UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
[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 0-11981
-------
PS PARTNERS II, LTD.
---------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 95-3878680
- --------------------------------------------- -----------------------------
(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 balance sheets at June 30, 1998
and December 31, 1997 2
Condensed statements of income for the three
and six months ended June 30, 1998 and 1997 3
Condensed statements of cash flows for the
six months ended June 30, 1998 and 1997 4-5
Notes to condensed financial statements 6
Management's discussion and analysis of financial condition
and results of operations 7-10
PART II. OTHER INFORMATION
(Items 1 through 5 are not applicable)
Item 6 - Exhibits and Reports on Form 8-K 11
<PAGE>
PS PARTNERS II, LTD.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---------------------------------------
(Unaudited)
(Restated - See Note 5)
ASSETS
<S> <C> <C>
Cash and cash equivalents $2,223,000 $888,000
Rent and other receivables 28,000 33,000
Real estate facilities, at cost:
Land 2,319,000 2,319,000
Buildings and equipment 12,707,000 12,584,000
---------------------------------------
15,026,000 14,903,000
Less accumulated depreciation (7,047,000) (6,728,000)
---------------------------------------
7,979,000 8,175,000
Investment in real estate entities 27,622,000 28,599,000
Other assets 27,000 75,000
---------------------------------------
$37,879,000 $37,770,000
=======================================
LIABILITIES AND PARTNERS' EQUITY
Accounts payable $51,000 $26,000
Advance payments from renters 85,000 74,000
Partners' equity:
Limited partners' equity, $500 per unit, 128,000
units authorized, issued and outstanding 37,284,000 37,211,000
General partner's equity 459,000 459,000
---------------------------------------
Total partners' equity 37,743,000 37,670,000
---------------------------------------
$37,879,000 $37,770,000
=======================================
</TABLE>
See accompanying note.
2
<PAGE>
PS PARTNERS II, LTD.
CONDENSED STATEMENTS OF INCOME
(Restated - See Note 5)
(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 $714,000 $711,000 $1,408,000 $1,377,000
Equity in earnings of real estate entities 1,051,000 906,000 1,902,000 1,679,000
Interest income 30,000 10,000 49,000 25,000
--------------------------------------------------------------------
1,795,000 1,627,000 3,359,000 3,081,000
--------------------------------------------------------------------
COSTS AND EXPENSES:
Cost of operations 201,000 189,000 401,000 384,000
Management fees 42,000 43,000 85,000 83,000
Depreciation and amortization 160,000 153,000 319,000 305,000
Administrative 59,000 52,000 78,000 72,000
--------------------------------------------------------------------
462,000 437,000 883,000 844,000
--------------------------------------------------------------------
NET INCOME $1,333,000 $1,190,000 $2,476,000 $2,237,000
====================================================================
Limited partners' share of net income
($17.29 per unit in 1998 and
$14.90 per unit in 1997) $2,213,000 $1,907,000
General partner's share of net income 263,000 330,000
-----------------------------------
$2,476,000 $2,237,000
===================================
</TABLE>
See accompanying notes.
3
<PAGE>
PS PARTNERS II, LTD.
CONDENSED STATEMENTS OF CASH FLOWS
(Restated - See Note 5)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------------------------
1998 1997
-----------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $2,476,000 $2,237,000
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 319,000 305,000
Decrease in rent and other receivables 5,000 48,000
Decrease in other assets 48,000 24,000
Increase (decrease) in accounts payable 25,000 (176,000)
Increase in advance payments from renters 11,000 1,000
Equity in earnings of real estate entities (1,902,000) (1,679,000)
-----------------------------------------
Total adjustments (1,494,000) (1,477,000)
-----------------------------------------
Net cash provided by operating activities 982,000 760,000
-----------------------------------------
CASH FLOWS PROVIDED BY INVESTING ACTIVITIES:
Distributions from real estate entities 2,879,000 1,982,000
Investment in real estate entities - (1,000)
Additions to real estate facilities (123,000) (93,000)
-----------------------------------------
Net cash provided by investing activities 2,756,000 1,888,000
-----------------------------------------
CASH FLOWS USED IN FINANCING ACTIVITIES:
Distributions to partners (2,403,000) (3,105,000)
-----------------------------------------
Net cash used in financing activities (2,403,000) (3,105,000)
-----------------------------------------
Net increase (decrease) in cash and cash equivalents 1,335,000 (457,000)
Cash and cash equivalents at the beginning of the period 888,000 1,075,000
-----------------------------------------
Cash and cash equivalents at the end of the period $2,223,000 $618,000
=========================================
</TABLE>
See accompanying notes.
4
<PAGE>
PS PARTNERS II, LTD.
