10-Q 1 prop3.txt PUBLIC STORAGE PROPERTIES, LTD. 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 June 30, 2001 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from to --------------- --------------- Commission File Number 0-8667 ------ PUBLIC STORAGE PROPERTIES, LTD. ------------------------------- (Exact name of registrant as specified in its charter) California 95-3196921 ---------------------------------------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 701 Western Ave. Glendale, California 91201-2349 -------------------------------------- ---------- (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 Page ---- PART I. FINANCIAL INFORMATION Condensed balance sheets at June 30, 2001 and December 31, 2000 2 Condensed statements of income for the three and six months ended June 30, 2001 and 2000 3 Condensed statement of partners' equity (deficit) for the six months ended June 30, 2001 4 Condensed statements of cash flows for the six months ended June 30, 2001 and 2000 5 Notes to condensed financial statements 6-7 Management's discussion and analysis of financial condition and results of operations 8-9 PART II. OTHER INFORMATION Item 6 Exhibits and Reports on Form 8-K 10 PUBLIC STORAGE PROPERTIES, LTD. CONDENSED BALANCE SHEETS
June 30, December 31, 2001 2000 --------------- --------------- (Unaudited) ASSETS ------ Cash and cash equivalents $ 187,000 $ 324,000 Rent and other receivables 43,000 74,000 Real estate facilities, at cost: Building, land improvements and equipment 8,938,000 8,814,000 Land 2,476,000 2,476,000 --------------- --------------- 11,414,000 11,290,000 Less accumulated depreciation (7,370,000) (7,103,000) --------------- --------------- 4,044,000 4,187,000 Other assets 67,000 79,000 --------------- --------------- Total assets $ 4,341,000 $ 4,664,000 =============== =============== LIABILITIES AND PARTNERS' EQUITY (DEFICIT) ------------------------------------------ Accounts payable $ 118,000 $ 77,000 Deferred revenue 182,000 151,000 Note payable to commercial bank 3,925,000 6,025,000 Partners' equity (deficit): Limited partners' equity (deficit), $500 per unit, 20,000 units authorized, issued and outstanding 86,000 (1,180,000) General partners' equity (deficit) 30,000 (409,000) --------------- --------------- Total partners' equity (deficit) 116,000 (1,589,000) --------------- --------------- Total liabilities and partners' equity (deficit) $ 4,341,000 $ 4,664,000 =============== ===============
See accompanying notes. 2 PUBLIC STORAGE PROPERTIES, LTD. CONDENSED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Six Months Ended June 30, June 30, ------------------------------- ------------------------------- 2001 2000 2001 2000 ------------- ------------- ------------- ------------- REVENUES: Rental income $ 1,471,000 $ 1,347,000 $ 2,909,000 $ 2,634,000 Gain on sale of land - 69,000 - 135,000 Other income 1,000 3,000 5,000 5,000 ------------- ------------- ------------- ------------- 1,472,000 1,419,000 2,914,000 2,774,000 ------------- ------------- ------------- ------------- COSTS AND EXPENSES: Cost of operations 283,000 284,000 575,000 571,000 Management fees paid to affiliate 89,000 81,000 175,000 158,000 Depreciation 133,000 132,000 267,000 271,000 Administrative 16,000 26,000 44,000 55,000 Interest expense 66,000 103,000 148,000 220,000 ------------- ------------- ------------- ------------- 587,000 626,000 1,209,000 1,275,000 ------------- ------------- ------------- ------------- NET INCOME $ 885,000 $ 793,000 $ 1,705,000 $ 1,499,000 ============= ============= ============= ============= Limited partners' share of net income ($84.40 per unit in 2001 and $74.20 per unit in 2000) $ 1,688,000 $ 1,484,000 General partners' share of net income 17,000 15,000 ------------- ------------- $ 1,705,000 $ 1,499,000 ============= =============
See accompanying notes. 3 PUBLIC STORAGE PROPERTIES, LTD. CONDENSED STATEMENT OF PARTNERS' EQUITY (DEFICIT) (UNAUDITED)
Total Limited General Partners' Partners Partners Equity ----------------- ----------------- ----------------- Balance at December 31, 2000 $ (1,180,000) $ (409,000) $ (1,589,000) Net income 1,688,000 17,000 1,705,000 Equity transfer (422,000) 422,000 - ----------------- ----------------- ----------------- Balance at June 30, 2001 $ 86,000 $ 30,000 $ 116,000 ================= ================= =================
