-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IXa4Btow3ebPKI7Q+FI77cMxGm2fRm725ltcz3p4A2stT6mKwXV0SNWnsonzSryg 3kB+rOW8nPKrxXocOTNjog== 0000950147-00-000472.txt : 20000411 0000950147-00-000472.hdr.sgml : 20000411 ACCESSION NUMBER: 0000950147-00-000472 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARMORED STORAGE INCOME INVESTORS 2 CENTRAL INDEX KEY: 0000788078 STANDARD INDUSTRIAL CLASSIFICATION: LESSORS OF REAL PROPERTY, NEC [6519] IRS NUMBER: 930930503 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 033-02732 FILM NUMBER: 582934 BUSINESS ADDRESS: STREET 1: 3839 N 3RD ST STREET 2: STE 108 CITY: PHOENIX STATE: AZ ZIP: 85012 BUSINESS PHONE: 6022301655 MAIL ADDRESS: STREET 1: 3839 N 3RD ST STREET 2: SUITE 108 CITY: PHOENIX STATE: AZ ZIP: 85012 10-K405 1 ANNUAL REPORT FOR YEAR ENDED 12/31/199 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended December 31, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from ______________ to ______________ Commission file number: 33-2732 ARMORED STORAGE INCOME INVESTORS 2 (a California Limited Partnership) --------------------------------------------------------------------- (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 St., Ste. 225, Phoenix, Arizona 85016 - -------------------------------------------- ---------- (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code: (602) 230-1655 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered ------------------- ----------------------------------------- None None Securities registered pursuant to Section 12(g) of the Act: Limited Partnership Units ------------------------- (Title of Class) Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Indicated 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 [X] As of March 1, 2000, 4210 Limited Partnership Units were outstanding. Such limited Partnership Units were sold at $500 per Unit. However, no market for the Limited Partnership Units of the Registrant exists and therefore the aggregate market value of the Units held by non-affiliates of the Registrant is not determinable. DOCUMENTS INCORPORATED BY REFERENCE The Registrant's Prospectus dated April 4, 1986 filed pursuant to Rule 424 (c) under the Securities Act of 1933 as amended is incorporated by reference into Parts I, II and III of this report pursuant to Rule 12b-23 under the Securities Exchange Act of 1934. PART I ITEM 1. BUSINESS (a) General Development of Business Armored Storage Income Investors 2 Limited Partnership (the "Registrant") is a limited partnership formed on January 13, 1986 under the laws of the State of California to acquire, develop, own and operate self-storage facilities using a minimum of mortgage indebtedness. The Registrant sold $2,105,000 in Limited Partnership Interests to the public pursuant to a Registration Statement on Form S-18 under the Securities Act of 1933 (Registration Statement No. 33-2732 as amended. The offering commenced on April 4, 1986 and terminated on April 3, 1987. (b) Financial Information About Industry Segments The Registrant operates in only one industry segment, the acquisition, development, operation and holding for investment of self-storage facilities. Information relating to the Registrant's revenues, operating profit (loss) and identifiable assets attributable thereto for the fiscal year ended December 31, 1999 is set forth under Item 8 below. (c) Narrative Description of Business The Self-Service Storage Association (SSSA) estimates that approximately one-half of the population relocates every three years. Urban areas are becoming more congested, houses are getting smaller and people are requiring outside storage space to meet their needs. Business owners, too, are feeling the crunch as the square foot cost of office space increases. They need an affordable alternative to using expensive office space for the storage of records and supplies. Self-storage is an innovation responding to the needs of the community. The facility owned and operated by the Registrant is designed to offer low cost, accessible and secure storage space for business and personal use. In addition to some indoor units, on-site, live-in managers provide an extra measure of security. The facility of the Registrant is designed for a comfortable architectural blend with the surrounding residential, commercial and retail areas. The Partnership's principal investment objectives are: (i) to provide distributions of Cash Flow from operations; (ii) realize capital appreciation of the Partnership's Property; and (iii) to preserve and protect the Limited Partners' capital. There can be no assurance that these objectives will be attained. 