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, 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 0-16876
-------
PS PARTNERS VIII, LTD., a California Limited Partnership
------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 95-4029178
- ------------------------------------------- ------------------------
(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 September 30, 1998
and December 31, 1997 2
Condensed statements of income for the three
and nine months ended September 30, 1998 and 1997 3
Condensed statements of cash flows for the
nine months ended September 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 VIII, LTD.,
a California Limited Partnership
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
---------------------------------
(Unaudited)
ASSETS
------
<S> <C> <C>
Cash and cash equivalents $ 513,000 $ 249,000
Rent and other receivables (4,000) 11,000
Real estate facilities, at cost:
Land 4,926,000 4,926,000
Buildings and equipment 12,413,000 12,320,000
---------------------------------
17,339,000 17,246,000
Less accumulated depreciation (5,510,000) (5,081,000)
---------------------------------
11,829,000 12,165,000
Investment in real estate entity 5,167,000 5,134,000
Other assets 31,000 31,000
---------------------------------
$ 17,536,000 $ 17,590,000
=================================
LIABILITIES AND PARTNERS' EQUITY
--------------------------------
Accounts payable $ 257,000 $ 223,000
Advance payments from renters 113,000 121,000
Partners' equity:
Limited partners' equity,
$500 per unit, 150,000 units authorized,
52,751 issued and outstanding 16,960,000 17,039,000
General partners' equity 206,000 207,000
---------------------------------
Total partners' equity 17,166,000 17,246,000
---------------------------------
$ 17,536,000 $ 17,590,000
=================================
</TABLE>
See accompanying notes.
2
<PAGE>
PS PARTNERS VIII, LTD.,
a California Limited Partnership
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------------------------------------------
1998 1997 1998 1997
-------------------------------------------------------------
REVENUE:
<S> <C> <C> <C> <C>
Rental income $ 714,000 $ 665,000 $ 2,078,000 $ 1,931,000
Equity in income of real estate entity 71,000 53,000 201,000 155,000
Interest income 7,000 4,000 17,000 10,000
-------------------------------------------------------------
792,000 722,000 2,296,000 2,096,000
-------------------------------------------------------------
COSTS AND EXPENSES:
Cost of operations 178,000 169,000 556,000 517,000
Management fees 42,000 40,000 124,000 116,000
Depreciation and amortization 142,000 140,000 429,000 418,000
Administrative 26,000 26,000 66,000 62,000
-------------------------------------------------------------
388,000 375,000 1,175,000 1,113,000
-------------------------------------------------------------
NET INCOME $ 404,000 $ 347,000 $ 1,121,000 $ 983,000
=============================================================
Limited partners' share of net income
($18.79 per unit in 1998 and
$16.19 per unit 1997) $ 991,000 $ 854,000
General partners' share of net income 130,000 129,000
-------------------------------
$ 1,121,000 $ 983,000
===============================
</TABLE>
See accompanying notes.
3
<PAGE>
PS PARTNERS VIII, LTD.,
a California Limited Partnership
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------------------------
1998 1997
------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 1,121,000 $ 983,000
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 429,000 418,000
Decrease in rent and other receivables 15,000 -
Decrease in other assets - 19,000
Increase (decrease) in accounts payable 34,000 (9,000)
Decrease in advance payments from renters (8,000) -
Equity in income of real estate entity (201,000) (155,000)
------------------------------------
Total adjustments 269,000 273,000
------------------------------------
Net cash provided by operating activities 1,390,000 1,256,000
------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Distributions from real estate entity 168,000 -
Investment in real estate entity - (2,000)
Additions to real estate facilities (93,000) (92,000)
------------------------------------
Net cash provided by (used in) investing activities 75,000 (94,000)
------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners (1,201,000) (1,201,000)
------------------------------------
Net cash used in financing activities (1,201,000) (1,201,000)
------------------------------------
Net increase (decrease) in cash and cash equivalents 264,000 (39,000)
Cash and cash equivalents at the beginning of the period 249,000 209,000
------------------------------------
Cash and cash equivalents at the end of the period $ 513,000 $ 170,000
====================================
</TABLE>
See accompanying notes.
4
<PAGE>
PS PARTNERS VIII, LTD.,
a California Limited Partnership
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Continued)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------------------------
1998 1997
------------------------------------
Supplemental schedule of noncash investing and financing activities:
<S> <C> <C>
Investment in real estate entity $ - $ (5,016,000)
Transfer of real estate facilities for interest in
real estate entity, net - 5,016,000
</TABLE>
See accompanying notes.
