FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
QUARTERLY OR TRANSITIONAL REPORT
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from.........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)
(864) 239-1000
(Issuer's telephone number)
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)
June 30, 1997
Assets
Cash and cash equivalents:
Unrestricted $ 928
Restricted-tenant security deposits 5
Accounts receivable, net of $10 allowance 12
Escrow for taxes 23
Other assets 38
Investment properties:
Land $ 1,026
Buildings and related personal property 6,117
7,143
Less accumulated depreciation (1,022) 6,121
$7,127
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 8
Tenant security deposits 11
Accrued taxes 36
Other liabilities 21
Minority interest 577
Partners' Capital (Deficit)
General partner's $ (4)
Limited partners' (32,601 units
issued and outstanding) 6,478 6,474
$7,127
See Accompanying Notes to Consolidated Financial Statements
b) UNITED INVESTORS INCOME PROPERTIES II
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
Revenues:
Rental income $ 269 $ 283 $ 539 $ 554
Other income 15 18 31 37
Total revenues 284 301 570 591
Expenses:
Operating 43 50 93 101
General and administrative 18 15 34 33
Maintenance 17 16 28 29
Depreciation 47 46 95 93
Property taxes 18 16 36 32
Total expenses 143 143 286 288
Minority interest in net
income of joint ventures (27) (32) (55) (64)
Net income $ 114 $ 126 $ 229 $ 239
Net income allocated to
general partner (1%) $ 1 $ 1 $ 2 $ 2
Net income allocated to
limited partners (99%) 113 125 227 237
$ 114 $ 126 $ 229 $ 239
Net income per limited
partnership unit $ 3.47 $3.83 $ 6.96 $7.27
See Accompanying Notes to Consolidated Financial Statements
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' (deficit) capital at
December 31, 1996 32,601 $ (3) $ 6,535 $ 6,532
Partners' distributions -- (3) (284) (287)
Net income for the six months
ended June 30, 1997 -- 2 227 229
Partners' (deficit) capital
at June 30, 1997 32,601 $ (4) $ 6,478 $ 6,474
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
d) UNITED INVESTORS INCOME PROPERTIES II
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net income $ 229 $ 239
Adjustments to reconcile net income to
net cash provided by operating activities:
Minority interest in net income of
joint ventures 55 64
Depreciation 95 93
Amortization of lease commissions 2 2
Change in accounts:
Accounts receivable 13 (6)
Escrow for taxes (1) (18)
Other assets 6 2
Accounts payable (6) 3
Accrued taxes 14 14
Other liabilities 6 25
Net cash provided by operating activities 413 418
Cash flows from investing activities:
Property improvements and replacements (3) --
Net cash used in investing activities (3) --
Cash flows from financing activities:
Distributions to minority interests (109) (52)
Partners' distributions (287) (285)
Net cash used in financing activities (396) (337)
Net increase in unrestricted cash and cash equivalents 14 81
Unrestricted cash and cash equivalents at beginning
of period 914 889
Unrestricted cash and cash equivalents at end of period $ 928 $ 970
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE>
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 United Investors Real Estate, Inc. (the "General Partner"), a
Delaware corporation, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three and six month periods ended June 30, 1997, are not
necessarily indicative of the results that may be expected for the fiscal year
ending December 31, 1997. 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, 1996.
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.
The General Partner's ability to honor its purchase obligation will depend upon
its ability to raise sufficient funds. As of the date of this Report, the
General Partner does not have sufficient funds to honor its purchase obligation
and it has not received any commitment or other indication that it will obtain
sufficient funds to honor this obligation. Accordingly there can be no
assurance that sufficient funds will be available to enable the General Partner
to honor its purchase obligation.
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 services based
on a percentage of revenue and for reimbursement of certain expenses incurred by
affiliates on behalf of the Partnership. The following payments were made to
affiliates of the General Partner for each of the six month periods ended June
30, 1997 and 1996 (in thousands):
1997 1996
Property management fees (included in operating
expenses) $ 15 $ 15
Reimbursement for services of affiliates
(included in general and administrative expenses) 16 16
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 six months ended June
30, 1997 and 1996:
Average Occupancy
Property 1997 1996
Keebler Distribution Center
Chesapeake, Virginia 0% 100%
Keebler Distribution Center
Columbia, South Carolina 100% 17%
Corinth Square Professional Building
Prairie Village, Kansas 80% 80%
U-Stor Covington Pike Mini-warehouse
Memphis Tennessee 99% 99%
The Keebler Company vacated the Columbia, South Carolina facility in January of
1996 and Keebler also vacated 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 Partnership realized net income of approximately $229,000 for the six months
ended June 30, 1997, compared to approximately $239,000 for the six months ended
June 30, 1996. The Partnership realized net income of approximately $114,000
for the three months ended June 30, 1997, compared to approximately $126,000 for
the three months ended June 30, 1996. The decrease in net income is primarily
related to the decrease in rental revenues at Corinth Square. The decrease in
rental revenue resulted from a reduction in tenant reimbursements. The decrease
in tenant reimbursements is attributable to fewer operating expenses at Corinth
Square due to a decrease in salary expenses at the property. Also contributing
to the decrease in net income is a decrease in other income, specifically
associated with fewer late charges at Corinth Square in 1997. The minority
interest in net income of the joint ventures decreased in the first six months
of 1997 due to a decrease in income at Corinth Square as discussed above.
During the six month periods ended June 30, 1997 and 1996, the Partnership did
not have any expenditures for major repairs and maintenance.
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. As discussed above, occupancy at the Keebler
distribution centers have fluctuated in 1997. However, Keebler is continuing to
pay rent on these vacated spaces and is obligated to continue paying rent
through the years 2001 (Columbia, South Carolina) and 2002 (Chesapeake,
Virginia).
At June 30, 1997, the Partnership held unrestricted cash and cash equivalents of
$928,000 compared to $970,000 at June 30, 1996. Net cash provided by operating
activities and net cash used in investing activities for the six months ended
June 30, 1997 were comparable with the corresponding period in 1996. Net cash
used in financing activities decreased due to greater distributions to minority
interest joint venturers in 1997.
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 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 $287,000 and $285,000 were made during the first six months of
1997 and 1996, respectively. Future cash distributions will depend on the
levels of cash generated from operations, property sales, and the availability
of reserves.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit 27 - Financial Data Schedule, is filed as an exhibit to this
report.
b) Reports on Form 8-K:
None filed during the quarter ended June 30, 1997.
SIGNATURES
In accordance with 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.
UNITED INVESTORS INCOME PROPERTIES II
By: United Investors Real Estate, Inc.,
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: August 12, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from United
Investors Income Properties II 1997 Second 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 928
<SECURITIES> 0
<RECEIVABLES> 22
<ALLOWANCES> 10
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 7,143
<DEPRECIATION> 1,022
<TOTAL-ASSETS> 7,127
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 6,474
<TOTAL-LIABILITY-AND-EQUITY> 7,127
<SALES> 0
<TOTAL-REVENUES> 570
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 286
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 229
<EPS-PRIMARY> 6.96<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
