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
---------------- ----------------
Commission File Number 1-10837
-------
PUBLIC STORAGE PROPERTIES XV, INC.
----------------------------------------------------
(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 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
June 30, 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
------------------------------------------------
<PAGE>
INDEX
Page
----
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 6-7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-11
PART II. OTHER INFORMATION 12
<PAGE>
<TABLE>
PUBLIC STORAGE PROPERTIES XV, INC.
CONDENSED BALANCE SHEETS
<CAPTION>
June 30, December 31,
1996 1995
------------- -----------
(Unaudited)
ASSETS
------
<S> <C> <C>
Cash and cash equivalents $ 981,000 $ 825,000
Marketable securities of affiliate
at market value (cost of $339,000) 474,000 437,000
Rent and other receivables 41,000 42,000
Prepaid expenses 160,000 358,000
Real estate facilities at cost:
Building, land improvements and equipment 32,018,000 31,919,000
Land 16,992,000 16,992,000
------------- -----------
49,010,000 48,911,000
Less accumulated depreciation (12,255,000) (11,617,000)
------------- ------------
36,755,000 37,294,000
------------- ------------
Total assets $ 38,411,000 $38,956,000
============= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Accounts payable $ 397,000 $ 491,000
Dividends payable 715,000 1,251,000
Advance payments from renters 283,000 312,000
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 20,764,000 18,870,000
Unrealized gain in marketable securities 135,000 98,000
Cumulative distributions (23,391,000) (21,961,000)
------------- -----------
Total shareholders' equity 37,016,000 36,902,000
------------- -----------
Total liabilities and shareholders' equity $38,411,000 $38,956,000
============= ============
</TABLE>
See accompanying notes.
2
<PAGE>
<TABLE>
PUBLIC STORAGE PROPERTIES XV, INC.
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------------- ---------------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
REVENUES:
<S> <C> <C> <C> <C>
Rental income $2,107,000 $1,994,000 $4,132,000 $3,925,000
Interest and other income
(including $5,000 and $10,000
of dividends from marketable
securities of affiliate for the three
and six months ended June 30,
1996 and 1995, respectively) 10,000 15,000 20,000 25,000
-------------- -------------- ------------- -------------
2,117,000 2,009,000 4,152,000 3,950,000
-------------- -------------- ------------- -------------
COSTS AND EXPENSES:
Cost of operations 634,000 595,000 1,284,000 1,150,000
Management fees
paid to affiliates 109,000 120,000 218,000 236,000
Depreciation 320,000 314,000 638,000 626,000
Interest expense 5,000 - 16,000 -
Administrative 41,000 47,000 102,000 103,000
------------- ------------ ----------- -------------
1,109,000 1,076,000 2,258,000 2,115,000
-------------- -------------- ------------- -------------
NET INCOME $ 1,008,000 $ 933,000 $1,894,000 $1,835,000
============== ============== ============= =============
Earnings per share:
Primary - Series A $0.43 $0.38 $0.81 $0.75
============== ============== ============= =============
Fully diluted - Series A $0.33 $0.30 $0.62 $0.59
============== ============== ============= =============
Dividends declared per share:
Series A $0.30 $0.30 $0.60 $0.60
============== ============== ============= =============
Series B $0.30 $0.30 $0.60 $0.60
============== ============== ============= =============
Weighted average common shares outstanding:
Primary - Series A 2,149,885 2,247,485 2,153,035 2,247,485
============== ============== ============= =============
Fully diluted - Series A 3,042,141 3,139,741 3,045,291 3,139,741
============== ============== ============= =============
</TABLE>
See accompanying notes.
3
<PAGE>
<TABLE>
Public Storage Properties XV, Inc.
