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 0-13479
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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
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<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
<PAGE>
PS PARTNERS III, LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------------------------
(Unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents $2,748,000 $1,455,000
Rent and other receivables 138,000 244,000
Real estate facilities, at cost:
Land 13,856,000 13,856,000
Buildings and equipment 69,377,000 68,931,000
------------------------------
83,233,000 82,787,000
Less accumulated depreciation (36,789,000) (35,058,000)
------------------------------
46,444,000 47,729,000
Investment in real estate entity 5,629,000 5,608,000
Other assets 146,000 144,000
------------------------------
$55,105,000 $55,180,000
==============================
LIABILITIES AND PARTNERS' EQUITY
Accounts payable $827,000 $932,000
Advance payments from renters 554,000 476,000
Minority interest in general partnerships 28,190,000 28,192,000
Partners' equity:
Limited partners' equity, $500 per unit, 128,000
units authorized, issued and outstanding 25,195,000 25,240,000
General partner's equity 339,000 340,000
------------------------------
Total partners' equity 25,534,000 25,580,000
------------------------------
$55,105,000 $55,180,000
==============================
</TABLE>
See accompanying notes.
2
<PAGE>
PS PARTNERS III, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------------------------------------------
1998 1997 1998 1997
-------------------------------------------------------------------
REVENUE:
<S> <C> <C> <C> <C>
Rental income $3,978,000 $3,831,000 $7,824,000 $7,537,000
Equity in income of real estate entity 122,000 104,000 225,000 177,000
Interest income 30,000 9,000 50,000 15,000
-------------------------------------------------------------------
4,130,000 3,944,000 8,099,000 7,729,000
-------------------------------------------------------------------
COSTS AND EXPENSES:
Cost of operations 1,305,000 1,231,000 2,578,000 2,538,000
Management fees 241,000 230,000 472,000 452,000
Depreciation and amortization 868,000 829,000 1,731,000 1,643,000
Administrative 63,000 57,000 85,000 78,000
-------------------------------------------------------------------
2,477,000 2,347,000 4,866,000 4,711,000
-------------------------------------------------------------------
Income before minority interest 1,653,000 1,597,000 3,233,000 3,018,000
Minority interest in income (611,000) (711,000) (1,279,000) (1,369,000)
-------------------------------------------------------------------
NET INCOME $1,042,000 $886,000 $1,954,000 $1,649,000
===================================================================
Limited partners' share of net income
($13.57 per unit in 1998 and
$11.21 per unit in 1997) $1,737,000 $1,435,000
General partner's share of net income 217,000 214,000
-----------------------------------
$1,954,000 $1,649,000
===================================
</TABLE>
See accompanying notes.
3
<PAGE>
PS PARTNERS III, 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 $1,954,000 $1,649,000
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 1,731,000 1,643,000
Decrease (increase) in rent and other receivables 106,000 (1,000)
(Increase) decrease in other assets (2,000) 130,000
Decrease in accounts payable (105,000) (349,000)
Increase (decrease) in advance payments from renters 78,000 (7,000)
Equity income in real estate entity (225,000) (177,000)
Minority interest in income 1,279,000 1,369,000
---------------------------------
Total adjustments 2,862,000 2,608,000
---------------------------------
Net cash provided by operating activities 4,816,000 4,257,000
---------------------------------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Distributions from real estate entity 204,000 -
Investment in real estate entity - (11,000)
Additions to real estate facilities (446,000) (639,000)
---------------------------------
Net cash used in investing activities (242,000) (650,000)
---------------------------------
CASH FLOWS USED IN FINANCING ACTIVITIES:
Distributions to holder of minority interest (1,281,000) (1,324,000)
Distributions to partners (2,000,000) (2,001,000)
---------------------------------
Net cash used in financing activities (3,281,000) (3,325,000)
---------------------------------
Net increase in cash and cash equivalents 1,293,000 282,000
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 $2,748,000 $811,000
=================================
</TABLE>
See accompanying notes.
4
<PAGE>
PS PARTNERS III, 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 $- $(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
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 III, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION 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 for the three months ended June 30, 1998 was
$1,042,000 compared to $886,000 for the three months ended June 30, 1997,
representing an increase of $156,000, or 18%. The increase was primarily due to
decreased minority interest in income for those properties held jointly with
PSI, an increase in property operations at the Partnership's real estate
facilities, and an increase in interest income.
