UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1994 OR 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 0-15816 Krupp Cash Plus-II Limited Partnership Massachusetts 04-2915326 (State or other jurisdiction of (IRS employer incorporation or organization) identification no.) 470 Atlantic Avenue, Boston, Massachusetts 02210 (Address of principal executive offices) (Zip Code) (617) 423-2233 (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 PART I. FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS KRUPP CASH PLUS-II LIMITED PARTNERSHIP BALANCE SHEETS ASSETS June 30, December 31, 1994 1993 Real estate assets: Multi-family apartment complex, less accumulated depreciation of $3,452,915 and $3,240,614, respectively $ 6,554,241 $ 6,718,936 Retail centers, less accumulated depreciation of $10,153,092 and $9,437,948, respectively 39,063,439 39,719,536 Investment in joint venture (Note 2) 21,619,286 21,737,592 Mortgage-backed securities ("MBS") (Note 5) 10,786,872 12,752,190 Total real estate assets 78,023,838 80,928,254 Cash and cash equivalents 7,341,569 5,622,515 Other assets 476,848 697,856 Total assets $85,842,255 $87,248,625 LIABILITIES AND PARTNERS' EQUITY Accounts payable $ 34,641 $ 162,516 Accrued expenses and other liabilities 670,486 586,197 Total liabilities 705,127 748,713 Partners' equity (Note 3) 85,137,128 86,499,912 Total liabilities and partners' equity $85,842,255 $87,248,625 The accompanying notes are an integral part of the financial statements. -2- KRUPP CASH PLUS-II LIMITED PARTNERSHIP STATEMENTS OF OPERATIONS For the Three Months Ended For the Six Months Ended June 30, June 30, 1994 1993 1994 1993 Revenue: Rental $1,481,044 1,588,245 $3,096,592 $3,125,914 Partnership's share of joint venture net income (Note 2) 103,397 77,680 280,694 243,042 Interest income - MBS 245,152 372,360 513,750 765,576 Interest income - other 65,428 79,379 114,705 155,555 Total revenue 1,895,021 2,117,664 4,005,741 4,290,087 Expenses: Operating (including reimbursements to affiliates of $55,717, $55,717, $111,435, and $111,435, respectively) 261,725 259,861 509,133 526,051 Maintenance 124,796 156,899 256,406 275,656 General and administrative (including reimbursements to affiliates of $90,097, $86,816, $176,837 and $170,916, respectively) 130,581 129,445 243,131 247,297 Real estate taxes (Note 4) (39,908) 214,712 201,928 461,916 Management fees paid to an affiliate 87,679 89,505 176,499 175,290 Depreciation 468,549 452,019 927,445 900,313 Total expenses 1,033,422 1,302,441 2,314,542 2,586,523 Net income $ 861,599 $ 815,223 $1,691,199 $1,703,564 Allocation of net income (Note 3): Net income per Unit of Depositary Receipt (7,499,718 Units Outstanding) $ .11 $ .10 $ .22 $ .22 Corporate Limited Partner $ 11 $ 10 $ 22 $ 22 General Partners $ 17,232 $ 16,304 $ 33,824 $ 34,071 The accompanying notes are an integral part of the financial statements. -3- KRUPP CASH PLUS-II LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS For the Six Months Ended June 30, 1994 1993 Operating activities: Net income $ 1,691,199 $ 1,703,564 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 927,445 900,313 Partnership's share of joint venture net income (280,694) (243,042) Distributions received from joint venture 399,000 100,000 Amortization of net MBS (discount)/premium (545) 1,694 Decrease in other assets 221,008 263,331 Increase (decrease) in accounts payable (127,875) 16,441 Increase in accrued expenses and other liabilities 84,289 5,706 Net cash provided by operating activities 2,913,827 2,748,007 Investing activities: Additions to fixed assets (106,653) (55,882) Principal collections on MBS 1,965,863 2,830,370 Net cash provided by investing activities 1,859,210 2,774,488 Financing activity: Distributions (3,053,983) (3,027,488) Net increase in cash and cash equivalents 1,719,054 2,495,007 Cash and cash equivalents, beginning of period 5,622,515 8,331,685 Cash and cash equivalents, end of period $ 7,341,569 $10,826,692 The accompanying notes are an integral part of the financial statements. -4- KRUPP CASH PLUS-II LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS (1) Accounting Policies Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted in this report on Form 10-Q pursuant to the Rules and Regulations of the Securities and Exchange Commission. In the opinion of the General Partners of Krupp Cash Plus-II Limited Partnership (the "Partnership") the disclosures contained in this report are adequate to make the information presented not misleading. See Notes to Financial Statements included in the Partnership's Annual Report on Form 10-K for the year ended December 31, 1993 for additional