Condensed Statement of Shareholders' Equity
(Unaudited)
<CAPTION>
Convertible Convertible Cumulative
Series A Series B Series C Paid-in Net
Shares Amount Shares Amount Shares Amount Capital Income
--------- ------- ------- ------ ------- ------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1995 2,171,885 $22,000 232,762 $2,000 659,494 $7,000 $39,864,000 $18,870,000
Net income - - - - - - - 1,894,000
Repurchase of shares (22,000) - - - - - (387,000) -
Unrealized gain in marketable securities - - - - - - - -
Cash distributions declared:
$.60 per share - Series A - - - - - - - -
$.60 per share - Series B - - - - - - - -
--------- ------- ------- ------ ------- ------ ----------- -----------
Balances at June 30, 1996 2,149,885 $22,000 232,762 $2,000 659,494 $7,000 $39,477,000 $20,764,000
========= ======= ======= ====== ======= ====== =========== ===========
</TABLE>
Unrealized gain Total
Cumulative in marketable Shareholders'
Distributions securities Equity
------------- ------------ -----------
Balances at December 31, 1995 ($21,961,000) $98,000 $36,902,000
Net income - - 1,894,000
Repurchase of shares - - (387,000)
Unrealized gain in marketable securities - 37,000 37,000
Cash distributions declared:
$.60 per share - Series A (1,290,000) - (1,290,000)
$.60 per share - Series B (140,000) - (140,000)
------------- -------- -----------
Balances at June 30, 1996 ($23,391,000) $135,000 $37,016,000
============ ======== ===========
See accompanying notes.
4
<PAGE>
<TABLE>
PUBLIC STORAGE PROPERTIES XV, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Six Months Ended
June 30,
-------------------------------------
1996 1995
---------------- ----------------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 1,894,000 $ 1,835,000
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation 638,000 626,000
Decrease (increase) in rent and other receivables 1,000 (2,000)
Amortization of prepaid management fees 210,000 -
Increase in prepaid expenses (12,000) -
Decrease in accounts payable (94,000) (54,000)
Decrease in advance payments from renters (29,000) (15,000)
---------------- ----------------
Total adjustments 714,000 555,000
---------------- ----------------
Net cash provided by operating activities 2,608,000 2,390,000
---------------- ----------------
Cash flows from investing activities:
Additions to real estate facilities (99,000) (90,000)
---------------- ----------------
Net cash used in investing activities (99,000) (90,000)
---------------- ----------------
Cash flows from financing activities:
Distributions paid to shareholders (1,966,000) (1,786,000)
Purchase of Company Series A common stock (387,000) -
---------------- ----------------
Net cash used in financing activities (2,353,000) (1,786,000)
---------------- ----------------
Net increase in cash
and cash equivalents 156,000 514,000
Cash and cash equivalents at
the beginning of the period 825,000 932,000
---------------- ----------------
Cash and cash equivalents at
the end of the period $ 981,000 $ 1,446,000
================ ================
Supplemental schedule of non-cash investing and financing activities:
Increase in fair value of marketable securities $ (37,000) $ (47,000)
================ ================
Unrealized gain on marketable securities $ 37,000 $ 47,000
================ ================
</TABLE>
See accompanying notes.
5
<PAGE>
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
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 months and six months ended June
30, 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 $279,000. The Company expensed $210,000 of the 1996 prepaid
management fees for the six months ended June 30, 1996. The balance of
prepaid management fees, $69,000, is included in prepaid expenses in the
Balance Sheet at June 30, 1996.
5. 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 June 30, 1996 was $474,000. The Company recognized $5,000 and
$10,000 in dividends for the three and six months ended June 30, 1996,
respectively, and included these amounts in other income in the condensed
statements of income.
6
<PAGE>
6. In January 1996, the Company obtained an unsecured 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% or the bank's LIBOR rate
plus 2.25%, will convert to a term loan on January 1, 1998. Interest is
payable monthly until maturity. Principal will be payable quarterly
beginning on January 1, 1998. On October 1, 2002, the remaining unpaid
principal and interest is due and payable. During the six months ended June
30, 1996, the Company borrowed and repaid $1,050,000. At June 30, 1996,
there was no outstanding balance on the credit facility.
7
<PAGE>
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 six months ended June 30, 1996 and 1995
was $1,894,000 and $1,835,000, respectively, representing an increase of $59,000
or 3%. Net income for the three months ended June 30, 1996 and 1995 was
$1,008,000 and $933,000, respectively, representing an increase of $75,000 or
8%. These 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).
