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 1-10792
PUBLIC STORAGE PROPERTIES XIV, INC.
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(Exact name of registrant as specified in its charter)
California 95-4300884
- - --------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
701 Western Avenue
Glendale, California 91201-2349
- - ---------------------------------------- ----------------
(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:
2,277,118 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 6-7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-10
PART II. OTHER INFORMATION 11
PUBLIC STORAGE PROPERTIES XIV, INC.
CONDENSED BALANCE SHEETS
March 31, December 31,
1996 1995
------------ ------------
(Unaudited)
ASSETS
------
Cash and cash equivalents $ 936,000 $ 949,000
Rent and other receivables 93,000 98,000
Prepaid expenses 237,000 329,000
Real estate facilities at cost:
Building, land improvements and equipment 30,604,000 30,575,000
Land 18,712,000 18,712,000
----------- -----------
49,316,000 49,287,000
Less accumulated depreciation (12,212,000) (11,869,000)
------------ ------------
37,104,000 37,418,000
------------ ------------
Total assets $38,370,000 $38,794,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Accounts payable $ 743,000 $ 824,000
Dividends payable 853,000 863,000
Advance payments from renters 334,000 322,000
Shareholders' equity:
Series A common, $.01 par value,
3,569,024 shares authorized,
2,277,118 shares issued and
outstanding (2,304,218 shares
issued and outstanding in 1995) 23,000 23,000
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 40,441,000 40,941,000
Cumulative income 28,867,000 27,859,000
Cumulative distributions (32,900,000) (32,047,000)
------------- -------------
Total shareholders' equity 36,440,000 36,785,000
------------ ------------
Total liabilities and shareholders' equity $38,370,000 $38,794,000
=========== ===========
See accompanying notes.
2
PUBLIC STORAGE PROPERTIES XIV, INC.
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended
March 31,
----------------------------------
1996 1995
------------ -------------
REVENUES:
Rental income $2,115,000 $2,060,000
Interest income 5,000 14,000
------------ -------------
2,120,000 2,074,000
------------ -------------
COSTS AND EXPENSES:
Cost of operations 605,000 566,000
Management fees paid to affiliates 112,000 120,000
Depreciation 343,000 340,000
Administrative 52,000 60,000
------------ ------------
1,112,000 1,086,000
------------ -------------
NET INCOME $1,008,000 $ 988,000
========== ==========
Primary earnings per share - Series A $0.41 $0.38
===== =====
Fully diluted earnings per share - Series A $0.32 $0.30
===== =====
Dividends declared per share:
Series A $0.34 $0.34
===== =====
Series B $0.34 $0.34
===== =====
Weighted average Common shares outstanding:
Primary - Series A 2,287,785 2,406,751
========= =========
Fully diluted - Series A 3,180,041 3,299,007
========= =========
See accompanying notes.
3
Public Storage Properties XIV, Inc.
Condensed Statement of Shareholders' Equity
(Unaudited)
Convertible Convertible
Series A Series B Series C
Shares Amount Shares Amount Shares Amount
--------- ------- ------- ------ ------- ------
Balances at December 31, 1995 2,304,218 $23,000 232,762 $2,000 659,494 $7,000
Net income - - - - - -
Repurchase of shares (27,100) - - - - -
Cash distributions declared:
$.34 per share - Series A - - - - - -
$.34 per share - Series B - - - - - -
--------- ------- ------- ------ ------- ------
Balances at March 31, 1996 2,277,118 $23,000 232,762 $2,000 659,494 $7,000
========= ======= ======= ====== ======= ======
Cumulative Total
Paid-in Net Cumulative Shareholders'
Capital Income Distributions Equity
----------- ----------- ------------ -----------
Balances at December 31, 1995 $40,941,000 $27,859,000 ($32,047,000) $36,785,000
Net income - 1,008,000 - 1,008,000
Repurchase of shares (500,000) - - (500,000)
Cash distributions declared:
$.34 per share - Series A - - (774,000) (774,000)
$.34 per share - Series B - - (79,000) (79,000)
----------- ----------- ------------ -----------
Balances at March 31, 1996 $40,441,000 $28,867,000 ($32,900,000) $36,440,000
=========== =========== ============ ===========
See accompanying notes.
4
PUBLIC STORAGE PROPERTIES XIV, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31,
------------------------------------
1996 1995
--------------- -----------------
Cash flows from operating activities:
Net income $1,008,000 $ 988,000
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 343,000 340,000
Decrease (increase) in rent and other receivables 5,000 (8,000)
Increase in prepaid expenses (1,000) -
Amortization of prepaid management fees 93,000 -
Decrease in accounts payable (81,000) (65,000)
Increase (decrease) in advance payments from renters 12,000 (7,000)
------------ ---------------
Total adjustments 371,000 260,000
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Net cash provided by operating activities 1,379,000 1,248,000
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Cash flows from investing activities:
Additions to real estate facilities (29,000) (13,000)
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Net cash used in investing activities (29,000) (13,000)
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Cash flows from financing activities:
Distributions paid to shareholders (863,000) (904,000)
Purchase of Company Series A common stock (500,000) (455,000)
-------------- -------------
Net cash used in financing activities (1,363,000) (1,359,000)
------------ -----------
Net decrease in cash
and cash equivalents (13,000) (124,000)
Cash and cash equivalents at
the beginning of the period 949,000 1,540,000
----------- -----------
Cash and cash equivalents at
the end of the period $ 936,000 $1,416,000
========== ==========
See accompanying notes.
