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 1-10851
PUBLIC STORAGE PROPERTIES XVI, INC.
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(Exact name of registrant as specified in its charter)
California 95-4300886
- - ------------------------------- ------------------------------
(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 co (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:
3,035,348 shares of $.01 par value Series A shares
324,989 shares of $.01 par value Series B shares
920,802 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 6-7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-10
PART II. OTHER INFORMATION 11
PUBLIC STORAGE PROPERTIES XVI, INC.
CONDENSED BALANCE SHEETS
March 31, December 31,
1996 1995
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(Unaudited)
ASSETS
------
Cash and cash equivalents $ 1,506,000 $ 1,440,000
Rent and other receivables 46,000 51,000
Prepaid expenses 302,000 420,000
Real estate facilities at cost:
Building, land improvements and equipment 41,952,000 41,937,000
Land 24,912,000 24,912,000
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66,864,000 66,849,000
Less accumulated depreciation (16,922,000) (16,488,000)
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49,942,000 50,361,000
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Total assets $51,796,000 $52,272,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Accounts payable $1,055,000 $1,033,000
Dividends payable 907,000 921,000
Advance payments from renters 318,000 307,000
Shareholders' equity:
Series A common, $.01 par value,
4,983,165 shares authorized,
3,035,348 shares issued and
outstanding (3,085,148 shares
issued and outstanding in 1995) 30,000 30,000
Convertible Series B common,
$.01 par value, 324,989 shares
authorized, issued and outstanding 3,000 3,000
Convertible Series C common,
$.01 par value, 920,802 shares
authorized, issued and outstanding 9,000 9,000
Paid-in-capital 55,725,000 56,511,000
Cumulative income 25,005,000 23,807,000
Cumulative distributions (31,256,000) (30,349,000)
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Total shareholders' equity 49,516,000 50,011,000
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Total liabilities and shareholders' equity $51,796,000 $52,272,000
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See accompanying notes.
2
PUBLIC STORAGE PROPERTIES XVI, INC.
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended
March 31,
-----------------------------------
1996 1995
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REVENUES:
Rental income $2,647,000 $2,510,000
Interest income 9,000 5,000
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2,656,000 2,515,000
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COSTS AND EXPENSES:
Cost of operations 806,000 760,000
Management fees paid to affiliates 138,000 147,000
Depreciation and amortization 434,000 452,000
Administrative 80,000 76,000
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1,458,000 1,435,000
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NET INCOME $1,198,000 $1,080,000
========== ==========
Primary earnings per share - Series A $0.36 $0.31
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Fully diluted earnings per share - Series A $0.28 $0.24
===== =====
Dividends declared per share:
Series A $0.27 $0.27
===== =====
Series B $0.27 $0.27
===== =====
Weighted average Common shares outstanding:
Primary - Series A 3,049,281 3,172,981
========= =========
Fully diluted - Series A 4,295,072 4,418,772
========= =========
See accompanying notes.
3
Public Storage Properties XVI, 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 3,085,148 $30,000 324,989 $3,000 920,802 $9,000 $56,511,000
Net income - - - - - - -
Repurchase of shares (49,800) - - - - - (786,000)
Cash distributions declared:
$.27 per share - Series A - - - - - - -
$.27 per share - Series B - - - - - - -
--------- ------- ------- ------ ------- ------ -----------
Balances at March 31, 1996 3,035,348 $30,000 324,989 $3,000 920,802 $9,000 $55,725,000
========= ======= ======= ====== ======= ====== ===========
Cumulative Total
Net Cumulative Shareholders'
Income Distributions Equity
----------- ------------ -----------
Balances at December 31, 1995 $23,807,000 ($30,349,000) $50,011,000
Net income 1,198,000 - 1,198,000
Repurchase of shares - - (786,000)
Cash distributions declared:
$.27 per share - Series A - (819,000) (819,000)
$.27 per share - Series B - (88,000) (88,000)
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Balances at March 31, 1996 $25,005,000 ($31,256,000) $49,516,000
=========== ============ ===========
See accompanying notes.
