FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
(As last amended by 34-32231, eff. 6/3/93.)
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT
For the transition period.........to.........
Commission file number 0-19243
UNITED INVESTORS INCOME PROPERTIES II
(Exact name of small business issuer as specified in its charter)
Missouri 43-1542903
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (864) 239-1000
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) UNITED INVESTORS INCOME PROPERTIES II
CONSOLIDATED BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
September 30, 1996
Assets
Cash and cash equivalents:
Unrestricted $ 971
Restricted-tenant security deposits 5
Accounts receivable (net of allowance of
$10) 19
Escrow for taxes 27
Other assets 51
Investment properties:
Land $ 1,026
Buildings and related personal property 6,099
7,125
Less accumulated depreciation (890) 6,235
$7,308
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 7
Tenant security deposits 11
Accrued taxes 28
Other liabilities 26
Minority interest 645
Partners' Capital (Deficit)
General partner $ (1)
Limited partners (32,601 units
issued and outstanding) 6,592 6,591
$7,308
See Accompanying Notes to Consolidated Financial Statements
b) UNITED INVESTORS INCOME PROPERTIES II
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 273 $ 256 $ 827 $ 798
Other income 14 17 51 51
Total revenues 287 273 878 849
Expenses:
Operating 54 46 155 145
General and administrative 15 17 48 47
Maintenance 12 19 41 53
Depreciation 47 47 140 139
Property taxes 15 16 47 49
Total expenses 143 145 431 433
Minority interest in net
income of joint ventures (29) (26) (93) (82)
Net income $ 115 $ 102 $ 354 $ 334
Net income allocated to
general partner (1%) $ 1 $ 1 $ 4 $ 3
Net income allocated to
limited partners (99%) 114 101 350 331
$ 115 $ 102 $ 354 $ 334
Net income per limited
partnership unit $3.50 $3.10 $10.74 $10.14
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
c) UNITED INVESTORS INCOME PROPERTIES II
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partner Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 32,601 $ -- $ 8,150 $ 8,150
Partners' capital (deficit) at
December 31, 1995 32,601 $ (1) $ 6,664 $ 6,663
Partners' distributions (4) (422) (426)
Net income for the nine months
ended September 30, 1996 4 350 354
Partners' capital (deficit)
at September 30, 1996 32,601 $ (1) $ 6,592 $ 6,591
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
d) UNITED INVESTORS INCOME PROPERTIES II
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
1996 1995
Cash flows from operating activities:
Net income $ 354 $ 334
Adjustments to reconcile net income to
net cash provided by operating activities:
Minority interest in net income of
joint ventures 93 82
Depreciation 140 139
Amortization of lease commissions 2 2
Change in accounts:
Accounts receivable (2) 20
Escrow for taxes (21) (9)
Other assets (2) (6)
Accounts payable 1 7
Accrued taxes 10 11
Other liabilities 12 11
Net cash provided by operating activities 587 591
Cash flows from investing activities:
Property improvements and replacements -- (34)
Net cash used in investing activities -- (34)
Cash flows from financing activities:
Distributions to minority interests (79) (78)
Partners' distributions (426) (410)
Net cash used in financing activities (505) (488)
Net increase in cash and cash equivalents 82 69
Cash and cash equivalents at beginning of period 889 831
Cash and cash equivalents at end of period $ 971 $ 900
See Accompanying Notes to Consolidated Financial Statements
e) UNITED INVESTORS INCOME PROPERTIES II
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of United Investors
Income Properties II (the Partnership), have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of the General Partner (United Investors Real Estate, Inc.), all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three and nine
month periods ended September 30, 1996, are not necessarily indicative of the
results that may be expected for the fiscal year ending December 31, 1996. For
further information, refer to the financial statements and footnotes thereto
included in the Partnership's annual report on Form 10-KSB for the fiscal year
ended December 31, 1995.
Certain reclassifications have been made to the 1995 information to conform to
the 1996 presentation.
NOTE B - BASIS OF ACCOUNTING
The financial statements include the Partnership's operating divisions, Keebler
Distribution Center, Chesapeake, Virginia, and Keebler Distribution Center,
Columbia, South Carolina. In addition, the Partnership owns a 65% interest in
Corinth Square Associates ("Corinth") and a 55% interest in Covington Pike
Associates ("Covington"). The Partnership consolidates its interest in the
joint ventures (whereby all accounts of the joint ventures are included in the
Partnership's financial statements with intercompany accounts being eliminated).
The minority partners' share of the joint ventures' net assets are reflected as
minority interest in the balance sheet of the Partnership. Earnings and losses
attributable to the minority partners' ownership of the joint ventures are
reflected as a reduction or addition to income in the statement of operations.
NOTE C - REPURCHASE OF UNITS
The Partnership's partnership agreement contains a provision which states that
the General Partner shall purchase up to 10% of the limited partnership Units
outstanding at the fifth anniversary date of the last Additional Closing Date
and become a limited partner with respect to such units. Any Limited Partner
desiring to sell all or any of his Units to the General Partner must submit a
written request to the General Partner beginning 30 days prior to the fifth
anniversary date.
NOTE D - TRANSACTIONS WITH AFFILIATED PARTNERS
The Partnership has no employees and is dependent on the General Partner and its
affiliates for the management and administration of all partnership activities.
