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 1-10850
--------
PUBLIC STORAGE PROPERTIES XX, INC.
------------------------------------
(Exact name of registrant as specified in its charter)
California 95-4300893
- --------------------------------- -------------------
(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:
862,134 shares of $.01 par value Series A shares
90,859 shares of $.01 par value Series B shares
257,432 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 XX, INC.
CONDENSED BALANCE SHEETS
<CAPTION>
September 30, December 31,
1996 1995
--------------- ---------------
(Unaudited)
ASSETS
------
<S> <C> <C>
Cash and cash equivalents $ 726,000 $ 538,000
Marketable securities of affiliate at market value (cost of $148,000) 226,000 190,000
Rent and other receivables 40,000 28,000
Prepaid expenses 37,000 129,000
Real estate facilities at cost:
Building, land improvements and equipment 11,753,000 11,731,000
Land 5,824,000 5,824,000
--------------- ---------------
17,577,000 17,555,000
Less accumulated depreciation (3,053,000) (2,701,000)
--------------- ---------------
14,524,000 14,854,000
--------------- ---------------
Total assets $ 15,553,000 $ 15,739,000
=============== ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Accounts payable $ 365,000 $ 396,000
Dividends payable 267,000 558,000
Advance payments from renters 81,000 88,000
Shareholders' equity:
Series A common, $.01 par value,
1,393,165 shares authorized, 862,134
shares issued and outstanding (870,734
shares issued and outstanding in 1995) 8,000 8,000
Convertible Series B common, $.01 par
value, 90,859 shares authorized, issued
and outstanding 1,000 1,000
Convertible Series C common, $.01 par
value, 257,432 shares authorized,
issued and outstanding 3,000 3,000
Paid-in-capital 15,661,000 15,823,000
Cumulative income 4,805,000 3,731,000
Cumulative distributions (5,716,000) (4,911,000)
Unrealized gain in marketable securities 78,000 42,000
--------------- ---------------
Total shareholders' equity 14,840,000 14,697,000
--------------- ---------------
Total liabilities and shareholders' equity $15,553,000 $15,739,000
=============== ===============
</TABLE>
See accompanying notes.
2
<PAGE>
<TABLE>
PUBLIC STORAGE PROPERTIES XX, 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 $826,000 $755,000 $2,361,000 $2,158,000
Dividends from marketable securities
of affiliate 2,000 2,000 6,000 6,000
Interest income 8,000 7,000 17,000 29,000
------------- ---------------- --------------- --------------
836,000 764,000 2,384,000 2,193,000
------------- ---------------- --------------- --------------
COSTS AND EXPENSES:
Cost of operations 236,000 235,000 758,000 686,000
Management fees paid to affiliate 44,000 45,000 120,000 129,000
Depreciation 117,000 119,000 352,000 353,000
Administrative 26,000 24,000 78,000 71,000
Interest expense - - 2,000 -
------------- ---------------- --------------- --------------
423,000 423,000 1,310,000 1,239,000
------------- ---------------- --------------- --------------
NET INCOME $413,000 $341,000 $1,074,000 $ 954,000
============= ================ =============== ==============
Earnings per share:
Primary - Series A $0.45 $0.35 $1.15 $0.97
============= ================ =============== ==============
Fully diluted - Series A $0.34 $0.27 $0.88 $0.76
============= ================ =============== ==============
Dividends declared per share:
Series A $0.28 $0.28 $0.84 $0.82
============= ================ =============== ==============
Series B $0.28 $0.28 $0.84 $0.82
============= ================ =============== ==============
Weighted average common shares
outstanding:
Primary - Series A 866,701 889,234 869,390 905,512
============= ================ =============== ==============
Fully diluted - Series A 1,214,992 1,237,525 1,217,681 1,253,803
============= ================ =============== ==============
</TABLE>
See accompanying notes.
3
<PAGE>
<TABLE>
Public Storage Properties XX, 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 870,734 $8,000 90,859 $1,000 257,432 $3,000 $15,823,000 $3,731,000
Net income - - - - - - - 1,074,000
Repurchase of shares (8,600) - - - - - (162,000) -
Unrealized gain in marketable
securities - - - - - - - -
Cash distributions declared:
$.84 per share - Series A - - - - - - - -
$.84 per share - Series B - - - - - - - -
-------- ------- -------- -------- -------- -------- --------- ----------
Balances at
September 30,1996 862,134 $8,000 90,859 $1,000 257,432 $3,000 $15,661,000 $4,805,000
======== ======== ========= ======== ======== ======== ========= ==========
</TABLE>
<TABLE>
Public Storage Properties XX, Inc.
Condensed Statement of Shareholders' Equity
(Unaudited)
<CAPTION>
Unrealized gain Total
Cumulative in marketable Shareholders'
Distributions securities Equity
------------- --------------- -------------
<S> <C> <C> <C>
Balances at
December 31, 1995 ($4,911,000) $42,000 $14,697,000
Net income - - 1,074,000
Repurchase of shares - - (162,000)
Unrealized gain in marketable
securities - 36,000 36,000
Cash distributions declared:
$.84 per share - Series A (727,000) - (727,000)
$.84 per share - Series B (78,000) - (78,000)
------------- --------------- -------------
Balances at
September 30,1996 ($5,716,000) $78,000 $14,840,000
============= =============== =============
</TABLE>
See accompanying notes.