1 MARKETS AND COMPETITION. The metropolitan Phoenix market has one of the greatest saturations of storage facilities per capita in the country. This increased competition has required delaying anticipated rental increases which may reduce availability of cash distributions. To meet the competition, the Registrant is, and intends to continue, taking steps to maximize efficient operations and to differentiate its facilities from the competition. GENERAL RISKS OF REAL ESTATE OWNERSHIP. The Registrant's investments are subject to the risks generally incident to the ownership of real property. These risks include the uncertainty of cash flow to meet fixed obligations, adverse changes in national economic conditions, changes in the relative demand for space in the locale of the facility (and thus the relative price which can be charged), adverse local market conditions due to changes in general or local economic conditions or neighborhood values, changes in interest rates and in the availability, cost and terms of mortgage funds, the financial condition of tenants and sellers of properties, changes in real estate tax rates and other operating expenses, governmental rules and fiscal policies including possible proposals for rent controls, as well as acts of nature, uninsured losses and other factors. SEASONALITY. The business of the Registrant is not generally subject to seasonal variations. EMPLOYEES. The Registrant has no full-time employees. (d) Financial Information About Foreign and Domestic Operations and Export Sales The registrant does not derive any revenue from foreign operations or export sales. ITEM 2. DESCRIPTION OF PROPERTY The Partnership owns one self-storage facility located in Phoenix, Arizona. WASHINGTON STREET The Registrant's self-storage facility is located at 3036 E. Washington Street, Phoenix, Arizona, in the central part of the city, with close proximity to Sky Harbor International Airport and the downtown business center. The facility, which consists of both one and two level storage buildings, is approximately 44,000 gross square feet, built on approximately 1.82 acres of land. The property was acquired on December 23, 1986, for a total purchase price of $1,122,000. The facility was approximately 10 years old at the time of the Registrant's purchase. As of February 28, 2000 the facility was 73% occupied. 2 ITEM 3. LEGAL PROCEEDINGS. The registrant is not subject to any material pending legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SECURITY HOLDER MATTERS (a) MARKET INFORMATION. No market for Limited Partnership Units exists or is expected to develop. (b) HOLDERS. The approximate number of holders of the Registrant's Limited Partnership Units as of the close of business on December 31, 1999 was 337. (c) DIVIDENDS. During the years ended December 31, 1997 through 1999, the Partnership made distributions of cash to the limited partners. The source of these distributions were as follows: 1997 1998 1999 ------- ------- ------- From net income $35,115 $19,971 $ 0 From partners' capital 28,035 43,179 50,520 ------- ------- ------- $63,150 $63,150 $50,520 ======= ======= ======= The Registrant will make annual distributions, to the extent available, of Cash Available for Distribution. There is, however, no assurance as to when or whether such cash will be available for distribution. Cash Available for Distribution is generally the Partnership's Excess Reserves and Cash Flow after reduction for any additions to reserves, and after payment of all operating cash expenses. To the extent available, Cash Available for Distribution for any Partnership fiscal year will be distributed 95% to the Limited Partners and 5% to the General Partner. 3 If in any period the General Partner determines that Partnership working capital reserves are in excess of the amount deemed necessary for Partnership operations (such excess being called "Excess Reserves"), such Excess Reserves may be distributed as Cash Available for Distribution. Cash Available for Distribution will be distributed to the Limited Partners of record as of the end of the applicable period in the ratio which the Units owned by such Limited Partner bears to the total Units owned by all Limited Partners entitled to such distribution. ITEM 6. SELECTED FINANCIAL DATA The following selected financial data should be read in conjunction with the financial statements and notes thereto included under Item 8 of this report. This data is not covered by the opinion of independent certified public accountants.
