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
----------------- --------------
Commission File Number 1-10709
PUBLIC STORAGE PROPERTIES XI, INC.
---------------------------------------------------
(Exact name of registrant as specified in its charter)
California 95-4300881
- - ------------------------------- ---------------------
(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
--------------
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:
1,836,837 shares of $.01 par value Series A shares
184,453 shares of $.01 par value Series B shares
522,618 shares of $.01 par value Series C shares
------------------------------------------------
<PAGE>
INDEX
Page
----
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
<PAGE>
PUBLIC STORAGE PROPERTIES XI, INC.
CONDENSED BALANCE SHEETS
<TABLE>
March 31, December 31,
1996 1995
------------ ------------
(Unaudited)
ASSETS
------
<S> <C> <C>
Cash and cash equivalents $ 837,000 $ 746,000
Rent and other receivables 25,000 87,000
Prepaid expenses 192,000 268,000
Real estate facilities at cost:
Building, land improvements and equipment 26,084,000 26,031,000
Land 12,118,000 12,118,000
----------- -----------
38,202,000 38,149,000
Less accumulated depreciation (11,136,000) (10,862,000)
------------ ------------
27,066,000 27,287,000
------------ ------------
Total assets $28,120,000 $28,388,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 613,000 $ 609,000
Dividends payable 687,000 694,000
Advance payments from renters 237,000 202,000
Shareholders' equity:
Series A common, $.01 par value,
2,828,989 shares authorized,
1,836,837 shares issued and
outstanding (1,856,337 shares
issued and outstanding in 1995) 19,000 19,000
Convertible Series B common, $.01 par
value, 184,453 shares authorized,
issued and outstanding 2,000 2,000
Convertible Series C common, $.01 par
value, 522,618 shares authorized,
issued and outstanding 5,000 5,000
Paid-in-capital 32,755,000 33,105,000
Cumulative income 23,553,000 22,816,000
Cumulative distributions (29,751,000) (29,064,000)
------------- -------------
Total shareholders' equity 26,583,000 26,883,000
------------ ------------
Total liabilities and shareholders' equity $28,120,000 $28,388,000
=========== ===========
</TABLE>
See accompanying notes.
2
<PAGE>
PUBLIC STORAGE PROPERTIES XI, INC.
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
Three Months Ended
March 31,
----------------------------------
1996 1995
------------- -------------
REVENUES:
<S> <C> <C>
Rental income $1,736,000 $1,648,000
Interest income 5,000 4,000
------------- -------------
1,741,000 1,652,000
------------- -------------
COSTS AND EXPENSES:
Cost of operations 578,000 525,000
Management fees paid to affiliates 93,000 96,000
Depreciation 274,000 268,000
Administrative 56,000 56,000
Interest expense 3,000 -
------------- -------------
1,004,000 945,000
------------- -------------
NET INCOME $ 737,000 $ 707,000
========== ==========
Primary earnings per share - Series A $0.37 $0.34
===== =====
Fully diluted earnings per share - Series A $0.29 $0.27
===== =====
Dividends declared per share:
Series A $0.34 $0.34
===== =====
Series B $0.34 $0.34
===== =====
Weighted average Common shares outstanding:
Primary - Series A 1,841,804 1,877,170
========= =========
Fully diluted - Series A 2,548,875 2,584,241
========= =========
</TABLE>
See accompanying notes.
3
<PAGE>
Public Storage Properties XI, Inc.
Condensed Statement of Shareholders' Equity
(Unaudited)
<TABLE>
Convertible Convertible
Series A Series B Series C
Shares Amount Shares Amount Shares Amount
--------- ------- ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1995 1,856,337 $19,000 184,453 $2,000 522,618 $5,000
Net income - - - - - -
Repurchase of shares (19,500) - - - - -
Cash distributions declared:
$.34 per share - Series A - - - - - -
$.34 per share - Series B - - - - - -
--------- ------- ------- ------ ------- ------
Balances at March 31, 1996 1,836,837 $19,000 184,453 $2,000 522,618 $5,000
========= ======= ======= ====== ======= ======
</TABLE>
<TABLE>
Cumulative Total
Paid-in Net Cumulative Shareholders'
Capital Income Distributions Equity
----------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
Balances at December 31, 1995 $33,105,000 $22,816,000 ($29,064,000) $26,883,000
Net income - 737,000 - 737,000
Repurchase of shares (350,000) - - (350,000)
Cash distributions declared:
$.34 per share - Series A - - (624,000) (624,000)
$.34 per share - Series B - - (63,000) (63,000)
----------- ----------- ------------ -----------
Balances at March 31, 1996 $32,755,000 $23,553,000 ($29,751,000) $26,583,000
=========== =========== ============ ===========
</TABLE>
See accompanying notes.
