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 June 30, 1998
-------------
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
incorporation or organization) Identification Number)
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 June 30, 1998
and December 31, 1997 2
Condensed consolidated statements of income for the three
and six months ended June 30, 1998 and 1997 3
Condensed consolidated statements of cash flows for the
six months ended June 30, 1998 and 1997 4-5
Notes to condensed consolidated financial statements 6
Management's discussion and analysis of financial condition
and results of operations 7-9
PART II. OTHER INFORMATION
(Items 1 through 5 are not applicable)
Item 6 - Exhibits and Reports on Form 8-K 10
Item 7 - Financial Statements and Exhibits 10
<PAGE>
PS PARTNERS, LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-----------------------------------
(Unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents $1,346,000 $819,000
Rent and other receivables 141,000 65,000
Real estate facilities, at cost:
Land 10,660,000 10,660,000
Buildings and equipment 45,128,000 44,834,000
-----------------------------------
55,788,000 55,494,000
Less accumulated depreciation (26,582,000) (25,402,000)
-----------------------------------
29,206,000 30,092,000
Investment in real estate entity 2,841,000 2,830,000
Other assets 190,000 136,000
-----------------------------------
$33,724,000 $33,942,000
===================================
LIABILITIES AND PARTNERS' EQUITY
Accounts payable $744,000 $686,000
Advance payments from renters 438,000 374,000
Minority interest in general partnerships 19,212,000 19,727,000
Partners' equity:
Limited partners' equity, $500 per unit, 66,000
units authorized, issued and outstanding 13,153,000 12,980,000
General partner's equity 177,000 175,000
-----------------------------------
Total partners' equity 13,330,000 13,155,000
-----------------------------------
$33,724,000 $33,942,000
===================================
</TABLE>
See accompanying notes.
2
<PAGE>
PS PARTNERS, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------------------------------------------
1998 1997 1998 1997
-------------------------------------------------------------------
REVENUE:
<S> <C> <C> <C> <C>
Rental income $3,053,000 $2,787,000 $5,927,000 $5,475,000
Equity in income of real estate entity 64,000 55,000 118,000 93,000
Interest income 16,000 7,000 28,000 14,000
-------------------------------------------------------------------
3,133,000 2,849,000 6,073,000 5,582,000
-------------------------------------------------------------------
COSTS AND EXPENSES:
Cost of operations 911,000 867,000 1,815,000 1,790,000
Management fees 185,000 167,000 357,000 328,000
Depreciation and amortization 589,000 584,000 1,180,000 1,161,000
Administrative 31,000 28,000 48,000 44,000
-------------------------------------------------------------------
1,716,000 1,646,000 3,400,000 3,323,000
-------------------------------------------------------------------
Income before minority interest 1,417,000 1,203,000 2,673,000 2,259,000
Minority interest in income (484,000) (434,000) (898,000) (805,000)
-------------------------------------------------------------------
NET INCOME $933,000 $769,000 $1,775,000 $1,454,000
===================================================================
Limited partners' share of net income
($24.23 per unit in 1998 and
$19.41 per unit in 1997) $1,599,000 $1,281,000
General partner's share of net income 176,000 173,000
----------------------------------
$1,775,000 $1,454,000
==================================
</TABLE>
See accompanying notes.
3
<PAGE>
PS PARTNERS, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------------------------
1998 1997
---------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $1,775,000 $1,454,000
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 1,180,000 1,161,000
(Increase) decrease in rent and other receivables (76,000) 26,000
(Increase) decrease in other assets (54,000) 64,000
Increase (decrease) in accounts payable 58,000 (3,000)
Increase in advance payments from renters 64,000 28,000
Equity in income of real estate entity (118,000) (93,000)
Minority interest in income 898,000 805,000
---------------------------------------
Total adjustments 1,952,000 1,988,000
---------------------------------------
Net cash provided by operating activities 3,727,000 3,442,000
---------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions from real estate entity 107,000 -
Investment in real estate entity - (3,000)
Additions to real estate facilities (294,000) (615,000)
---------------------------------------
Net cash used in investing activities (187,000) (618,000)
---------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to holder of minority interest (1,413,000) (1,230,000)
Distributions to partners (1,600,000) (1,600,000)
---------------------------------------
Net cash used in financing activities (3,013,000) (2,830,000)
---------------------------------------
Net increase (decrease) in cash and cash equivalents 527,000 (6,000)
Cash and cash equivalents at the beginning of the period 819,000 506,000
---------------------------------------
Cash and cash equivalents at the end of the period $1,346,000 $500,000
=======================================
</TABLE>
See accompanying notes.