4
PUBLIC STORAGE PROPERTIES XVI, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31,
1996 1995
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(restated)
Cash flows from operating activities:
Net income $1,198,000 $1,080,000
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 434,000 452,000
Decrease in rent and other receivables 5,000 22,000
Amortization of prepaid management fees 118,000 -
Increase in prepaid expenses - (1,000)
Increase (decrease) in accounts payable 22,000 (78,000)
Increase (decrease) in advance payments from renters 11,000 (2,000)
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Total adjustments 590,000 393,000
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Net cash provided by operating activities 1,788,000 1,473,000
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Cash flows from investing activities:
Additions to real estate facilities (15,000) (15,000)
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Net cash used in investing activities (15,000) (15,000)
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Cash flows from financing activities:
Distributions paid to shareholders (921,000) (954,000)
Purchase of Company Series A common stock (786,000) (894,000)
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Net cash used in financing activities (1,707,000) (1,848,000)
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Net increase (decrease) in cash and cash equivalents 66,000 (390,000)
Cash and cash equivalents at the beginning of the period 1,440,000 1,074,000
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Cash and cash equivalents at the end of the period $ 1,506,000 $ 684,000
============ ============
See accompanying notes.
5
PUBLIC STORAGE PROPERTIES XVI, 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 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% (8.50% at March 31,
1996) or the bank's LIBOR rate plus 2.25%, 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.
6
5. In November 1995, the Company prepaid eight months of 1996 management
fees at a total cost of $315,000. The Company expensed $118,000 of the
1996 prepaid management fees for the three months ended March 31, 1996.
The balance of prepaid management fees, $197,000, is included in other
assets in the Balance Sheet at March 31, 1996.
7
PUBLIC STORAGE PROPERTIES XVI, 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
$1,198,000 compared to $1,080,000 for the three months ended March 31, 1995,
representing an increase of $118,000 or 11%. This increase is primarily a result
of an increase in property net operating income (rental revenue less cost of
operations, management fees paid to affiliates and depreciation expense).
Rental income for the three months ended March 31, 1996 and 1995 was
$2,647,000 and $2,510,000, respectively, representing an increase of $137,000.
Approximately $50,000 of the increase in rental revenues is attributable to an
increase in occupancy levels and rental rates at the Company's three
mini-warehouse properties located in Washington. Approximately $46,000 of the
increase is attributable to an increase in rental rates at the Company's seven
mini-warehouse properties in California. Rental revenues at the Company's
business park operations for the three month period ended March 31, 1996
compared to the same period in 1995 remained stable.
The Company's mini-warehouse operations had weighted average occupancy
levels of 88.6% and 86.9% for the three month periods ended March 31, 1996 and
1995, respectively. The Company's business park operations had weighted average
occupancy levels of 98% for both the three month periods ended March 31, 1996
and 1995, respectively.
Cost of operations (including management fees paid to affiliates and
depreciation expense) increased to $944,000 from $907,000 for the three months
ended March 31, 1996 and 1995, respectively, representing an increase of
$37,000. This increase is mainly attributable to increases in property taxes and
payroll offset by a decrease in management fees paid to affiliates. The increase
in property taxes is due to a one-time tax refund received during the three
months ended March 31, 1995.
In November 1995, the Company 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 Company expensed $118,000 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 Company saved approximately $17,000 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.
LIQUIDITY AND CAPITAL RESOURCES.
- - --------------------------------
Cash flows from operating activities ($1,788,000 for the three months ended
March 31, 1996) and cash reserves were sufficient to meet all current
obligations and distributions of the Company including a regular distribution of
$.27 per Series A common share ($907,000 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% (8.50% at March 31, 1996) or the bank's LIBOR rate
plus 2.25%, 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.
The Company's Board of Directors has authorized the Company to purchase up
to 1,000,000 shares of Series A common stock. The Company has repurchased
702,026 shares of Series A common stock, of which 49,800 shares were purchased
in the first quarter of 1996.
The bylaws of the Company provide that, during 1998, 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.
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 $1,698,000. 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 $1,632,000 and $1,532,000, 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.
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 XVI, INC.
BY:/s/ Ronald L. Havner, Jr.
------------------------
Ronald L. Havner, Jr.,
Vice President
and Chief Financial Officer