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, 1999
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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 balance sheets at March 31, 1999
and December 31, 1998 2
Condensed statements of income for the three
months ended March 31, 1999 and 1998 3
Condensed statements of cash flows for the three
months ended March 31, 1999 and 1998 4
Notes to condensed financial statements 5-6
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 BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------------- -----------------
(Unaudited)
ASSETS
------
<S> <C> <C>
Cash and cash equivalents $1,005,000 $3,122,000
Rent and other receivables 13,000 16,000
Real estate facilities, at cost:
Land 3,558,000 3,558,000
Buildings and equipment 13,096,000 13,062,000
----------------- -----------------
16,654,000 16,620,000
Less accumulated depreciation (7,519,000) (7,339,000)
----------------- -----------------
9,135,000 9,281,000
Investment in real estate entities 13,640,000 13,897,000
Other assets 59,000 21,000
----------------- -----------------
$23,852,000 $26,337,000
================= =================
LIABILITIES AND PARTNERS' EQUITY
--------------------------------
Accounts payable $348,000 $228,000
Advance payments from renters 101,000 82,000
Partners' equity:
Limited partners' equity, $500 per unit, 128,000
units authorized, issued and outstanding 23,085,000 25,683,000
General partner's equity 318,000 344,000
----------------- -----------------
Total partners' equity 23,403,000 26,027,000
----------------- -----------------
$23,852,000 $26,337,000
================= =================
</TABLE>
See accompanying notes.
2
<PAGE>
PS PARTNERS III, LTD.
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------------
1999 1998
----------------- -----------------
REVENUE:
<S> <C> <C>
Rental income $685,000 $682,000
Equity in earnings of real estate entities 1,350,000 669,000
Interest income 40,000 20,000
----------------- -----------------
2,075,000 1,371,000
----------------- -----------------
COSTS AND EXPENSES:
Cost of operations 252,000 231,000
Management fees 41,000 41,000
Depreciation and amortization 180,000 165,000
Administrative 26,000 22,000
----------------- -----------------
499,000 459,000
----------------- -----------------
NET INCOME $1,576,000 $912,000
================= =================
Limited partners' share of net income
($8.95 per unit in 1999 and
$6.28 per unit in 1998) $1,145,000 $804,000
General partner's share of net income 431,000 108,000
----------------- -----------------
$1,576,000 $912,000
================= =================
</TABLE>
See accompanying notes.
3
<PAGE>
PS PARTNERS III, LTD.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------------
1999 1998
------------------ -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $1,576,000 $912,000
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 180,000 165,000
Decrease in rent and other receivables 3,000 48,000
Increase in other assets (38,000) (5,000)
Increase (decrease) in accounts payable 120,000 (81,000)
Increase in advance payments from renters 19,000 5,000
Equity in earnings of real estate entities (1,350,000) (669,000)
------------------ -----------------
Total adjustments (1,066,000) (537,000)
------------------ -----------------
Net cash provided by operating activities 510,000 375,000
------------------ -----------------
CASH FLOWS PROVIDED BY INVESTING ACTIVITIES:
Distributions from real estate entities 1,607,000 1,026,000
Additions to real estate facilities (34,000) (71,000)
------------------ -----------------
Net cash provided by investing activities 1,573,000 955,000
------------------ -----------------
CASH FLOWS USED IN FINANCING ACTIVITIES:
Distributions to partners (4,200,000) (1,000,000)
------------------ -----------------
Net cash used in financing activities (4,200,000) (1,000,000)
------------------ -----------------
Net (decrease) increase in cash and cash equivalents (2,117,000) 330,000
Cash and cash equivalents at the beginning of the period 3,122,000 1,222,000
------------------ -----------------
Cash and cash equivalents at the end of the period $1,005,000 $1,552,000
================== =================
</TABLE>
See accompanying notes.
4
<PAGE>
PS PARTNERS III, LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1999
(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
for the year ended December 31, 1998.