4
<PAGE>
<TABLE>
PUBLIC STORAGE PROPERTIES XX, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Nine Months Ended
September 30,
----------------------------------
1996 1995
--------------- ---------------
Cash flows form operating activities:
<S> <C> <C>
Net income $1,074,000 $954,000
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation 352,000 353,000
Increase in rent and other receivables (12,000) (5,000)
Increase in prepaid expenses (11,000) -
Amortization of prepaid management fees 103,000 -
(Decrease) increase in accounts payable (31,000) 22,000
(Decrease) increase in advance payments from renters (7,000) 8,000
--------------- ---------------
Total adjustments 394,000 378,000
--------------- ---------------
Net cash provided by operating activities 1,468,000 1,332,000
--------------- ---------------
Cash flows from investing activities:
Additions to real estate facilities (22,000) (40,000)
--------------- ---------------
Net cash used in investing activities (22,000) (40,000)
--------------- ---------------
Cash flows form financing activities:
Distributions paid to shareholders (1,096,000) (977,000)
Purchase of Company Series A common stock (162,000) (921,000)
--------------- ---------------
Net cash used in financing activities (1,258,000) (1,898,000)
--------------- ---------------
Net increase (decrease) in cash and cash equivalents 188,000 (606,000)
Cash and cash equivalents at the beginning of the period 538,000 1,347,000
--------------- ---------------
Cash and cash equivalents at the end of the period $ 726,000 $741,000
=============== ===============
Supplemental schedule of non-cash investing and financing activities:
Increase in fair value of marketable securities $ (36,000) $ (42,000)
=============== ===============
Unrealized gain on marketable securities $ 36,000 $ 42,000
=============== ===============
</TABLE>
See accompanying notes.
5
<PAGE>
PUBLIC STORAGE PROPERTIES XX, 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 $103,000. 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 10,000 common shares of Public
Storage, Inc., a publicly traded real estate investment trust and an
affiliate of the Company, for $148,000. The market value of these
securities at September 30, 1996 was $226,000.
7. In December 1995, the Company obtained an unsecured revolving credit
facility with a bank for borrowings up to $750,000 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% or the bank's LIBOR rate plus 2.25%. 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 $150,000 on its line of credit facility. At September
30, 1996, there was no outstanding balance on the credit facility.
6
<PAGE>
PUBLIC STORAGE PROPERTIES XX, 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 $1,074,000 and $954,000, respectively, representing an increase of
$120,000 or 13%. Net income for the three months ended September 30, 1996 and
1995 was $413,000 and $341,000, respectively, representing an increase of
$72,000 or 21%. These increases are primarily the result of increases in
property net operating income (rental income less cost of operations, management
fees paid to affiliate and depreciation expense).
Rental income for the nine months ended September 30, 1996 and 1995 was
$2,361,000 and $2,158,000, respectively, representing an increase of $203,000 or
9%. Rental income for the three months ended September 30, 1996 and 1995 was
$826,000 and $755,000, respectively, representing an increase of $71,000 or 9%.
These increases are mainly due to increased occupancy levels and rental rates at
all of the Company's properties.
The Company's mini-warehouse operations had weighted average occupancy
levels of 94% and 92% for the nine month periods ended September 30, 1996 and
1995, respectively.
Cost of operations (including management fees paid to affiliate and
depreciation expense) for the nine months ended September 30, 1996 and 1995 was
$1,230,000 and $1,168,000, respectively, representing an increase of $62,000 or
5%. This increase is primarily attributable to a one-time tax refund of $44,000
received at the Company's Los Angeles, California property in the first quarter
of 1995 from appealing prior years tax assessments. Cost of operations remained
stable for the three months ended September 30, 1996 compared to 1995.
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
expensed the prepaid management fees. The amount is shown as management fees
paid to affiliate in the condensed statements of income. As a result of the
prepayment, the Company saved approximately $22,000 in management fees, based on
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
$2,000 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.
7
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES.
- --------------------------------
Cash flows from operating activities ($1,468,000 in 1996) and cash reserves
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 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 $750,000 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% or the bank's LIBOR rate plus 2.25%. 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 $150,000 on
its line of credit facility. 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 $0.28. In addition, consistent with the
Company's REIT distribution requirements, the Company's Board of Directors
declared a special distribution of $0.47 per share. The distributions are
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 300,000 shares of Series A common stock. As of September 30, 1996, the
Company had repurchased 182,740 shares of Series A common stock, of which 8,600
shares were purchased in 1996.
In February 1994, the Company purchased 10,000 common shares of Public
Storage, Inc., a publicly traded real estate investment trust and an affiliate
of the Company, for $148,000. The market value of these securities at September
30, 1996 was $226,000.
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 $294,000.
The bylaws of the Company provide that, during 1999, 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 nine months ended September 30, 1996
and 1995 was $1,426,000 and $1,307,000, respectively. FFO for the three months
ended September 30, 1996 and 1995 was $530,000 and $460,000, respectively. FFO
8
<PAGE>
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 14, 1996
PUBLIC STORAGE PROPERTIES XX, 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> 0000870541
<NAME> PUBLIC STORAGE PROPERTIES XX, 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> 726,000
<SECURITIES> 226,000
<RECEIVABLES> 77,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,029,000
<PP&E> 17,577,000
<DEPRECIATION> (3,053,000)
<TOTAL-ASSETS> 15,553,000
<CURRENT-LIABILITIES> 713,000
<BONDS> 0
0
0
<COMMON> 12,000
<OTHER-SE> 14,828,000
<TOTAL-LIABILITY-AND-EQUITY> 15,553,000
<SALES> 0
<TOTAL-REVENUES> 2,384,000
<CGS> 0
<TOTAL-COSTS> 1,230,000
<OTHER-EXPENSES> 78,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,000
<INCOME-PRETAX> 1,074,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,074,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,074,000
<EPS-PRIMARY> 1.15
<EPS-DILUTED> .88
</TABLE>
