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, 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
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California 95-3878680
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
701 Western Avenue
Glendale, California 91201-2394
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(Address of principal executive offices) (Zip Code)
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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.
INDEX
PART I. FINANCIAL INFORMATION
Condensed consolidated balance sheets at March 31, 1996
and December 31, 1995 2
Condensed consolidated statements of income for the three
months ended March 31, 1996 and 1995 3
Condensed consolidated statements of cash flows for the three
months ended March 31, 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 5 are not applicable)
Item 6 - Exhibits and Reports on Form 8-K 9
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PS PARTNERS II, LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
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March 31, December 31,
1996 1995
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(Unaudited)
ASSETS
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Cash and cash equivalents 548,000 904,000
Rent and other receivables 15,000 85,000
Real estate facilities, at cost:
Land 17,414,000 17,414,000
Buildings and equipment 72,105,000 71,986,000
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89,519,000 89,400,000
Less accumulated depreciation (35,036,000) (34,181,000)
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54,483,000 55,219,000
Other assets 167,000 163,000
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$ 55,213,000 $ 56,371,000
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LIABILITIES AND PARTNERS' EQUITY
--------------------------------
Accounts payable $ 514,000 $ 648,000
Advance payments from renters 480,000 433,000
Mortgage notes payable - 2,260,000
Minority interest in general partnerships 15,195,000 13,797,000
Partners' equity:
Limited partners' equity, $500 per unit, 128,000
units authorized, issued and outstanding 38,553,000 38,760,000
General partner's equity 471,000 473,000
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39,024,000 39,233,000
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Total partners' equity $ 55,213,000 $ 56,371,000
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See accompanying notes.
PS PARTNERS II, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended
March 31,
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1996 1995
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REVENUE:
Rental income $ 3,763,000 $ 3,589,000
Interest income 12,000 55,000
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3,775,000 3,644,000
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COSTS AND EXPENSES:
Cost of operations 1,312,000 1,177,000
Management fees 220,000 210,000
Depreciation and amortization 855,000 810,000
Interest expense 14,000 45,000
Administrative 17,000 56,000
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2,418,000 2,298,000
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Income before minority interest 1,357,000 1,346,000
Minority interest in income 365,000 374,000
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NET INCOME $ 992,000 $ 972,000
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Limited partners' share of net income
($6.74 per unit in 1996 and $6.90
per unit in 1995) $ 863,000 $ 883,000
General partner's share of net income 129,000 89,000
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$ 992,000 $ 972,000
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See accompanying notes.
PS PARTNERS II, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31,
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1996 1995
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Cash flows from operating activities:
Net income $ 992,000 $ 972,000
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 855,000 810,000
Decrease in rent and other receivables 70,000 3,000
Increase in other assets (4,000) (8,000)
Decrease in accounts payable (134,000) (87,000)
Increase in advance payments from renters 47,000 9,000
Minority interest in income 365,000 374,000
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Total adjustments 1,199,000 1,101,000
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Net cash provided by operating activities 2,191,000 2,073,000
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Cash flows from investing activities:
Additions to real estate facilities (119,000) (31,000)
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Net cash used in investing activities (119,000) (31,000)
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Cash flows from financing activities:
Principal payments on mortgage notes payable (2,260,000) (8,000)
Distributions to holder of minority interest (405,000) (432,000)
Contribution from holder of minority interest 1,438,000 -
Distributions to partners (1,201,000) (800,000)
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Net cash used in financing activities (2,428,000) (1,240,000)
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Net (decrease) increase in cash and cash equivalents (356,000) 802,000
Cash and cash equivalents at the beginning of the period 904,000 3,258,000
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Cash and cash equivalents at the end of the period $ 548,000 $ 4,060,000
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See accompanying notes.
PS PARTNERS II, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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 March 31, 1996, the results of operations for the three months ended March 31, 1996 and 1995 and cash flows for the three months then ended.
3. The results of operations for the three months ended March 31, 1996 are not necessarily indicative of the results to be expected for the full year.
PS PARTNERS II, LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Three months ended March 31, 1996 compared to three months ended March 31, 1995:
The Partnership's net income for the three months ended March 31, 1996 was $992,000 compared to $972,000 for the three months ended March 31, 1995, representing an increase of $20,000 or 2%. This increase was primarily attributable to increased property operating results at the Partnership's business park facilities combined with decreases in administrative and interest expenses, partially offset by an increase in depreciation expense, combined with a decrease in interest income.
Property net operating income (rental income less cost of operations and management fees and excluding depreciation expense) increased approximately $29,000 for the three months ended March 31, 1996 compared to the three months ended March 31, 1995, as rental income increased by $174,000 or 5%, and cost of operations (including management fees) increased by $145,000 or 11%.