CONDENSED STATEMENTS OF CASH FLOWS
(Restated - See Note 5)
(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 entities $- $(8,539,000)
Transfer of real estate facilities for interest in real estate
entities, net - 8,539,000
</TABLE>
See accompanying notes.
5
<PAGE>
PS PARTNERS II, LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1998
(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/A for the year ended December 31,
1997.
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 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.
4. In January 1997, the Partnership, the Joint Venture, PSI, and other related
partnerships transferred a total of 35 business parks to PS Business Parks,
LP ("PSBPLP"), an operating partnership formed to own and operate business
parks in which PSI has a significant interest. Included among the
properties transferred were the Partnership's and Joint Venture's business
parks in exchange for respective partnership interests in PSBPLP. The
general partners of PSBPLP is PS Business Parks, Inc.
5. Previously, the Partnership consolidated the Joint Venture in its financial
statements. The accompanying financial statements have been restated to
de-consolidate the Joint Venture. This restatement had no impact upon net
income or Partner's Equity.
6. Summarized combined financial data with respect to the Real Estate Entities
is as follows:
Six Months Ended June 30,
-----------------------------------
1998 1997
-----------------------------------
Total revenues......................... $42,282,000 $18,773,000
Minority interest in income............ $5,683,000 $4,392,000
Net income............................. $13,632,000 $3,715,000
6
<PAGE>
PS PARTNERS II, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
- --------------------------
Management's Discussion and Analysis of Financial Condition and Results
of Operations contains "forward looking" statements that involve risks and
uncertainties and are based upon a number of assumptions. Actual results and
trends may differ materially depending upon a number of factors. Information
regarding these factors is contained in the Partnership's Annual Report on Form
10-K/A for the fiscal year ended December 31, 1997 and in the report for the
quarterly period on Form 10-Q/A for the quarter ended March 31, 1998.
RESULTS OF OPERATIONS
- ---------------------
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997:
The Partnership's net income for the three months ended June 30, 1998
was $1,333,000 compared to $1,190,000 for the three months ended June 30, 1997,
representing an increase of $143,000, or 12%. The increase was primarily due to
the Partnership's share of improved property operations at the real estate
facilities that the Partnership has an interest in combined with a decrease in
depreciation expense allocated to the Partnership with respect to the Joint
Venture.
Property Operations
- -------------------
Rental income for the Partnership's wholly-owned mini-warehouse properties
was $714,000 compared to $711,000 for the three months June 30, 1998 and 1997,
respectively, representing an increase of $3,000. Cost of operations (including
management fees) increased $11,000, or 5%, to $243,000 from $232,000 for the
three months ended June 30, 1998 and 1997, respectively. Accordingly, for the
Partnership's wholly-owned mini-warehouse properties, property net operating
income decreased by $8,000, or 2%, from $479,000 to $471,000 for the three
months ended June 30, 1997 and 1998, respectively.
Equity in Earnings of Real Estate Entities
- ------------------------------------------
Equity in earnings of real estate entities was $1,051,000 in the three
months ended June 30, 1998 as compared to $906,000 during the three months ended
June 30, 1997, representing an increase of $145,000, or 16%. This was due
primarily to the Partnership's share of improved operating results at the Joint
Venture's mini-warehouses, combined with a decrease in depreciation expense
allocated to the Partnership with respect to the Joint Venture.
7
<PAGE>
Depreciation and Amortization
- -----------------------------
Depreciation and amortization increased $7,000, or 5%, from $153,000 to
$160,000 for the three months ended June 30, 1997 and 1998, respectively. This
increase was primarily attributable to the depreciation of capital expenditures
made during 1997 and 1998.
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997:
The Partnership's net income for the six months ended June 30, 1998 was
$2,476,000 compared to $2,237,000 for the six months ended June 30, 1997,
representing an increase of $239,000, or 11%. The increase was primarily due to
the Partnership's share of improved property operations at the real estate
facilities that the Partnership has an interest in, combined with a decrease in
depreciation expense allocated to the Partnership with respect to the Joint
Venture.
Property Operations
- -------------------
Rental income for the Partnership's wholly-owned mini-warehouse properties
was $1,408,000 compared to $1,377,000 for the six months June 30, 1998 and 1997,
respectively, representing an increase of $31,000, or 2%. Cost of operations
(including management fees) increased $19,000, or 4%, to $486,000 from $467,000
for the six months ended June 30, 1998 and 1997, respectively. Accordingly, for
the Partnership's wholly-owned mini-warehouse properties, property net operating
income increased by $12,000, or 1%, from $910,000 to $922,000 for the six months
ended June 30, 1997 and 1998, respectively.
