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 September 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
September 30, 1996:
2,136,885 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 September 30, 1996
and December 31, 1995 2
Condensed Statements of Income for the three and nine
months ended September 30, 1996 and 1995 3
Condensed Statement of Shareholders' Equity for the
nine months ended September 30, 1996 4
Condensed Statements of Cash Flows for the
nine months ended September 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
<PAGE>
<TABLE>
PUBLIC STORAGE PROPERTIES XV, INC.
CONDENSED BALANCE SHEETS
<CAPTION>
September 30, December 31,
1996 1995
----------------- ----------------
(Unaudited)
ASSETS
------
<S> <C> <C>
Cash and cash equivalents $1,341,000 $ 825,000
Marketable securities of affiliate at market value (cost of $339,000) 520,000 437,000
Rent and other receivables 60,000 42,000
Prepaid expenses 106,000 358,000
Real estate facilities at cost:
Building, land improvements and equipment 32,012,000 31,919,000
Land 16,992,000 16,992,000
----------------- ----------------
49,004,000 48,911,000
Less accumulated depreciation (12,498,000) (11,617,000)
----------------- ----------------
36,506,000 37,294,000
----------------- ----------------
Total assets $38,533,000 $38,956,000
================= ================
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Accounts payable $ 443,000 $ 491,000
Dividends payable 711,000 1,251,000
Advance payments from renters 280,000 312,000
Shareholders' equity:
Series A common, $.01 par value,
3,569,024 shared authorized,
2,136,885 shares issued and
outstanding (2,171,885 shares
issued and outstanding in 1995) 21,000 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 39,231,000 39,864,000
Cumulative income 21,759,000 18,870,000
Unrealized gain in marketable securities 181,000 98,000
Cumulative distributions (24,102,000) (21,961,000)
----------------- ----------------
Total shareholders' equity 37,099,000 36,902,000
----------------- ----------------
Total liabilities and shareholders' equity $38,533,000 $38,956,000
================= ================
</TABLE>
See accompanying notes.
2
<PAGE>
<TABLE>
PUBLIC STORAGE PROPERTIES XV, INC.
CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------------- ------------------------------
1996 1995 1996 1995
--------------- ----------------- ------------- --------------
(Restated) (Restated)
REVENUES:
<S> <C> <C> <C> <C>
Rental income $2,137,000 $2,072,000 $6,269,000 $5,997,000
Dividends from marketable securities
of affiliate 5,000 5,000 15,000 15,000
Interest income 10,000 9,000 20,000 24,000
--------------- ----------------- ------------- --------------
2,152,000 2,086,000 6,304,000 6,036,000
--------------- ----------------- ------------- --------------
COSTS AND EXPENSES:
Cost of operations 640,000 613,000 1,924,000 1,763,000
Management fees paid to affiliates 116,000 124,000 334,000 360,000
Depreciation 342,000 327,000 980,000 953,000
Interest expense - - 16,000 -
Administrative 59,000 59,000 161,000 162,000
--------------- ----------------- ------------- --------------
1,157,000 1,123,000 3,415,000 3,238,000
--------------- ----------------- ------------- --------------
NET INCOME $ 995,000 $ 963,000 $2,889,000 $2,798,000
=============== ================= ============= ==============
Earnings per share:
Primary - Series A $0.44 $0.40 $1.25 $1.15
=============== ================= ============= ==============
Fully diluted - Series A $0.33 $0.30 $0.95 $0.89
=============== ================= ============= ==============
Dividends declared per share:
Series A $0.30 $0.30 $0.90 $0.90
=============== ================= ============= ==============
Series B $0.30 $0.30 $0.90 $0.90
=============== ================= ============= ==============
Weighted average common shares
outstanding:
Primary - Series A 2,139,185 2,225,785 2,148,418 2,240,252
=============== ================= ============= ==============
Fully diluted - Series A 3,031,441 3,118,041 3,040,674 3,132,508
=============== ================= ============= ==============
</TABLE>
See accompanying notes.