Rental income for the Partnership's mini-warehouse operations was $3,149,000 compared to $3,036,000 for the three months ended March 31, 1996 and 1995, respectively, representing an increase of $113,000 or 4%. 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 $.60 compared to $.57 for the three months ended March 31, 1996 and 1995, respectively. The weighted average occupancy levels at the mini-warehouse facilities remained stable at 89% for both of the three month periods ended March 31, 1995 and 1996. Cost of operations (including management fees) increased $116,000 or 11% to $1,206,000 from $1,090,000 for the three months ended March 31, 1996 and 1995, respectively. This increase was primarily the result of increases in repairs and maintenance, utilities and property tax expenses. Accordingly, for the Partnership's mini-warehouse operations, property net operating income decreased by $3,000 from $1,946,000 to $1,943,000 for the three months ended March 31, 1995 and 1996, respectively.
Rental income for the Partnership's business parks operations was $614,000 compared to $553,000 for the three months ended March 31, 1996 and 1995, respectively, representing an increase of $61,000 or 11%. The monthly average realized rent per square foot for the business park facilities was $.79 compared to $.76 for the three months ended March 31, 1996 and 1995, respectively. The weighted average occupancy level at the business park facilities remained stable at 96% for both three month periods ended March 31, 1996 and 1995. Cost of operations (including management fees) increased $29,000 or 10% to $326,000 from $297,000 for the three months ended March 31, 1996 and 1995, respectively. This increase is primarily the result of an increase in utility expense. Accordingly, for the Partnership's business park facilities, property net operating income increased by $32,000 or 13% from $256,000 to $288,000 for the three months ended March 31, 1995 and 1996, respectively.
Minority interest in income was $365,000 in 1996 compared to $374,000 in 1995, representing a decrease of $9,000, or 2%. This decrease was primarily attributed to the allocation of depreciation and amortization expense (pursuant to the partnership agreement with respect to those real estate facilities which are jointly owned by Public Storage, Inc.) ("PSI") to PSI of $90,000 compared to $65,000 for the three months ended March 31, 1996 and 1995, respectively.
In March 1996, the Partnership retired early its remaining mortgage note payable; consequently, interest expense decreased approximately $31,000 from $45,000 to $14,000 for the three months ended March 31, 1995 and 1996, respectively.
Administrative expenses decreased $39,000 from $56,000 in 1995 to $17,000 in 1996. This decrease is principally attributable to decreases in state income tax provisions, investor services expenses, and accounting expenses.
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 ($2,191,000 for the three months ended March 31, 1996) has been sufficient to meet all current obligations of the Partnership.
During 1996, the Partnership anticipates approximately $1,303,000 of capital improvements (of which $221,000 represents PSI's joint venture share). The anticipated increase in capital improvements in 1996 is mainly due to $351,000 of budgeted improvements at the Partnership's business parks; specifically, remodeling of common areas, resurfacing of a parking lot and tenant improvements to vacated spaces on terminated leases. 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. Included in the 1996 capital improvement budget are estimated costs of $223,000 for such enhancements. Total capital improvements were $119,000 for the three months ended March 31, 1996 of which $107,000 represents the Partnership's share.
The Partnership paid distributions to the limited and general partners totaling $1,070,000 ($8.36 per unit) and $131,000, respectively, during the first three months of 1996. Future distribution rates may be adjusted to levels which are supported by operating cash flow after capital improvements and any other necessary obligations.
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) 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, 1996
PS PARTNERS II, LTD.
BY: Public Storage, Inc.
General Partner
BY: /s/ Ronald L. Havner, Jr.
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Senior Vice President and Chief Financial
Officer of Public Storage, Inc.
(Principal financial officer)
BY: /s/ John Reyes
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Vice President and Controller
of Public Storage, Inc.
Principal accounting officer)
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| ARTICLE 5 |
| CIK: 0000727069 |
| NAME: PS PARTNERS II, LTD. |
| PERIOD TYPE | 3 MOS |
| FISCAL YEAR END | DEC 31 1995 |
| PERIOD START | Jan 01 1996 |
| PERIOD END | MAR 31 1996 |
| CASH | 548,000 |
| SECURITIES | 0 |
| RECEIVABLES | 15,000 |
| ALLOWANCES | 0 |
| INVENTORY | 0 |
| CURRENT ASSETS | 563,000 |
| PP&E | 89,519,000 |
| DEPRECIATION | (35,036,000) |
| TOTAL ASSETS | 55,213,000 |
| CURRENT LIABILITIES | 994,000 |
| BONDS | 0 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 0 |
| OTHER SE | 39,024,000 |
| TOTAL LIABILITY AND EQUITY | 55,213,000 |
| SALES | 3,763,000 |
| TOTAL REVENUES | 3,775,000 |
| CGS | 1,532,000 |
| TOTAL COSTS | 1,532,000 |
| OTHER EXPENSES | 872,000 |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 14,000 |
| INCOME PRETAX | 992,000 |
| INCOME TAX | 0 |
| INCOME CONTINUING | 0 |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 992,000 |
| EPS PRIMARY | 6.74 |
| EPS DILUTED | 0.000 |