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 March 31, 1999, the results of operations for the three
months ended March 31, 1999 and 1998 and cash flows for the three
months then ended.
3. The results of operations for the three months ended March 31, 1999 are
not necessarily indicative of the results to be expected for the full
year.
4. In January 1997, 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 was the Joint Venture's business park in
exchange for a partnership interest in PSBPLP. The general partner of
PSBPLP is PS Business Parks, Inc.
5. Summarized combined financial data with respect to the Real Estate
Entities is as follows:
Three Months Ended March 31,
-------------------------------------
1999 1998
----------------- ------------------
Total revenues......................... $32,566,000 $18,056,000
Minority interest in income............ $2,966,000 $2,814,000
Net income............................. $10,809,000 $4,999,000
6. During the first quarter of 1999, the Joint Venture and the State of
Texas ("Texas") reached agreement on the terms of a conveyance, in lieu
of an exercise of the State's right of eminent domain, of a parcel of
land with improvements at the Joint Venture's East Ben White, Austin,
Texas property. Texas intends to use the parcel of land for road
expansion. As a result of the agreement, the Joint Venture received net
5
<PAGE>
settlement proceeds of approximately $771,000. The Joint Venture
recognized a gain on the partial disposition of the property of
approximately $533,000, the Partnership's portion of which was
approximately $438,000.
In March 1999, the Joint Venture and the City of Manchester, Airport
Authority ("Airport Authority") reached agreement on the terms of an
acquisition by termination, in lieu of an exercise of the City's right
of eminent domain, of the Joint Venture's Manchester, New Hampshire
property. The Airport Authority intends to use the land for the
construction of an extension of its runways and for the relocation of
an adjoining road. According to the terms of the agreement of
acquisition, the Airport Authority will acquire the property at the
purchase price $2,250,000. The Joint Venture expects the receipt of net
proceeds and the close of transaction to be completed during the second
quarter of 1999.
6
<PAGE>
PS PARTNERS III, 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 for the fiscal year ended December 31, 1998.
RESULTS OF OPERATIONS
- ---------------------
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998:
The Partnership's net income for the three months ended March 31, 1999
was $1,576,000 compared to $912,000 for the three months ended March 31, 1998,
representing an increase of $664,000, or 73%. The increase was primarily due to
the Partnership's share of the gain on the disposition of a portion of the Joint
Venture's East Ben White property of $438,000, combined with a decrease in
depreciation allocated to the Partnership with respect to the Joint Venture,
partially offset by a decrease in the Partnership's share of property operations
at the real estate facilities in which the Partnership has an interest.
Excluding the effect of the partial disposition of the property, the
Partnership's net income for the three months ended March 31, 1999 was
$1,138,000 compared to $912,000 for the three months ended March 31, 1998,
representing an increase of $226,000, or 25%.
Rental income for the Partnership's wholly-owned mini-warehouse
properties was $685,000 compared to $682,000 for the three months ended March
31, 1999 and 1998, respectively, representing an increase of $3,000. Cost of
operations (including management fees) increased $21,000, or 8%, to $293,000
from $272,000 for the three months ended March 31, 1999 and 1998, respectively.
Accordingly, for the Partnership's wholly-owned mini-warehouse properties,
property net operating income decreased by $18,000, or 5%, from $410,000 to
$392,000 for the three months ended March 31, 1998 and 1999, respectively.
Equity in Earnings of Real Estate Entities
- ------------------------------------------
Equity in earnings of real estate entities was $1,350,000 in the three
months ended March 31, 1999 as compared to $669,000 during the three months
ended March 31, 1998, representing an increase of $681,000, or 102%. This
increase was due primarily to the Partnership's share of the gain on the
disposition of a portion of the Joint Venture's East Ben White property of
$438,000, combined with a decrease in depreciation allocated to the Partnership
with respect to the Joint Venture, partially offset by a decrease in the
Partnership's share of operating results at the Joint Venture's mini-warehouse
properties. Excluding the effect of the partial disposition of the property,
7
<PAGE>
equity in earnings of real estate entities was $912,000 compared to $669,000 for
the three months ended March 31, 1999 and 1998, respectively, representing an
increase of $243,000, or 36%.