For the Period ---------------------------------------------------------------------- Jan 1, 1992 Jan 1, 1993 Jan 1, 1994 Jan 1, 1995 Statement of Income Thru Thru Thru Thru Information: Dec 31, 1992 Dec 31, 1993 Dec 31, 1994 Dec 31, 1995 ------------ ------------ ------------ ------------ Total Revenues $ 178,981 $ 168,868 $ 192,084 $ 191,603 Net Income (Loss) $ 11,055 $ (13,369) $ 28,109) $ 10,089 Net Income (Loss) Per Limited Partnership Unit $ 2.49 $ (3.14) $ 6.34 $ 2.28 Jan 1, 1996 Jan 1, 1997 Jan 1, 1999 Jan 1, 1999 Thru Thru Thru Thru Dec 31, 1996 Dec 31, 1997 Dec 31, 1998 Dec 31, 1999 ------------ ------------ ------------ ------------ Total Revenues $ 222,536 $ 232,967 $ 217,933 $ 210,390 Net Income (Loss) $ 42,015 $ 36,963 $ 21,022 $ (6,318) Net Income (Loss) Per Limited Partnership Unit $ 9.48 $ 8.34 $ 4.74 $ (1.43) Balance Sheet As of As of As of As of Information: Dec 31, 1992 Dec 31, 1993 Dec 31, 1994 Dec 31, 1995 ------------ ------------ ------------ ------------ Total Assets $1,117,739 $ 1,076,397 $ 1,070,340 $ 1,047,288 Long-Term Debt $ 0 $ 0 $ 0 $ 0 Partners' Capital $1,103,365 $ 1,059,051 $ 1,055,872 $ 1,027,688 Distributions Per Unit $ 8.07 $ 8.07 $ 8.07 $ 9.00 As of As of As of As of Dec 31, 1996 Dec 31, 1997 Dec 31, 1998 Dec 31, 1999 ------------ ------------ ------------ ------------ Total Assets $1,051,247 $ 1,028,366 $ 990,763 $ 979,991 Long-Term Debt $ 0 $ 0 $ 0 $ 0 Partners' Capital $1,030,966 $ 1,006,757 $ 967,365 $ 953,854 Distributions Per Unit $ 10.00 $ 15.00 $ 15.00 $ 12.00
4 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (a)(1) and (a)(2) LIQUIDITY AND CAPITAL RESOURCES The Registrant was organized in January, 1986 and its offering of Limited Partnership Units was declared effective April 13, 1986. The Registrant raised $2,105,000 during the offering period. The cash balance at December 31, 1999 of $89,477 will be used primarily as working capital reserves and, when appropriate, for distributions to the Limited Partners. Capital resources will only increase during the coming year as a result of a corresponding increase rental activity. The registrant has acquired and developed all of its properties, therefore, no significant additional outlays of funds are expected beyond those items already budgeted. (a)(3) RESULTS OF OPERATIONS Rental income for 1999 was slightly lower than in 1998. An increase in vacancies was primarily responsible for the decrease. The Washington Street facility maintained an overall occupancy level of approximately 75%. During the year occupancy ranged from 72% to 79%. Occupancy at December 31, 1999 was 72%. After four years of relatively stable operating expenses, our costs rose 18% in 1999. Several factors were responsible. In an effort to increase occupancy we increased our advertising budget and opened our facility seven days a week. Additionally, we experienced higher than normal maintenance expenditures and property taxes rose by 7%. The registrant anticipates that rental income in 2000 will be increased over 1999 as occupancies rebound. Our market studies indicate that our rates are competitive and future rent increases will be made on a selective basis. Expenses for 2000 should be similar to 1999 unless unforeseen circumstances occur. Inflation has historically been a contributing factor to the increase in rental income levels and capital appreciation of income producing real estate. The most significant trends or uncertainties having an impact on the Partnership's revenues are those associated with inflation, changes in demand for self-storage spaces and fluctuations in rental and occupancy rates of the Partnership property. The modest inflation levels of the past several years have kept rent increases to a minimum. We continue to monitor the property's performance to maximize long-term capital appreciation which is consistent with the Partnership's objectives. ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. See Index to Financial Statements and Schedules attached hereto. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES Registrant changed accountants due to the sale of the attest assets of Toback CPA's to McGladrey & Pullen, L.L.P. 5 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The Partnership is managed by Armored Management, L.L.C., a limited liability company whose members include Carl R. Spiekerman and Dale D. Ulrich. Armored Management, L.L.C. was elected as general partner by a vote of the limited partners in the fourth quarter of 1993. The new general partner succeeds Armored Storage Ltd., which dissolved because of the dissolution of its sole general partner. The partnership entered into an agreement with Armored Management, L.L.C. to manage the Partnership's self-storage facility. The terms of the agreement are for one year and shall be renewed on a month-to-month basis unless and until either party