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, 2000 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 September 30, 2000 and December 31, 1999 2 Condensed statements of income for the three and nine months ended September 30, 2000 and 1999 3 Condensed statement of partners' deficit for the nine months ended September 30, 2000 4 Condensed statements of cash flows for the nine months ended September 30, 2000 and 1999 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 September 30, December 31, 2000 1999 --------------- ---------------- (Unaudited) ASSETS ------ Cash and cash equivalents $ 159,000 $ 153,000 Rent and other receivables 37,000 73,000 Real estate facilities, at cost: Building, land improvements and equipment 8,784,000 8,611,000 Land 2,475,000 2,511,000 --------------- ---------------- 11,259,000 11,122,000 Less accumulated depreciation (6,970,000) (6,569,000) --------------- ---------------- 4,289,000 4,553,000 Other assets 84,000 94,000 --------------- ---------------- Total assets $ 4,569,000 $ 4,873,000 =============== ================ LIABILITIES AND PARTNERS' DEFICIT --------------------------------- Accounts payable $ 79,000 $ 78,000 Deferred revenue 147,000 156,000 Note payable to commercial bank 6,675,000 9,225,000 Partners' deficit: Limited partners' deficit, $500 per unit, 20,000 units authorized, issued and outstanding (1,732,000) (3,405,000) General partners' deficit (600,000) (1,181,000) --------------- ---------------- Total partners' deficit (2,332,000) (4,586,000) --------------- ---------------- Total liabilities and partners' deficit $ 4,569,000 $ 4,873,000 =============== ================ See accompanying notes. 2
PUBLIC STORAGE PROPERTIES, LTD. CONDENSED STATEMENTS OF INCOME (UNAUDITED) Three Months Ended Nine Months Ended September 30, September 30, ------------------------------- ------------------------------- 2000 1999 2000 1999 ------------- ------------- ------------- ------------- REVENUES: Rental income $ 1,371,000 $ 1,296,000 $ 4,005,000 $ 3,709,000 Gain on sale of land 1,000 - 136,000 - Other income 2,000 1,000 7,000 6,000 ------------- ------------- ------------- ------------- 1,374,000 1,297,000 4,148,000 3,715,000 ------------- ------------- ------------- ------------- COSTS AND EXPENSES: Cost of operations 293,000 281,000 864,000 859,000 Management fees paid to affiliate 82,000 78,000 240,000 223,000 Depreciation 130,000 146,000 401,000 433,000 Administrative 16,000 14,000 71,000 56,000 Interest expense 98,000 143,000 318,000 459,000 ------------- ------------- ------------- ------------- 619,000 662,000 1,894,000 2,030,000 ------------- ------------- ------------- ------------- NET INCOME $ 755,000 $ 635,000 $ 2,254,000 $ 1,685,000 ============= ============= ============= ============= Limited partners' share of net income ($111.55 per unit in 2000 and $83.40 per unit in 1999) $ 2,231,000 $ 1,668,000 General partners' share of net income 23,000 17,000 ------------- ------------- $ 2,254,000 $ 1,685,000 ============= ============= See accompanying notes. 3
PUBLIC STORAGE PROPERTIES, LTD. CONDENSED STATEMENT OF PARTNERS' DEFICIT (UNAUDITED) Total Limited General Partners' Partners Partners Deficit ----------------- ----------------- ----------------- Balance at December 31, 1999 $ (3,405,000) $ (1,181,000) $ (4,586,000) Net income 2,231,000 23,000 2,254,000 Equity transfer (558,000) 558,000 - ----------------- ----------------- ----------------- Balance at September 30, 2000 $ (1,732,000) $ (600,000) $ (2,332,000) ================= ================= ================= See accompanying notes. 4
PUBLIC STORAGE PROPERTIES, LTD. CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) Nine Months Ended September 30, ------------------------------------- 2000 1999 ---------------- ---------------- Cash flows from operating activities: Net income $ 2,254,000 $ 1,685,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 401,000 433,000 Gain on sale of land (136,000) - Decrease in rent and other receivables 36,000 5,000 Decrease (increase) in other assets 10,000 (1,000) Increase (decrease) in accounts payable 1,000 (24,000) (Decrease) increase in deferred revenue (9,000) 8,000 ---------------- ---------------- Total adjustments 303,000 421,000 ---------------- ---------------- Net cash provided by operating activities 2,557,000 2,106,000 ---------------- ---------------- Cash flows from investing activities: Proceeds from sale of land 172,000 - Additions to real estate facilities (173,000) (115,000) ---------------- ---------------- Net cash used in investing activities (1,000) (115,000) ---------------- ---------------- Cash flows from financing activities: Principal payments on note payable to commercial bank (2,550,000) (2,125,000) ---------------- ---------------- Net cash used in financing activities (2,550,000) (2,125,000) ---------------- ---------------- Net increase (decrease) in cash and cash equivalents 6,000 (134,000) Cash and cash equivalents at the beginning of the period 153,000 248,000 ---------------- ---------------- Cash and cash equivalents at the end of the period $ 159,000 $ 114,000 ================ ================ 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, 1999. 