UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the period ended September 30, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from to
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Commission File Number 0-8676
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PUBLIC STORAGE PARTNERS II, LTD.
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(Exact name of registrant as specified in its charter)
California 95-3146963
- -------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
701 Western Avenue
Glendale, California 91201
- -------------------------------- --------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 244-8080
--------------------
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
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<PAGE>
INDEX
Page
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PART I. FINANCIAL INFORMATION
Condensed balance sheets at September 30, 1996
and December 31, 1995 2
Condensed statements of income for the three and nine
months ended September 30, 1996 and 1995 3
Condensed statement of partners' deficit for the
nine months ended September 30, 1996 4
Condensed statements of cash flows for the
nine months ended September 30, 1996 and 1995 5
Notes to condensed financial statements 6
Management's discussion and analysis of
financial condition and results of operations 7-8
PART II. OTHER INFORMATION 9
<PAGE>
<TABLE>
PUBLIC STORAGE PARTNERS II, LTD.
CONDENSED BALANCE SHEETS
<CAPTION>
September 30, December 31,
1996 1995
-------------------- --------------------
(Unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 137,000 $ -
Rent and other receivables 27,000 23,000
Real estate facilities, at cost:
Buildings and equipment 3,357,000 3,281,000
Land 1,267,000 1,267,000
------------------- ---------------------
4,624,000 4,548,000
Less accumulated depreciation (2,390,000) (2,265,000)
------------------- ---------------------
2,234,000 2,283,000
------------------- ---------------------
Other assets 193,000 279,000
------------------- ---------------------
Total assets $ 2,591,000 $ 2,585,000
=================== =====================
LIABILITIES AND PARTNERS' DEFICIT
Accounts payable $ 18,000 $ 35,000
Deferred revenue 68,000 74,000
Notes payable 8,163,000 8,602,000
Partners' deficit:
Limited partners' deficit, $500 per
unit, 10,000 units authorized,
9,890 issued and outstanding (4,197,000) (4,544,000)
General partner's deficit (1,461,000) (1,582,000)
-------------------- ---------------------
Total partners' deficit (5,658,000) (6,126,000)
-------------------- ---------------------
Total liabilities and partners' deficit $ 2,591,000 $ 2,585,000
==================== =====================
</TABLE>
See accompanying notes.
2
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<TABLE>
PUBLIC STORAGE PARTNERS II, LTD.
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------------- -----------------------------------
1996 1995 1996 1995
------------------ ------------------ ----------------- ---------------
(Restated) (Restated)
REVENUE:
<S> <C> <C> <C> <C>
Rental income $ 593,000 $ 558,000 $ 1,720,000 $1,646,000
Dividends and other income
(including dividends from marketable
securities of affiliate in 1995) 1,000 2,000 2,000 7,000
------------------ ------------------ ----------------- ---------------
594,000 560,000 1,722,000 1,653,000
------------------ ------------------ ----------------- ---------------
COSTS AND EXPENSES:
Cost of operations 121,000 107,000 352,000 315,000
Management fees paid to affiliate 33,000 33,000 95,000 99,000
Depreciation 44,000 37,000 125,000 109,000
Administrative 9,000 9,000 27,000 27,000
Environmental cost - - - 10,000
Interest expense 215,000 236,000 655,000 718,000
------------------ ------------------ ----------------- ---------------
422,000 422,000 1,254,000 1,278,000
------------------ ------------------ ----------------- ---------------
NET INCOME $ 172,000 $ 138,000 $ 468,000 $ 375,000
================== ================== ================= ===============
Limited partners' share of net income
($46.81 per unit in 1996 and $37.51
per unit in 1995) $ 463,000 $ 371,000
General partner's share of net income 5,000 4,000
----------------- ---------------
$ 468,000 $ 375,000
================= ===============
</TABLE>
See accompanying notes.
3
<PAGE>
<TABLE>
PUBLIC STORAGE PARTNERS II, LTD.