terminates the agreement. The agreement provides that the manager shall receive, as compensation for services, the greater of $1,000 per month or 6% of the actual gross cash receipts from the prior month. The Partnership entered into an agreement with Armored Management, L.L.C. to provide administrative services to the Partnership, such as investor relations, database management (including data processing of investor subscriptions, fund distributions, ownership changes, and subscription input), accounting, preparation and/or coordinating the preparation of periodic regulatory reports and tax related forms. The term of the agreement is one year and shall continue on a month-to-month basis unless either party terminates the agreement. The agreement provides that Armored Management, L.L.C. shall receive a fixed fee of $3,000 per month as compensation for its services. Additionally, Armored Management, L.L.C. bills the Partnership for providing assistance in the annual Partnership audit. (a) IDENTIFICATION OF DIRECTORS Carl R. Spiekerman and Dale D. Ulrich are the managing members of Armored Management L.L.C. Mr. Spiekerman, 56, is the sole shareholder and Chief Executive Officer of The Environmental Group, Inc., a Phoenix based real estate development firm. Mr. Spiekerman holds a Bachelor's Degree from the University of Puget Sound, Tacoma, Washington, and a Master's Degree from the University of Washington. Mr. Ulrich, 46, is a C.P.A. and also a panel trustee for the District of Arizona Bankruptcy Court and former president of the Arizona Society of CPA's. Mr. Ulrich graduated from Marquette University, Milwaukee, Wisconsin. (b) IDENTIFICATION OF EXECUTIVE OFFICERS None (c) SIGNIFICANT EMPLOYEES None (d) FAMILY RELATIONSHIPS None (e) LEGAL PROCEEDINGS None 6 ITEM 11. EXECUTIVE COMPENSATION The General Partner, and its affiliates, earned fees, commissions, and expense reimbursements, as permitted in the Limited Partnership Agreement, as follows: For the Year Ended: 12/31/99 12/31/98 12/31/97 -------- -------- -------- Direct expenses relating to None None $2000 administration of the Partnership which were reimbursed or are to be reimbursed to the Managing General Partner, or affiliates thereof General Partner's distributive share of $2659(1) $3325 $3323 cash available for distribution Real estate commission upon the sale of None(2) None None Partnership property payable to the General Partner General Partner's share of sale or None(3) None None refinancing proceeds - ---------- (1) Cash Available for Distribution, if any, shall be Distributed 95% to the Limited Partners, and 5% to the General Partner. If at any time the allocation and distribution provisions of the Limited Partnership Agreement do not result in the allocation or distribution to the General Partners of an aggregate of at least one percent (1%) of the item being allocated or distributed, the Limited Partnership Agreement states that the General Partners are to be allocated or distributed so much more of such item as will cause the General Partners to be allocated or distributed one percent (1%) thereof. (2) The General Partner, or an affiliate, is entitled to receive a subordinated real estate commission in an amount not to exceed the lesser of one-half the amount customarily charged by others rendering similar services or 3% of the sale price. (3) Sale or refinancing proceeds will be distributed to Limited Partners in accordance with their Capital Accounts in an amount equal to their Adjusted Capital Contributions, then to the Limited Partners in an amount, if any, by which actual Distributions of Cash Available for Distribution were less than the preferred 10% return, then to the General Partner, a subordinated unpaid 5% of Cash Available for Distribution, and the remaining 80% to the Limited Partners, and 20% to the General Partner. 7 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT There is no person known to the Registrant who owns beneficially or of record more than 10% of the voting securities of the Registrant. However, the General Partner has discretionary control over most of the decisions made by or for the Registrant pursuant to the terms of the Partnership Agreement. The Registrant has no directors or officers. As of December 31, 1999 Dale D. Ulrich, one of the members of the managing general partner, owns 56 limited partnership units constituting 1% of the total outstanding units. There are no arrangements known to the Registrant, the operation of which may, at a subsequent date, result in a change in control of the Registrant. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS During the years ended December 31, 1999 and 1998 the General Partner was paid the following fees: 1999 1998 ------- ------- Property management $12,825 $13,219 Partnership administration $36,000 $36,000 Audit assistance $ 6,000 $ 5,000 During the year ended December 31, 1997 The Environmental Group, Inc., an affiliate of the General Partner, received or incurred $2,000 in direct expense reimbursement for the administration of the Partnership. During the year ended December 31, 1997, QuestCor, Inc., an affiliate of the General Partner, was paid $13,918 for property management fees, $30,000 for partnership administration services, and $5,000 for assistance with the annual audit. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a)(1) and (a)(2) LIST OF FINANCIAL STATEMENTS AND SCHEDULES AS A PART OF THIS REPORT Report of Independent Certified Public Accountants FINANCIAL STATEMENTS Balance sheets Statements of operations Statements of changes in partners' equity Statements of cash flows Notes to financial statements (a)(3) LIST OF EXHIBITS FILED AS PART OF THIS REPORT None (b) REPORTS ON FORM 8-K Change of accountants filed February 28, 2000. 8 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the 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 LIMITED PARTNERSHIP By: Armored Management, L.L.C. Its: General partner Dated: 3/28/00 By: /s/ Carl R. Spiekerman ------------------------------------- Carl R. Spiekerman, Member By: /s/ Dale D. Ulrich ------------------------------------- Dale D. Ulrich, Member Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person in the capacity on the date indicated. Signature Title Date --------- ----- ---- /s/ Carl R. Spiekerman Member of Armored Management 3/28/00 - ------------------------- L.L.C., general partner Carl R. Spiekerman /s/ Dale D. Ulrich - ------------------------- Member of Armored Management 3/28/00 Dale D. Ulrich L.L.C., general partner 9 ARMORED STORAGE INCOME INVESTORS 2 (A CALIFORNIA LIMITED PARTNERSHIP) FINANCIAL STATEMENTS DECEMBER 31, 1999 CONTENTS Page ---- Independent auditors' reports 11-12 Financial statements: Balance sheets 13 Statements of operations 14 Statements of changes in partners' equity 15 Statements of cash flows 16-17 Notes to financial statements 18-22 10 To the Partners of Armored Storage Income Investors 2 Phoenix, Arizona INDEPENDENT AUDITOR'S REPORT We have audited the accompanying balance sheet of Armored Storage Income Investors 2 (a California limited partnership) as of December 31, 1999, and the related statement of operations, changes in partners' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the 1999 financial statements referred to above present fairly, in all material respects, the financial position of Armored Storage Income Investors 2 as of December 31, 1999, and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. February 4, 2000 Phoenix, Arizona 11 To the Partners of Armored Storage Income Investors 2 Phoenix, Arizona INDEPENDENT AUDITOR'S REPORT We have audited the accompanying balance sheet of Armored Storage Income Investors 2 (a California Limited Partnership) as of December 31, 1998 and the related statements of operations, changes in partners' equity, and cash flows for each of the two years ended December 31, 1998 and 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Armored Storage Income Investors 2 (a California Limited Partnership) as of December 31, 1998, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 1998 and 1997 in conformity with generally accepted accounting principles. TOBACK CPAs, P.C. Phoenix, Arizona January 27, 1999 12 ARMORED STORAGE INCOME INVESTORS 2 (A CALIFORNIA LIMITED PARTNERSHIP) BALANCE SHEETS DECEMBER 31, 1999 AND 1998 ASSETS 1999 1998 ----------- ----------- Rental property and equipment: Land $ 242,825 $ 242,825 Building 1,100,520 1,100,520 Furniture and fixtures 25,446 25,446 ----------- ----------- 1,368,791 1,368,791 Less accumulated depreciation (481,584) (444,341) ----------- ----------- 887,207 924,450 Cash 89,477 63,113 Accounts receivable, net of allowance of $2,500 and $3,200 2,500 3,200 ----------- ----------- Total assets $ 979,184 $ 990,763 =========== =========== LIABILITIES AND PARTNERS' EQUITY Accounts payable and accrued expenses $ 19,795 $ 18,398 Unearned rent 6,342 5,000 ----------- ----------- Total liabilities 26,137 23,398 ----------- ----------- Commitments (Note 3) Partners' equity (Note 4): General partner (8,745) (6,015) Limited partners; 4,210 units outstanding 961,792 1,019,366 ----------- ----------- 953,047 1,013,351 Less amount due from former general partner (Note 5) -- (45,986) ----------- ----------- 953,047 967,365 ----------- ----------- Total liabilities and partners' equity $ 979,184 $ 990,763 =========== =========== The accompanying notes are an integral part of these financial statements. 