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
For the transition period from to
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Commission File Number 1-10837
PUBLIC STORAGE PROPERTIES XV, INC.
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(Exact name of registrant as specified in its charter)
California 95-4300885
- - -------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
701 Western Ave.
Glendale, California 91201-2349
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 244-8080
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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.
Yes X No
-- --
The number of shares outstanding of the Company's classes of common stock as of
March 31, 1996:
2,149,885 shares of $.01 par value Series A shares
232,762 shares of $.01 par value Series B shares
659,494 shares of $.01 par value Series C shares
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INDEX
Page
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PART I. FINANCIAL INFORMATION
Condensed Balance Sheets at March 31, 1996
and December 31, 1995 2
Condensed Statements of Income for the three
months ended March 31, 1996 and 1995 3
Condensed Statement of Shareholders' Equity for the
three months ended March 31, 1996 4
Condensed Statements of Cash Flows for the
three months ended March 31, 1996 and 1995 5
Notes to Condensed Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-9
PART II. OTHER INFORMATION 10
PUBLIC STORAGE PROPERTIES XV, INC.
CONDENSED BALANCE SHEETS
March 31, December 31,
1996 1995
------------- -----------
(Unaudited)
ASSETS
------
Cash and cash equivalents $ 413,000 $ 825,000
Marketable securities of affiliate
at market value (cost of $339,000) 469,000 437,000
Rent and other receivables 35,000 42,000
Prepaid expenses 253,000 358,000
Real estate facilities at cost:
Building, land improvements and equipment 31,959,000 31,919,000
Land 16,992,000 16,992,000
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48,951,000 48,911,000
Less accumulated depreciation (11,935,000) (11,617,000)
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37,016,000 37,294,000
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Total assets $ 38,186,000 $38,956,000
============ ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Accounts payable $ 441,000 $ 491,000
Dividends payable 715,000 1,251,000
Advance payments from renters 312,000 312,000
Shareholders' equity:
Series A common, $.01 par value,
3,569,024 shares authorized,
2,149,885 shares issued and
outstanding (2,171,885 shares
issued and outstanding in 1995) 22,000 22,000
Convertible Series B common,
$.01 par value, 232,762 shares
authorized, issued and outstanding 2,000 2,000
Convertible Series C common,
$.01 par value, 659,494 shares
authorized, issued and outstanding 7,000 7,000
Paid-in-capital 39,477,000 39,864,000
Cumulative income 19,756,000 18,870,000
Unrealized gain in marketable securities 130,000 98,000
Cumulative distributions (22,676,000) (21,961,000)
------------ -------------
Total shareholders' equity 36,718,000 36,902,000
------------ ------------
Total liabilities and shareholders' equity $38,186,000 $38,956,000
=========== ===========
See accompanying notes.
2
PUBLIC STORAGE PROPERTIES XV, INC.
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended
March 31,
-----------------------------------
1996 1995
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REVENUES:
Rental income $2,025,000 $1,931,000
Interest and other income
(including $5,000 of dividends from marketable
securities of affiliate in both 1996 and 1995) 10,000 10,000
------------- --------------
2,035,000 1,941,000
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COSTS AND EXPENSES:
Cost of operations 650,000 555,000
Management fees paid to affiliates 109,000 116,000
Depreciation 318,000 312,000
Interest expense 11,000 -
Administrative 61,000 56,000
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1,149,000 1,039,000
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NET INCOME $ 886,000 $ 902,000
============= ============
Primary earnings per share - Series A $0.38 $0.37
===== =====
Fully diluted earnings per share - Series A $0.29 $0.29
===== =====
Dividends declared per share:
Series A $0.30 $0.30
===== =====
Series B $0.30 $0.30
===== =====
Weighted average Common shares outstanding:
Primary - Series A 2,156,185 2,247,485
========= =========
Fully diluted - Series A 3,048,441 3,139,741
========= =========
See accompanying notes.
3
Public Storage Properties XV, Inc.