3
<PAGE>
<TABLE>
Public Storage Properties XV, Inc.
Condensed Statement of Shareholders' Equity
(Unaudited)
<CAPTION>
Convertible Convertible
Series A Series B Series C Paid-in
Shares Amount Shares Amount Shares Amount Capital
-------- ------- -------- ------- ------- -------- ---------
<S> <C> <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
Net income - - - - - - -
Repurchase of shares (35,000) (1,000) - - - - (633,000)
Unrealized gain in marketable - - - - - - -
securities
Cash distributions declared:
$.90 per share - Series A - - - - - - -
$.90 per share - Series B - - - - - - -
-------- ------- -------- ------- ------- -------- ------------
Balances at September 30, 1996 2,136,885 $21,000 232,762 $2,000 659,494 $7,000 $39,231,000
======== ======= ======== ======= ======= ======== ============
</TABLE>
<TABLE>
Public Storage Properties XV, Inc.
Condensed Statement of Shareholders' Equity
(Unaudited)
<CAPTION>
Unrealized
Cumulative gain Total
Net Cumulative in marketable Shareholders'
Income Distributions Securities Equity
---------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1995 $18,870,000 ($21,961,000) $98,000 $36,902,000
Net income 2,889,000 - - 2,889,000
Repurchase of shares - - - (634,000)
Unrealized gain in marketable - - 83,000 83,000
securities
Cash distributions declared:
$.90 per share - Series A - (1,931,000) - (1,931,000)
$.90 per share - Series B - (210,000) - (210,000)
---------- ------------- ------------- ------------
Balances at September 30, 1996 $21,759,000 ($24,102,000) $181,000 $37,099,000
========== ============= ============= ============
</TABLE>
See accompanying notes.
4
<PAGE>
<TABLE>
PUBLIC STORAGE PROPERTIES XV, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Nine Months Ended
September 30,
-----------------------------------
1996 1995
------------- ------------
Cash flows from operating activities:
<S> <C> <C>
Net income $2,889,000 $2,798,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 980,000 953,000
Increase in rent and other receivables (18,000) (2,000)
Amortization of prepaid management fees 279,000 -
Increase in prepaid expenses (27,000) -
(Decrease) increase in accounts payable (48,000) 3,000
Decrease in advance payments from renters (32,000) (22,000)
------------- ------------
Total adjustments 1,134,000 932,000
------------- ------------
Net cash provided by operating activities 4,023,000 3,730,000
------------- ------------
Cash flows from investing activities:
Additions to real estate facilities (192,000) (249,000)
------------- ------------
Net cash used in investing activities (192,000) (249,000)
------------- ------------
Cash flows from financing activities:
Distributions paid to shareholders (2,681,000) (2,530,000)
Purchase of Company Series A common stock (634,000) (499,000)
------------- ------------
Net cash used in financing activities (3,315,000) (3,029,000)
------------- ------------
Net increase in cash and cash equivalents 516,000 452,000
Cash and cash equivalents at the beginning of the period 825,000 932,000
------------- ------------
Cash and cash equivalents at the end of the period $1,341,000 $1,384,000
============= ============
Supplemental schedule of non-cash investing and financing activities:
Increase in fair value of marketable securities $ (83,000) $ (98,000)
============= ============
Unrealized gain on marketable securities $ 83,000 $ 98,000
============= ============
</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
September 30, 1996 and December 31, 1995, the results of its operations for
the three and nine months ended September 30, 1996 and 1995 and its cash
flows for the nine months then ended.
3. The results of operations for the three and nine months ended September 30,
1996 are not necessarily indicative of the results expected for the full
year.
4. Certain prior year amounts have been restated in order to conform to
current year presentation.
5. In 1995, the Company prepaid eight months of 1996 management fees at a
total cost of $279,000. The amount has been expensed as management fees
paid to affiliate during the nine months ended September 30, 1996.
