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, 1997
------------------
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 0-11186
-------
PS PARTNERS, LTD.
(Exact name of registrant as specified in its charter)
-------------------------------------------------------
California 95-3729108
- ------------------------------- --------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
701 Western Avenue
Glendale, California 91201-2394
- ---------------------------------------- ------------------------
(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
-- --
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION
Condensed consolidated balance sheets at September 30, 1997
and December 31, 1996 2
Condensed consolidated statements of income for the three
and nine months ended September 30, 1997 and 1996 3
Condensed consolidated statements of cash flows for the
nine months ended September 30, 1997 and 1996 4-5
Notes to condensed consolidated financial statements 6-7
Management's discussion and analysis of financial condition
and results of operations 8-12
PART II. OTHER INFORMATION
(Items 1 through 5 are not applicable)
Item 6 - Exhibits and Reports on Form 8-K 13
<PAGE>
<TABLE>
<CAPTION>
PS PARTNERS, LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1997 1996
---------------------------------------
(Unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 695,000 $ 506,000
Rent and other receivables 70,000 89,000
Real estate facilities, at cost:
Land 10,659,000 11,855,000
Buildings and equipment 44,580,000 46,862,000
---------------------------------------
55,239,000 58,717,000
Less accumulated depreciation (24,810,000) (24,576,000)
---------------------------------------
30,429,000 34,141,000
Investment in real estate entity 2,867,000 -
Other assets 137,000 205,000
---------------------------------------
$ 34,198,000 $ 34,941,000
=======================================
LIABILITIES AND PARTNERS' EQUITY
Accounts payable $ 648,000 $ 654,000
Advance payments from renters 370,000 366,000
Minority interest in general partnerships 20,044,000 20,668,000
Partners' equity:
Limited partners' equity, $500 per unit, 66,000
units authorized, issued and outstanding 12,961,000 13,077,000
General partner's equity 175,000 176,000
---------------------------------------
Total partners' equity 13,136,000 13,253,000
---------------------------------------
$ 34,198,000 $ 34,941,000
=======================================
See accompanying notes.
2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PS PARTNERS, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------------------------------------------
1997 1996 1997 1996
---------------------------------------------------------------
REVENUE:
<S> <C> <C> <C> <C>
Rental income $ 2,896,000 $ 2,851,000 $ 8,371,000 $ 8,366,000
Equity in income of real estate entity 48,000 - 141,000 -
Interest income 8,000 10,000 22,000 23,000
---------------------------------------------------------------
2,952,000 2,861,000 8,534,000 8,389,000
---------------------------------------------------------------
COSTS AND EXPENSES:
Cost of operations 844,000 871,000 2,634,000 2,714,000
Management fees 174,000 170,000 502,000 498,000
Depreciation and amortization 595,000 602,000 1,756,000 1,791,000
Administrative 38,000 35,000 82,000 77,000
---------------------------------------------------------------
1,651,000 1,678,000 4,974,000 5,080,000
---------------------------------------------------------------
Income before minority interest 1,301,000 1,183,000 3,560,000 3,309,000
Minority interest in income (472,000) (458,000) (1,277,000) (1,454,000)
---------------------------------------------------------------
NET INCOME $ 829,000 $ 725,000 $ 2,283,000 $ 1,855,000
===============================================================
Limited partners' share of net income
($30.65 per unit in 1997 and $24.23
per unit in 1996) $ 2,023,000 $ 1,599,000
General partner's share of net income 260,000 256,000
-------------------------------
$ 2,283,000 $ 1,855,000
===============================
See accompanying notes.
