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 September 30, 1996
------------------
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 0-15800
-------
PS PARTNERS VII, LTD., a California Limited Partnership
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 95-4018460
- ----------------------------------- ----------------------
(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 September 30, 1996
and December 31, 1995 2
Condensed consolidated statements of income for the three and nine
months ended September 30, 1996 and 1995 3
Condensed consolidated statements of cash flows for the nine
months ended September 30, 1996 and 1995 4
Notes to condensed consolidated financial statements 5
Management's discussion and analysis of financial condition
and results of operations 6-8
PART II. OTHER INFORMATION
(Items 1 through 4 are not applicable)
Item 5 - Other Information 9
Item 6 - Exhibits and Reports on Form 8-K 9
<PAGE>
<TABLE>
PS PARTNERS VII, LTD.,
a California Limited Partnership
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 30, December 31,
1996 1995
------------------- -------------------
(Unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 340,000 $ 535,000
Rent and other receivables 57,000 48,000
Real estate facilities, at cost:
Land 18,782,000 18,782,000
Buildings and equipment 51,440,000 50,187,000
------------------- -------------------
70,222,000 68,969,000
Less accumulated depreciation (20,080,000) (18,271,000)
------------------- -------------------
50,142,000 50,698,000
Other assets 155,000 125,000
------------------- -------------------
$ 50,694,000 $ 51,406,000
=================== ===================
LIABILITIES AND PARTNERS' EQUITY
Accounts payable $ 1,223,000 $ 970,000
Advance payments from renters 362,000 387,000
Minority interest in general partnerships 21,520,000 21,167,000
Partners' equity:
Limited partners' equity, $500 per unit, 150,000
units authorized, 108,831 issued and outstanding 27,243,000 28,522,000
General partners' equity 346,000 360,000
------------------- -------------------
Total partners' equity 27,589,000 28,882,000
------------------- -------------------
$ 50,694,000 $ 51,406,000
=================== ===================
</TABLE>
See accompanying notes.
2
<PAGE>
<TABLE>
PS PARTNERS VII, LTD.,
a California Limited Partnership
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------------ ------------------------------------
1996 1995 1996 1995
------------------ ---------------- ---------------- ------------------
REVENUE:
<S> <C> <C> <C> <C>
Rental income $ 2,684,000 $ 2,641,000 $ 7,918,000 $ 7,751,000
Interest income 3,000 25,000 10,000 80,000
------------------ ---------------- ---------------- ------------------
2,687,000 2,666,000 7,928,000 7,831,000
------------------ ---------------- ---------------- ------------------
COSTS AND EXPENSES:
Cost of operations 831,000 777,000 2,441,000 2,293,000
Management fees 158,000 156,000 469,000 459,000
Depreciation and amortization 618,000 570,000 1,809,000 1,641,000
Administrative 44,000 37,000 90,000 118,000
------------------ ---------------- ---------------- ------------------
1,651,000 1,540,000 4,809,000 4,511,000
------------------ ---------------- ---------------- ------------------
Income before minority interest 1,036,000 1,126,000 3,119,000 3,320,000
Minority interest in income (542,000) (568,000) (1,601,000) (1,671,000)
------------------ ---------------- ---------------- ------------------
NET INCOME $ 494,000 $ 558,000 $ 1,518,000 $ 1,649,000
================== ================ ================ ==================
Limited partners' share of net income
($11.26 per unit in 1996 and $11.08
per unit in 1995) $ 1,225,000 $ 1,206,000
General partners' share of net income 293,000 443,000
---------------- ------------------
$ 1,518,000 $ 1,649,000
================ ==================
</TABLE>
See accompanying notes.