5
PUBLIC STORAGE PROPERTIES XIV, 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 February 1996, the Company's Board of Directors authorized the
Company to obtain a line of credit facility for a maximum of $2,500,000
for working capital purposes, including the repurchase of the Company's
stock.
6
In March 1996, the Company obtained an unsecured revolving credit
facility with a bank for borrowings up to $2,500,000. Outstanding
borrowings on the credit facility which, at the Company's option, bear
interest at either the bank's prime rate plus .25% or the bank's LIBOR
rate plus 2.25%, will convert to a term loan on December 31, 1998.
Interest is payable monthly. Commencing on January 31, 1999, principal
will be payable monthly in eleven installments equal to one forty-eighth
of the outstanding principal amount of the line of credit on December
31, 1998. On December 31, 1999, the remaining unpaid principal and
interest is due and payable. There was no outstanding balance on the
credit facility at March 31, 1996.
5. In 1995, the Company prepaid eight months of 1996 management fees at a
total cost of $248,000. The Company expensed $93,000 of the 1996 prepaid
management fees for the three months ended March 31, 1996. The balance
of prepaid management fees, $155,000, is included in prepaid expenses in
the Balance Sheet at March 31, 1996.
7
PUBLIC STORAGE PROPERTIES XIV, 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
$1,008,000 compared to $988,000 for the three months ended March 31, 1995,
representing an increase of $20,000 or 2%. This increase is primarily the result
of an increase in property net operating income (rental income 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
$2,115,000 and $2,060,000, respectively, representing an increase of $55,000 or
3%. This increase is primarily due to an increase in rental rates at a majority
of the Company's mini-warehouse operations. The Company's business park
operations showed a decrease in rental income of $17,000. This decrease is
attributable to a decrease in occupancy of 8 points at the Company's Torrance,
California business park.
The Company's mini-warehouse operations had weighted average occupancy
levels of 92% and 91% for the three month periods ended March 31, 1996 and 1995,
respectively. The Company's business park operations had weighted average
occupancy levels of 92% and 97% for 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 $1,060,000 from $1,026,000 for the three
months ended March 31, 1996 and 1995, respectively, representing an increase of
$34,000 or 3%. This increase is attributable to an increase in payroll and
repairs and maintenance costs offset by a decrease in utility costs. Repairs and
maintenance costs increased during the first quarter of 1996 mainly due to an
increase in snow removal costs associated with higher than normal snow levels
experienced at the Company's mini-warehouse properties in the eastern states.
8
In 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 $93,000 of prepaid
management fees. The amount is included in management fees paid to affiliates in
the condensed statements of income. As a result of the prepayment, the Company
saved approximately $11,000 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 ($1,379,000 for the three months ended
March 31, 1996) and cash reserves were sufficient to meet all current
obligations and distributions of the Company during the three months ended March
31, 1996. Management expects cash flows from operating activities will be
sufficient to fund capital expenditures and quarterly distributions.
In March 1996, the Company obtained an unsecured revolving credit facility
with a bank for borrowings up to $2,500,000. Outstanding borrowings on the
credit facility which, at the Company's option, bear interest at either the
bank's prime rate plus .25% or the bank's LIBOR rate plus 2.25%, will convert to
a term loan on December 31, 1998. Interest is payable monthly. Commencing on
January 31, 1999, principal will be payable monthly in eleven installments equal
to one-forty eighth of the outstanding principal amount of the line of credit on
December 31, 1998. On December 31, 1999, the remaining unpaid principal and
interest is due and payable. There was no outstanding balance on the credit
facility at March 31, 1996.
The Company's Board of Directors has authorized the Company to purchase up
to 600,000 Series A common stock. As of March 31, 1996, the Company had
repurchased 399,650 shares of Series A common stock, of which 27,100 were
purchased in the first quarter of 1996.
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 $1,480,000.
9
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 $1,351,000 and $1,328,000, 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.
10
PART II. OTHER INFORMATION
ITEMS 1 through 5 are inapplicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS: The following exhibit is included herein:
(27) Financial Data Schedule
B) REPORTS ON 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 XIV, INC.
BY: /s/ Ronald L. Havner, Jr.
-------------------------
Ronald L. Havner, Jr.
Vice President and
Chief Financial Officer
11