3
</TABLE>
<PAGE>
<TABLE>
PS PARTNERS, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
September 30,
---------------------------------------
1997 1996
---------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 2,283,000 $ 1,855,000
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 1,756,000 1,791,000
Decrease in rent and other receivables 19,000 36,000
Decrease (increase) in other assets 68,000 (49,000)
Decrease in accounts payable (6,000) (54,000)
Increase (decrease) in advance payments from renters 4,000 (9,000)
Equity in income of real estate entity (141,000) -
Minority interest in income 1,277,000 1,454,000
---------------------------------------
Total adjustments 2,977,000 3,169,000
---------------------------------------
Net cash provided by operating activities 5,260,000 5,024,000
---------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in real estate entity (3,000) -
Additions to real estate facilities (767,000) (473,000)
---------------------------------------
Net cash used in investing activities (770,000) (473,000)
---------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to holder of minority interest (1,901,000) (1,893,000)
Distributions to partners (2,400,000) (2,400,000)
---------------------------------------
Net cash used in financing activities (4,301,000) (4,293,000)
---------------------------------------
Net increase in cash and cash equivalents 189,000 258,000
Cash and cash equivalents at the beginning of the period 506,000 511,000
---------------------------------------
Cash and cash equivalents at the end of the period $ 695,000 $ 769,000
=======================================
</TABLE>
See accompanying notes.
4
<PAGE>
<TABLE>
<CAPTION>
PS PARTNERS, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Continued)
Nine Months Ended
September 30,
---------------------------------------
1997 1996
---------------------------------------
Supplemental schedule of noncash investing and financing activities:
<S> <C> <C>
Investment in real estate entity $ (2,724,000) $ -
Transfer of real estate facilities for interest in real estate entity 2,724,000 -
See accompanying notes.
5
</TABLE>
<PAGE>
PS PARTNERS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
1. The accompanying unaudited condensed consolidated 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 consolidated 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, 1996.
2. In the opinion of management, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments, consisting of
only normal accruals, necessary to present fairly the Partnership's
financial position at September 30, 1997, the results of operations for the
three and nine months ended September 30, 1997 and 1996 and cash flows for
the nine months then ended.
3. The results of operations for the three and nine months ended September 30,
1997 are not necessarily indicative of the results to be expected for the
full year.
4. Effective January 2, 1997, Public Storage, Inc. ("PSI"), the Partnership's
general partner, formed a new private real estate investment trust named
American Office Park Properties, Inc. ("AOPP") which will focus its
investment efforts on the ownership and management of commercial properties
(also referred to as business park facilities). In connection with the
formation of AOPP, PSI and affiliated partnerships transferred commercial
properties to a newly created partnership underlying AOPP in exchange for
limited partnership interests (AOPP and the underlying partnership
collectively referred to as the "New REIT"). The Partnership participated
in the initial transaction by exchanging its Signal Hill, California
business park property, which was owned jointly by the Partnership and PSI,
for 150,000 limited partnership units, which represented approximately 2.2%
of the initial capitalization of the partnership underlying AOPP. In
addition, since January 1997, New REIT manages the commercial operations of
the Partnership's Webster, Texas property.
6
<PAGE>
4. (Continued)
The number of limited partnership units received by the Partnership was
based on the relative fair market value of the Partnership's commercial
property exchanged compared to the aggregate of all other real estate
assets exchanged for limited partnership units in the underlying
partnership. The Partnership's limited partnership units, pursuant to the
terms and conditions of the governing documents, are convertible into
shares of common stock of AOPP.
The general partners believe that the concentration of PSI's, the
Partnership's and affiliate entities' commercial properties into a single
entity will create a vehicle which should facilitate future growth in this
segment of the real estate industry. PSI, the Partnership and the
affiliates transferring real estate assets to the New REIT will participate
in the growth through their ownership interests in the New REIT.
The Partnership accounts for its investment in New REIT using the equity
method of accounting; accordingly, equity in earnings of real estate
entity, as reflected on the Partnership's statement of income for the three
and nine months ended September 30, 1997, reflects the Partnership's pro
rata share of the earnings of the New REIT. The investment was initially
recorded at the Partnership's net book value of its Signal Hill, California
property exchanged for limited partnership units. The investment is
subsequently adjusted for the Partnership's pro rata share of income and
distributions from the underlying partnership of the New REIT.
7
<PAGE>
PS PARTNERS, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
Results of Operations:
- ----------------------
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1996:
The Partnership's net income was $829,000 and $725,000 for the three months
ended September 30, 1997 and 1996, respectively, representing an increase of
$104,000, or 14%. The increase was primarily due to an increase in property
operations at the Partnership's real estate facilities.