CONDENSED STATEMENT OF PARTNERS' DEFICIT
(UNAUDITED)
<CAPTION>
Total
Limited General Partners'
Partners Partner Deficit
------------------------------------------------------------
<S> <C> <C> <C>
Balance at December 31, 1995 ($4,544,000) ($1,582,000) ($6,126,000)
Net income 468,000
463,000 5,000
Equity transfer -
(116,000) 116,000
----------------- ---------------- ---------------
Balance at September 30, 1996 ($4,197,000) ($1,461,000) ($5,658,000)
================= ================ ===============
</TABLE>
See accompanying notes.
4
<PAGE>
<TABLE>
PUBLIC STORAGE PARTNERS II, LTD.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Nine Months Ended
September 30,
-----------------------------------------------
1996 1995
-------------------- -------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 468,000 $ 375,000
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation 125,000 109,000
(Increase) decrease in rent and other receivables (4,000) 7,000
Decrease in prepaid loan fees 8,000 8,000
Amortization of prepaid management fees 83,000 -
Increase in other assets (5,000) (1,000)
(Decrease) increase in accounts payable (17,000) 15,000
(Decrease) increase in deferred revenue (6,000) 6,000
-------------------- -------------------
Total adjustments 184,000 144,000
-------------------- -------------------
Net cash provided by operating activities 652,000 519,000
-------------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to real estate facilities (76,000) (40,000)
-------------------- -------------------
Net cash used in investing activities (76,000) (40,000)
-------------------- -------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on mortgage notes payable (439,000) (396,000)
-------------------- -------------------
Net cash used in financing activities (439,000) (396,000)
-------------------- -------------------
Net increase in cash and cash equivalents 137,000 83,000
Cash and cash equivalents at the beginning of the period - 159,000
-------------------- -------------------
Cash and cash equivalents at the end of the period $ 137,000 $ 242,000
==================== ====================
Supplemental schedule of noncash investing and financing activities:
Increase in fair value of marketable securities $ - $ (25,000)
==================== ====================
Unrealized gain on marketable securities - 25,000
==================== ====================
</TABLE>
See accompanying notes.
5
<PAGE>
PUBLIC STORAGE PARTNERS II, LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. The accompanying unaudited condensed financial statements have been
prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
such rules and regulations, although management believes that the
disclosures contained herein are adequate to make the information presented
not misleading. These unaudited condensed financial statements should be
read in conjunction with the financial statements and related notes
appearing in the Partnership's Form 10-K for the year ended December 31,
1995.
2. In the opinion of management, the accompanying unaudited condensed
financial statements reflect all adjustments, consisting of only normal
accruals, necessary to present fairly the Partnership's financial position
at September 30, 1996, the results of its operations for the three and nine
months ended September 30, 1996 and 1995 and its cash flows for the nine
months then ended.
3. The results of operations for the three and nine months ended September 30,
1996 are not necessarily indicative of the results expected for the full
year.
4. In 1995, the Partnership prepaid eight months of 1996 management fees at a
cost of $83,000. The amount has been amortized at management fees paid to
affiliate during the nine months ended September 30, 1996.
5. Certain prior year amounts have been reclassified to conform with the 1996
presentation.
6
<PAGE>
PUBLIC STORAGE PARTNERS II, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 1995:
The Partnership's net income for the nine months ended September 30, 1996
was $468,000 compared to $375,000 for the nine months ended September 30, 1995,
representing an increase of $93,000, or 25%. The Partnership's net income for
the three months ended September 30, 1996 was $172,000 compared to $138,000 for
the three months ended September 30, 1995, representing an increase of $34,000
or 25%. These increases are primarily a result of increased rental income
combined with decreased interest expense due to lower outstanding loan balances
in 1996 compared to 1995 .
