-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GCgulu32WYlbuGUOJvfYqhFDawVyu0aztt0pIKibYN0oNBNNFDrGA13mXdKZ/lQG 9BAoz5hIpWQoyxjIXMwKCg== 0000741513-98-000017.txt : 19981116 0000741513-98-000017.hdr.sgml : 19981116 ACCESSION NUMBER: 0000741513-98-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PS PARTNERS III LTD CENTRAL INDEX KEY: 0000741513 STANDARD INDUSTRIAL CLASSIFICATION: LESSORS OF REAL PROPERTY, NEC [6519] IRS NUMBER: 953920904 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-13479 FILM NUMBER: 98747032 BUSINESS ADDRESS: STREET 1: 701 WESTERN AVE STREET 2: SUITE 200 CITY: GLENDALE STATE: CA ZIP: 91201-2397 BUSINESS PHONE: 8182448080 MAIL ADDRESS: STREET 1: 701 WESTERN AVE STREET 2: SUITE 200 CITY: GLENDALE STATE: CA ZIP: 91201 10-Q 1 10-Q 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 0-13479 ------- 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 --- --- INDEX PART I. FINANCIAL INFORMATION Condensed consolidated balance sheets at September 30, 1998 and December 31, 1997 2 Condensed consolidated statements of income for the three and nine months ended September 30, 1998 and 1997 3 Condensed consolidated statements of cash flows for the nine months ended September 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 7-11 PART II. OTHER INFORMATION (Items 1 through 5 are not applicable) Item 6 - Exhibits and Reports on Form 8-K 12 PS PARTNERS III, LTD. CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31, 1998 1997 --------------------------------- (Unaudited) ASSETS Cash and cash equivalents $ 3,260,000 $ 1,455,000 Rent and other receivables 172,000 244,000 Real estate facilities, at cost: Land 13,856,000 13,856,000 Buildings and equipment 69,737,000 68,931,000 --------------------------------- 83,593,000 82,787,000 Less accumulated depreciation (37,670,000) (35,058,000) --------------------------------- 45,923,000 47,729,000 Investment in real estate entity 5,666,000 5,608,000 Other assets 145,000 144,000 --------------------------------- $ 55,166,000 $ 55,180,000 ================================= LIABILITIES AND PARTNERS' EQUITY Accounts payable $ 1,035,000 $ 932,000 Advance payments from renters 503,000 476,000 Minority interest in general partnerships 27,798,000 28,192,000 Partners' equity: Limited partners' equity, $500 per unit, 128,000 units authorized, issued and outstanding 25,488,000 25,240,000 General partner's equity 342,000 340,000 --------------------------------- Total partners' equity 25,830,000 25,580,000 --------------------------------- $ 55,166,000 $ 55,180,000 =================================
See accompanying notes. 2 PS PARTNERS III, LTD. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Nine Months Ended September 30, September 30, --------------------------------------------------------------------- 1998 1997 1998 1997 --------------------------------------------------------------------- REVENUE: Rental income $ 4,065,000 $ 3,929,000 $ 11,889,000 $ 11,466,000 Equity in income of real estate entity 122,000 91,000 347,000 268,000 Interest income 41,000 14,000 91,000 29,000 --------------------------------------------------------------------- 4,228,000 4,034,000 12,327,000 11,763,000 --------------------------------------------------------------------- COSTS AND EXPENSES: Cost of operations 1,339,000 1,247,000 3,917,000 3,785,000 Management fees 241,000 236,000 713,000 688,000 Depreciation and amortization 881,000 838,000 2,612,000 2,481,000 Administrative 42,000 41,000 127,000 119,000 --------------------------------------------------------------------- 2,503,000 2,362,000 7,369,000 7,073,000 --------------------------------------------------------------------- Income before minority interest 1,725,000 1,672,000 4,958,000 4,690,000 Minority interest in income (429,000) (741,000) (1,708,000) (2,110,000) --------------------------------------------------------------------- NET INCOME $ 1,296,000 $ 931,000 $ 3,250,000 $ 2,580,000 ===================================================================== Limited partners' share of net income ($22.81 per unit in 1998 and $17.63 per unit in 1997) $ 2,920,000 $ 2,257,000 General partner's share of net income 330,000 323,000 ----------------------------------- $ 3,250,000 $ 2,580,000 ===================================
See accompanying notes. 3 PS PARTNERS III, LTD. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended September 30, ----------------------------------- 1998 1997 ----------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 3,250,000 $ 2,580,000 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 2,612,000 2,481,000 Decrease (increase) in rent and other receivables 72,000 (1,000) (Increase) decrease in other assets (1,000) 132,000 Increase (decrease) in accounts payable 103,000 (97,000) Increase (decrease) in advance payments from renters 27,000 (45,000) Equity income in real estate entity (347,000) (268,000) Minority interest in income 1,708,000 2,110,000 ----------------------------------- Total adjustments 4,174,000 4,312,000 ----------------------------------- Net cash provided by operating activities 7,424,000 6,892,000 ----------------------------------- CASH FLOWS USED IN INVESTING ACTIVITIES: Distributions from real estate entity 289,000 - Investment in real estate entity - (11,000) Additions to real estate facilities (806,000) (1,132,000) ----------------------------------- Net cash used in investing activities (517,000) (1,143,000) ----------------------------------- CASH FLOWS USED IN FINANCING ACTIVITIES: Distributions to holder of minority interest (2,102,000) (2,102,000) Distributions to partners (3,000,000) (3,000,000) ----------------------------------- Net cash used in financing activities (5,102,000) (5,102,000) ----------------------------------- Net increase in cash and cash equivalents 1,805,000 647,000 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 $ 3,260,000 $ 1,176,000 ===================================
See accompanying notes. 4 PS PARTNERS III, LTD. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Continued)
Nine Months Ended September 30, ----------------------------------- 1998 1997 ----------------------------------- Supplemental schedule of noncash investing and financing activities: Investment in real estate entity $ - $ (5,399,000) Transfer of real estate facilities for interest in real estate entity, net - 5,399,000