information relevant to significant accounting policies followed by the Partnership. In the opinion of the General Partners of the Partnership, the accompanying unaudited financial statements reflect all adjustments (consisting of only normal recurring accruals) necessary to present fairly the Partnership's financial position as of June 30, 1994 and its results of operations for the three and six months ended June 30, 1994 and 1993 and cash flows for the six months ended June 30, 1994 and 1993. Certain prior year balances have been reclassified to conform with current year financial statement presentation. The results of operations for the three and six months ended June 30, 1994 are not necessarily indicative of the results which may be expected for the full year. See Management's Discussion and Analysis of Financial Condition and Results of Operations included in this report. (2) Investment in Joint Venture Condensed financial statements of the Joint Venture are as follows: Brookwood Village Joint Venture Condensed Balance Sheets ASSETS June 30, December 31, 1994 1993 Property, at cost $ 54,065,472 $53,961,916 Accumulated depreciation (11,668,729) (10,743,771) 42,396,743 43,218,145 Other assets 1,107,012 715,779 Total assets $ 43,503,755 $43,933,924 LIABILITIES AND PARTNERS' EQUITY Total liabilities $ 265,183 $ 458,740 Partners' equity: The partnership $ 21,619,286 $21,737,592 Joint venture partner 21,619,286 21,737,592 Total partners' equity 43,238,572 43,475,184 Total liabilities and partners' equity $ 43,503,755 $43,933,924 Continued -5- KRUPP CASH PLUS-II LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS, Continued (2) Investment in Joint Venture, Continued Brookwood Village Joint Venture Condensed Statements of Operations For the Three Months For the Six Months Ended June 30, Ended June 30, 1994 1993 1994 1993 Revenues $1,405,901 $1,346,422 2,928,886 $ 2,796,997 Property operating expenses (734,820) (730,095) (1,442,540) (1,398,121) Income before depreciation 671,081 616,327 1,486,346 1,398,876 Depreciation (464,287) (460,968) (924,958) (912,793) Net income $ 206,794 $ 155,359 $ 561,388 486,083 Allocation of net income: The partnership $ 103,397 $ 77,680 $ 280,694 $ 243,042 Joint venture partner 103,397 77,679 280,694 243,041 $ 206,794 $ 155,359 $ 561,388 486,083 (3) Changes in Partners' Equity (Deficit) A summary of changes in partners' equity (deficit) for the six months ended June 30, 1994 is as follows: Corporate Total Limited General Partners' Unitholders Partner Partners Equity Balance at December 31, 1993 $86,776,391 $1,362 $(277,841) $86,499,912 Net income 1,657,353 22 33,824 1,691,199 Distributions (3,012,209) (40) (41,734) (3,053,983) Balance at June 30, 1994 $85,421,535 $1,344 $(285,751) $85,137,128 (4) Real Estate Taxes During the second quarter of 1994, the Partnership successfully petitioned for the reassessment of the prior year real estate taxes on Coral Plaza. The Partnership received a tax refund for the 1987, 1988 and 1989 real estate tax years of approximately $270,000. Continued -6- KRUPP CASH PLUS-II LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS, Continued (5) MBS At June 30, 1994, the Partnership's MBS Portfolio had a market value of $11,083,000 and unrealized gains of $385,000 and unrealized losses of $88,000. At December 31, 1993 the Partnership's MBS Portfolio had a market value of $13,646,000. The Partnership does not expect to realize these gains or losses as it has the intention and ability to hold the MBS until maturity. -7- KRUPP CASH PLUS-II LIMITED PARTNERSHIP Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources The Partnership's liquidity is derived from the operations of the Partnership's properties (Encino Oaks, Alderwood, Canyon Place, Coral Plaza and Cumberland Glen), distributions from the Partnerships interest in Brookwood Village Joint Venture, earnings and collections on MBS and interest earned on its short-term investments. The source of future liquidity to pay distributions to partners is expected to be cash flow generated by the Partnership's MBS and real estate investments. Sustaining the distribution rate is largely dependent upon these items. Management has found it necessary in recent years to pay a larger share of tenant buildouts to attract quality tenants to our retail centers. This policy has proven to be successful in increasing occupancy and rental income at properties where it has been undertaken and is expected to continue in 1994. In fact, two of the Partnership's real estate investments are currently at full capacity and are expected to remain so in 1994. In order to remain competitive in their