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, 2000, the results of its operations for the nine months ended September 30, 2000 and 1999 and its cash flows for the nine months then ended. 3. The results of operations for the nine months ended September 30, 2000 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% (7.17% as of September 30, 2000). 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 September 30, 2000 the unrealized gain on the interest swap, if required to be liquidated was approximately $45,000. 5. We sold during March 2000 excess land adjacent to one of our operating properties for $98,000. This resulted in a gain of approximately $66,000 being realized in the first quarter of 2000. We sold during June 2000, excess land adjacent to one of our operating properties for $73,000. This resulted in a gain of approximately $69,000 being realized in the second quarter of 2000. We sold during August 2000 excess 6
land adjacent to one of our operating properties for $1,000. This resulted in a gain of approximately $1,000 being realized in the third quarter of 2000. 6. In June 1998, June 1999 and June 2000, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities -- Deferral of the Effective Date of SFAS No. 133," and SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities - an, amendment of SFAS No. 133." These statements outline the accounting treatment for all derivative activity. The Partnership is required to and will adopt SFAS No. 133 in the first quarter of fiscal 2001 and does not expect adoption to have a significant effect on its consolidated results of operations or financial position. 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 nine months ended September 30, 2000 compared to three and nine months ended September 30, 1999: Our net income for the nine months ended September 30, 2000 was $2,254,000 compared to $1,685,000 for the nine months ended September 30, 1999, representing an increase of $569,000 or 34%. Our net income for the three months ended September 30, 2000 was $755,000 compared to $635,000 for the three months ended September 30, 1999, representing an increase of $120,000 or 19%. These increases are primarily a result of the sale of excess land which resulted in a gain of $136,000 and increased property operating results combined with a decrease in interest expense. Rental income for the nine months ended September 30, 2000 was $4,005,000 compared to $3,709,000 for the nine months ended September 30, 1999, representing an increase of $296,000 or 8%. Rental income for the three months ended September 30, 2000 was $1,371,000 compared to $1,296,000 for the three months ended September 30, 1999, representing an increase of $75,000 or 6%. These increases are primarily attributable to higher rental rates and higher occupancy levels at our mini-warehouse facilities. The weighted average occupancy levels at the mini-warehouse facilities were 96% and 94% for the nine months ended September 30, 2000 and 1999, respectively. Annual realized rent for the nine months ended September 30, 2000 increased to $10.97 per occupied square foot from $10.41 per occupied square foot for the nine months ended September 30, 1999. 8
Cost of operations (including management fees paid to an affiliate) for the nine months ended September 30, 2000 was $1,104,000 compared to $1,082,000 for the nine months ended September 30, 1999, representing an increase of $22,000 or 2%. Cost of operations (including management fees paid to an affiliate) for the three months ended September 30, 2000 was $375,000 compared to $359,000 for the three months ended September 30, 1999, representing a increase of $16,000 or 4%. Interest expense decreased $141,000 to $318,000 for the nine months ended September 30, 2000 from $459,000 for the same period in 1999. This decrease is mainly attributable to lower outstanding principal balances. See Liquidity and Capital Resources for a discussion of the refinancing of the Partnership's indebtedness. LIQUIDITY AND CAPITAL RESOURCES Cash generated from operations ($2,557,000 for the nine months ended September 30, 2000) 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% (7.17% as of September 30, 2000). 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 September 30, 2000, the unrealized gain on the interest rate swap, if required to be liquidated was approximately $45,000. 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: (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 13, 2000 PUBLIC STORAGE PROPERTIES, LTD. BY: Public Storage, Inc. General Partner BY: /s/ John Reyes John Reyes Senior Vice President and Chief Financial Officer 10