3
<PAGE>
<TABLE>
PS PARTNERS VII, LTD.,
a California Limited Partnership
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Nine Months Ended
September 30,
---------------------------------------
1996 1995
------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 1,518,000 $ 1,649,000
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 1,809,000 1,641,000
Increase in rent and other receivables (9,000) (7,000)
Increase in other assets (30,000) -
Decrease in accounts payable 253,000 240,000
Decrease in advance payments from renters (25,000) (10,000)
Minority interest in income 1,601,000 1,671,000
------------------ ------------------
Total adjustments 3,599,000 3,535,000
------------------ ------------------
Net cash provided by operating activities 5,117,000 5,184,000
------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to real estate facilities (1,253,000) (335,000)
------------------ ------------------
Net cash used in investing activities (1,253,000) (335,000)
------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to holder of minority interest (1,248,000) (1,628,000)
Distributions to partners (2,811,000) (4,303,000)
------------------ ------------------
Net cash used in financing activities (4,059,000) (5,931,000)
------------------ ------------------
Net decrease in cash and cash equivalents (195,000) (1,082,000)
Cash and cash equivalents at the beginning of the period 535,000 1,844,000
------------------ ------------------
Cash and cash equivalents at the end of the period $ 340,000 $ 762,000
================== ==================
</TABLE>
See accompanying notes.
4
<PAGE>
PS PARTNERS VII, LTD.,
a California Limited Partnership
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(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, 1995.
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 September 30, 1996, the results of operations for the
three and nine months ended September 30, 1996 and 1995 and cash flows for
the nine months then ended.
3. The results of operations for the three and nine months ended September 30,
1996 are not necessarily indicative of the results to be expected for the
full year.
5
<PAGE>
PS PARTNERS VII, LTD.,
a California Limited Partnership
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations:
- ----------------------
THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1995:
The Partnership's net income was $494,000 and $558,000 for the three months
ended September 30, 1996 and 1995, respectively, representing a decrease of
$64,000, or 11%. This decrease was primarily due to an increase in depreciation
expense, combined with decreases in property operating results and interest
income, partially offset by a decrease in minority interest in income for those
properties held jointly with Public Storage, Inc. ("PSI").
Interest income decreased for the three months ended September 30, 1996
over the same period in 1995 as a result of a decrease in average invested cash
balances.
Net property income (rental income less cost of operations and management
fees and excluding depreciation) for the three months ended September 30, 1996
decreased $13,000 or 1%, as rental income increased $43,000 or 2%, and costs of
operations (including management fees and excluding depreciation expense)
increased $56,000 or 6% compared to the same period in 1995.
Rental income for the Partnership's mini-warehouse operations was
$2,458,000 compared to $2,429,000 for the three months ended September 30, 1996
and 1995, respectively, representing an increase of $29,000, or 1%. This
increase was primarily attributable to increased occupancy levels. The weighted
average occupancy levels at the mini-warehouse facilities was 91% compared to
90% for the three months ended September 30, 1996 and 1995, respectively. The
monthly average realized rent per square foot for the mini-warehouse facilities
remained stable at $.61 for the three months ended September 30, 1996 and 1995.
Cost of operations (including management fees) for the mini-warehouses increased
$60,000, or 7%, to $873,000 from $813,000 for the three months ended September
30, 1996 and 1995, respectively. This increase was primarily attributable to
increases in property tax, payroll, and advertising expenses. Accordingly, for
the Partnership's mini-warehouse operations, property net operating income
decreased $31,000 or 2%, from $1,616,000 to $1,585,000 for the three months
ended September 30, 1995 and 1996, respectively.
Rental income for the Partnership's business park operations increased
$14,000 or 7%, to $226,000 from $212,000 for the three months ended September
30, 1996 and 1995, respectively. This increase was primarily attributable to
increased rental rates and occupancy levels. The weighted average occupancy
levels at the business park facilities was 100% compared to 99% for the three
months ended September 30, 1996 and 1995, respectively. The monthly average
realized rent per square foot for the business park facilities was $.53 compared
to $.48 for the three months ended September 30, 1996 and 1995, respectively.