respective markets the Partnership's properties are budgeted to spend $735,000 for capital improvements in 1994, while the Joint Venture is scheduled to perform $1.1 million for capital renovations this year. Principal collections on MBS continued at a high level for the first half of 1994 because the mortgage interest rate environment has increased refinancing activity, which in turn has led to prepayments of the mortgages underlying the MBS. However, the present rise in interest rates may result in a reduction in MBS principal prepayments in the near future. For this reason, management will continue to monitor liquidity levels to assure that acceptable working capital levels are being maintained. Continued -8- KRUPP CASH PLUS-II LIMITED PARTNERSHIP Distributable Cash Flow and Net Cash Proceeds from Capital Transactions Shown below is the calculation of Distributable Cash Flow and Net Cash Proceeds from Capital Transactions as defined by Section 17 of the Partnership Agreement for the six months ended June 30, 1994 and the period from inception to June 30, 1994. (Rounded to $1,000 except per Unit amounts) For the six months Inception to Ended June 30, June 30, 1994 1994 Distributable Cash Flow: Net income for tax purposes $ 1,839 $38,897 Items not requiring or (not providing) the use of operating funds: Tax basis depreciation and amortization 833 12,255 Acquisition expenses paid from offering proceeds charged to operations - 248 Partnership's share of joint venture taxable net income (356) (4,316) Distributions from Brookwood Village Joint Venture 399 6,607 Additions to fixed assets (107) (1,452) Amounts released from reserves for capital improvements - 1,020 Total Distributable Cash Flow ("DCF") $ 2,608 $53,259 Limited Partners' Share of DCF $ 2,556 $52,194 Limited Partners' Share of DCF per Unit $ .34 $ 6.96 (c) General Partners' Share of DCF $ 52 $ 1,065 Net Proceeds from Capital Transactions: Principal collections on MBS 1,965 34,347 Reinvestment of MBS principal collections $ - $(3,687) Total Net Proceeds from Capital Transactions $ 1,965 $30,660 Distributions: Limited Partners $ 2,996(a) $84,815(b) Limited Partners' Average per Unit $ .40(a) $ 11.31(b)(c) General Partners 52(a) 1,065(b) Total Distributions $ 3,048(a) $85,880(b) -9- KRUPP CASH PLUS-II LIMITED PARTNERSHIP (a) Represents distributions paid in 1994, except the February 1994 distribution, which relates to 1993 cash flows and includes an estimate of the distribution to be paid in August, 1994. (b) Includes estimate of the distribution to be paid in August, 1994. (c) Limited Partners average per Unit return of capital as of August, 1994 is $4.35 [$11.31 - $6.96]. Operations A. Partnership Rental revenues decreased for the three and six months ended June 30, 1994 as compared to the same period in 1993 due to a bankruptcy filing of a tenant at Canyon Place in May. Currently the plan of action by management at Canyon Place is to rearrange some smaller tenants and allow the larger tenants to expand. MBS interest income decreased for the three and six months ended June 30, 1994 as compared to the same period in 1993 due to scheduled and prepaid principal collections on the outstanding principal balance which occurred throughout 1993 and 1994. Other interest income has decreased for the three and six months ended June 30, 1994 as compared to the same period in 1993 due to lower average cash balances. Total expenses for the three and six months ended June 30, 1994 as compared to the same period in 1993 remained relatively stable with the exception of real estate taxes. Real estates taxes decreased due to a refund of prior years real estate taxes at Coral Plaza of approximately $270,000. B. Joint Venture Brookwood's revenues increased for the three and six months ended June 30, 1994 as compared to the same period in 1993 due to increases in occupancy. Revenues also increased due to higher tenant reimbursements caused by the increase in operating expenses which were associated with the increase in occupancy. -10- KRUPP CASH PLUS-II LIMITED PARTNERSHIP PART II - OTHER INFORMATION Item 1. Legal Proceedings Response: None Item 2. Change in Securities Response: None Item 3. Defaults upon Senior Securities Response: None Item 4. Submission of Matters to a Vote of Security Holders Response: None Item 5. Other Information Response: None Item 6. Exhibits and Reports on Form 8-K Response: None -11- SIGNATURE 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. Krupp Cash Plus-II Limited Partnership (Registrant) BY: /s/Marianne Pritchard Marianne Pritchard Treasurer of The Krupp Corporation, a General Partner DATE: July 29, 1994 -12-