Rental income for the six months ended June 30, 1996 and 1995 was
$4,132,000 and $3,925,000, respectively, representing an increase of $207,000 or
5%. Rental income for the three months ended June 30, 1996 and 1995 was
$2,107,000 and $1,994,000, respectively, representing an increase of $113,000 or
6%. The Company's mini-warehouse operations showed increases in rental income of
$197,000 and $105,000 for the six and three month periods ended June 30, 1996,
respectively, compared to the same periods in 1995 primarily due to increased
rental rates at the Company's six California properties. The Company's
Gaithersburg, Maryland business park also contributed to the increase in rental
income due to increased rental rates.
The Company's mini-warehouse operations had weighted average occupancy
levels of 91% and 89% for the six month periods ended June 30, 1996 and 1995,
respectively. The Company's business park facility had an average occupancy
level of 100% and 98% for the six month periods ended June 30, 1996 and 1995,
respectively.
Cost of operations (including management fees paid to affiliates and
depreciation expense) increased to $2,140,000 from $2,012,000 for the six month
period ended June 30, 1996 and 1995, respectively, representing an increase of
$128,000 or 6%. Cost of operations increased to $1,063,000 from $1,029,000 for
the three month period ended June 30, 1996 and 1995, respectively, representing
an increase of $34,000 or 3%. These increases are primarily attributable to
increases in repairs and maintenance costs, advertising and property tax
expense. 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 facilities located in the eastern states. Property
taxes increased primarily due to a one-time tax refund received in early 1995 at
the Company's San Jose, California mini-warehouse facility.
8
<PAGE>
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 $210,000 of prepaid
management fees. The amount is included in management fees paid to affiliates in
the condensed statement of income. As a result of the prepayment, the Company
saved approximately $28,000 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.
During the six months ended June 30, 1996, the Company incurred $16,000 of
interest expense on its line of credit facility.
Liquidity and Capital Resources.
- --------------------------------
Cash flows from operating activities ($2,608,000 in 1996), cash reserves
and borrowings from the Company's credit facility discussed below 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 January 1996, the Company obtained an unsecured 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% or the bank's LIBOR rate plus 2.25%, will convert to
a term loan on January 1, 1998. Interest is payable monthly until maturity.
Principal will be payable quarterly beginning on January 1, 1998. On October 1,
2002, the remaining unpaid principal and interest is due and payable. During the
six months ended June 30, 1996, the Company borrowed and repaid $1,050,000. At
June 30, 1996, there was no outstanding balance on the credit facility.
9
<PAGE>
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 above.
No shares were repurchased in the second quarter of 1996, however, share
repurchases are expected to continue in the third quarter.
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 June 30,
1996 was $474,000. The Company recognized $5,000 and $10,000 in dividends for
the three and six months ended June 30, 1996, respectively, and included these
amounts in other income in 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.
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.
10
<PAGE>
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 $2,532,000 and $2,461,000, respectively. FFO for the three months ended
June 30, 1996 and 1995 was $1,328,000 and $1,247,000, 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.
11
<PAGE>
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: August 13 1996
PUBLIC STORAGE PROPERTIES XV, INC.
BY: /s/ Ronald L. Havner, Jr.
--------------------------
Ronald L. Havner, Jr.
Senior Vice President
and Chief Financial Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000870499
<NAME> PUBLIC STORAGE PROPERTIES XV, INC.
<MULTIPLIER> 1
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 981,000
<SECURITIES> 474,000
<RECEIVABLES> 201,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,656,000
<PP&E> 49,010,000
<DEPRECIATION> (12,255,000)
<TOTAL-ASSETS> 38,411,000
<CURRENT-LIABILITIES> 1,395,000
<BONDS> 0
0
0
<COMMON> 31,000
<OTHER-SE> 36,985,000
<TOTAL-LIABILITY-AND-EQUITY> 38,411,000
<SALES> 0
<TOTAL-REVENUES> 4,152,000
<CGS> 0
<TOTAL-COSTS> 2,140,000
<OTHER-EXPENSES> 102,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,000
<INCOME-PRETAX> 1,894,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,894,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,894,000
<EPS-PRIMARY> .81
<EPS-DILUTED> .62
</TABLE>