Net property income (rental income less cost of operations and management
fees and excluding depreciation) for the three months ended September 30, 1997
increased $68,000, or 4%, as rental income increased $45,000, or 2%, and cost of
operations (including management fees and excluding depreciation expense)
decreased $23,000, or 2%, compared to the same period in 1996. Net property
income for the three months ended September 30, 1997 excludes property
operations for the Signal Hill, California business park facility, which was
transferred to the New REIT in January 1997. Excluding Signal Hill operations
for the three months ended September 30, 1996, net property income for the three
months ended September 30, 1997 increased $144,000, or 8%, as rental income
increased $163,000, or 6%, and cost of operations increased $19,000, or 2%,
compared to the three months ended September 30, 1996.
Rental income for the Partnership's mini-warehouse operations was
$2,845,000 compared to $2,684,000 for the three months ended September 30, 1997
and 1996, respectively, representing an increase of $161,000, or 6%. The
increase in rental income was primarily attributable to increased rental rates
and occupancy levels. The monthly average realized rent per square foot for the
mini-warehouse facilities was $.64 compared to $.60 for the three months ended
September 30, 1997 and 1996, respectively. The weighted average occupancy levels
at the mini-warehouse facilities increased to 92% from 91% for the three months
ended September 30, 1997 and 1996, respectively. Cost of operations (including
management fees) for the mini-warehouses increased $28,000, or 3%, to $1,003,000
from $975,000 for the three months ended September 30, 1997 and 1996,
respectively. The increase in cost of operations was primarily attributable to
increases in advertising expenses, partially offset by decreased payroll
expenses. Accordingly, for the Partnership's mini-warehouse operations, property
net operating income increased $133,000, or 8%, from $1,709,000 to $1,842,000
for the three months ended September 30, 1996 and 1997, respectively.
Rental income for the Partnership's business-park operations was $51,000
compared to $167,000 for the three months ended September 30,1997 and 1996,
respectively, representing a decrease of $116,000, or 69%. Excluding the
operations of the Signal Hill property, rental income increased $2,000, or 4%,
to $51,000 from $49,000 for the three months ended June 30 , 1997 and 1996,
respectively. The increase in rental income was primarily attributable to an
8
<PAGE>
PS PARTNERS, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
increase in occupancy levels, partially offset by a decrease in rental rates.
The weighted average occupancy level at the Partnership's Webster, Texas
business park facility was 98% compared to 90% for the three months ended
September 30, 1997 and 1996, respectively. The monthly average realized rent per
square foot for the Webster facility was $.71 compared to $.72 for the three
months ended September 30, 1997 and 1996, respectively. Cost of operations
(including management fees) for the business parks decreased $51,000, or 77%, to
$15,000 from $66,000 for the three months ended September 30, 1997 and 1996,
respectively. Excluding the operations of the Signal Hill property, cost of
operations decreased $9,000, or 38%, to $15,000 from $24,000 for the three
months ended September 30, 1997 and 1996, respectively. Accordingly, for the
Partnership's business park facilities, property net operating income decreased
by $65,000, or 64%, from $101,000 to $36,000 for the three months ended
September 30, 1996 and 1997, respectively. Excluding the operations of the
Signal Hill property, property net operating income increased by $11,000, or
44%, from $25,000 to $36,000 for the three months ended September 30, 1996 and
1997, respectively.
Effective January 2, 1997, Public Storage, Inc. ("PSI"), the Partnership's
general partner, formed a new private real estate investment trust named
American Office Park Properties, Inc. ("AOPP") which will focus its investment
efforts on the ownership and management of commercial properties. In connection
with the formation of AOPP, PSI and affiliated partnerships transferred
commercial properties to a newly created partnership underlying AOPP in exchange
for limited partnership interests (AOPP and the underlying partnership
collectively referred to as the "New REIT"). The Partnership participated in the
initial transaction by exchanging its Signal Hill, California business park
property, which was owned jointly by the Partnership and PSI, for 150,000
limited partnership units, which represented approximately 2.2% of the initial
capitalization of the partnership underlying AOPP. In addition, since January
1997, New REIT manages the commercial operations of the Partnership's Webster,
Texas property.