13 ARMORED STORAGE INCOME INVESTORS 2 (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 1999 1998 1997 --------- -------- -------- Rental income $ 209,712 $216,513 $231,117 Interest income 678 1,420 1,850 --------- -------- -------- 210,390 217,933 232,967 --------- -------- -------- Expenses: Property operations 109,376 90,276 93,758 Partnership administration fees and property management fees paid to related parties (Note 3) 54,825 54,219 48,918 Other partnership administration fees 6,071 15,537 17,718 Depreciation 37,243 36,879 35,610 --------- -------- -------- 217,515 196,911 196,004 --------- -------- -------- Net income (loss) $(7,125) $ 21,022 $ 36,963 ========= ======== ======== Net income (loss) allocated to general partner $ (71) $ 1,051 $ 1,848 Net income (loss) allocated to limited partners (7,054) 19,971 35,115 --------- -------- -------- Net income (loss) $ (7,125) $ 21,022 $ 36,963 ========= ======== ======== Net income (loss) allocated to limited partners per limited partnership unit (Note 4) $ (1.68) $ 4.74 $ 8.34 ========= ======== ======== Distributions per limited partnership unit $ 12.00 $ 14.98 $ 14.98 ========= ======== ======== Number of limited partnership units outstanding 4,210 4,210 4,210 ========= ======== ======== The accompanying notes are an integral part of these financial statements. 14 ARMORED STORAGE INCOME INVESTORS 2 (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF CHANGES IN PARTNERS' EQUITY YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
Amount due from former general General Limited partner partner partners Total -------- -------- ----------- ----------- Balance, December 31, 1996 $(57,349) $ (2,265) $ 1,090,580 $ 1,030,966 Distributions to partners -- (3,325) (63,150) (66,475) Payments received from former general partner 5,303 -- -- 5,303 Net income -- 1,848 35,115 36,963 -------- -------- ----------- ----------- Balance, December 31, 1997 (52,046) (3,742) 1,062,545 1,006,757 Distributions to partners -- (3,324) (63,150) (66,474) Payments received from former general partner 6,060 -- -- 6,060 Net income -- 1,051 19,971 21,022 -------- -------- ----------- ----------- Balance, December 31, 1998 (45,986) (6,015) 1,019,366 967,365 Distributions to partners (2,659) (50,520) (53,179) Payments received from former general partner 45,986 45,986 Net loss (71) (7,054) (7,125) -------- -------- ----------- ----------- Balance, December 31, 1999 $ -- $ (8,745) $ 961,792 $ 953,047 ======== ======== =========== ===========
The accompanying notes are an integral part of these financial statements. 15 ARMORED STORAGE INCOME INVESTORS 2 (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
1999 1998 1997 --------- --------- --------- Cash flows from operating activities: Cash received from customers $ 211,754 $ 215,013 $ 231,017 Cash paid to suppliers and service providers (178,875) (157,243) (160,066) Interest received 678 1,420 1,850 --------- --------- --------- Net cash provided by operating activities 33,557 59,190 72,801 --------- --------- --------- Cash flows from investing activities: Purchase of rental property and equipment -- (35,166) -- --------- --------- --------- Cash flows from financing activities: Distributions to limited partners (50,520) (63,150) (63,150) Distributions to general partner (2,659) (3,324) (3,325) Payments received on due from former general partner 45,986 6,060 5,303 --------- --------- --------- Net cash used in financing activities (7,193) (60,414) (61,172) --------- --------- --------- (Decrease) increase in cash and cash equivalents 26,364 (36,390) 11,629 Cash: Beginning 63,113 99,503 87,874 --------- --------- --------- Ending $ 89,477 $ 63,113 $ 99,503 ========= ========= =========
The accompanying notes are an integral part of these financial statements. 16 ARMORED STORAGE INCOME INVESTORS 2 (A CALIFORNIA LIMITED PARTNERSHIP) STATEMENTS OF CASH FLOWS (CONTINUED) YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997 1999 1998 1997 -------- -------- -------- Reconciliation of net income (loss) to net cash provided by operating activities Net income (loss) $ (7,125) $ 21,022 $ 36,963 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 37,243 36,879 35,610 Changes in assets and liabilities: Decrease (increase) in accounts receivable 700 (500) (1,100) Increase in accounts payable and accrued expenses 1,397 2,789 328 (Decrease) increase in unearned rent (1,342) (1,000) 1,000 -------- -------- -------- Net cash provided by operating activities $ 33,557 $ 59,190 $ 72,801 ======== ======== ======== The accompanying notes are an integral part of these financial statements. 17 ARMORED STORAGE INCOME INVESTORS 2 (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS 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 in Phoenix, Arizona. As of December 31, 1993, the General Partner was Armored Storage, Ltd., a California Limited Partnership. Sales of the Partnership units commenced in April of 1986 as the Partnership was authorized to issue a total of 20,000 units for a total offering of $10,000,000. 