6. 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 September 30, 1996 was $520,000.
7. 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 September 30,
1996, there was no outstanding balance on the credit facility.
6
<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 nine months ended September 30, 1996 and
1995 was $2,889,000 and $2,798,000, respectively, representing an increase of
$91,000 or 3%. Net income for the three months ended September 30, 1996 and 1995
was $995,000 and $963,000, respectively, representing an increase of $32,000 or
3%. 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 nine months ended September 30, 1996 and 1995 was
$6,269,000 and $5,997,000, respectively, representing an increase of $272,000 or
5%. Rental income for the three months ended September 30, 1996 and 1995 was
$2,137,000 and $2,072,000, respectively, representing an increase of $65,000 or
3%. The Company's mini-warehouse operations showed increases in rental income of
$247,000 and $50,000 for the nine and three month periods ended September 30,
1996, respectively, compared to the same periods in 1995 due to increased rental
rates and occupancy levels. The Company's Gaithersburg, Maryland business park
also showed an increase in rental income due to increased rental rates and
occupancy levels.
The Company's mini-warehouse operations had weighted average occupancy
levels of 92% and 90% for the nine month periods ended September 30, 1996 and
1995, respectively. The Company's business park facility had an average
occupancy level of 100% and 94% for the nine month periods ended September 30,
1996 and 1995, respectively.
Cost of operations (including management fees paid to affiliates and
depreciation expense) increased to $3,238,000 from $3,076,000 for the nine month
periods ended September 30, 1996 and 1995, respectively, representing an
increase of $162,000 or 5%. Cost of operations increased to $1,098,000 from
$1,064,000 for the three month periods ended September 30, 1996 and 1995,
respectively, representing an increase of $34,000 or 3%. These increases are
primarily attributable to increases in payroll, 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.
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. The Company has
expensed the 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 $39,000 in management fees, based on
7
<PAGE>
the management fees that would have been payable on rental income generated in
the nine months ended September 30, 1996 compared to the amount prepaid.
During the nine months ended September 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 ($4,023,000 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 nine months ended September 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
September 30, 1996, there was no outstanding balance on the credit facility.
On November 12, 1996, the Company's Board of Directors declared a regular
quarterly distribution per share of $0.30 payable on January 15, 1997 to
shareholders of record on December 31, 1996.
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 539,883
shares of Series A common stock, of which 35,000 shares were purchased in 1996
utilizing funds from the credit facility described above.
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 September
30, 1996 was $520,000.
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.
8
<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 nine months ended September 30, 1996
and 1995 was $3,869,000 and $3,751,000, respectively. FFO for the three months
ended September 30, 1996 and 1995 was $1,337,000 and $1,290,000, 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 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: November 13, 1996
PUBLIC STORAGE PROPERTIES XV, INC.
BY: /s/ Ronald L. Havner, Jr.
-------------------------
Ronald L. Havner, Jr.
Senior Vice President and
Chief Financial Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000870499
<NAME> PUBLIC STORAGE PROPERTIES XV, INC.
<MULTIPLIER> 1
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 1,341,000
<SECURITIES> 520,000
<RECEIVABLES> 166,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,027,000
<PP&E> 49,004,000
<DEPRECIATION> (12,498,000)
<TOTAL-ASSETS> 38,533,000
<CURRENT-LIABILITIES> 1,434,000
<BONDS> 0
0
0
<COMMON> 30,000
<OTHER-SE> 37,069,000
<TOTAL-LIABILITY-AND-EQUITY> 38,533,000
<SALES> 0
<TOTAL-REVENUES> 6,304,000
<CGS> 0
<TOTAL-COSTS> 3,238,000
<OTHER-EXPENSES> 161,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,000
<INCOME-PRETAX> 2,889,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,889,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,889,000
<EPS-PRIMARY> 1.25
<EPS-DILUTED> .95
</TABLE>