The Partnership accounts for its investment in New REIT using the equity
method of accounting. The following table summarizes the Partnership's equity in
earnings from its investment in the New REIT for the three months ended
September 30, 1997 compared to the operation of the Signal Hill, California
business park facility for the three months ended September 30, 1996:
Three Months Ended September 30,
-------------------------------
1997 1996
------------- ------------
Equity in earnings of real estate entity $ 48,000 $ -
Rental income - 118,000
Cost of operations - 42,000
------------- ------------
Net operating income 48,000 76,000
Depreciation - 43,000
------------- ------------
$ 48,000 $ 33,000
============= ============
9
<PAGE>
PS PARTNERS, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
Minority interest in income increased $14,000 to $472,000 from $458,000 for
the three months ended September 30, 1997 and 1996, respectively. This increase
was primarily attributable to an increase in operations at the Partnership's
real estate facilities owned jointly with PSI, partially offset by the
allocation of depreciation and amortization expense (pursuant to the partnership
agreement with respect to those real estate facilities which are jointly owned
with PSI) to PSI of $341,000 for the three months ended September 30, 1997
compared to $303,000 for the same period in 1996.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1996:
The Partnership's net income was $2,283,000 and $1,855,000 for the nine
months ended September 30, 1997 and 1996, respectively, representing an increase
of $428,000, or 23%. The increase was primarily due to an increase in property
operations at the Partnership's real estate facilities, combined with reduced
minority interest in income for those properties held jointly with PSI.
Net property income (rental income less cost of operations and management
fees and excluding depreciation) for the nine months ended September 30, 1997
increased $81,000, or 2%, as rental income increased $5,000 and cost of
operations (including management fees and excluding depreciation expense)
decreased $76,000, or 2%, compared to the same period in 1996. Net property
income for the nine months ended September 30, 1997 excludes property operations
for the Signal Hill, California business park facility, which was transferred to
AOPPLP in January 1997. Excluding Signal Hill operations for the nine months
ended September 30, 1996, net property income for the nine months ended
September 30, 1997 increased $281,000, or 6%, as rental income increased
$347,000, or 4%, and cost of operations increased $66,000, or 2%, compared to
the nine months ended September 30, 1996.
Rental income for the Partnership's mini-warehouse operations was
$8,226,000 compared to $7,874,000 for the nine months ended September 30, 1997
and 1996, respectively, representing an increase of $352,000, or 4%. The
increase in rental income was primarily attributable to increased rental rates.
The monthly average realized rent per square foot for the mini-warehouse
facilities was $.63 compared to $.60 for the nine months ended September 30,
1997 and 1996, respectively. The weighted average occupancy levels at the
mini-warehouse facilities remained stable at 89% for the nine months ended
September 30, 1997 and 1996. Cost of operations (including management fees) for
10
<PAGE>
PS PARTNERS, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
the mini-warehouses increased $74,000 to $3,071,000 from $2,997,000 for the nine
months ended September 30, 1997 and 1996, respectively. The increase in cost of
operations was primarily attributable to increases in advertising, management,
and property tax expenses, partially offset by a decrease in repairs and
maintenance expenses. Accordingly, for the Partnership's mini-warehouse
operations, property net operating income increased $278,000, or 6%, from
$4,877,000 to $5,155,000 for the nine months ended September 30, 1996 and 1997,
respectively.
Rental income for the Partnership's business-park operations was $145,000
compared to $492,000 for the nine months ended September 30, 1997 and 1996,
respectively, representing a decrease of $347,000, or 71%. Excluding the
operations of the Signal Hill property, rental income decreased $5,000, or 3%,
to $145,000 from $150,000 for the nine months ended September 30, 1997 and 1996,
respectively. The decrease in rental income was primarily attributable to a
decrease in occupancy levels. The weighted average occupancy level at the
Partnership's Webster, Texas business park facility was 92% compared to 95% for
the nine months ended September 30, 1997 and 1996, respectively. The monthly
average realized rent per square foot for the Webster facility remained stable
at $.71 for the nine months ended September 30, 1997 and 1996, respectively.
