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
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1997
[ ] 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
1
(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)
March 31, 1997
Assets
Cash:
Unrestricted $ 911
Restricted-tenant security deposits 5
Accounts receivable, net of allowance of $10 21
Escrows for taxes 22
Other assets 40
Investment properties
Land $ 1,026
Buildings and related personal property 6,117
7,143
Less accumulated depreciation (975) 6,168
$ 7,167
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 8
Tenant security deposits 11
Accrued taxes 40
Other liabilities 15
Minority interest 587
Partners' Capital (Deficit)
General partner $ (3)
Limited partners (32,601
units issued and outstanding) 6,509 6,506
$ 7,167
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
March 31,
1997 1996
Revenues:
Rental income $ 270 $ 271
Other income 16 19
Total revenues 286 290
Expenses:
Operating 50 51
General and administrative 16 18
Maintenance 11 13
Depreciation 48 47
Property taxes 18 16
Total expenses 143 145
Minority interest in net (28) (32)
income of joint ventures
Net income $ 115 $ 113
Net income allocated to general partner (1%) $ 1 $ 1
Net income allocated to limited partners (99%) 114 112
$ 115 $ 113
Net income per limited partnership unit $3.50 $3.44
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)
Limited
Partnership General Limited
Units Partner Partners Total
Original capital contributions 32,601 $ -- $ 8,150 $ 8,150
Partners' capital (deficit)
at December 31, 1996 32,601 $ (3) $ 6,535 $ 6,532
Partners' distributions (1) (140) (141)
Net income for the three months
ended March 31, 1997 1 114 115
Partners' capital (deficit)
at March 31, 1997 32,601 $ (3) $ 6,509 $ 6,506
See Accompanying Notes to Consolidated Financial Statements
d) UNITED INVESTORS INCOME PROPERTIES II
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Three Months Ended
March 31,
1997 1996
Cash flows from operating activities:
Net income $ 115 $ 113
Adjustments to reconcile net income to
net cash provided by operating activities:
Minority interest in net income of
joint ventures 28 32
Depreciation 48 47
Amortization of lease commissions 1 1
Change in accounts:
Accounts receivable 4 (2)
Escrow for taxes -- (9)
Other assets 5 1
Accounts payable (6) 3
Accrued taxes 18 16
Other liabilities -- 1
Net cash provided by operating activities 213 203
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 (72) (25)
Partners' distributions (141) (141)
Net cash used in financing activities (213) (166)
Net (decrease) increase in cash (3) 37
Cash at beginning of period 914 889
Cash at end of period $ 911 $ 926
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 Investor Real Estate, Inc.), all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three month
period ended March 31, 1997, are not necessarily indicative of the results that
may be expected for the fiscal year ended 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.
Certain reclassifications have been made to the 1996 information to conform to
the 1997 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 agreement for the Partnership 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 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 the three months ended March 31, 1997 and 1996 (in
thousands):
1997 1996
Property management fees $12 $13
Reimbursement for services of affiliates 8 8
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 three months ended March
31, 1997 and 1996:
Average Occupancy
Property 1997 1996
Keebler Distribution Center
Chesapeake, Virginia 100% 100%
Keebler Distribution Center
Columbia, South Carolina 100% 100%
Corinth Square Professional Building
Prairie Village, Kansas 80% 80%
U-Stor Covington Pike Mini-warehouse
Memphis, Tennessee 99% 100%
The Keebler Company vacated the Columbia, South Carolina facility in January of
1996 and vacated the Chesapeake, Virginia facility in August of 1996. The
Keebler Company has indicated its intentions to honor its financial obligations
under the respective leases. Keebler is obligated to continue paying rent on
the vacated space 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 $115,000 for the three months ended March
31, 1997, compared to net income of $113,000 for the corresponding period of
1996. Net income for the three months ended March 31, 1997 is comparable to the
corresponding period of 1996. The minority interest in net income of the joint
ventures increased in the first quarter of 1997 due to a decrease in net income
at Corinth Square Professional Building offset by an increase in net income at
Covington Pike Mini-Warehouse.
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 March 31, 1997, the Partnership held unrestricted cash of $911,000 compared
to $926,000 at March 31, 1996. The increase in net cash provided by operating
activities is attributable to a decrease in deposits to tax escrows. Net cash
used in financing activities decreased due to greater distributions to minority
interest joint venturers.
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 property 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 $141,000 were made during the first quarter of 1997 and 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 March 31, 1997.
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: May 15, 1997