4
<PAGE>
PS PARTNERS, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Continued)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------------------------
1998 1997
---------------------------------------
Supplemental schedule of noncash investing and financing activities:
<S> <C> <C>
Investment in real estate entity $- $(2,725,000)
Transfer of real estate facilities for interest in real estate entity, net - 2,725,000
</TABLE>
See accompanying notes.
5
<PAGE>
PS PARTNERS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
(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, 1997.
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 June 30, 1998, the results of operations for the
three and six months ended June 30, 1998 and 1997 and cash flows for the
six months then ended.
3. The results of operations for the three and six months ended June 30, 1998
are not necessarily indicative of the results to be expected for the full
year.
6
<PAGE>
PS PARTNERS, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
Results of Operations:
- ----------------------
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997:
The Partnership's net income was $933,000 and $769,000 for the three months
ended June 30, 1998 and 1997, respectively, representing an increase of
$164,000, or 21%. The increase was primarily due to an increase in property
operations at the Partnership's real estate facilities, combined with increased
interest income, partially offset by increased minority interest in income for
those properties held jointly with PSI.
Rental income for the Partnership's mini-warehouse operations was
$3,005,000 compared to $2,740,000 for the three months ended June 30, 1998 and
1997, respectively, representing an increase of $265,000, or 10%. The increase
in rental income was primarily attributable to increased rental rates and
occupancy rates. The monthly average realized rent per square foot for the
mini-warehouse facilities was $.67 compared to $.63 for the three months ended
June 30, 1998 and 1997, respectively. The weighted average occupancy levels at
the mini-warehouse facilities was 93% compared to 90% for the three months ended
June 30, 1998 and 1997, respectively. Cost of operations (including management
fees) for the mini-warehouses increased $63,000, or 6%, to $1,075,000 from
$1,012,000 for the three months ended June 30, 1998 and 1997, respectively. The
increase in cost of operations was primarily attributable to increases in
property tax, repairs and maintenance, and advertising and promotion (due
primarily to the PSI national telephone reservations center) expenses.
Accordingly, for the Partnership's mini-warehouse operations, property net
operating income increased $202,000, or 12%, from $1,728,000 to $1,930,000 for
the three months ended June 30, 1997 and 1998, respectively.
Rental income for the Partnership's business-park operations was $48,000
compared to $47,000 for the three months ended June 30, 1998 and 1997. The
monthly average realized rent per square foot for the Partnership's business
park facility was $.76 compared to $.71 for the three months ended June 30, 1998
and 1997, respectively. The weighted average occupancy level was 87% compared to
89% for the three months ended June 30, 1998 and 1997, respectively. Cost of
operations (including management fees) for the business park decreased to
$21,000 from $22,000 for the three months ended June 30, 1998 and 1997,
respectively. Accordingly, for the Partnership's business park facility,
property net operating income increased $2,000, or 8%, from $25,000 to $27,000
for the three months ended June 30, 1997 and 1998, respectively.
Interest income increased $9,000, or 123%, from $7,000 to $16,000 for the
three months ended June 30, 1997 and 1998, respectively. This increase was
primarily attributable to increased average invested cash balances.
7
<PAGE>
Minority interest in income increased $50,000, or 12%, to $484,000 from
$434,000 for the three months ended June 30, 1998 and 1997, respectively. This
increase was primarily attributable to an increase in operations at the
Partnership's real estate facilities owned jointly with PSI.
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997:
The Partnership's net income was $1,775,000 and $1,454,000 for the six
months ended June 30, 1998 and 1997, respectively, representing an increase of
$321,000, or 22%. The increase was primarily due to an increase in property
operations at the Partnership's real estate facilities, combined with increased
interest income, partially offset by increased minority interest in income for
those properties held jointly with PSI.
Rental income for the Partnership's mini-warehouse operations was
$5,828,000 compared to $5,381,000 for the six months ended June 30, 1998 and
1997, respectively, representing an increase of $447,000, or 8%. The increase in
rental income was primarily attributable to increased rental rates, combined
with increased average occupancy levels. The monthly average realized rent per
square foot for the mini-warehouse facilities was $.65 compared to $.62 for the
six months ended June 30, 1998 and 1997, respectively. The weighted average
occupancy levels at the mini-warehouse facilities were 92% and 88% for the six
months ended June 30, 1998 and 1997, respectively. Cost of operations (including
management fees) for the mini-warehouses increased $60,000, or 3%, to $2,128,000
from $2,068,000 for the six months ended June 30, 1998 and 1997, respectively.