4
<PAGE>
PUBLIC STORAGE PROPERTIES XI, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
Three Months Ended
March 31,
------------------------------------
1996 1995
------------- --------------
Cash flows from operating activities:
<S> <C> <C>
Net income $737,000 $ 707,000
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 274,000 268,000
Decrease in rent and other receivables 62,000 12,000
Increase in prepaid expenses (1,000) (1,000)
Amortization of prepaid management fees 77,000 -
Increase (decrease) in accounts payable 4,000 (75,000)
Increase in advance payments from renters 35,000 9,000
------------- --------------
Total adjustments 451,000 213,000
------------ ------------
Net cash provided by operating activities 1,188,000 920,000
------------ ------------
Cash flows from investing activities:
Additions to real estate facilities (53,000) (28,000)
------------ -------------
Net cash used in investing activities (53,000) (28,000)
------------- -------------
Cash flows from financing activities:
Distributions paid to shareholders (694,000) (705,000)
Purchase of Company Series A common stock (350,000) (352,000)
------------ ------------
Net cash used in financing activities (1,044,000) (1,057,000)
----------- -----------
Net increase (decrease) in cash
and cash equivalents 91,000 (165,000)
Cash and cash equivalents at
the beginning of the period 746,000 754,000
----------- -----------
Cash and cash equivalents at
the end of the period $ 837,000 $ 589,000
========== ==========
</TABLE>
See accompanying notes.
5
<PAGE>
PUBLIC STORAGE PROPERTIES XI, 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 Company prepaid eight months of 1996 management fees at a
total cost of $205,000. The Company expensed $77,000 of the 1996 prepaid
management fees for the three months ended March 31, 1996. The balance of
prepaid management fees, $128,000, is included in prepaid expenses in the
Balance Sheet at March 31, 1996.
6
<PAGE>
PUBLIC STORAGE PROPERTIES XI, 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
$737,000 compared to $707,000 for the three months ended March 31, 1995,
representing an increase of $30,000 or 4%. 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
$1,736,000 and $1,648,000, respectively, representing an increase of $88,000 or
5%. The Company's mini-warehouse operations contributed $75,000 to the increase
in rental revenues. Approximately 47% of the increase in rental revenues was
generated by the Company's two California properties due to an increase in
rental rates. The Company's business park operations also showed an increase in
rental revenues due to an increase in rental rates.
The Company's mini-warehouse operations had weighted average occupancy
levels of 89% and 91% for the three months ended March 31, 1996 and 1995,
respectively. The Company's business park operations had weighted average
occupancy levels of 94% and 97% for the three months ended March 31, 1996 and
1995, respectively.
Cost of operations (including management fees paid to affiliates and
depreciation expense) increased to $945,000 from $889,000 for the three months
ended March 31, 1996 and 1995, respectively, representing an increase of $56,000
or 6%. This increase is attributable to an increase in payroll expense and
repairs and maintenance costs. The increase in repairs and maintenance costs is
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.
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 $77,000 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 $8,000 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
<PAGE>
During the three months ended March 31, 1996, the Company incurred $3,000
in interest expense on its line of credit facility. No such expense was incurred
during the same period in 1995 since the Company did not have a credit facility.
LIQUIDITY AND CAPITAL RESOURCES.
- - --------------------------------
Cash flows from operating activities ($1,188,000 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 operations will be sufficient to
fund capital expenditures and quarterly distributions.
In December 1995, the Company obtained an unsecured revolving credit
facility with a bank for borrowings up to $3,000,000 for working capital
purposes and to repurchase the Company's stock. Outstanding borrowings on the
credit facility, 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). Interest is payable monthly. On December 31,
1999, all unpaid principal and accrued interest is due and payable. During the
first quarter of 1996, the Company borrowed and repaid $250,000 on its line of
credit facility. At March 31, 1996, there was no outstanding balance on the
credit facility.
The Company's Board of Directors has authorized the Company to purchase up
to 400,000 Series A common stock. As of March 31, 1996, the Company had
repurchased 284,375 shares of Series A common stock, of which 19,500 were
purchased in the first quarter of 1996.
8
<PAGE>
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 $1,218,000.
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.
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 $1,011,000 and $975,000, 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
<PAGE>
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 XI, INC.
BY: /s/ Ronald L. Havner, Jr.
--------------------------
Ronald L. Havner, Jr.
Vice President and
Chief Financial Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000866368
<NAME> PUBLIC STORAGE PROPERTIES XI, INC.
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-START> Jan-01-1996
<PERIOD-END> Mar-31-1996
<CASH> 837,000
<SECURITIES> 0
<RECEIVABLES> 217,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,054,000
<PP&E> 38,202,000
<DEPRECIATION> (11,136,000)
<TOTAL-ASSETS> 28,120,000
<CURRENT-LIABILITIES> 1,537,000
<BONDS> 0
0
0
<COMMON> 26,000
<OTHER-SE> 26,557,000
<TOTAL-LIABILITY-AND-EQUITY> 28,120,000
<SALES> 0
<TOTAL-REVENUES> 1,741,000
<CGS> 0
<TOTAL-COSTS> 945,000
<OTHER-EXPENSES> 56,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,000
<INCOME-PRETAX> 737,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 737,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 737,000
<EPS-PRIMARY> .37
<EPS-DILUTED> .29
</TABLE>