Cost of operations (including management fees) for the business parks decreased
$4,000, or 3%, to $116,000 from $120,000 for the three months ended September
30, 1996 and 1995, respectively. Accordingly, for the Partnership's business
park facilities, property net operating income increased $18,000, or 20%, to
$110,000 from $92,000 for the three months ended September 30, 1996 and 1995,
respectively.
Depreciation and amortization increased by $48,000, from $570,000 for the
three months ended September 30, 1995 to $618,000 for the same period in 1996.
This increase is due to the depreciation of capital expenditures which were made
during 1995 and 1996.
Minority interest in income decreased $26,000 to $542,000 from $568,000 for
the three months ended September 30, 1996 and 1995, respectively. This decrease
6
<PAGE>
PS PARTNERS VII, LTD.,
a California Limited Partnership
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
was primarily attributable to the allocation of depreciation and amortization
expenses (pursuant to the partnership agreement with respect to those real
estate facilities which are jointly owned with PSI) to PSI of $29,000 for the
three months ended September 30, 1996 compared to $12,000 for the same period in
1995, and a decrease in operations at the Partnership's real estate facilities
for those properties owned jointly with PSI.
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1995:
The Partnership's net income was $1,518,000 and $1,649,000 for the nine
months ended September 30, 1996 and 1995, respectively, representing a decrease
of $131,000, or 8%. This decrease was primarily due to an increase in
depreciation expense and a decrease in interest income, partially offset by
decreases in minority interest in income for those properties held jointly with
PSI and administrative expenses.
Interest income decreased for the nine months ended September 30, 1996 over
the same period in 1995 as a result of a decrease in average invested cash
balances.
Net property income (rental income less cost of operations and management
fees and excluding depreciation) for the nine months ended September 30, 1996
increased $9,000, as rental income increased $167,000, or 2%, and costs of
operations (including management fees and excluding depreciation expense)
increased $158,000, or 6%, compared to the same period in 1995.
Rental income for the Partnership's mini-warehouse operations was
$7,241,000 compared to $7,083,000 for the nine months ended September 30, 1996
and 1995, respectively, representing an increase of $158,000, or 2%. This
increase was primarily attributable to increased rental rates. The monthly
average realized rent per square foot for the mini-warehouse facilities was $.61
compared to $.60 for the nine months ended September 30, 1996 and 1995,
respectively. The weighted average occupancy levels at the mini-warehouse
facilities remained stable at 89% for the nine months ended September 30, 1996
and 1995. Costs of operations (including management fees) for the
mini-warehouses increased $157,000, or 6%, to $2,602,000 from $2,445,000 for the
nine months ended September 30, 1996 and 1995, respectively. This increase was
primarily attributable to increases in property tax, payroll, and advertising
expenses, partially offset by a decrease in repairs and maintenance expense.
Accordingly, for the Partnership's mini-warehouse operations, property net
operating income increased $1,000 to $4,639,000 from $4,638,000 for the nine
months ended September 30, 1996 and 1995, respectively.
Rental income for the Partnership's business park operations decreased
$9,000 or 1%, to $677,000 from $668,000 for the nine months ended September 30,
1996 and 1995, respectively. This increase was primarily attributable to
increased rental rates and occupancy levels. The weighted average occupancy
levels at the business park facilities was 100% compared to 99% for the nine
months ended September 30, 1996 and 1995, respectively. The monthly average
realized rent per square foot for the business park facilities was $.52 compared
to $.48 for the nine months ended September 30, 1996 and 1995, respectively.
Cost of operations (including management fees) for the business parks increased
$1,000 to $308,000 from $307,000 for the nine months ended September 30, 1996
and 1995, respectively. Accordingly, for the Partnership's business park
facilities, property net operating income increased by $8,000 or 2%, from
$361,000 to $369,000 for the nine months ended September 30, 1995 and 1996,
respectively.