Condensed Statement of Shareholders' Equity
(Unaudited)
Convertible Convertible
Series A Series B Series C Paid-in
Shares Amount Shares Amount Shares Amount Capital
--------- ------- ------- ------ ------- ------ -----------
Balances at December 31, 1995 2,171,885 $22,000 232,762 $2,000 659,494 $7,000 $39,864,000
Net income - - - - - - -
Repurchase of shares (22,000) - - - - - (387,000)
Unrealized gain in marketable securities - - - - - - -
Cash distributions declared:
$.30 per share - Series A - - - - - - -
$.30 per share - Series B - - - - - - -
--------- ------- ------- ------ ------- ------ -----------
Balances at March 31, 1996 2,149,885 $22,000 232,762 $2,000 659,494 $7,000 $39,477,000
========= ======= ======= ====== ======= ====== ===========
Cumulative Unrealized gain Total
Net Cumulative in marketable Shareholders'
Income Distributions securities Equity
----------- ------------ -------- -----------
Balances at December 31, 1995 $18,870,000 ($21,961,000) $98,000 $36,902,000
Net income 886,000 - - 886,000
Repurchase of shares - - - (387,000)
Unrealized gain in marketable securities - - 32,000 32,000
Cash distributions declared:
$.30 per share - Series A - (645,000) - (645,000)
$.30 per share - Series B - (70,000) - (70,000)
----------- ------------ -------- -----------
Balances at March 31, 1996 $19,756,000 $(22,676,000) $130,000 $36,718,000
=========== ============ ======== ===========
See accompanying notes.
4
PUBLIC STORAGE PROPERTIES XV, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31,
---------------------------------
1996 1995
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Cash flows from operating activities:
Net income $ 886,000 $ 902,000
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 318,000 312,000
Decrease (increase) in rent and other receivables 7,000 (1,000)
Amortization of prepaid management fees 105,000 -
Decrease in accounts payable (50,000) (64,000)
Decrease in advance payments from renters - (13,000)
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Total adjustments 380,000 234,000
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Net cash provided by operating activities 1,266,000 1,136,000
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Cash flows from investing activities:
Additions to real estate facilities (40,000) (21,000)
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Net cash used in investing activities (40,000) (21,000)
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Cash flows from financing activities:
Distributions paid to shareholders (1,251,000) (1,042,000)
Purchase of Company Series A common stock (387,000) -
------------ ------------
Net cash used in financing activities (1,638,000) (1,042,000)
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Net (decrease) increase in cash and cash equivalents (412,000) 73,000
Cash and cash equivalents at the beginning of the period 825,000 932,000
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Cash and cash equivalents at the end of the period $ 413,000 $ 1,005,000
============= ============
Supplemental schedule of non-cash investing and financing activities:
Increase in fair value of marketable securities $ (32,000) $ (58,000)
============= ============
Unrealized gain on marketable securities $ 32,000 $ 58,000
============= ============
See accompanying notes.
5
PUBLIC STORAGE PROPERTIES XV, INC.
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 Company's Form 10-K for
the year ended December 31, 1995.
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 Company's financial position
at March 31, 1996 and December 31, 1995, the results of its operations
for the three months ended March 31, 1996 and 1995 and its 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 expected for the full year.
4. In 1995, the Partnership prepaid eight months of 1996 management fees at
a total cost of $279,000. The Partnership expensed $105,000 of the 1996
prepaid management fees for the three months ended March 31, 1996. The
balance of prepaid management fees, $174,000, is included in prepaid
expenses in the Balance Sheet at March 31, 1996.
6
PUBLIC STORAGE PROPERTIES XV, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain
significant factors occurring during the periods presented in the accompanying
Condensed Financial Statements.
RESULTS OF OPERATIONS.
- - ----------------------
The Company's net income for the three months ended March 31, 1996 was
$886,000 compared to $902,000 for the three months ended March 31, 1995,
representing a decrease of $16,000 or 2%. This decrease is primarily a result of
an increase in interest expense.
Rental income for the three months ended March 31, 1996 and 1995 was
$2,025,000 and $1,931,000, respectively, representing an increase of $94,000.
Approximately $43,000 of the increase in rental revenues is attributable to an
overall increase in rental rates and occupancy levels at the Company's six
mini-warehouse properties located in California. Rental revenues increased by
$3,000 at the Company's business park facility for the three month period ended
March 31, 1996 compared to the same period in 1995 primarily due to an increase
in rental rates.
The Company's mini-warehouse operations had weighted average occupancy
levels of 89.6% and 88.3% for the three month periods ended March 31, 1996 and
1995, respectively. The Company's business park facility had a weighted average
occupancy level of 100.0% for both three month periods ended March 31, 1996 and
1995, respectively.
Cost of operations (including management fees paid to affiliates and
depreciation expense) increased to $1,077,000 from $983,000 for the three months
ended March 31, 1996 and 1995, respectively, representing an increase of
$94,000. This increase is mainly attributable to increases in property taxes and
snow removal cost. The increase in property taxes is primarily due to a one time
refund received in 1995 at the Company's San Jose, California mini-warehouse
facility. Snow removal cost increased due to higher than normal snow levels in
the Company's eastern states facilities.