See accompanying notes. 4 PUBLIC STORAGE PROPERTIES, LTD. CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended June 30, ------------------------------------- 2001 2000 ---------------- ---------------- Cash flows from operating activities: Net income $ 1,705,000 $ 1,499,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 267,000 271,000 Gain on sale of land - (135,000) Decrease (increase) in rent and other receivables 31,000 (23,000) Decrease in other assets 12,000 7,000 Increase (decrease) in accounts payable 41,000 (46,000) Increase in deferred revenue 31,000 - ---------------- ---------------- Total adjustments 382,000 74,000 ---------------- ---------------- Net cash provided by operating activities 2,087,000 1,573,000 ---------------- ---------------- Cash flows from investing activities: Proceeds from sale of land - 171,000 Additions to real estate facilities (124,000) (36,000) ---------------- ---------------- Net cash (used in) provided by investing activities (124,000) 135,000 ---------------- ---------------- Cash flows from financing activities: Principal payments on note payable to commercial bank (2,100,000) (1,700,000) ---------------- ---------------- Net cash used in financing activities (2,100,000) (1,700,000) ---------------- ---------------- Net (decrease) increase in cash and cash equivalents (137,000) 8,000 Cash and cash equivalents at the beginning of the period 324,000 153,000 ---------------- ---------------- Cash and cash equivalents at the end of the period $ 187,000 $ 161,000 ================ ================
See accompanying notes. 5 PUBLIC STORAGE PROPERTIES, LTD. NOTES TO CONDENSED FINANCIAL STATEMENTS (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, 2000. 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 June 30, 2001, the results of its operations for the six months ended June 30, 2001 and 2000 and its cash flows for the six months then ended. 3. The results of operations for the three and six months ended June 30, 2001 are not necessarily indicative of the results expected for the full year. 4. During October 1998, we borrowed $12,400,000 from a commercial bank. The loan is unsecured and bears interest at the London Interbank Offering Rate ("LIBOR") plus 0.55% (4.35% as of June 30, 2001). The loan requires monthly payments of interest and matures October 2002. Principal may be paid, in whole or in part, at any time without penalty or premium. We also entered into interest rate swap agreements to reduce the impact of changes in interest rates on a portion of its floating rate debt. The agreement, which covers $5,000,000 of debt through October 2000, effectively changes the interest rate exposure from floating rate to a fixed rate of 5.205%. The second agreement, which covers $2,500,000 of debt through October 2001 and effectively changes the interest rate exposure from floating rate to a fixed rate of 5.33%. Market gains and losses on the value of the swap are deferred and included in income over the life of the contract. We record the differences paid or received on the interest rate swap in interest expense as payments are made or received. As of June 30, 2001 the unrealized loss on the interest swap, if required to be liquidated was approximately $5,000. 6 5. In June 1998, the FASB issued Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities," as amended in June 2000 by Statement of Financial Accounting Standards No. 138 ("SFAS 138"), "Accounting for Certain Derivative Instruments and Certain Hedging Activities," which requires companies to recognize all derivatives as either assets or liabilities in the balance sheet and measure such instruments at fair value. As amended by Statement of Financial Accounting Standards No. 137 ("SFAS 137"), "Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133," the provisions of SFAS 133 will require adoption by the Partnership on January 1, 2001. The Partnership adopted SFAS 133, as amended by SFAS 138, on January 1, 2001, and the adoption had no material impact on the Partnership's consolidated financial statements. 7 PUBLIC STORAGE PROPERTIES, LTD., MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD LOOKING STATEMENTS -------------------------- When used within this document, the words "expects," "believes," "anticipates," "should," "estimates," and similar expressions are intended to identify "forward-looking statements" within the meaning of that term in Section 27A of the Securities Exchange Act of 1933, as amended, and in Section 21F of the Securities Exchange Act of 1934, as amended. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors, which may cause the actual results and performance of the Partnership to be materially different from those expressed or implied in the forward looking statements. Such factors include the impact of competition from new and existing real estate facilities which could impact rents and occupancy levels at the real estate facilities that the Partnership has an interest in; the Partnership's ability to effectively compete in the markets that it does business in; the impact of the regulatory environment as well as national, state, and local laws and regulations including, without limitation, those governing Partnerships; and the impact of general economic conditions upon rental rates and occupancy levels at the real estate facilities that the Partnership has an interest in. RESULTS OF OPERATIONS --------------------- THREE AND SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO THREE AND SIX MONTHS ENDED JUNE 30, 2000: Our net income for the six months ended June 30, 2001 was $1,705,000 compared to $1,499,000 for the six months ended June 30, 2000, representing an increase of $206,000 or 14%. Our net income for the three months ended June 30, 2001 was $885,000 compared to $793,000 for the three months ended June 30, 2000, representing an increase of $92,000 or 12%. These increases are primarily a result of increased operating results at our real estate facilities and a decrease in interest expense. Rental income for the six months ended June 30, 2001 was $2,909,000 compared to $2,634,000 for the six months ended June 30, 2000, representing an increase of $275,000 or 10%. Rental income for the three months ended June 30, 2001 was $1,471,000 compared to $1,347,000 for the three months ended June 30, 2000, representing an increase of $124,000 or 9%. These increases are primarily attributable to higher rental rates. Weighted average occupancy levels at the mini-warehouse facilities were 92% and 96% for the six months ended June 30, 2001 and 2000, respectively. Annual realized rent for the six months ended June 30, 2001 increased to $12.41 per occupied square foot compared $10.85 per occupied square foot for the six months ended June 30, 2000. Cost of operations (including management fees paid to an affiliate) for the six months ended June 30, 2001 was $750,000 compared to $729,000 for the six months ended June 30, 2000, representing an increase of $21,000 or 3%. Cost of operations (including management fees paid to an affiliate) for the three months ended June 30, 2001 was $372,000 compared to $365,000 for the three months ended 8 June 30, 2000, representing a increase of $7,000 or 2%. This increase is attributable to increases in management fees which are based on property revenues of the Partnership. Interest expense was $148,000 in the six months ended June 30, 2001 compared to $220,000 in the same period in 2000, a $72,000 or 32% decrease. This decrease is mainly attributable to a lower outstanding principal balance. LIQUIDITY AND CAPITAL RESOURCES ------------------------------- Cash generated from operations ($2,087,000 for the six months ended June 30, 2001) has been sufficient to meet all current obligations of the Partnership. During October 1998, we borrowed $12,400,000 from a commercial bank to payoff other loans. The loan is unsecured and bears interest at the London Interbank Offering Rate ("LIBOR") plus 0.55% (4.35% as of June 30, 2001). The loan requires monthly payments of interest and mature October 2002. Principal may be paid, in whole or in part, at any time without penalty or premium. We have also entered into interest rate swap agreements to reduce the impact of changes in interest rates on a portion of its floating rate debt. The agreement, which covers $5,000,000 of debt through October 2000, effectively changes the interest rate exposure from floating rate to a fixed rate of 5.205%. The second agreement, which covers $2,500,000 of debt through October 2001 and effectively changes the interest rate exposure from floating rate to a fixed rate of 5.33%. Market gains and losses on the value of the swap are deferred and included in income over the life of the contract. We record the differences paid or received on the interest rate swap in interest expense as payments are made or received. As of June 30, 2001, the unrealized loss on the interest rate swap, if required to be liquidated was approximately $5,000. 9 PART II. OTHER INFORMATION ITEMS 1 through 5 are inapplicable. ITEM 6 Exhibits and Reports on Form 8-K -------------------------------- (a) The following Exhibits are included herein: None (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: August 13, 2001 PUBLIC STORAGE PROPERTIES, LTD. BY: Public Storage, Inc. General Partner BY: /s/ John Reyes -------------- John Reyes Senior Vice President and Chief Financial Officer 10