Rental income for the Partnership's mini-warehouse operations was
$3,978,000 compared to $3,831,000 for the three months ended June 30, 1998 and
1997, respectively, representing an increase of $147,000, 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 $.61
compared to $.58 for the three months ended June 30, 1998 and 1997,
respectively. The weighted average occupancy levels at the mini-warehouse
facilities remained stable at 90% for the three months ended June 30, 1997 and
1998. Cost of operations (including management fees) increased $85,000, or 6%,
to $1,546,000 from $1,461,000 for the three months ended June 30, 1998 and 1997,
respectively. The increase was primarily attributable to increases in
advertising and promotion (due primarily to the PSI national telephone
reservations center), property tax, and office expenses. Accordingly, for the
Partnership's mini-warehouse operations, property net operating income increased
by $62,000, or 3%, from $2,370,000 to $2,432,000 for the three months ended June
30, 1997 and 1998, respectively.
Interest income increased $21,000, or 233%, from $9,000 to $30,000 for the
three months ended June 30, 1997 and 1998, respectively. This increase was
primarily attributable to increased average invested cash balances.
Depreciation and amortization increased $39,000, or 5%, from $829,000 to
$868,000 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.
Minority interest in income decreased $100,000, or 14%, to $611,000 from
$711,000 for the three months ended June 30, 1998 and 1997, 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
$319,000 for the three months ended June 30, 1998 compared to $138,000 for the
same period in 1997, partially offset by an increase in operations at the
Partnership's real estate facilities owned jointly with PSI.
7
<PAGE>
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
$1,954,000 compared to $1,649,000 for the six months ended June 30, 1997,
representing an increase of $305,000, or 19%. The increase was primarily due to
an increase in property operations at the Partnership's real estate facilities,
decreased minority interest in income for those properties held jointly with
PSI, and an increase in interest income.
Rental income for the Partnership's mini-warehouse operations was
$7,824,000 compared to $7,537,000 for the six months ended June 30, 1998 and
1997, respectively, representing an increase of $287,000, 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 $.60
compared to $.58 for the six months ended June 30, 1998 and 1997, respectively.
The weighted average occupancy levels at the mini-warehouse facilities remained
stable at 89% for the six months ended June 30, 1997 and 1998. Cost of
operations (including management fees) increased $60,000, or 2%, to $3,050,000
from $2,990,000 for the six months ended June 30, 1998 and 1997, respectively.
The increase was primarily attributable to increases in advertising and
promotion (due primarily to the PSI national telephone reservations center)and
property tax expenses, partially offset by a decrease in payroll expense.
Accordingly, for the Partnership's mini-warehouse operations, property net
operating income increased by $227,000, or 5%, from $4,547,000 to $4,774,000 for
the six months ended June 30, 1997 and 1998, respectively.
Interest income increased $35,000, or 233%, from $15,000 to $50,000 for the
six months ended June 30, 1997 and 1998, respectively. This increase was
primarily attributable to increased average invested cash balances.
Depreciation and amortization increased $88,000, or 5%, from $1,643,000 to
$1,731,000 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.
Minority interest in income was $1,279,000 in 1998 compared to $1,369,000
in 1997, representing a decrease of $90,000, or 7%. 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 $495,000 for the six
months ended June 30, 1998 compared to $260,000 for the same period in 1997,
partially offset by an increase in operations at the Partnership's real estate
facilities owned jointly with PSI.
8
<PAGE>
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
($4,816,000 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 $1,227,000 of
capital improvements (of which $379,000 represents PSI's joint venture share).
Total capital improvements were $446,000 for the six months ended June 30, 1998
of which $295,000 represents the Partnership's share.
The Partnership paid distributions to the limited and general partners
totaling $1,782,000 ($13.92 per unit) and $218,000, 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 necessary obligations.
9
<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: August 13, 1998
PS PARTNERS III, 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> 0000741513
<NAME> PS PARTNERS III, 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> 2,748,000
<SECURITIES> 0
<RECEIVABLES> 138,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,886,000
<PP&E> 83,233,000
<DEPRECIATION> (36,789,000)
<TOTAL-ASSETS> 55,105,000
<CURRENT-LIABILITIES> 1,381,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 25,534,000
<TOTAL-LIABILITY-AND-EQUITY> 55,105,000
<SALES> 0
<TOTAL-REVENUES> 8,099,000
<CGS> 0
<TOTAL-COSTS> 3,050,000
<OTHER-EXPENSES> 1,816,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,954,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,954,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,954,000
<EPS-PRIMARY> 13.57
<EPS-DILUTED> 13.57
</TABLE>