Rental income was $1,720,000 compared to $1,646,000 for the nine months
ended September 30, 1996 and 1995, respectively, representing an increase of
$74,000 or 5%. Rental income was $593,000 compared to $558,000 for the three
months ended September 30, 1996 and 1995, respectively, representing an increase
of $35,000 or 6%. The increase for both the three and the nine months ended
September 30, 1996 is primarily attributable to an increase in occupancy levels
at the Partnership's mini-warehouse facilities. The weighted average occupancy
levels at the mini-warehouse facilities were 86% and 84% for the nine months
ended September 30, 1996 and 1995, respectively. Realized rent for the nine
months ended September 30, 1996 increased to $.88 per occupied square foot from
$.86 per occupied square foot for the nine month ended September 30, 1995.
Cost of operations (including management fees paid to an affiliate)
increased $33,000 or 8% to $447,000 from $414,000 for the nine months ended
September 30, 1996 and 1995, respectively. This increase is mainly attributable
to increases in repairs and maintenance, payroll, and advertising expenses. Cost
of operations (including management fees paid to an affiliate) increased $14,000
or 10% to $154,000 from $140,000 for the three months ended September 30, 1996
and 1995 respectively. This increase is mainly attributable to an increase in
repairs and maintenance expense.
In 1995, the Partnership prepaid eight months of 1996 management fees on
its mini-warehouse operations (based on the management fees for the comparable
period during the calendar year immediately preceding the prepayment) discounted
at the rate of 14% per year to compensate for early payment. The Partnership has
7
<PAGE>
expensed the prepaid management fees during the nine months ended September 30,
1996 The amount is included in management fees paid to affiliate in the
condensed statements of income. As a result of the prepayment, the Partnership
saved approximately $8,000 in management fees, based on the management fees that
would have been payable on rental income generated in the nine months ended
September 30, 1996 compared to the amount prepaid.
Interest expense decreased $63,000 to $655,000 from $718,000 for the nine
months ended September 30, 1996 and 1995, respectively. This decrease is mainly
attributable to lower outstanding principal balances on the Partnership's notes
payable.
In 1995, the Partnership incurred cost of $10,000 to conduct environmental
assessments of its properties to evaluate the environmental condition of and
potential environmental liabilities of such properties. Those assessments did
not indicate any environmental contamination of any of its property sites which
individually or in the aggregate would be material to the Partnership's overall
business, financial condition, or results of operations. No such cost was
incurred in 1996.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Cash generated from operations ($652,000 for the nine months ended
September 30, 1996) has been sufficient to meet all current obligations of the
Partnership, including principal repayments of the Partnership's notes payable.
In the fourth quarter of 1990, quarterly distributions were discontinued to
enable the Partnership to make principal repayments that commenced in 1990 and
will continue through 1996, at which time the remaining principal balance is
due.
8
<PAGE>
PART II. OTHER INFORMATION
ITEMS 1 through 5 are inapplicable.
ITEM 6 Exhibits and Reports on Form 8-K
(a) The following Exhibit is included herein:
(27) Financial Data Schedule
(b) Form 8 - K
None.
SIGNATURES
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.
DATED: November 12, 1996
PUBLIC STORAGE PARTNERS II, LTD.
BY: Public Storage, Inc.
General Partner
BY: /s/ Ronald L. Havner, Jr.
-------------------------
Ronald L. Havner, Jr.
Senior Vice President and
Chief Financial Officer
(principal financial officer)
9
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000275915
<NAME> PUBLIC STORAGE PARTNERS II, LTD.
<MULTIPLIER> 1
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 137,000
<SECURITIES> 0
<RECEIVABLES> 220,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 357,000
<PP&E> 4,624,000
<DEPRECIATION> (2,390,000)
<TOTAL-ASSETS> 2,591,000
<CURRENT-LIABILITIES> 86,000
<BONDS> 8,163,000
0
0
<COMMON> 0
<OTHER-SE> (5,658,000)
<TOTAL-LIABILITY-AND-EQUITY> 2,591,000
<SALES> 0
<TOTAL-REVENUES> 1,722,000
<CGS> 0
<TOTAL-COSTS> 447,000
<OTHER-EXPENSES> 152,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 655,000
<INCOME-PRETAX> 468,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 468,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 468,000
<EPS-PRIMARY> 46.81
<EPS-DILUTED> 46.81
</TABLE>