Cost of operations (including management fees) for the business parks decreased
$150,000, or 70%, to $65,000 from $215,000 for the nine months ended September
30, 1997 and 1996, respectively. Excluding the operations of the Signal Hill
property, cost of operations decreased $8,000, or 11%, to $65,000 from $73,000
for the nine months ended September 30, 1997 and 1996, respectively.
Accordingly, for the Partnership's business park facilities, property net
operating income decreased by $197,000, or 71%, from $277,000 to $80,000 for the
nine months ended September 30, 1996 and 1997, respectively. Excluding the
operations for the Signal Hill property, property net operating income increased
by $3,000, or 4%, from $77,000 to $80,000 for the nine months ended September
30, 1996 and 1997.
The following table summarizes the Partnership's equity in earnings from
its investment in the New REIT for the nine months ended September 30, 1997
compared to the operation of the Signal Hill, California business park facility
for the nine months ended September 30, 1996:
Nine Months Ended September 30,
-------------------------------
1997 1996
------------- ------------
Equity in earnings of real estate entity $ 141,000 $ -
Rental income - 342,000
Cost of operations - 142,000
------------- ------------
Net operating income 141,000 200,000
Depreciation - 126,000
------------- ------------
$ 141,000 $ 74,000
============= ============
Minority interest in income decreased $177,000 to $1,277,000 from
$1,454,000 for the nine months ended September 30, 1997 and 1996, respectively.
This decrease was primarily attributable to the allocation of depreciation and
amortization expense (pursuant to the partnership agreement with respect to
those real estate facilities which are jointly owned with PSI) to PSI of
11
<PAGE>
PS PARTNERS, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
$1,000,000 for the nine months ended September 30, 1997 compared to $693,000 for
the same period in 1996, partially offset by an increase in operations at the
Partnership's real estate facilities owned jointly with PSI.
Liquidity and Capital Resources
- -------------------------------
The Partnership has adequate sources of cash to finance its operations,
both on a short-term and long-term basis, primarily from internally generated
cash from property operations and cash reserves. Cash generated from operations
($5,260,000 for the nine months ended September 30, 1997) has been sufficient to
meet all current obligations of the Partnership.
During 1997, the Partnership anticipates approximately $940,000 of capital
improvements (of which $378,000 represents PSI's joint venture share). During
1995, the Partnership's property manager commenced a program to enhance the
visual appearance of the mini-warehouse facilities. Such enhancements include
new signs, exterior color schemes, and improvements to the rental offices. This
program continued in 1997. Total capital improvements were $767,000 for the nine
months ended September 30, 1997 of which $452,000 represents the Partnership's
share.
The Partnership paid distributions to the limited and general partners
totaling $2,138,000 ($32.40 per unit) and $262,000, respectively, during the
first nine months of 1997. Future distribution rates may be adjusted to levels
which are supported by operating cash flow after capital improvements and any
other obligations.
12
<PAGE>
PART II. OTHER INFORMATION
ITEMS 1 through 5 are not applicable.
Item 6 Exhibits and Reports on Form 8-K
--------------------------------
(a) The following Exhibits are 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 13, 1997
PS PARTNERS, LTD.
BY: Public Storage, Inc.
General Partner
BY: /s/ John Reyes
-----------------------------------------
Senior Vice President and Chief Financial
Officer of Public Storage, Inc.
(principal financial and accounting
officer)
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000702276
<NAME> PS PARTNERS , LTD.
<MULTIPLIER> 1
<CURRENCY> U.S. $
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 695,000
<SECURITIES> 0
<RECEIVABLES> 70,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 765,000
<PP&E> 55,239,000
<DEPRECIATION> (24,810,000)
<TOTAL-ASSETS> 34,198,000
<CURRENT-LIABILITIES> 1,018,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 13,136,000
<TOTAL-LIABILITY-AND-EQUITY> 34,198,000
<SALES> 0
<TOTAL-REVENUES> 8,534,000
<CGS> 0
<TOTAL-COSTS> 3,136,000
<OTHER-EXPENSES> 1,838,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,283,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,283,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,283,000
<EPS-PRIMARY> 30.65
<EPS-DILUTED> 30.65
</TABLE>
