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, 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
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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
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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
June 30, 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 June 30, 1996
and December 31, 1995 2
Condensed Statements of Income for the three
and six months ended June 30, 1996 and 1995 3
Condensed Statement of Shareholders' Equity for the
six months ended June 30, 1996 4
Condensed Statements of Cash Flows for the
six months ended June 30, 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 XIV, INC.
CONDENSED BALANCE SHEETS
June 30, December 31,
1996 1995
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(Unaudited)
ASSETS
------
Cash and cash equivalents $ 1,517,000 $ 949,000
Rent and other receivables 22,000 98,000
Prepaid expenses 152,000 329,000
Real estate facilities at cost:
Building, land improvements and equipment 30,726,000 30,575,000
Land 18,712,000 18,712,000
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49,438,000 49,287,000
Less accumulated depreciation (12,564,000) (11,869,000)
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36,874,000 37,418,000
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Total assets $38,565,000 $38,794,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Accounts payable $ 703,000 $ 824,000
Dividends payable 853,000 863,000
Advance payments from renters 328,000 322,000
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 29,961,000 27,859,000
Cumulative distributions (33,753,000) (32,047,000)
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Total shareholders' equity 36,681,000 36,785,000
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Total liabilities and shareholders' equity $38,565,000 $38,794,000
============= =============
See accompanying notes.
2
PUBLIC STORAGE PROPERTIES XIV, INC.
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------------- ---------------------------------
1996 1995 1996 1995
-------------- -------------- ------------ -------------
REVENUES:
Rental income $2,196,000 $2,122,000 $4,311,000 $4,182,000
Interest income 8,000 14,000 13,000 28,000
-------------- -------------- ------------ -------------
2,204,000 2,136,000 4,324,000 4,210,000
-------------- -------------- ------------ -------------
COSTS AND EXPENSES:
Cost of operations 592,000 570,000 1,197,000 1,136,000
Management fees
paid to affiliates 113,000 123,000 225,000 243,000
Depreciation 352,000 352,000 695,000 692,000
Administrative 53,000 58,000 105,000 118,000
-------------- -------------- ------------ -------------
1,110,000 1,103,000 2,222,000 2,189,000
-------------- -------------- ------------ -------------
NET INCOME $1,094,000 $1,033,000 $2,102,000 $2,021,000
============== ============== ============ =============
Earnings per share:
Primary - Series A $0.44 $0.40 $0.85 $0.78
============== ============== ============ =============
Fully diluted - Series A $0.34 $0.32 $0.66 $0.62
============== ============== ============ =============
Dividends declared per share:
Series A $0.34 $0.34 $0.68 $0.68
============== ============== ============ =============
Series B $0.34 $0.34 $0.68 $0.68
============== ============== ============ =============
Weighted average common shares outstanding:
Primary - Series A 2,277,118 2,380,851 2,282,451 2,393,801
============== ============== ============ =============
Fully diluted - Series A 3,169,374 3,273,107 3,174,707 3,286,057
============== ============== ============ =============
See accompanying notes.
3
Public Storage Properties XIV, Inc.
Condensed Statement of Shareholders' Equity
(Unaudited)
Convertible Convertible Cumulative
Series A Series B Series C Paid-in Net
Shares Amount Shares Amount Shares Amount Capital Income
--------- ------- ------- ------ ------- ------ ----------- -----------
Balances at December 31, 1995 2,304,218 $23,000 232,762 $2,000 659,494 $7,000 $40,941,000 $27,859,000
Net income - - - - - - - 2,102,000
Repurchase of shares (27,100) - - - - - (500,000) -
Cash distributions declared:
$.68 per share - Series A - - - - - - - -
$.68 per share - Series B - - - - - - - -
--------- ------- ------- ------ ------- ------ ----------- -----------
Balances at June 30, 1996 2,277,118 $23,000 232,762 $2,000 659,494 $7,000 $40,441,000 $29,961,000
========= ======= ======= ====== ======= ====== =========== ===========
Total
Cumulative Shareholders'
Distributions Equity
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Balances at December 31, 1995 ($32,047,000) $36,785,000
Net income - 2,102,000
Repurchase of shares - (500,000)
Cash distributions declared:
$.68 per share - Series A (1,548,000) (1,548,000)
$.68 per share - Series B (158,000) (158,000)
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Balances at June 30, 1996 ($33,753,000) $36,681,000
============ ===========
See accompanying notes.