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. In January 1994, Armored Management L.L.C. assumed the general partnership interest from Armored Storage, Ltd. as a result of a majority vote of the limited partners. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: FAIR VALUE: The carrying amount of cash and cash equivalents approximates fair value because of the short maturity of those instruments. RENTAL PROPERTY AND EQUIPMENT: Rental property and equipment are stated at cost. Depreciation is provided on the straight-line method over the following estimated useful lives: Years ----- Building 30 Furniture and fixtures 5 RENTAL INCOME AND ACCOUNTS RECEIVABLE: The Partnership generates rental income from month-to-month rental agreements for space at its self-storage facility on the accrual basis. Accounts receivable are recorded for rental payments that are delinquent at year end. An allowance is recorded for management's estimate of uncollectible rental receivables. After a receivable is 90 days delinquent the contents of the units are generally sold and the proceeds are used to reduce the receivable balance. ADVERTISING: Advertising costs are charged to operations as incurred. 18 ARMORED STORAGE INCOME INVESTORS 2 (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS (CONTINUED) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued: ACCOUNTING ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. INCOME TAXES: The Partnership does not record a provision for income taxes as any income or loss from the Partnership is recognized by the individual partners for tax reporting purposes. Differences between the tax bases and reported amounts of the Partnership assets and liabilities result from a difference in accumulated depreciation of approximately $57,000 at December 31, 1999 and capitalized syndication costs for tax purposes of approximately $280,000. 3. COMMITMENTS AND RELATED PARTY TRANSACTIONS: Prior to January 1, 1998, the Partnership operated under an agreement with Chris Cap Corporation dba QuestCor, Inc. (QuestCor) to manage the Partnership's self-storage facility. The agreement provided that the manager receive, as compensation for services, the greater of $1,000 per month or 6% of the gross cash receipts. On January 1, 1998, the Partnership entered into an agreement with similar terms for these services with Armored Management, L.L.C. The term of the agreement is for one year through December 31, 1999. Subsequent to year end, on January 1, 2000, the Company entered into a new management agreement with Armored Management, LLC. The term of the agreement is for one year through December 31, 2000 and shall continue on a month-to-month basis unless either party terminates the agreement. 19 ARMORED STORAGE INCOME INVESTORS 2 (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS (CONTINUED) 3. COMMITMENTS AND RELATED PARTY TRANSACTIONS, Continued: Prior to January 1, 1998, the Partnership had contracted with QuestCor to provide administrative services to the Partnership, such as investor relations, database management (including data processing of investor subscriptions, fund distributions, ownership changes, and subscription input), accounting, preparation and coordinating the preparation of periodic regulatory reports and tax related forms. The agreement provided for payment by the Partnership to QuestCor of $2,500 per month as compensation for its services. Additionally, the Partnership paid QuestCor $5,000 per year for providing assistance in the annual Partnership audit. A 50% member of Armored Management, L.L.C. is also a 50% shareholder of QuestCor. On January 1, 1998, the Partnership entered into a similar agreement for these services with Armored Management, L.L.C. The current year agreement provided for payment by the Partnership to Armored Management, L.L.C. of $3,000 per month as compensation for its services. Additionally, the Partnership pays Armored Management, L.L.C. $5,000 per year for providing assistance in the annual Partnership audit. The term of the agreement is for one year through December 31, 1999 and shall continue on a month-to-month basis unless either party terminates the agreement. Subsequent to year end, on January 1, 2000, the Company entered into a new management agreement with Armored Management, LLC. The term of the agreement is for one year through December 31, 2000 and shall continue on a month-to-month basis unless either party terminates the agreement. The following are the approximate fees paid to the related management companies for the years ended December 31, 1999, 1998 and 1997: 1999 1998 1997 ------- ------- ------- Property management $13,000 $13,000 $14,000 Partnership administration 36,000 36,000 30,000 Audit assistance 6,000 5,000 5,000 During the year ended December 31, 1997, the Partnership paid an affiliate of the General Partner $2,500 in direct expense reimbursements associated with a market study for the facility. 