The increase in cost of operations was primarily attributable to increases in
property tax and advertising and promotion (due primarily to the PSI national
telephone reservations center) expenses. Accordingly, for the Partnership's
mini-warehouse operations, property net operating income increased $387,000, or
12%, from $3,313,000 to $3,700,000 for the six months ended June 30, 1997 and
1998, respectively.
Rental income for the Partnership's business-park operations was $99,000
compared to $94,000 for the six months ended June 30, 1998 and 1997,
respectively, representing an increase of $5,000, or 5%. The increase in rental
income was primarily attributable to an increase in rental rates. The monthly
average realized rent per square foot was $.75 compared to $.70 for the six
months ended June 30, 1998 and 1997, respectively. The weighted average
occupancy level remained stable at 90% for the six months ended June 30, 1998
and 1997. Cost of operations (including management fees) for the business park
decreased $6,000, or 12%, to $44,000 from $50,000 for the six months ended June
30, 1998 and 1997, respectively. The decrease in cost of operations was
primarily attributable to a decrease in repairs and maintenance expense.
Accordingly, for the Partnership's business park facility, property net
operating income increased by $11,000, or 25%, from $44,000 to $55,000 for the
six months ended June 30, 1997 and 1998, respectively.
8
<PAGE>
Interest income increased $14,000, or 100%, from $14,000 to $28,000 for the
six months ended June 30, 1997 and 1998, respectively. This increase was
primarily attributable to increased average invested cash balances.
Minority interest in income increased $93,000, or 12%, to $898,000 from
$805,000 for the six months ended June 30, 1998 and 1997, respectively. This
increase was primarily attributable to 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
($3,727,000 for the six months ended June 30, 1998) has been sufficient to meet
all current obligations of the Partnership.
During 1998, the Partnership anticipates approximately $867,000 of capital
improvements (of which $369,000 represents PSI's joint venture share). Total
capital improvements were $294,000 for the six months ended June 30, 1998 of
which $166,000 represents the Partnership's share.
The Partnership paid distributions to the limited and general partners
totaling $1,426,000 ($21.60 per unit) and $174,000, respectively, during the
first six months of 1998. Future distribution rates may be adjusted to levels
which are supported by operating cash flow after capital improvements and any
other obligations.
9
<PAGE>
PART II. OTHER INFORMATION
Items 1 through 4 are not applicable.
Item 5 Other Events
------------
The Partnership has entered into an Agreement and Plan of Reorganization by
and among PSI, PS Partners Merger Co., Inc. and the Partnership, dated as of
July 14, 1998 (the "Agreement and Plan of Reorganization"). Under the Agreement
and Plan of Reorganization, each of the Partnership units held by the public
limited partners will be converted into the right to receive a value of $713 in
PSI common stock or, at the limited partner's election, in cash. The Agreement
and Plan of Reorganization is referenced as Exhibit 2 hereto and is incorporated
herein by this reference.
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
Item 7 Financial Statements and Exhibits
---------------------------------
(c) Exhibits.
(2) Agreement and Plan of Reorganization by and among Public Storage,
Inc., PS Partners Merger Co., Inc. and PS Partners, Ltd. Dated as of July 14,
1998. Filed with the Partnership's Current Report on Form 8-K dated July 14,
1998 and incorporated herein by reference.
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: August 13, 1998
PS PARTNERS, LTD.
BY: Public Storage, Inc.
General Partner
BY: /s/ John Reyes
-----------------------------------------
John Reyes
Senior Vice President and Chief Financial
Officer of Public Storage, Inc.
(principal financial and accounting
officer)
10
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000702276
<NAME> PS PARTNERS, LTD.
<MULTIPLIER> 1
<CURRENCY> U.S. $
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 1,346,000
<SECURITIES> 0
<RECEIVABLES> 141,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,487,000
<PP&E> 55,788,000
<DEPRECIATION> (26,582,000)
<TOTAL-ASSETS> 33,724,000
<CURRENT-LIABILITIES> 1,182,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 13,330,000
<TOTAL-LIABILITY-AND-EQUITY> 33,724,000
<SALES> 0
<TOTAL-REVENUES> 6,073,000
<CGS> 0
<TOTAL-COSTS> 2,172,000
<OTHER-EXPENSES> 1,228,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,775,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,775,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,775,000
<EPS-PRIMARY> 24.23
<EPS-DILUTED> 24.23
</TABLE>