4
PUBLIC STORAGE PROPERTIES XIV, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
June 30,
-----------------------------------
1996 1995
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Cash flows from operating activities:
Net income $2,102,000 $2,021,000
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 695,000 692,000
Decrease (increase) in rent and other receivables 76,000 (4,000)
Increase in prepaid expenses (9,000) -
Amortization of prepaid management fees 186,000 -
Decrease in accounts payable (121,000) (19,000)
Increase (decrease) in advance payments from renters 6,000 (3,000)
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Total adjustments 833,000 666,000
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Net cash provided by operating activities 2,935,000 2,687,000
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Cash flows from investing activities:
Additions to real estate facilities (151,000) (58,000)
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Net cash used in investing activities (151,000) (58,000)
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Cash flows from financing activities:
Distributions paid to shareholders (1,716,000) (1,798,000)
Purchase of Company Series A common stock (500,000) (899,000)
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Net cash used in financing activities (2,216,000) (2,697,000)
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Net increase (decrease) in cash
and cash equivalents 568,000 (68,000)
Cash and cash equivalents at
the beginning of the period 949,000 1,540,000
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Cash and cash equivalents at
the end of the period $1,517,000 $1,472,000
============= =============
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
June 30, 1996 and December 31, 1995, the results of its operations for the
three and six months ended June 30, 1996 and 1995 and its cash flows for
the six months then ended.
3. The results of operations for the three and six months ended June 30, 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.
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 June 30, 1996.
5. In 1995, the Company prepaid eight months of 1996 management fees at a
total cost of $248,000. The Company expensed $186,000 of the 1996 prepaid
management fees for the six months ended June 30, 1996. The balance of
prepaid management fees, $62,000, is included in prepaid expenses in the
Balance Sheet at June 30, 1996.
6
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 six months ended June 30, 1996 and 1995
was $2,102,000 and $2,021,000, respectively, representing an increase of $81,000
or 4%. Net income was $1,094,000 and $1,033,000 for the three months ended June
30, 1996 and 1995, respectively, representing an increase of $61,000 or 6%. The
increases are primarily the result of increases in property net operating income
(rental income less cost of operations, management fees paid to affiliates and
depreciation expense) at the Company's mini-warehouse operations.
Rental income for the six months ended June 30, 1996 and 1995 was
$4,311,000 and $4,182,000, respectively, representing an increase of $129,000 or
3%. Rental income for the three months ended June 30, 1996 and 1995 was
$2,196,000 and $2,122,000, respectively, representing an increase of $74,000 or
3%. These increases are 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 decreases in rental income of approximately $1,000 and $18,000
for the three and six months ended June 30, 1996 over 1995, respectively. These
decreases are mainly attributable to a decrease in occupancy levels at the
Company's Torrance, California business park.
The Company's mini-warehouse operations had weighted average occupancy
levels of 94% and 93% for the six month periods ended June 30, 1996 and 1995,
respectively. The Company's business park operations had weighted average
occupancy levels of 92% and 97% for the six month periods ended June 30, 1996
and 1995, respectively.
Cost of operations (including management fees paid to affiliates and
depreciation expense) for the six months ended June 30, 1996 and 1995 was
$2,117,000 and $2,071,000, respectively, representing an increase of $46,000 or
2%. Cost of operations for the three months ended June 30, 1996 and 1995 was
$1,057,000 and $1,045,000, respectively, representing an increase of $12,000 or
1%. These increases are primarily attributable to increases in payroll expense,
advertising and repairs and maintenance costs. The increase in repairs and
maintenance costs is primarily 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 offset by a decrease in costs
associated with storm damage sustained in early 1995 at the Company's Torrance,
California business park.
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 six
month period ended June 30, 1996, the Company expensed $186,000 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 $26,000 in management fees, based on the management fees
that would have been payable on rental income generated in the six months ended
June 30, 1996 compared to the amount prepaid.
7
Liquidity and Capital Resources.
- --------------------------------
Cash flows from operating activities ($2,935,000 in 1996) and cash reserves
were sufficient to meet all current obligations and distributions of the Company
during the six months ended June 30, 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 June 30, 1996.
The Company's Board of Directors has authorized the Company to purchase up
to 600,000 shares of Series A common stock. As of June 30, 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. No shares were repurchased in the second
quarter of 1996, however, share repurchases are expected to continue in the
third quarter.
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.
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.
8
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 six months ended June 30, 1996 and
1995 was $2,797,000 and $2,713,000, respectively. FFO for the three months ended
June 30, 1996 and 1995 was $1,446,000 and $1,385,000, 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) EXHIBITS: The following exhibit is included herein:
(27) Financial Data Schedule
(B) REPORTS ON 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, 1996
PUBLIC STORAGE PROPERTIES XIV, INC.
BY: /s/ Ronald L. Havner, Jr.
-------------------------
Ronald L. Havner, Jr.
Senior Vice President and
Chief Financial Officer
10