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 March 31, 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 0-13479
-------
PS PARTNERS III, LTD.
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 95-3920904
- ---------------------------------- ----------------------
(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 March 31, 1998
and December 31, 1997 2
Condensed consolidated statements of income for the three
months ended March 31, 1998 and 1997 3
Condensed consolidated statements of cash flows for the three
months ended March 31, 1998 and 1997 4-5
Notes to condensed consolidated financial statements 6
Management's discussion and analysis of financial condition
and results of operations 7-8
PART II. OTHER INFORMATION
(Items 1 through 5 are not applicable)
Item 6 - Exhibits and Reports on Form 8-K 9
<PAGE>
PS PARTNERS III, LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
------------------------------------
(Unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 1,876,000 $ 1,455,000
Rent and other receivables 191,000 244,000
Real estate facilities, at cost:
Land 13,856,000 13,856,000
Buildings and equipment 69,102,000 68,931,000
------------------------------------
82,958,000 82,787,000
Less accumulated depreciation (35,921,000) (35,058,000)
------------------------------------
47,037,000 47,729,000
Investment in real estate entity 5,593,000 5,608,000
Other assets 151,000 144,000
------------------------------------
$ 54,848,000 $ 55,180,000
====================================
LIABILITIES AND PARTNERS' EQUITY
Accounts payable $ 706,000 $ 932,000
Advance payments from renters 514,000 476,000
Minority interest in general partnerships 28,136,000 28,192,000
Partners' equity:
Limited partners' equity, $500 per unit, 128,000
units authorized, issued and outstanding 25,153,000 25,240,000
General partner's equity 339,000 340,000
------------------------------------
Total partners' equity 25,492,000 25,580,000
------------------------------------
$ 54,848,000 $ 55,180,000
====================================
</TABLE>
See accompanying notes.
2
<PAGE>
PS PARTNERS III, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------------
1998 1997
------------------------------------
REVENUE:
<S> <C> <C>
Rental income $ 3,846,000 $ 3,706,000
Equity in income of real estate entity 103,000 73,000
Interest income 20,000 6,000
------------------------------------
3,969,000 3,785,000
------------------------------------
COSTS AND EXPENSES:
Cost of operations 1,273,000 1,307,000
Management fees 231,000 222,000
Depreciation and amortization 863,000 814,000
Administrative 22,000 21,000
------------------------------------
2,389,000 2,364,000
------------------------------------
Income before minority interest 1,580,000 1,421,000
Minority interest in income (668,000) (658,000)
------------------------------------
NET INCOME $ 912,000 $ 763,000
====================================
Limited partners' share of net income
($6.28 per unit in 1998 and
$5.13 per unit in 1997) $ 804,000 $ 656,000
General partner's share of net income 108,000 107,000
------------------------------------
$ 912,000 $ 763,000
====================================
</TABLE>
See accompanying notes.
3
<PAGE>
PS PARTNERS III, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------------
1998 1997
---------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 912,000 $ 763,000
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 863,000 814,000
Decrease in rent and other receivables 53,000 34,000
(Increase) decrease in other assets (7,000) 112,000
Decrease in accounts payable (226,000) (320,000)
Increase in advance payments from renters 38,000 16,000
Equity income in real estate entity (103,000) (73,000)
Minority interest in income 668,000 658,000
---------------------------------------
Total adjustments 1,286,000 1,241,000
---------------------------------------
Net cash provided by operating activities 2,198,000 2,004,000
---------------------------------------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Distributions from real estate entity 118,000 -
Investment in real estate entity - (11,000)
Additions to real estate facilities (171,000) (404,000)
---------------------------------------
Net cash used in investing activities (53,000) (415,000)
---------------------------------------
CASH FLOWS USED IN FINANCING ACTIVITIES:
Distributions to holder of minority interest (724,000) (586,000)
Distributions to partners (1,000,000) (1,000,000)
---------------------------------------
Net cash used in financing activities (1,724,000) (1,586,000)
---------------------------------------
Net increase in cash and cash equivalents 421,000 3,000
Cash and cash equivalents at the beginning of the period 1,455,000 529,000
---------------------------------------
Cash and cash equivalents at the end of the period $ 1,876,000 $ 532,000
=======================================
</TABLE>
See accompanying notes.