Depreciation and Amortization
- -----------------------------
Depreciation and amortization increased $15,000, or 9%, from $165,000
to $180,000 for the three months ended March 31, 1998 and 1999, respectively.
This increase was primarily attributable to the depreciation of capital
expenditures made during 1998 and 1999.
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. Because of the partial
condemnation of the Joint Venture's East Ben White facility, the operating
results of the East Ben White property are not comparable on a 1999 to 1998
basis. Consequently, the amounts described below exclude the operations of the
East Ben White property.
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998:
Rental income for the Mini-Warehouse Properties was $3,864,000 compared
to $3,801,000 for the three months ended March 31, 1999 and 1998, respectively,
representing an increase of $63,000, or 2%. The increase in rental income was
primarily attributable to increased rental rates, partially offset by a decrease
in average occupancy rates. The monthly average realized rent per square foot
for the Mini-Warehouse Properties was $.62 compared to $.59 for the three months
ended March 31, 1999 and 1998, respectively. The weighted average occupancy
levels at the Mini-Warehouse Properties decreased from 89% to 87% for the three
months ended March 31, 1998 and 1999, respectively. Cost of operations
(including management fees) increased $161,000, or 11%, to $1,642,000 from
$1,481,000 for the three months ended March 31, 1999 and 1998, respectively.
This increase was primarily attributable to increases in advertising, payroll,
repairs and maintenance, and property tax expenses. Accordingly, for the
Mini-Warehouse Properties, property net operating income decreased by $98,000,
or 4%, from $2,320,000 to $2,222,000 for the three months ended March 31, 1998
and 1999, respectively.
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
and distributions from real estate entities ($2,117,000 for the three months
ended March 31, 1999) has been sufficient to meet all current obligations of the
Partnership.
During 1999, the Partnership anticipates approximately $194,000 of
capital improvements with respect to the Partnership's wholly-owned facilities.
Total capital improvements were $34,000 for the three months ended March 31,
1999 with respect to these properties.
The Partnership paid distributions to the limited and general partners
totaling $3,742,000 ($29.23 per unit) and $458,000, respectively, during the
first three months of 1999. Included in these distributions were special
distributions of a portion of the Partnership's operating reserve to the limited
and general partners totaling approximately $2,851,000 ($22.27 per unit) and
$349,000, respectively. Future distribution rates may be adjusted to levels
which are supported by operating cash flow after capital improvements and any
other necessary obligations.
9
<PAGE>
PART II. OTHER INFORMATION
ITEMS 1 through 5 are not applicable.
Item 6 Exhibits and Reports on Form 8-K
--------------------------------
(a) The following Exhibits are included herein:
(27) Financial Data Schedule
(b) Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATED: May 14, 1999
PS PARTNERS III, LTD.
BY: Public Storage, Inc.
General Partner
BY: /s/ John Reyes
---------------------------------------------
John Reyes
Senior Vice President and Chief Financial
Officer of Public Storage, Inc.
(principal financial and accounting officer)
10
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000741513
<NAME> PS PARTNERS III, LTD.
<MULTIPLIER> 1
<CURRENCY> U.S.$
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 1,005,000
<SECURITIES> 0
<RECEIVABLES> 13,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,018,000
<PP&E> 16,654,000
<DEPRECIATION> (7,519,000)
<TOTAL-ASSETS> 23,852,000
<CURRENT-LIABILITIES> 449,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 23,403,000
<TOTAL-LIABILITY-AND-EQUITY> 23,852,000
<SALES> 0
<TOTAL-REVENUES> 2,075,000
<CGS> 0
<TOTAL-COSTS> 293,000
<OTHER-EXPENSES> 206,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,576,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,576,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,576,000
<EPS-PRIMARY> 8.95
<EPS-DILUTED> 8.95
</TABLE>