The partnership agreement provides for payments to affiliates for property
management services based on a percentage of revenue and for reimbursement of
certain expenses incurred by affiliates on behalf of the Partnership. Property
management fees are included in operating expenses. The following payments were
made to affiliates of the General Partner for each of the nine months ended
September 30, 1996 and 1995:
1996 1995
Property management fees $ 23 $ 23
Reimbursement for services of affiliates 24 23
The Partnership insures Corinth Square under a master policy through an agency
and insurer unaffiliated with the General Partner. An affiliate of the General
Partner acquired, in the acquisition of a business, certain financial
obligations from an insurance agency which was later acquired by the agent who
placed the current year's master policy. The current agent assumed the
financial obligations to the affiliate of the General Partner who receives
payments on these obligations from the agent. The amount of the Partnership's
insurance premiums accruing to the benefit of the affiliate of the General
Partner by virtue of the agent's obligations is not significant.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The Partnership's investment properties consist of two distribution centers, an
office building, and a mini-storage facility. The following table sets forth
the average occupancy of the properties for each of the nine months ended
September 30, 1996 and 1995:
Average Occupancy
Property
Property 1996 1995
Keebler Distribution Center
Chesapeake, Virginia -- 100%
Keebler Distribution Center
Columbia, South Carolina 100% 100%
Corinth Square Professional Building
Prairie Village, Kansas 80% 83%
U-Stor Covington Pike Mini-warehouse
Memphis, Tennessee 99% 99%
The Keebler Company vacated the Columbia, South Carolina facility in January of
1996 and the Chesapeake, Virginia facility in August, 1996. The Keebler Company
has indicated its intentions to honor its financial obligations. Keebler is
obligated to continue paying rent on the vacated spaces through the years 2001
(Columbia, South Carolina) and 2002 (Chesapeake, Virginia). Should the tenant
fail to honor its lease obligations, operating results would be adversely
affected. The tenant has thus far paid the scheduled rental payments on the
vacated facilities. In addition, Keebler, with approval from the Partnership,
entered into a sub-lease agreement for the Columbia, South Carolina facility.
The tenant is obligated to pay rent to Keebler through December 31, 2000. The
decrease in occupancy at Corinth Square was due to a tenant occupying 1,240
square feet vacating the property in September of 1995.
The Partnership realized net income of $354,000 for the nine months ended
September 30, 1996, compared to $334,000 for the nine months ended September 30,
1995. The Partnership realized net income of $115,000 for the three months
ended September 30, 1996, compared to $102,000 for the three months ended
September 30, 1995. The increased net income is due to increased rental
revenues. Increases in rental revenues resulted from scheduled increases in
rental rates in the Keebler, SC lease and rate increases at Covington Pike. A
decrease in rental revenue at Corinth Square resulting from the decrease in
occupancy noted above was offset by an increase in tenant common area expense
reimbursements. The minority interest in net income of the joint ventures
increased during the first nine months of 1996 due to an increase in the income
at Covington Pike.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of its investment properties to assess
the feasibility of increasing rents, maintaining or increasing occupancy levels
and protecting the Partnership from increases in expenses. As part of this
plan, the General Partner attempts to protect the Partnership from the burden of
inflation-related increases in expenses by increasing rents and maintaining a
high overall occupancy level. However, due to changing market conditions, which
can result in the use of rental concessions and rental reductions to offset
softening market conditions, there is no guarantee that the General Partner will
be able to sustain such a plan.
At September 30, 1996, the Partnership held unrestricted cash of $971,000
compared to $900,000 at September 30, 1995. Net cash provided by operating
activities decreased primarily due to increased escrow funding for 1996 taxes.
Net cash used in investing activities decreased due to no property improvements
being made in 1996. Net cash used in financing activities increased as a result
of greater distributions to the partners for the nine months ended September 30,
1996, compared to the corresponding period of 1995.
The sufficiency of existing liquid assets to meet future liquidity and capital
expenditure requirements is directly related to the level of capital
expenditures required at the investment properties to adequately maintain the
physical assets and other operating needs of the Partnership. Such assets are
currently thought to be sufficient for any near-term needs of the Partnership.
Cash distributions of $551,000 were made during the year ending December 31,
1995. Cash distributions of $426,000 were made during the nine months ended
September 30, 1996.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit 27 - Financial Data Schedule
b) Reports on Form 8-K:
None filed during the quarter ended September 30, 1996.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
UNITED INVESTORS INCOME PROPERTIES II
(A Missouri Limited Partnership)
By: United Investors Real Estate, Inc., a
Delaware corporation, its General Partner
By: /s/Carroll D. Vinson
Carroll D. Vinson
President
By: /s/Robert D. Long, Jr.
Robert D. Long, Jr.
Vice President/CAO
Date: November 12, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from United
Investors Income Properties II 1996 Third Quarter 10-QSB and is qualified in its
entirety by reference to such 10-QSB filing.
</LEGEND>
<CIK> 0000862028
<NAME> UNITED INVESTORS INCOME PROPERTIES II
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 971
<SECURITIES> 0
<RECEIVABLES> 29
<ALLOWANCES> 10
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 7,125
<DEPRECIATION> 890
<TOTAL-ASSETS> 7,308
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 6,591
<TOTAL-LIABILITY-AND-EQUITY> 7,308
<SALES> 0
<TOTAL-REVENUES> 878
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 431
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 354
<EPS-PRIMARY> 10.74<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
