETS> 74,955
<PP&E> 1,368,791
<DEPRECIATION> 462,741
<TOTAL-ASSETS> 981,005
<CURRENT-LIABILITIES> 23,203
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 957,802
<TOTAL-LIABILITY-AND-EQUITY> 981,005
<SALES> 0
<TOTAL-REVENUES> 110,167
<CGS> 0
<TOTAL-COSTS> 80,265
<OTHER-EXPENSES> 39,466
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (9,564)
<INCOME-TAX> 0
<INCOME-CONTINUING> (9,564)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,564)
<EPS-BASIC> (2.16)
<EPS-DILUTED> (2.16)
</TABLE>