In 1995, the Partnership prepaid eight months of 1996 management fees on
its mini-warehouse operations (based on the management fees for the comparable
period during the calendar year immediately preceding the prepayment) discounted
at the rate of 14% per year to compensate for early payment. During the three
month period ended March 31, 1996, the Partnership expensed $105,000 of prepaid
management fees. The amount is included in management fees paid to affiliate in
the condensed statement of income. As a result of the prepayment, the
Partnership saved approximately $12,000 in management fees, based on the
management fees that would have been payable on rental income generated in the
three months ended March 31, 1996 compared to the amount prepaid.
7
Interest expense of $11,000 was incurred in the first quarter of 1996 as a
result of a loan the Company obtained in January 1996.
LIQUIDITY AND CAPITAL RESOURCES.
- - --------------------------------
Cash flows from operating activities ($1,266,000 for the three months ended
March 31, 1996) cash reserves and borrowings from the Company's credit facility
discussed below were sufficient to meet all current obligations of the Company
including a regular distribution of $.31 per Series A and Series B common share
($715,000 in aggregate for the three months ended March 31, 1996).
In January 1996, the Company obtained an unsecured non-revolving credit
facility with a bank for borrowings up to $5,000,000. Outstanding borrowings on
the credit facility which, at the Company's option, bear interest at either the
bank's prime rate plus .25% (8.5% at March 31, 1996) or the bank's LIBOR rate
plus 2.25% (7.75% at March 31, 1996), will convert to a term loan on January 1,
1998. Interest is payable monthly beginning on April 1, 1996 until maturity.
Principal will be payable quarterly beginning on January 1, 1998. On October 1,
2001, the remaining unpaid principal and interest is due and payable. For the
three months ended March 31, 1996, the Company borrowed and repaid $600,000. In
April 1996, the Company borrowed an additional $450,000.
As of March 31, 1996, the Company was in compliance with the covenants of
the credit facility.
The Company's Board of Directors has authorized the Company to purchase up
to 900,000 shares of Series A common stock. The Company has repurchased 526,883
shares of Series A common stock, of which 22,000 shares were purchased in the
first quarter of 1996 utilizing funds from the credit facility described below.
In February 1994, the Company purchased 23,000 common shares of Public
Storage, Inc., a publicly traded real estate investment trust and an affiliate
of the Company, for $339,000. The market value of these securities at March 31,
1996 was $469,000. The Company recognized $5,000 in dividends for the three
months ended March 31, 1996 and included this amount in other income on the
condensed statements of Income.
The Company has elected and intends to continue to qualify as a real estate
investment trust ("REIT") for federal income tax purposes. As a REIT, the
Company must meet, among other tests, sources of income, share ownership, and
certain asset tests. The Company is not taxed on that portion of its taxable
income which is distributed to its shareholders provided that at least 95% of
its taxable income is so distributed to its shareholders prior to filing of the
Company's tax return. The primary difference between book income and taxable
income is depreciation expense. In 1995, the Company's federal tax depreciation
was $1,404,000.
8
The bylaws of the Company provide that, during 1997, unless shareholders
have previously approved such a proposal, the shareholders will be presented
with a proposal to approve or disapprove (a) the sale or financing of all or
substantially all of the properties and (b) the distribution of the proceeds
from such transaction and, in the case of a sale, the liquidation of the
Company.
SUPPLEMENTAL INFORMATION.
- - -------------------------
The Company's funds from operations ("FFO") is defined generally by the
National Association of Real Estate Investment Trusts as net income before loss
on early extinguishment of debt and gain on disposition of real estate, plus
depreciation and amortization. FFO for the three months ended March 31, 1996 and
1995 was $1,204,000 and $1,214,000, respectively. FFO is a supplemental
performance measure for equity Real Estate Investment Trusts used by industry
analysts. FFO does not take into consideration principal payments on debt,
capital improvements, distributions and other obligations of the Company. The
only depreciation or amortization that is added to income to derive FFO is
depreciation and amortization directly related to physical real estate. All
depreciation and amortization reported by the Company relates to physical real
estate and does not include any depreciation or amortization related to
goodwill, deferred financing costs or other intangibles. FFO is not a substitute
for the Company's net cash provided by operating activities or net income
computed in accordance with generally accepted accounting principles, as a
measure of liquidity or operating performance.
9
PART II. OTHER INFORMATION
ITEMS 1 through 5 are inapplicable.
ITEM 6 Exhibits and Reports on Form 8-K
(a) The following Exhibit is 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 13, 1996
PUBLIC STORAGE PROPERTIES XV, INC.
BY: /s/ Ronald L. Havner, Jr.
-------------------------
Ronald L. Havner, Jr.
Vice President and
Chief Financial Officer
10