Depreciation and amortization increased by $168,000, from $1,641,000 for
the nine months ended September 30, 1995 to $1,809,000 for the same period in
1996. This increase is due to the depreciation of capital expenditures which
were made during 1995 and 1996.
Administrative expenses decreased $28,000 from $118,000 in 1995 to $90,000
in 1996. This decrease is principally a result of non-recurring expenses in
1995, totaling $24,000, incurred in connection with environmental assessments of
the Partnership's facilities.
7
<PAGE>
PS PARTNERS VII, LTD.,
a California Limited Partnership
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Minority interest in income decreased $70,000 to $1,601,000 from $1,671,000
for the nine months ended September 30, 1996 and 1995, respectively. This
decrease was primarily attributable to the allocation of depreciation and
amortization expenses (pursuant to the partnership agreement with respect to
those real estate facilities which are jointly owned with PSI) to PSI of $84,000
for the nine months ended September 30, 1996 compared to $12,000 for the same
period in 1995.
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
($5,117,000 for the nine months ended September 30, 1996) has been sufficient to
meet all current obligations of the Partnership.
During 1996, the Partnership anticipates approximately $1,464,000 of
capital improvements (of which $429,000 represents PSI's joint venture share).
During 1995, the Partnership's property manager commenced a program to enhance
the visual appearance of the mini-warehouse facilities managed by it. Such
enhancements will include new signs, exterior color schemes, and improvements to
the rental offices. In addition, several of the Texas properties are undergoing
major property enhancements, which include the installation of climate control.
Total capital improvements were $1,253,000 for the nine months ended September
30, 1996 of which $877,000 represents the Partnership's share.
The Partnership paid distributions to the limited and general partners
totaling $2,504,000 ($23.01 per unit) and $307,000, respectively, during the
first nine months of 1996. In the second quarter of 1996, the Partnership
reduced the distribution rate from $9.01 to $7.00 per quarter. In mid-1995, the
Partnership made a special distribution of $8.19 that significantly reduced the
Partnership's cash reserves. Over the last year there has been no significant
improvement to the Partnership's operations. The General Partners believe that
modest increases in the Partnership's operations should enable the Partnership
to maintain distributions at a level of $7.00 per quarter, while making
necessary capital improvements to the Partnership's properties, and replenishing
the Partnership's cash reserves.
8
<PAGE>
PART II. OTHER INFORMATION
ITEMS 1 through 4 are not applicable.
Item 5 Other Information
-----------------
In June and July 1996, PSI completed cash tender offers pursuant to which
PSI acquired a total of 7,785 limited partnership units in the Partnership at
$357 per unit.
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: November 12, 1996
PS PARTNERS VII, LTD.,
a California Limited Partnership
BY: Public Storage, Inc.
General Partner
BY: /s/ Ronald L. Havner Jr.
------------------------------
Ronald L. Havner, Jr.
Senior Vice President and Chief Financial
Officer of Public Storage, Inc.
(principal financial officer)
BY: /s/ John Reyes
------------------------------
John Reyes
Vice President and Controller
of Public Storage, Inc.
(principal accounting officer)
9
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000781850
<NAME> PS PARTNERS VII, LTD.
<MULTIPLIER> 1
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 340,000
<SECURITIES> 0
<RECEIVABLES> 57,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 397,000
<PP&E> 70,222,000
<DEPRECIATION> (20,080,000)
<TOTAL-ASSETS> 50,694,000
<CURRENT-LIABILITIES> 1,585,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 27,589,000
<TOTAL-LIABILITY-AND-EQUITY> 50,694,000
<SALES> 0
<TOTAL-REVENUES> 7,928,000
<CGS> 0
<TOTAL-COSTS> 2,910,000
<OTHER-EXPENSES> 1,899,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,518,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,518,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,518,000
<EPS-PRIMARY> 11.26
<EPS-DILUTED> 11.26
</TABLE>