4. PARTNERS' EQUITY: The Limited Partnership Agreement provides that profits, losses, and cash available for distribution shall be allocated as follows: 20 ARMORED STORAGE INCOME INVESTORS 2 (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS (CONTINUED) 4. PARTNERS' EQUITY, Continued: ALLOCATION OF NET INCOME: Net income is to be allocated to the Limited Partners, ninety-five percent (95%) in accordance with their capital percentages and to the General Partner, five percent (5%), until such time as the Limited Partners have received in cash from all sources (other than cash available for distribution) an amount equal to one hundred percent (100%) of their capital contribution; thereafter to the Limited Partners, eighty percent (80%) in accordance with their capital percentages, and to the General Partner, twenty percent (20%). ALLOCATION OF NET LOSS: Net losses are to be allocated to the Limited Partners, ninety-nine percent (99%) in accordance with their capital percentages and to the General Partner, one percent (1%), until such time as the Limited Partners have received distributions of cash from all sources (other than cash available for distribution) in an amount equal to one hundred percent (100%) of their capital contributions; thereafter to the Limited Partners, eighty percent (80%) in accordance with their capital percentages and to the General partner, twenty percent (20%). CASH AVAILABLE FOR DISTRIBUTION: Cash available for distribution, if any, realized by or available to the Partnership, shall be distributed no less frequently than annually in the following percentages: (1) to the Limited Partners, ninety-five percent (95%) in accordance with their capital percentages; and (2) to the General Partner five percent (5%). Cash available for distribution is generally the Partnership's net cash flow less amounts set aside as reserves. If in any period the General Partner determines that Partnership working capital reserves are in excess of the amount deemed necessary for Partnership operations, such excess reserves may be distributed as cash available for distribution. MINIMUM ALLOCATION AND DISTRIBUTION TO THE GENERAL PARTNERS: If, at any time, the allocation and distribution provisions of the Limited Partnership Agreement do not result in the allocation or distribution to the General Partner of an aggregate of at least one percent (1%) of the item being allocated or distributed, the Limited Partnership Agreement states that the General Partner is to be allocated or distributed so much more of such item as will cause the General Partner to be allocated or distributed one percent (1%) thereof. 21 ARMORED STORAGE INCOME INVESTORS 2 (A CALIFORNIA LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS (CONTINUED) 4. PARTNERS' EQUITY, Continued: SALE OR REFINANCING PROCEEDS: Anysale or refinancing proceeds will be distributed to yield a 10% annual cumulative noncompounded return on Limited Partners' adjusted capital contributions determined as of the first day of each calendar year before the General Partner is entitled to participate. 5. DUE FROM FORMER GENERAL PARTNER: Due from former General Partner (Armored Storage, Ltd.) represented a receivable of 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 which was based on the total amount of limited partners' capital raised. At December 31, 1986, syndication fees of approximately $309,000 had been paid. On April 3, 1987, the offering was terminated. Based on actual units sold through the date of termination, excess syndication fees totaling approximately $113,000 were recorded as amounts due from the former General Partner. As collateral for the receivable, Armored Storage One Limited Partnership (a related partnership through common general partners) assigned its partnership interests in any proceeds or distributions from Armored Storage Income Investors Limited Partnership to Armored Storage Income Investors 2 until such time as the indebtedness is satisfied. During 1999, the former general partner paid off the remaining balance outstanding. 6. PARTNERSHIP ADMINISTRATION AND PROPERTY OPERATIONS: Included in other partnership administration and property operations are the following expenses: 1999 1998 1997 ------- ------- ------- Other partnership administration: Accounting $14,840 $13,835 $13,275 Other 1,231 1,702 4,443 Property operations: Advertising 5,802 2,092 18,145 Insurance 2,448 2,494 2,369 Property taxes 38,871 36,183 30,460 Repairs and maintenance 10,048 5,756 2,933 Utilities 6,996 7,119 6,616 Wages and payroll taxes 34,574 26,330 23,774 22 EX-27 2 FINANCIAL DATA SCHEDULE
5 12-MOS DEC-31-1999 DEC-31-1999 89,477 0 5,000 2,500 0 91,977 1,368,791 481,584 979,184 26,137 0 0 0 0 953,047 979,184 0 210,390 0 158,637 58,071 0 0 (7,125) 0 (7,125) 0 0 0 (7,125) (1.68) (1.68)
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