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, 1995
[ ] 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 (803) 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)
September 30, 1995
Assets
Cash and cash equivalents:
Unrestricted $ 900,006
Restricted-tenant security deposits 4,776
Accounts receivable 35,834
Escrow for taxes 11,963
Other assets 54,200
Investment properties:
Land $1,026,222
Buildings and related personal property 6,099,327
7,125,549
Less accumulated depreciation (704,355) 6,421,194
$7,427,973
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable $ 12,801
Tenant security deposits 10,856
Accrued taxes 29,948
Other liabilities 26,107
Minority interest 637,443
Partners' Capital (Deficit)
General partner $ (696)
Limited partners (32,601 units
issued and outstanding) 6,711,514 6,710,818
$7,427,973
[FN]
See Accompanying Notes to Consolidated Financial Statements
b) UNITED INVESTORS INCOME PROPERTIES II
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
Revenues:
Rental income $258,100 $239,978 $751,335 $699,058
Other income 17,456 22,159 51,100 48,926
Total revenues 275,556 262,137 802,435 747,984
Expenses:
Operating 32,694 28,588 105,682 86,939
General and administrative 17,569 12,335 47,184 40,119
Property management fees 12,545 14,541 36,591 47,018
Maintenance 19,524 15,353 53,118 47,993
Depreciation 46,209 45,840 138,626 137,525
Amortization 820 819 2,458 2,077
Property taxes 15,605 21,666 48,877 40,453
Tenant reimbursements 2,425 (12,336) (46,493) (61,003)
Total expenses 147,391 126,806 386,043 341,121
Minority interest in net
income of joint ventures (25,955) (26,305) (82,515) (85,002)
Net income $102,210 $109,026 $333,877 $321,861
Net income allocated to
general partner (1%) $ 1,022 $ 1,090 $ 3,339 $ 3,219
Net income allocated to
limited partners (99%) 101,188 107,936 330,538 318,642
$102,210 $109,026 $333,877 $321,861
Net income per limited
partnership unit $ 3.10 $ 3.31 $ 10.14 $ 9.77
[FN]
See Accompanying Notes to Consolidated Financial Statements
c) UNITED INVESTORS INCOME PROPERTIES II
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
Limited
Partnership General Limited
Units Partners Partners Total
Original capital contributions 32,601 $ 100 $8,150,250 $8,150,350
Partners' capital at
December 31, 1994 32,601 $ 63 $6,786,717 $6,786,780
Partners' distributions -- (4,098) (405,741) (409,839)
Net income for the nine months
ended September 30, 1995 -- 3,339 330,538 333,877
Partners' capital (deficit)
at September 30, 1995 32,601 $ (696) $6,711,514 $6,710,818
[FN]
See Accompanying Notes to Consolidated Financial Statements
d) UNITED INVESTORS INCOME PROPERTIES II
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
1995 1994
Cash flows from operating activities:
Net income $ 333,877 $ 321,861
Adjustments to reconcile net income to
net cash provided by operating activities:
Minority interest in net income of
joint ventures 82,515 85,002
Depreciation 138,626 137,525
Amortization of lease commissions 2,458 2,077
Change in accounts:
Accounts receivable 19,526 13,982
Escrow for taxes (8,981) (2,145)
Other assets (6,645) (19,005)
Accounts payable 7,271 (8,513)
Accrued taxes 10,933 9,841
Other liabilities 10,840 21,291
Net cash provided by operating activities 590,420 561,916
Cash flows from investing activities:
Property improvements and replacements (33,645) (8,078)
Net cash used in investing activities (33,645) (8,078)
Cash flows from financing activities:
Distributions to minority interests (77,963) (103,653)
Partners' distributions (409,839) (349,491)
Net cash used in financing activities (487,802) (453,144)
Net increase in cash 68,973 100,694
Cash at beginning of period 831,033 752,868
Cash at end of period $ 900,006 $ 853,562
[FN]
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 financial statements 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, 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, 1995, are not necessarily indicative of the results
that may be expected for the fiscal year ended December 31, 1995. 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, 1994.
Certain reclassifications have been made to the 1994 information to conform
to the 1995 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. 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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The Partnership's investment properties consist of two distribution centers,
a mini-storage facility and an office building. The following table sets forth
the average occupancy of the properties for the nine months ended September 30,
1995 and 1994:
Average
Occupancy
1995 1994
Keebler Distribution Center
Chesapeake, Virginia 100% 100%
Keebler Distribution Center
Columbia, South Carolina 100% 100%
Corinth Square Professional Building
Prairie Village, Kansas 83% 84%
U-Stor Covington Pike Mini-warehouse
Memphis, Tennessee 99% 99%
Occupancy has remained stable at the Partnership's properties. The General
Partner, however, was recently notified by the Keebler Company that it intends
to vacate the Columbia, South Carolina facility in 1996 and the Chesapeake,
Virginia facility in 1997. The Keebler company has indicated its intentions to
honor its financial obligations (the Company is obligated to continue paying
rent on the vacated space through the years 2001 (Columbia, South Carolina) and
2002 (Chesapeake, Virginia), but the ultimate impact of this uncertainty on the
Partnership cannot be determined at this time.
The Partnership realized net income for the nine months ended September 30,
1995, of $333,877, of which $102,210 was income for the third quarter. The
corresponding net income for 1994 was $321,861 and $109,026, respectively. The
increase in net income for the nine months ended September 30, 1995, is
primarily due to increased rental revenues resulting from reduced bad debt
expense in 1995 at Corinth Square. Partially offsetting the revenue increase
were increases in operating, general and administrative, and property tax
expenses. Operating expenses increased due to higher utilities and increased
administrative and maintenance salary expenses at Corinth Square in 1995.
General and administrative expenses increased as a result of increased expense
reimbursements in 1995. Property tax expense for the nine month period ended
September 30, 1995, increased as a result of low estimates being recorded in the
first nine months of 1994. Partially offsetting these expense increases was a
decrease in management fees at the Keebler Distribution Centers in 1995. Tenant
reimbursements decreased due to an adjustment made in the third quarter of 1995
resulting from certain maintenance expenses at Corinth which were determined to
be unreimburseable.
As part of the ongoing business plan of the Partnership, the General Partner
monitors the rental market environment of each 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, 1995, the Partnership held unrestricted cash of $900,006
compared to $831,033 at December 31, 1994. Net cash provided by operating
activities increased primarily as a result of decreased payments on accounts
payable. Net cash used in investing activities increased due to increased
property improvements at Corinth in 1995. Net cash used in financing activities
increased as a result of increased partners' distributions.
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 meet 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 $470,674 were made during 1994 and cash distributions of
$409,839 were made during the first nine months of 1995.
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 September 30, 1995.
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.
Controller and Principal
Accounting Officer
Date: November 13, 1995