4
<PAGE>
PS PARTNERS III, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Continued)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------------
1998 1997
------------------------------------
Supplemental schedule of noncash investing and financing activities:
<S> <C> <C>
Investment in real estate entity $ - $ (5,399,000)
Transfer of real estate facilities for interest in real
estate entity, net - 5,399,000
</TABLE>
See accompanying notes.
5
<PAGE>
PS PARTNERS III, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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 March 31, 1998, the results of operations for the
three months ended March 31, 1998 and 1997 and cash flows for the three
months then ended.
3. The results of operations for the three months ended March 31, 1998 are
not necessarily indicative of the results to be expected for the full
year.
4. In January 1997, the Partnership and 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 was the Partnership's business park in exchange
for a partnership interest in PSBPLP. The general partner of PSBPLP is PS
Business Parks, Inc.
6
<PAGE>
PS PARTNERS III, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations:
- ----------------------
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997:
The Partnership's net income for the three months ended March 31, 1998
was $912,000 compared to $763,000 for the three months ended March 31, 1997,
representing an increase of $149,000, or 20%. The increase was primarily due to
an increase in property operations at the Partnership's real estate facilities.
Rental income for the Partnership's mini-warehouse operations was
$3,846,000 compared to $3,706,000 for the three months ended March 31, 1998 and
1997, respectively, representing an increase of $140,000, 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 $.59
compared to $.57 for the three months ended March 31, 1998 and 1997,
respectively. The weighted average occupancy levels at the mini-warehouse
facilities remained stable at 89% for the three months ended March 31, 1997 and
1998. Cost of operations (including management fees) decreased $25,000, or 2%,
to $1,504,000 from $1,529,000 for the three months ended March 31, 1998 and
1997, respectively. Accordingly, for the Partnership's mini-warehouse
operations, property net operating income increased by $165,000, or 8%, from
$2,177,000 to $2,342,000 for the three months ended March 31, 1997 and 1998,
respectively.
Depreciation and amortization increased $49,000, or 6%, from $814,000 to
$863,000 for the three months ended March 31, 1997 and 1998, respectively. This
increase was primarily attributable to the depreciation of capital expenditures
made during 1997 and 1998.
Minority interest in income was $668,000 in 1998 compared to $658,000 in
1997, representing an increase of $10,000, or 2%. This increase was primarily
attributable to an increase in operations at the Partnership's real estate
facilities owned jointly with PSI, partially offset by an 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 $176,000 for the three months ended March 31, 1998 compared to
$122,000 for the same period in 1997.
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
7
<PAGE>
cash from property operations and cash reserves. Cash generated from operations
($2,198,000 for the three months ended March 31, 1998) has been sufficient to
meet all current obligations of the Partnership.
During 1998, the Partnership anticipates approximately $1,227,000 of
capital improvements (of which $379,000 represents PSI's joint venture share).
Total capital improvements were $171,000 for the three months ended March 31,
1998 of which $124,000 represents the Partnership's share.
The Partnership paid distributions to the limited and general partners
totaling $891,000 ($6.96 per unit) and $109,000, respectively, during the first
three months of 1998. Future distribution rates may be adjusted to levels which
are supported by operating cash flow after capital improvements and any other
necessary obligations.
8
<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) Reports on 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: May 13, 1998
PS PARTNERS III, 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)
9
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000741513
<NAME> PS PARTNERS III, LTD.
<MULTIPLIER> 1
<CURRENCY> U.S. $
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 1,876,000
<SECURITIES> 0
<RECEIVABLES> 191,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,067,000
<PP&E> 82,958,000
<DEPRECIATION> (35,921,000)
<TOTAL-ASSETS> 54,848,000
<CURRENT-LIABILITIES> 1,220,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 25,492,000
<TOTAL-LIABILITY-AND-EQUITY> 54,848,000
<SALES> 0
<TOTAL-REVENUES> 3,969,000
<CGS> 0
<TOTAL-COSTS> 1,504,000
<OTHER-EXPENSES> 885,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 912,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 912,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 912,000
<EPS-PRIMARY> 6.28
<EPS-DILUTED> 6.28
</TABLE>