Equity in Earnings of Real Estate Entities
- ------------------------------------------
Equity in earnings of real estate entities was $1,902,000 in the six
months ended June 30, 1998 as compared to $1,679,000 during the six months ended
June 30, 1997, representing an increase of $223,000, or 13%. This was due
primarily to the Partnership's share of improved operating results at the Joint
Venture's mini-warehouses combined with a decrease in depreciation expense
allocated to the Partnership with respect to the Joint Venture.
Depreciation and Amortization
- -----------------------------
Depreciation and amortization increased $14,000, or 5%, from $305,000
to $319,000 for the six months ended June 30, 1997 and 1998, respectively. This
increase was primarily attributable to the depreciation of capital expenditures
made during 1997 and 1998.
8
<PAGE>
SUPPLEMENTAL PROPERTY DATA
- --------------------------
Most of the Partnership's net income is from the Partnership's share of
the operating results of the Mini-Warehouse Properties. Therefore, in order to
evaluate the Partnership's operating results, the General Partners analyze the
operating performance of the Mini-Warehouse Properties.
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997:
Rental income for the Mini-Warehouse Properties was $3,490,000 compared
to $3,404,000 for the three months ended June 30, 1998 and 1997, respectively,
representing an increase of $86,000, or 3%. The increase in rental income was
primarily attributable to increased rental rates at the Mini-Warehouse
Properties, combined with increased average occupancy levels. The monthly
average realized rent per square foot for the Mini-Warehouse Properties was $.65
compared to $.64 for the three months ended June 30, 1998 and 1997,
respectively. The weighted average occupancy levels at the Mini-Warehouse
Properties increased from 90% to 91% for the three months ended June 30, 1997
and 1998, respectively. Cost of operations (including management fees) increased
$63,000, or 5%, to $1,297,000 from $1,234,000 for the three months ended June
30, 1998 and 1997, respectively. This increase was primarily attributable to
increases in property tax and advertising and promotion (due primarily to the
PSI national telephone reservation center) expenses. Accordingly, for the
Mini-Warehouse Properties, property net operating income increased by $23,000
from $2,170,000 to $2,193,000 for the three months ended June 30, 1997 and 1998,
respectively.
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997:
Rental income for the Mini-Warehouse Properties was $6,868,000 compared
to $6,657,000 for the six months ended June 30, 1998 and 1997, respectively,
representing an increase of $211,000, or 3%. The increase in rental income was
primarily attributable to increased rental rates at the Mini-Warehouse
Properties, combined with increased average occupancy levels. The monthly
average realized rent per square foot for the Mini-Warehouse Properties was $.65
compared to $.63 for the six months ended June 30, 1998 and 1997, respectively.
The weighted average occupancy levels at the Mini-Warehouse Properties increased
from 89% to 90% for the six months ended June 30, 1997 and 1998, respectively.
Cost of operations (including management fees) increased $130,000, or 5%, to
$2,620,000 from $2,490,000 for the six months ended June 30, 1998 and 1997,
respectively. This increase was primarily attributable to increases in
advertising and promotion (due primarily to the PSI national telephone
reservation center), property tax, and repairs and maintenance expenses.
9
<PAGE>
Accordingly, for the Mini-Warehouse Properties, property net operating income
increased by $81,000, or 2%, from $4,167,000 to $4,248,000 for the six months
ended June 30, 1997 and 1998, respectively.
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
and distributions from real estate entities ($3,861,000 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 $226,000 of
capital improvements for the Partnership's wholly-owned properties; total
capital improvements for the six months ended June 30, 1998 with respect to
these properties were $123,000.
The Partnership paid distributions to the limited and general partners
totaling $2,142,000 ($16.72 per unit) and $261,000, respectively, during the
first six months of 1998. Future distribution rates may be adjusted to levels
which are supported by operating cash flow and distributions from Real Estate
Entities after capital improvements and any other necessary obligations.
10
<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: March 11, 1999
PS PARTNERS II, 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)
11
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000727069
<NAME> PS PARTNERS II, 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> 2,223,000
<SECURITIES> 0
<RECEIVABLES> 28,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,251,000
<PP&E> 15,026,000
<DEPRECIATION> (7,047,000)
<TOTAL-ASSETS> 37,879,000
<CURRENT-LIABILITIES> 136,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 37,743,000
<TOTAL-LIABILITY-AND-EQUITY> 37,879,000
<SALES> 0
<TOTAL-REVENUES> 3,359,000
<CGS> 0
<TOTAL-COSTS> 486,000
<OTHER-EXPENSES> 397,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,476,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,476,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,476,000
<EPS-PRIMARY> 17.29
<EPS-DILUTED> 17.29
</TABLE>