5
<PAGE>
PS PARTNERS VIII, LTD.,
a California Limited Partnership
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 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 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 September 30, 1998, the results of operations for the three and nine
months ended September 30, 1998 and 1997 and cash flows for the nine months
then ended.
3. The results of operations for the three and nine months ended September 30,
1998 are not necessarily indicative of the results to be expected for the
full year.
6
<PAGE>
PS PARTNERS VIII, LTD.,
a California Limited Partnership
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, 1997 and in the reports for the
quarterly periods on Form 10-Q for the quarters ended March 31, 1998 and June
30, 1998.
Results of Operations:
- ----------------------
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1997:
The Partnership's net income for the three months ended September 30, 1998
was $404,000 compared to $347,000 for the same period in 1997, representing an
increase of $57,000, or 16%. The increase is primarily attributable to an
increase in the Partnership's mini-warehouse operations.
Rental income for the Partnership's mini-warehouse operations was $714,000
compared to $665,000 for the three months ended September 30, 1998 and 1997,
respectively, representing an increase of $49,000, or 7%. The increase in rental
income was primarily attributable to increased rental rates at the Partnership's
mini-warehouse facilities, partially offset by decreased average occupancy
levels. The monthly average realized rent per square foot for the mini-warehouse
facilities was $.88 compared to $.80 for the three months ended September 30,
1998 and 1997, respectively. The weighted average occupancy levels at the
mini-warehouse facilities decreased from 95% to 93% for the three months ended
September 30, 1997 and 1998, respectively. Cost of operations (including
management fees) increased $11,000, or 5%, to $220,000 from $209,000 for the
three months ended September 30, 1998 and 1997, respectively. This increase was
primarily attributable to increases in payroll and advertising and promotion
(due primarily to the PSI national telephone reservation center) expenses.
Accordingly, for the Partnership's mini-warehouse operations, property net
operating income increased $38,000, or 8%, from $456,000 to $494,000 for the
three months ended September 30, 1997 and 1998, respectively.
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1997:
The Partnership's net income for the nine months ended September 30, 1998
was $1,121,000 compared to $983,000 for the same period in 1997, representing an
increase of $138,000, or 14%. The increase is primarily attributable to an
increase in the Partnership's mini-warehouse operations.
7
<PAGE>
Rental income for the Partnership's mini-warehouse operations was
$2,078,000 compared to $1,931,000 for the nine months ended September 30, 1998
and 1997, respectively, representing an increase of $147,000, or 8%. The
increase in rental income was primarily attributable to increased rental rates
at the Partnership's mini-warehouse facilities. The monthly average realized
rent per square foot for the mini-warehouse facilities was $.85 compared to $.80
for the nine months ended September 30, 1998 and 1997, respectively. The
weighted average occupancy levels at the mini-warehouse facilities remained
stable at 93% for the nine months ended September 30, 1997 and 1998. Cost of
operations (including management fees) increased $47,000, or 7%, to $680,000
from $633,000 for the nine months ended September 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 payroll expenses. Accordingly, for the
Partnership's mini-warehouse operations, property net operating income increased
$100,000, or 8%, from $1,298,000 to $1,398,000 for the nine months ended
September 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
($1,390,000 for the nine months ended September 30, 1998) has been sufficient to
meet all current obligations of the Partnership.
During 1998, the Partnership anticipates approximately $188,000 of capital
improvements. Total capital improvements were $93,000 for the nine months ended
September 30, 1998.
The Partnership paid distributions to the limited and general partners
totaling $1,070,000 ($20.28 per unit) and $131,000, respectively, during the
first nine 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.
Impact of the Year 2000 Issue
- -----------------------------
Public Storage, Inc. ("PSI"), the general partner and property manager, has
completed an assessment of all of its hardware and software applications to
identify susceptibility to what is commonly referred to as the "Y2K Issue"
whereby certain computer programs have been written using two digits rather than
four to define the applicable year. Any of PSI's computer programs or hardware
with the Y2K Issue that have date-sensitive applications or embedded chips may
recognize a date using "00" as the year 1900 rather than the year 2000,
resulting in miscalculations or system failure causing disruptions of
operations.
8
<PAGE>
Many of PSI's critical applications, relative to the direct management of
properties, have recently been replaced and PSI believes they are already Year
2000 compliant. PSI has an implementation in process on the remaining critical
applications, including its general ledger and related systems, that are
believed to have Y2K Issues. PSI expects the implementation to be complete by
June 1999. Contingency plans have been developed for use in case PSI's
implementations are not completed on a timely basis. While PSI presently
believes that the impact of the Y2K Issue on its systems can be mitigated, if
the plan for ensuring Year 2000 compliance and the related contingency plans
were to fail, be insufficient, or not be implemented on a timely basis,
operations of the Partnership could be materially impacted.