See accompanying notes. 5 PS PARTNERS III, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 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 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. 4. The City of Manchester, Airport Authority ("Airport Authority") intends to acquire the Partnership's Manchester, New Hampshire property through exercise of its right of eminent domain or pursuant to a conveyance in lieu of an exercise of such power. The Airport Authority intends to construct an extension of its runways, and relocate an adjoining road. The Partnership is currently negotiating with the Airport Authority to determine an equitable reparation settlement. The Partnerhsip does not anticipate the recognition of a loss as a result of the taking. The State of Texas, Department of Transportation ("Texas") and the Partnership have agreed in principle on the terms of a proposed conveyance, in lieu of an exercise of the State's right of eminent domain of a parcel of land at the Partnership's East Ben White, Austin, Texas property. Texas intends to use the parcel of land for road expansion. The Partnership anticipates the transaction will be completed during the fourth quarter of 1998. The Partnership does not anticipate the recognition of a loss as a result of the partial taking. 6 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, 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 $1,296,000 compared to $931,000 for the three months ended September 30, 1997, representing an increase of $365,000, or 39%. 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 $4,065,000 compared to $3,929,000 for the three months ended September 30, 1998 and 1997, respectively, representing an increase of $136,000, or 3%. The increase in rental income was primarily attributable to increased rental rates, partially offset by decreased average occupancy levels. The monthly average realized rent per square foot for the mini-warehouse facilities was $.62 compared to $.59 for the three months ended September 30, 1998 and 1997, respectively. The weighted average occupancy levels at the mini-warehouse facilities decreased to 90% from 92% for the three months ended September 30, 1998 and 1997, respectively. Cost of operations (including management fees) increased $97,000, or 7%, to $1,580,000 from $1,483,000 for the three months ended September 30, 1998 and 1997, respectively. The increase was primarily attributable to increases in advertising and promotion (due primarily to the PSI national telephone reservation center), payroll, and property tax expenses. Accordingly, for the Partnership's mini-warehouse operations, property net operating income increased by $39,000, or 2%, from $2,446,000 to $2,485,000 for the three months ended September 30, 1997 and 1998, respectively. Interest income increased $27,000, or 193%, from $14,000 to $41,000 for the three months ended September 30, 1997 and 1998, respectively. This increase was primarily attributable to increased average invested cash balances. 7 Depreciation and amortization increased $43,000, or 5%, from $881,000 to $838,000 for the three months ended September 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 $312,000, or 42%, to $429,000 from $741,000 for the three months ended September 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 $493,000 for the three months ended September 30, 1998 compared to $147,000 for the same period in 1997, partially offset by an increase in operations at the Partnership's real estate facilities owned jointly with PSI. 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 $3,250,000 compared to $2,580,000 for the nine months ended September 30, 1997, representing an increase of $670,000, or 26%. 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 $11,889,000 compared to $11,466,000 for the nine months ended September 30, 1998 and 1997, respectively, representing an increase of $423,000, 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 nine months ended September 30, 1998 and 1997, respectively. The weighted average occupancy levels at the mini-warehouse facilities remained stable at 90% for the nine months ended September 30, 1997 and 1998. Cost of operations (including management fees) increased $157,000, or 4%, to $4,630,000 from $4,473,000 for the nine months ended September 30, 1998 and 1997, respectively. The increase was primarily attributable to increases in advertising and promotion (due primarily to the PSI national telephone reservation center) and property tax expenses. Accordingly, for the Partnership's mini-warehouse operations, property net operating income increased by $266,000, or 4%, from $6,993,000 to $7,259,000 for the nine months ended September 30, 1997 and 1998, respectively. Interest income increased $62,000, or 214%, from $29,000 to $91,000 for the nine months ended September 30, 1997 and 1998, respectively. This increase was primarily attributable to increased average invested cash balances. 8 Depreciation and amortization increased $131,000, or 5%, from $2,481,000 to $2,612,000 for the nine months ended September 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 $1,708,000 in 1998 compared to $2,110,000 in 1997, representing a decrease of $402,000, or 19%. 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 $988,000 for the nine months ended September 30, 1998 compared to $420,000 for the same period in 1997, partially offset by an increase in operations at the Partnership's real estate facilities owned jointly with PSI. 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 ($7,424,000 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 $1,227,000 of capital improvements (of which $379,000 represents PSI's joint venture share). Total capital improvements were $806,000 for the nine months ended September 30, 1998 of which $548,000 represents the Partnership's share. The Partnership paid distributions to the limited and general partners totaling $2,673,000 ($20.88 per unit) and $327,000, 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. 9 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 $164,000. 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 10 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 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. 11 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: November 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) 12 EX-27 2 FDS --
5 0000741513 PARTNERS III, LTD. 1 U.S. $ 9-MOS DEC-31-1998 JAN-1-1998 SEP-30-1998 1 3,260,000 0 172,000 0 0 3,432,000 83,593,000 (37,670,000) 55,166,000 1,538,000 0 0 0 0 25,830,000 55,166,000 0 12,327,000 0 4,630,000 2,739,000 0 0 3,250,000 0 3,250,000 0 0 0 3,250,000 22.81 22.81
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