Certain of PSI's other non-computer related systems that may be impacted by
the Y2K Issue, such as security systems, are currently being evaluated, and PSI
expects the evaluation to be completed by June 1999. PSI expects the
implementation of any required solutions to be complete in advance of December
31, 1999. PSI has not fully evaluated the impact of lack of Year 2000 compliance
on these systems, but has no reason to believe that lack of compliance would
materially impact the operations of the Partnership.
The Partnership exchanges electronic data with certain outside vendors in
the banking and payroll processing areas. PSI has been advised by these vendors
that their systems are or will be Year 2000 compliant, but has requested a Year
2000 compliance certification from these entities. PSI is not aware of any other
vendors, suppliers, or other external agents with a Y2K Issue that would
materially impact the Partnership's results of operations, liquidity, or capital
resources. However, PSI has no means of ensuring that external agents will be
Year 2000 compliant, and there can be no assurance that the Partnership has
identified all such external agents. The inability of external agents to
complete their Year 2000 compliance process in a timely fashion could materially
impact the Partnership. The effect of non-compliance by external agents is not
determinable.
The total cost of PSI's Year 2000 compliance activities (which primarily
consists of the costs of new systems) will be allocated to all entities that use
the PSI computer systems. The amount to be allocated to the Partnership is
estimated at approximately $20,000. These costs are capitalized.
The costs of the projects and the date on which PSI believes that it will
be Year 2000 compliant are based upon management's best estimates, and were
derived utilizing numerous assumptions of future events. There can be no
assurance that these estimates will be achieved, and actual results could differ
materially from those anticipated. There can be no assurance that PSI has
identified all potential Y2K Issues either within PSI and the Partnership or at
external agents. In addition, the impact of the Y2K Issue on governmental
9
<PAGE>
entities and utility providers and the resultant impact on the Partnership, as
well as disruptions in the general economy, may be material but cannot be
reasonably determined or quantified.
10
<PAGE>
PART II. OTHER INFORMATION
Items 1 through 4 are not applicable.
Item 5 Other Information
The Partnership has entered into an Agreement and Plan of Reorganization by
and among PSI, PS Partners VIII Merger Co., Inc. and the Partnership, dated as
of September 28, 1998 (the "Agreement and Plan of Reorganization"). Under the
Agreement and Plan of Reorganization, each of the Partnership units held by the
public limited partners will be converted into the right to receive a value of
$449 in PSI common stock or, at the limited partner's election, in cash. The
Agreement and Plan of Reorganization is referenced as Exhibit 2 hereto and is
incorporated herein by this reference.
Item 6 Exhibits and Reports on Form 8-K
(a) The following Exhibits are included herein:
(27) Financial Data Schedule
(b) Form 8-K
The Partnership filed a Current Report on Form 8-K dated September
28, 1998 (filed September 30, 1998), pursuant to Item 5, relating to the
Agreement and Plan of Reorganization referenced above.
Item 7 Financial Statements and Exhibits
(c) Exhibits.
(2)Agreement and Plan of Reorganization by and among Public
Storage, Inc., PS Partners VIII Merger Co., Inc. and PS Partners VIII, Ltd.
Dated as of September 28, 1998. Filed with the Partnership's Current Report on
Form 8-K dated September 28, 1998 and incorporated herein by reference.
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 13, 1998
PS PARTNERS VIII, LTD.,
a California Limited Partnership
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> 0000793934
<NAME> PS PARTNERS VIII, LTD.
<MULTIPLIER> 1
<CURRENCY> U.S. $
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 513,000
<SECURITIES> 0
<RECEIVABLES> (4,000)
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 509,000
<PP&E> 17,339,000
<DEPRECIATION> (5,510,000)
<TOTAL-ASSETS> 17,536,000
<CURRENT-LIABILITIES> 370,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 17,166,000
<TOTAL-LIABILITY-AND-EQUITY> 17,536,000
<SALES> 0
<TOTAL-REVENUES> 2,296,000
<CGS> 0
<TOTAL-COSTS> 680,000
<OTHER-EXPENSES> 495,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,121,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,121,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,121,000
<EPS-PRIMARY> 18.79
<EPS-DILUTED> 18.79
</TABLE>
